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General Category => Going Pro => Topic started by: hopfenundmalz on April 16, 2013, 12:44:02 AM

Title: What Am I Missing in This Artcle?
Post by: hopfenundmalz on April 16, 2013, 12:44:02 AM
No Experience. $7000 dollars. = Profit!

Typo on the amount? Will they hire someone that knows how to brew?

http://www.mlive.com/news/kalamazoo/index.ssf/2013/04/miller_road_microbrewery.html
Title: Re: What Am I Missing in This Artcle?
Post by: Thirsty_Monk on April 16, 2013, 01:44:15 AM
Quote
He plans to spend about $7,000 to purchase new equipment and remodel.
500 to 1000BBL brewery + 2 employees.
And this all for only $7000.
Even 10 times that amount is doing it on cheap and no labour cost in it.
Title: What Am I Missing in This Artcle?
Post by: majorvices on April 16, 2013, 02:11:41 AM
You guys scoff, but it can be done. Assuming magic elves will be involved.
Title: Re: What Am I Missing in This Artcle?
Post by: jamminbrew on April 16, 2013, 02:18:35 AM
I'd love to get my hands on a system that will put out that much beer for only $7,000. Including remodel cost!  Must be a typo. $70,000 is a much more believable figure.
Title: Re: What Am I Missing in This Artcle?
Post by: nateo on April 16, 2013, 02:32:18 AM
That's probably not a typo. All the cool kids are starting severely under-capitalized breweries.

I wonder if all these new "pro" brewers will siphon off business from properly run breweries, ruining not just their own business, but several others as well. Hopefully they'll go under quickly enough that the good breweries who deserve the business can stay afloat. 
Title: Re: What Am I Missing in This Artcle?
Post by: klickitat jim on April 16, 2013, 03:34:58 AM
If so we will all be brewing on used commercial gear before long

"Freedom is temporary unless you are also Brave!" - Patriot

Title: Re: What Am I Missing in This Artcle?
Post by: anthony on April 16, 2013, 03:45:52 AM
That's probably not a typo. All the cool kids are starting severely under-capitalized breweries.

I wonder if all these new "pro" brewers will siphon off business from properly run breweries, ruining not just their own business, but several others as well. Hopefully they'll go under quickly enough that the good breweries who deserve the business can stay afloat.

Sounds like you've been talking to Larry Bell or Kim Jordan or Jim Koch about their worst fears regarding this "boom".
Title: Re: What Am I Missing in This Artcle?
Post by: Alewyfe on April 16, 2013, 04:05:09 AM
Their success will be directly proportional to the number of great friends they have that are happy to drink their crappy beer once they actually start charging for it.

Title: Re: What Am I Missing in This Artcle?
Post by: phunhog on April 16, 2013, 05:58:15 AM
That's probably not a typo. All the cool kids are starting severely under-capitalized breweries.

I wonder if all these new "pro" brewers will siphon off business from properly run breweries, ruining not just their own business, but several others as well. Hopefully they'll go under quickly enough that the good breweries who deserve the business can stay afloat.

I don't know if the crappy breweries will necessarily hurt the good breweries. Craft beer is here to stay. It may not grow as fast as it has been but it ain't going away either.  If someone experiences crappy beer at a local brewery I seriously doubt they will swear off beer all together. If anything they will gravitate towards the better breweries and the problem will work itself out.  I do agree that a lot of new breweries are under capitalized.  One just went under in my area. Although I am hesitant to call it a "brewery" since their beers were contract brewed 100 miles away. In the end it just didn't pay the bills to make it worthwhile. Too bad, because even though it was brewed on contract, the beer was pretty good.
Title: Re: What Am I Missing in This Artcle?
Post by: kylekohlmorgen on April 16, 2013, 11:04:54 AM
You guys scoff, but it can be done. Assuming magic elves will be involved.

Had an old boss that used to start these conversations with:

"Well, if I had enough midgets and buckets..."
Title: Re: What Am I Missing in This Artcle?
Post by: Slowbrew on April 16, 2013, 11:42:11 AM
They don't mention what his other businesses at the location are.  I suppose he could already be running some kind of food production already and simply needs to augment existing equipment, put up a wall,buy some tables/glassware and build a bar.

Small business owners are usually serial venture capitalists so you really don't know what they can pull off.  I've worked for some real jewels in my younger days.  They always saw opportunities but weren't too good at the long game sometimes.

Paul

Paul
Title: Re: What Am I Missing in This Artcle?
Post by: hopfenundmalz on April 16, 2013, 12:46:31 PM
That's probably not a typo. All the cool kids are starting severely under-capitalized breweries.

I wonder if all these new "pro" brewers will siphon off business from properly run breweries, ruining not just their own business, but several others as well. Hopefully they'll go under quickly enough that the good breweries who deserve the business can stay afloat.

Sounds like you've been talking to Larry Bell or Kim Jordan or Jim Koch about their worst fears regarding this "boom".
They all were around in the late 90s when many breweries went under.

I would think that the $ amount is a typo, might have to contact mlive and see what they say.
Title: Re: What Am I Missing in This Artcle?
Post by: nateo on April 16, 2013, 01:36:18 PM
What I'm talking about is market share. In some markets, there might be easy growth and unmet demand. In others, any growth in your market share means a decrease in your competitor's market share. The pie is getting bigger, but not fast enough to feed all the new mouths coming to the table.

Craft beer is  growing at about 15% per year. In 2012, craft beer was 13,235,917 bbl. The previous year, it was 11,467,337 bbls, that's 15.42% growth in one year. 

So there were 1,768,580 new bbls of demand. In 2012, there were 2,347 breweries in operation, and 409 new breweries that opened, and 43 that closed. That's a net of 366 new breweries, or 15.59% growth. Sounds good, right?

How much of that new demand was captured by established breweries? I know some (maybe most) of that was captured by New Belgium, Bouldevard, Sam Adams, etc. So how much was left for the start-ups? I'd be surprised if more than 25% of the growth was going to startups. I'd suspect it's more in the 10% range. If I'm right, 10% of the new demand is  176858 bbl, or 483bbl per new brewery. There might be some room for small breweries in certain markets, but you also have to look at the massive investments NB and Oskar and others are making in building new factories. The companies with the most capital will be best positioned to grab the new demand.

There are a lot of local/regional factors that go into this, and I don't have solid numbers for where the growth is going, exactly. 15% growth per year is not sustainable over a long period of time.
Title: Re: What Am I Missing in This Artcle?
Post by: bwana on April 16, 2013, 01:56:37 PM
I agree that 7000 dollars does not sound right,but just because the owner has no brewing expierence does not mean he will fail. One employee could be an expierienced brewer. Keeping your overhead down and starting small will probably lead to his success.
Title: Re: What Am I Missing in This Artcle?
Post by: redbeerman on April 16, 2013, 02:02:18 PM
15% growth per year is not sustainable over a long period of time.

Agreed, but for the time being though, it is 15% of a fairly small number (6.5% of total market) in comparison to the much larger market for beer in general.  Still room for growth as most younger folks are going for craft beers and even some older folks are getting converted.  Some of the larger markets may reach saturation before the smaller markets as I believe that is where we are seeing the largest growth currently.  Or not. ;)
Title: Re: What Am I Missing in This Artcle?
Post by: nateo on April 16, 2013, 03:34:47 PM
It's not just beer that's growing. Craft beer isn't only competing with macro beer. Craft distilling is growing, "soda-booze" malt liquor products are growing as fast as craft beer too. There are only so many dollars people spend on booze, and most booze is bought by a really small proportion of drinkers. In my psychopathology class, when we were talking about alcoholism, the number was something like 80% of all booze sold is bought by 10% of the total number of drinkers. Almost everyone has a glass of port at Christmas, but hardly anyone drinks heavily.

So small shifts in taste amongst the booze-hounds can have huge impact on demand for specific segments of the alcohol market.
Title: Re: What Am I Missing in This Artcle?
Post by: phunhog on April 16, 2013, 04:40:04 PM
I think breweries better get used to getting a smaller and smaller piece of the market share. Part of the problem is that everyone thinks they are going to make money with a brewery....at least enough to support themselves.  This is where I think we can learn from the wine industry. Many, in fact I would say most, wineries/vineyards are started by people who made their money somewhere else.  I have looking at the plethora of new wineries in my general area and most, if not all, are started by people in their 40's-60's.  Most are only open 3 days a week and have very limited distribution.  I see this as the future of breweries.....not a 15bbl brewery that is trying to get their beer in every store, bar, and restaurant in sight.
Title: Re: What Am I Missing in This Artcle?
Post by: micsager on April 16, 2013, 04:44:25 PM
That's probably not a typo. All the cool kids are starting severely under-capitalized breweries.

I wonder if all these new "pro" brewers will siphon off business from properly run breweries, ruining not just their own business, but several others as well. Hopefully they'll go under quickly enough that the good breweries who deserve the business can stay afloat.

Interesting take. 

I don't think any brewery "deserves" business. 



 
Title: Re: What Am I Missing in This Artcle?
Post by: micsager on April 16, 2013, 04:47:17 PM
I think breweries better get used to getting a smaller and smaller piece of the market share. Part of the problem is that everyone thinks they are going to make money with a brewery....at least enough to support themselves.  This is where I think we can learn from the wine industry. Many, in fact I would say most, wineries/vineyards are started by people who made their money somewhere else.  I have looking at the plethora of new wineries in my general area and most, if not all, are started by people in their 40's-60's.  Most are only open 3 days a week and have very limited distribution.  I see this as the future of breweries.....not a 15bbl brewery that is trying to get their beer in every store, bar, and restaurant in sight.

+1  Nice post.
Title: Re: What Am I Missing in This Artcle?
Post by: nateo on April 16, 2013, 08:26:04 PM
Interesting take. 

I don't think any brewery "deserves" business. 

I think if your brewery has horrible chlorophenol problems, or sells infected beer, you "deserve" to go out of business. You're doing the entire craft industry a disservice by selling s***ty beer, as well as siphoning off sales that would otherwise support a good brewery that knows what they're doing.
Title: What Am I Missing in This Artcle?
Post by: majorvices on April 16, 2013, 10:44:59 PM
I think breweries better get used to getting a smaller and smaller piece of the market share. Part of the problem is that everyone thinks they are going to make money with a brewery....at least enough to support themselves.  This is where I think we can learn from the wine industry. Many, in fact I would say most, wineries/vineyards are started by people who made their money somewhere else.  I have looking at the plethora of new wineries in my general area and most, if not all, are started by people in their 40's-60's.  Most are only open 3 days a week and have very limited distribution.  I see this as the future of breweries.....not a 15bbl brewery that is trying to get their beer in every store, bar, and restaurant in sight.

I hear what you are saying except they are two entirely different business models. How many people are going out to local pubs and ordering local wines? How long does it take to produce a wine as opposed to a beer? I think there are things in both industries that can be borrowed and/or copied, but at the crux of the issue they are two different business models entirely.

IMO you have a lot of pico breweries who are either going to succeed because they have great beer and great passion to work for pennies or are going to fail because, regardless of the quality of the beer the brewers are going to decide the passion is not worth the loss of freetime and weekends.
Title: Re: What Am I Missing in This Artcle?
Post by: micsager on April 16, 2013, 10:57:53 PM
Interesting take. 

I don't think any brewery "deserves" business. 

I think if your brewery has horrible chlorophenol problems, or sells infected beer, you "deserve" to go out of business. You're doing the entire craft industry a disservice by selling s***ty beer, as well as siphoning off sales that would otherwise support a good brewery that knows what they're doing.

Oh I certainly believe some breweries deserve to go "out of business,"  I just don't think any deserve to be in business.  They must earn it.  Every day. 
Title: What Am I Missing in This Artcle?
Post by: majorvices on April 16, 2013, 10:59:59 PM
Interesting take. 

I don't think any brewery "deserves" business. 

I think if your brewery has horrible chlorophenol problems, or sells infected beer, you "deserve" to go out of business. You're doing the entire craft industry a disservice by selling s***ty beer, as well as siphoning off sales that would otherwise support a good brewery that knows what they're doing.

Oh I certainly believe some breweries deserve to go "out of business,"  I just don't think any deserve to be in business.  They must earn it.  Every day.

Shouldn't that go for every business? Except Microsoft, of course. ;)
Title: Re: What Am I Missing in This Artcle?
Post by: micsager on April 16, 2013, 11:01:13 PM
Interesting take. 

I don't think any brewery "deserves" business. 

I think if your brewery has horrible chlorophenol problems, or sells infected beer, you "deserve" to go out of business. You're doing the entire craft industry a disservice by selling s***ty beer, as well as siphoning off sales that would otherwise support a good brewery that knows what they're doing.

Oh I certainly believe some breweries deserve to go "out of business,"  I just don't think any deserve to be in business.  They must earn it.  Every day.

Shouldn't that go for every business? Except Microsoft, of course. ;)

Most certainly.  (even microsoft)  I just didn't think my first post was clear.   
Title: What Am I Missing in This Artcle?
Post by: majorvices on April 16, 2013, 11:05:05 PM
Interesting take. 

I don't think any brewery "deserves" business. 

I think if your brewery has horrible chlorophenol problems, or sells infected beer, you "deserve" to go out of business. You're doing the entire craft industry a disservice by selling s***ty beer, as well as siphoning off sales that would otherwise support a good brewery that knows what they're doing.

Oh I certainly believe some breweries deserve to go "out of business,"  I just don't think any deserve to be in business.  They must earn it.  Every day.

Shouldn't that go for every business? Except Microsoft, of course. ;)

Most certainly.  (even microsoft)  I just didn't think my first post was clear.

But .... obviously we have given Microsoft a pass. Just look at Windows 8. I have it on my computer. And it sucks!
Title: Re: What Am I Missing in This Artcle?
Post by: Thirsty_Monk on April 17, 2013, 02:20:23 AM
Linux.

And now back to original post.
Title: Re: What Am I Missing in This Artcle?
Post by: a10t2 on April 17, 2013, 04:18:21 PM
Craft beer is  growing at about 15% per year. ... 10% of the new demand is  176858 bbl, or 483bbl per new brewery.

That sounds reasonable given that most of those breweries are on 15 bbl systems or smaller. Especially when you factor in how many are doing 1 bbl or less. Unless you're a large packaging brewery, doing 500 bbl in your first year is solid. It's well above what I've forecasted.
Title: Re: What Am I Missing in This Artcle?
Post by: nateo on April 17, 2013, 04:36:15 PM
No one knows what the future will hold, but there's a concept called "sensitivity analysis." A static sales (or growth) forecast may make your business look profitable, but a very small difference in sales could make a big difference in whether your business is profitable. Same thing with projected growth.

Some parts of the business plan might be relatively robust, for instance it's common for construction or plant costs to end up being much larger than anticipated, but the company is still profitable even with twice the start-up costs.

There's no "one size fits all" solution, but I've seen a lot of business plans that just create one static projection of sales, and the whole thing would fall apart if they don't hit their overly-optimistic numbers. That's not to say you should be as conservative as possible, because risk = reward. The safest thing is to not open a brewery at all, but that's not always the best solution.
Title: Re: What Am I Missing in This Artcle?
Post by: phunhog on April 17, 2013, 05:19:10 PM
I think breweries better get used to getting a smaller and smaller piece of the market share. Part of the problem is that everyone thinks they are going to make money with a brewery....at least enough to support themselves.  This is where I think we can learn from the wine industry. Many, in fact I would say most, wineries/vineyards are started by people who made their money somewhere else.  I have looking at the plethora of new wineries in my general area and most, if not all, are started by people in their 40's-60's.  Most are only open 3 days a week and have very limited distribution.  I see this as the future of breweries.....not a 15bbl brewery that is trying to get their beer in every store, bar, and restaurant in sight.

I hear what you are saying except they are two entirely different business models. How many people are going out to local pubs and ordering local wines? How long does it take to produce a wine as opposed to a beer? I think there are things in both industries that can be borrowed and/or copied, but at the crux of the issue they are two different business models entirely.

IMO you have a lot of pico breweries who are either going to succeed because they have great beer and great passion to work for pennies or are going to fail because, regardless of the quality of the beer the brewers are going to decide the passion is not worth the loss of freetime and weekends.

I agree. That is why I suggested that if you want to open a pico/nano brewery to make your money somewhere else first.  That way the brewery can essentially stay a hobby and not become a "job" since you aren't relying on it for your income. 
Title: Re: What Am I Missing in This Artcle?
Post by: nateo on April 17, 2013, 06:28:36 PM
I agree. That is why I suggested that if you want to open a pico/nano brewery to make your money somewhere else first.  That way the brewery can essentially stay a hobby and not become a "job" since you aren't relying on it for your income.

I've often thought, whilst brewing, that a lot of local, state and federal paperwork would make my hobby so much better. 
Title: Re: What Am I Missing in This Artcle?
Post by: anthony on April 17, 2013, 06:52:00 PM
While beer sales are up, and just barely, there was a good point made at CBC this year that macro brands are losing more drinkers than craft beer is gaining. Many of them are turning back to spirits and some are venturing into alternative beverages like cider, malt beverages, etc.

And the argument that Kim, Jim, Larry, et al. are making is that their breweries, some of the largest breweries by sales volume in craft brewing, spend lots of $$ each year to not only promote their specific brands but promote craft beer in general. Some of the new small breweries are riding the coat-tails of that movement, and when they make bad beer, that negative experience blows back and impacts the big craft brewers too. And it impacts other breweries in the same local market too.
Title: Re: What Am I Missing in This Artcle?
Post by: phunhog on April 17, 2013, 07:55:35 PM
I agree. That is why I suggested that if you want to open a pico/nano brewery to make your money somewhere else first.  That way the brewery can essentially stay a hobby and not become a "job" since you aren't relying on it for your income.

I've often thought, whilst brewing, that a lot of local, state and federal paperwork would make my hobby so much better.
No doubt to get that there is a lot of paperwork up front. Once you get going though I have heard that it isn't bad at all.
Title: Re: What Am I Missing in This Artcle?
Post by: micsager on April 18, 2013, 02:44:38 PM
I agree. That is why I suggested that if you want to open a pico/nano brewery to make your money somewhere else first.  That way the brewery can essentially stay a hobby and not become a "job" since you aren't relying on it for your income.

I've often thought, whilst brewing, that a lot of local, state and federal paperwork would make my hobby so much better.

LOL.  We own and operate a pico brewery.  And there's no doubt that the paperwork is a PITA.  But, now that I've got a system down, it's not TOO bad.  But, I hear ya.

Title: Re: What Am I Missing in This Artcle?
Post by: nateo on April 18, 2013, 03:38:38 PM
I can only speak from my experience, but I had a situation where someone was willing to give me the space and money to start a nano-brewery.

I decided mixing my hobby and work would be like mixing chocolate and crap. The crap would still be crap, but the chocolate would be a whole lot worse.