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General Category => Going Pro => Topic started by: morticaixavier on December 06, 2013, 03:54:43 PM

Title: CSB (Community Supported Breweries)
Post by: morticaixavier on December 06, 2013, 03:54:43 PM
So what are everyone's thoughts on this model? CSA (Community Supported Agriculture) seems to be going strong after a decade or two run up. Farmers running CSA's make a heck of a lot closer to a living wage than those working for the wholesale market. They face a lot less risk each year as well already having much of their income pledged or even delivered regardless of actual yield.

Of course a lot of breweries can retail their product easily anyway but they still face the risk of opening the doors to the crickets and sitting on barrels of good beer as it goes bad (although from comments on another thread that may not be a problem right now). Also, many of the CSBs I have seen so far offer a set volume of product for your membership so the brewer does not gain the protection against major product losses that the farmer gets either.

So for the small start up brewer does the CSB model provide any of the benefits that the CSA model does for a small farm? If you could pre-sell memberships could this not provide a big boost over the first major barrier to entry into the business? Namely the cost of facilities/equipment.

I can also see how potential investors, seeing a pre-sold customer base might be more willing to risk their money with a new brewery.

But what about as beer drinkers/lovers. Would you pay up front for a years worth of beer? I imagine a lot of folks would at first at least to support a new brewery, a local brewery, a friend/relative, whatever. But, assuming the beer was good enough, would you re-up at the end of the initial term?

What considerations might make you more or less likely to re-up?

It's an interesting business model especially in this age of the 'local' and 'slow' food movements.
Title: Re: CSB (Community Supported Breweries)
Post by: micsager on December 06, 2013, 04:10:23 PM
So what are everyone's thoughts on this model? CSA (Community Supported Agriculture) seems to be going strong after a decade or two run up. Farmers running CSA's make a heck of a lot closer to a living wage than those working for the wholesale market. They face a lot less risk each year as well already having much of their income pledged or even delivered regardless of actual yield.

Of course a lot of breweries can retail their product easily anyway but they still face the risk of opening the doors to the crickets and sitting on barrels of good beer as it goes bad (although from comments on another thread that may not be a problem right now). Also, many of the CSBs I have seen so far offer a set volume of product for your membership so the brewer does not gain the protection against major product losses that the farmer gets either.

So for the small start up brewer does the CSB model provide any of the benefits that the CSA model does for a small farm? If you could pre-sell memberships could this not provide a big boost over the first major barrier to entry into the business? Namely the cost of facilities/equipment.

I can also see how potential investors, seeing a pre-sold customer base might be more willing to risk their money with a new brewery.

But what about as beer drinkers/lovers. Would you pay up front for a years worth of beer? I imagine a lot of folks would at first at least to support a new brewery, a local brewery, a friend/relative, whatever. But, assuming the beer was good enough, would you re-up at the end of the initial term?

What considerations might make you more or less likely to re-up?

It's an interesting business model especially in this age of the 'local' and 'slow' food movements.

Interesting idea.  Hard to say how it would all work out, that's for sure.  We have three basic beers that we brew.  And the two places that have our beer on tap do order ahead of time, and I brew those beers based on what the customer has ordered.  But it's all done on a handshake type deal.  In this state, I think prepaying would be illegal on the wholesale side.  Not sure about retail.
Title: Re: CSB (Community Supported Breweries)
Post by: morticaixavier on December 06, 2013, 04:26:07 PM
I'm sure there would be state by state considerations and those would for sure influence how to structure your program.

I've seen folks do it like a 'mug club' where members simply pay 1/2 pint prices for a full pint and more like the box of vegetables model where you go to the taproom or other central location and get your growler filled. Another had a very complex arrangement in which you could take your 'share' in a variety of ways from a 1/3 to 1/6 bbl keg down to a punch card for pints in the tap room

I think the pre-pay option wouldn't work for a retail account like your bar customers mic because they have to take a risk on that purchase anyway when they fork over the bucks for the keg. To ask them to take that risk all at once at the beginning of the year would likely be just too much.
Title: Re: CSB (Community Supported Breweries)
Post by: Jimmy K on December 06, 2013, 04:56:32 PM
Warning - basically brain vomit...

A friend of mine is opening a CSB in Vermont called Burlington Beer Company. CSB members get a series of limited release specialty beers through the year, so it's not even close to a year's worth of beer. I think the benefit of this style CSB (for the brewery) is in identifying and building relationships with customers than providing funding for the brewery. Although I'm sure it does mitigate some risk and money upfront is always preferable.

Around here anyway, CSA mostly provide a set volume of food/week. During a good year, the farms may give some bonuses members, but they sell a lot of it too. Likewise, when a farm can't meet it's commitment, members get very frustrated. But farms operate on a cycle that breweries don't have to worry about. They pay expenses in the spring, work through a long growing season, and then get paid when the crop matures. There are few ways around this, but the CSA provides a way to get paid when the farm is putting out expenses. An established brewery produces year round, so it won't benefit as much from the cash flow advantage. Still, it might help it get started when no money is coming in.

I don't think a CSB would be a good way to fund equipment/facility expenses. It's basically a loan from your customers, but it's a loan that will be paid off within the year. So I think it's wise to use it for certain expenses like ingredients, not for expenses you'd rather have years to pay off, like fermenters. It might encourage investors to see CSB memberships, but I wonder if the time you're looking for investors is long before the time you're looking for CSB members (which would be sold when the brewery is almost or is open).

I'm surprised that I haven't seen a Kickstarter where people could pre-purchase beer from a yet-to-be-opened brewery. Then again, you might need controls to prevent everyone from redeeming their purchase in the first weeks after you've opened. The last thing you want after going through the expense of building a brewery is to be giving away large portions of your first batches (ie paying back those loans) at a time when you're cash flow is probably poor. Not that it can't, or shouldn't be done. It's just I think a CSB owner would have to carefully plan what the money goes towards and how repayment will affect sales.

Then again, if I owned a brewery and somebody asked if I'd rather be paid today or last month...
Title: Re: CSB (Community Supported Breweries)
Post by: morticaixavier on December 06, 2013, 05:15:47 PM
Burlington Beer Company is one I am watching. Going to stop by there if they are open next time I'm home.

Of course, when I say a 'years worth of beer' I mean some beer each month through out the year. a 'Years worth' can mean a lot of different things to different people.
Title: Re: CSB (Community Supported Breweries)
Post by: thatgeekguy on December 06, 2013, 07:08:54 PM
Black Star Co-op in Austin Texas is a successful brewpub that follows this path, waitstaff gets paid a living wage, they don't accept tips and utilize self-directed work teams. Oh, and they make some pretty good beer as well....
Title: Re: CSB (Community Supported Breweries)
Post by: Jimmy K on December 06, 2013, 07:42:58 PM
Burlington Beer Company is one I am watching. Going to stop by there if they are open next time I'm home.

Of course, when I say a 'years worth of beer' I mean some beer each month through out the year. a 'Years worth' can mean a lot of different things to different people.
True. And I think it's a very small pool of people who'd prepay for an actual year's worth of beer and want it to be all from the same brewery.

I'd join a CSB for a new brewery to support them. For a CBS at an established brewery I'd want to feel I was getting something in return. Access to special releases, discounts off regular prices, etc.
Title: Re: CSB (Community Supported Breweries)
Post by: morticaixavier on December 06, 2013, 08:34:03 PM
Black Star Co-op in Austin Texas is a successful brewpub that follows this path, waitstaff gets paid a living wage, they don't accept tips and utilize self-directed work teams. Oh, and they make some pretty good beer as well....

that looks really cool. I'll have to watch them as well.
Title: Re: CSB (Community Supported Breweries)
Post by: Jeff M on December 07, 2013, 03:24:22 AM
I was thinking about running a kickstarter for my brewery when we are ready to take out loans etc for extra startup funds.  offering differently timed growler fills(once a week, once a month etc etc) was one of the things i was toying with.
Title: Re: CSB (Community Supported Breweries)
Post by: Thirsty_Monk on December 07, 2013, 04:21:29 AM
I think it is mixed bag. Beer is luxury item for non luxury price. Ask yourself if you would pay let say $500 a year for this. I think this is way above the beer price point and you would have to do a lot of education.

Check this brewery.
http://houseofbrewsmadison.com/csb-info/
He is in Madison WI. This is very educated and liberal city of about 200,000.
Last I heard he had 9 subscribers.
Title: Re: CSB (Community Supported Breweries)
Post by: reverseapachemaster on December 07, 2013, 05:29:46 PM
Kickstarter will not allow you to sell beer through their program in exchange for funding.

Is this similar to breweries that do membership programs where you receive a certain number of beers plus first dibs on other releases? Or is it a commitment to receive a large portion of beers from the brewery? I joined the Bruery's membership program for next year. I think it guarantees us nine beers plus first rights to buy several other releases plus discounts on all purchases at the brewery. My wife travels out to California for business almost every week so she can mule it back to Texas for us. It's worth it to get some rare beers but I'm not sure I'd commit to prepaying for a case of a standard release every month, especially since I homebrew.
Title: Re: CSB (Community Supported Breweries)
Post by: morticaixavier on December 07, 2013, 11:18:59 PM
Kickstarter will not allow you to sell beer through their program in exchange for funding.

Is this similar to breweries that do membership programs where you receive a certain number of beers plus first dibs on other releases? Or is it a commitment to receive a large portion of beers from the brewery? I joined the Bruery's membership program for next year. I think it guarantees us nine beers plus first rights to buy several other releases plus discounts on all purchases at the brewery. My wife travels out to California for business almost every week so she can mule it back to Texas for us. It's worth it to get some rare beers but I'm not sure I'd commit to prepaying for a case of a standard release every month, especially since I homebrew.

there is at least one new crowdsourcing site that does allow the sale of beer or at least beer club memberships as part of the campaign.

I'm not actually talking specifically about anything at this point more just trying to find out what people think about the idea. I've seen several that do what you are talking about with the bottle club and at least one that plans on brewing something new for each installment so there would not be any 'standard' brew.

But that is one aspect for sure, X number of special bottles a year plus first rights on other releases etc.
Title: Re: CSB (Community Supported Breweries)
Post by: morticaixavier on December 07, 2013, 11:20:29 PM
I think it is mixed bag. Beer is luxury item for non luxury price. Ask yourself if you would pay let say $500 a year for this. I think this is way above the beer price point and you would have to do a lot of education.

Check this brewery.
http://houseofbrewsmadison.com/csb-info/
He is in Madison WI. This is very educated and liberal city of about 200,000.
Last I heard he had 9 subscribers.

I actually contacted him about his project and he was fairly terse and dismissive in his email so I let it go. I'm sure it's a hard stressful thing to be starting a new business and I didn't want to push it. But if he is not getting the support he was looking for I can see how that would be even more stressful.
Title: Re: CSB (Community Supported Breweries)
Post by: Thirsty_Monk on December 08, 2013, 02:19:10 AM
I think it is mixed bag. Beer is luxury item for non luxury price. Ask yourself if you would pay let say $500 a year for this. I think this is way above the beer price point and you would have to do a lot of education.

Check this brewery.
http://houseofbrewsmadison.com/csb-info/
He is in Madison WI. This is very educated and liberal city of about 200,000.
Last I heard he had 9 subscribers.

I actually contacted him about his project and he was fairly terse and dismissive in his email so I let it go. I'm sure it's a hard stressful thing to be starting a new business and I didn't want to push it. But if he is not getting the support he was looking for I can see how that would be even more stressful.
He started at about the same time when I did. I do not hear too much about it so I would say it is not working.
I have send you a PM with my opinion.
Title: Re: CSB (Community Supported Breweries)
Post by: Alewyfe on December 08, 2013, 02:21:58 AM
7 Devils Brewery in Coos Bay sold investor pints at $100 ea. They limited to 300. All proceeds went to employ/ hire local artisans to supply items to the pub. Local muralist did a wonderful antique type mariners map painting on the outside of the building. Woodworkers crafted the interior tables and bar. Glass blower crafted a custom chandelier for the taproom. The place is just lovely.

All holders of an investor pint are entitled to one free pint any Weds. or Sun. for a year. They limited it to 300 as they were concerned about being too crowded. They are slammed busy on Weds and Sundays. Most people come in with friends and relatives in tow. It has worked very well for them. All pints sold out prior to the official opening.
Title: Re: CSB (Community Supported Breweries)
Post by: Jimmy K on December 08, 2013, 02:37:46 AM
Since Kickstarter's been mentioned. I'll mention my friends at the new Mispillion River Brewing company in Delaware. They have an indiegogo campaign and one of their options is your name engraved on a barstool at the bar for $500. They've sold five so far - not bad.
http://www.indiegogo.com/projects/mispillion-river-brewing (http://www.indiegogo.com/projects/mispillion-river-brewing)
Also mort, in case you didn't know. Joe (Burlington Beer) had a kickstarter that just closed and raised $25,000.
Title: Re: CSB (Community Supported Breweries)
Post by: reverseapachemaster on December 08, 2013, 05:19:52 PM
Since Kickstarter's been mentioned. I'll mention my friends at the new Mispillion River Brewing company in Delaware. They have an indiegogo campaign and one of their options is your name engraved on a barstool at the bar for $500. They've sold five so far - not bad.
http://www.indiegogo.com/projects/mispillion-river-brewing (http://www.indiegogo.com/projects/mispillion-river-brewing)
Also mort, in case you didn't know. Joe (Burlington Beer) had a kickstarter that just closed and raised $25,000.

I'd be curious to see how long that lasts because as far as I know each state regulates the sale of alcohol and it's doubtful this site has licensing to sell beer through each state.
Title: Re: CSB (Community Supported Breweries)
Post by: Thirsty_Monk on December 08, 2013, 05:46:26 PM
7 Devils Brewery in Coos Bay sold investor pints at $100 ea. They limited to 300. All proceeds went to employ/ hire local artisans to supply items to the pub. Local muralist did a wonderful antique type mariners map painting on the outside of the building. Woodworkers crafted the interior tables and bar. Glass blower crafted a custom chandelier for the taproom. The place is just lovely.

All holders of an investor pint are entitled to one free pint any Weds. or Sun. for a year. They limited it to 300 as they were concerned about being too crowded. They are slammed busy on Weds and Sundays. Most people come in with friends and relatives in tow. It has worked very well for them. All pints sold out prior to the official opening.

I think this is a good way to rase money.
Title: Re: CSB (Community Supported Breweries)
Post by: Jimmy K on December 08, 2013, 06:32:12 PM
Since Kickstarter's been mentioned. I'll mention my friends at the new Mispillion River Brewing company in Delaware. They have an indiegogo campaign and one of their options is your name engraved on a barstool at the bar for $500. They've sold five so far - not bad.
http://www.indiegogo.com/projects/mispillion-river-brewing (http://www.indiegogo.com/projects/mispillion-river-brewing)
Also mort, in case you didn't know. Joe (Burlington Beer) had a kickstarter that just closed and raised $25,000.

I'd be curious to see how long that lasts because as far as I know each state regulates the sale of alcohol and it's doubtful this site has licensing to sell beer through each state.
Neither of them sold beer

- Sent by my R2 unit

Title: Re: CSB (Community Supported Breweries)
Post by: morticaixavier on December 08, 2013, 06:40:20 PM
I wonder if there is a legal distinction being made between selling 'beer' and selling a 'membership'.

Check out crowdbrewed.com. Particularly J Wakefield Brewing who raise over 100k (more than 200% of the original campaign goal). They are providing beer in one form or another at many of the pledge levels but they are all in the form of a membership.
Title: Re: CSB (Community Supported Breweries)
Post by: Jimmy K on December 09, 2013, 03:03:03 AM
I wonder if there is a legal distinction being made between selling 'beer' and selling a 'membership'.
Probably not, I'm guessing. If money and beer change hands, any well written law would consider it a sale regardless of time lapse. Whether it's legal to sell a beer membership probably depends mostly on state law.

I'm not sure if your comment was triggered by mine that they didn't sell beer. But Burlington's kickstarter sold swag only. The CSB is sold directly through the brewery.
Title: Re: CSB (Community Supported Breweries)
Post by: anthony on December 09, 2013, 04:02:01 AM
There's a place in Chicago that was initially going to go full-on CSB but realized they kind of needed some infrastructure first. Now that they (almost) have that all in place, they are reintroducing their CSB plans. Here is a recent article about it:

http://www.chicagogrid.com/enterprise/begyle-brewing-updates-csa-swapping-kale-beer/

Title: Re: CSB (Community Supported Breweries)
Post by: reverseapachemaster on December 09, 2013, 02:35:56 PM
I wonder if there is a legal distinction being made between selling 'beer' and selling a 'membership'.

Check out crowdbrewed.com. Particularly J Wakefield Brewing who raise over 100k (more than 200% of the original campaign goal). They are providing beer in one form or another at many of the pledge levels but they are all in the form of a membership.

If joining the membership includes a portion of free beer then no, there is no legal distinction.

I took a look at what info was available on that website. It's highly suspect but at least taking the website at face value they aren't really crowdsourcing. They are selling private placements to accredited investors in which investors are taking on equity in the company, at least as far the offer I found on the website. We'll see how long the SEC lets that stick around.
Title: Re: CSB (Community Supported Breweries)
Post by: Jimmy K on December 09, 2013, 02:52:44 PM
I wonder if there is a legal distinction being made between selling 'beer' and selling a 'membership'.

Check out crowdbrewed.com. Particularly J Wakefield Brewing who raise over 100k (more than 200% of the original campaign goal). They are providing beer in one form or another at many of the pledge levels but they are all in the form of a membership.

If joining the membership includes a portion of free beer then no, there is no legal distinction.

I took a look at what info was available on that website. It's highly suspect but at least taking the website at face value they aren't really crowdsourcing. They are selling private placements to accredited investors in which investors are taking on equity in the company, at least as far the offer I found on the website. We'll see how long the SEC lets that stick around.
At least for the J Wakefield Brewer, no contribution level, even for $5000, mentions equity.
Title: Re: CSB (Community Supported Breweries)
Post by: hopfenundmalz on December 09, 2013, 03:19:52 PM
I wonder if there is a legal distinction being made between selling 'beer' and selling a 'membership'.

Check out crowdbrewed.com. Particularly J Wakefield Brewing who raise over 100k (more than 200% of the original campaign goal). They are providing beer in one form or another at many of the pledge levels but they are all in the form of a membership.

If joining the membership includes a portion of free beer then no, there is no legal distinction.

I took a look at what info was available on that website. It's highly suspect but at least taking the website at face value they aren't really crowdsourcing. They are selling private placements to accredited investors in which investors are taking on equity in the company, at least as far the offer I found on the website. We'll see how long the SEC lets that stick around.
At least for the J Wakefield Brewer, no contribution level, even for $5000, mentions equity.
A place not too far from here had various start up investment levels. I think an equity share was $25k, and that was 8 or 10 years ago.
Title: Re: CSB (Community Supported Breweries)
Post by: morticaixavier on December 09, 2013, 03:28:55 PM
I wonder if there is a legal distinction being made between selling 'beer' and selling a 'membership'.

Check out crowdbrewed.com. Particularly J Wakefield Brewing who raise over 100k (more than 200% of the original campaign goal). They are providing beer in one form or another at many of the pledge levels but they are all in the form of a membership.

If joining the membership includes a portion of free beer then no, there is no legal distinction.

I took a look at what info was available on that website. It's highly suspect but at least taking the website at face value they aren't really crowdsourcing. They are selling private placements to accredited investors in which investors are taking on equity in the company, at least as far the offer I found on the website. We'll see how long the SEC lets that stick around.

There are two sides to that site, separated by very different sign up processes. The one you were looking at is only for accredited investors. The other side, labeled I think 'Rewards Campaigns' is the non-equity side.
Title: Re: CSB (Community Supported Breweries)
Post by: reverseapachemaster on December 10, 2013, 04:23:26 AM
I see what you're saying. Yeah, those breweries are definitely offering beer in exchange for money, which is a beer sale. The FAQ on that side of the website says no beer sales without proper distribution channels in place but obviously they aren't doing much in the way of regulating their own website. I'm sure the TTB and/or the IRS will come knocking soon enough.
Title: Re: CSB (Community Supported Breweries)
Post by: kylekohlmorgen on December 11, 2013, 03:35:15 PM
I absolutely intend on having a presale model ala The Bruery or The Rare Barrel for barrel-aged releases.

However, I think brand identity (and demand) needs to be established beforehand. Not supplying demand after you're already in the market is bad enough. I would imagine if you didn't supply a pre-paid demand, your brand would go to the 7th circle of Beer Blogger hell. Big risk. Once you know what you can produce, and your customers know the quality is worth buying in, pre-sale allows you to keep the wheels turning while sitting on beer. I also think its a unique interaction with customers that generates buzz and excitement.

The Rare Barrel sold pre-sale, reserve memberships before they had product in the market and did quite well. I don't see how I could ask my customers to buy $300 in beer before they've tried any of it.
Title: Re: CSB (Community Supported Breweries)
Post by: Jimmy K on December 11, 2013, 03:54:14 PM
I see what you're saying. Yeah, those breweries are definitely offering beer in exchange for money, which is a beer sale. The FAQ on that side of the website says no beer sales without proper distribution channels in place but obviously they aren't doing much in the way of regulating their own website. I'm sure the TTB and/or the IRS will come knocking soon enough.
As long as self distribution is legal in their state, everything should be fine as long as the customer picks up the beer at the brewery. If beer is being shipped to customers, they have to deal with receiving state laws as well. But shipping could be done following the procedures of a beer of the month club. And if they're not paying TTB/IRS taxes, then that's really a separate issue.
Title: Re: CSB (Community Supported Breweries)
Post by: reverseapachemaster on December 11, 2013, 04:09:35 PM
I see what you're saying. Yeah, those breweries are definitely offering beer in exchange for money, which is a beer sale. The FAQ on that side of the website says no beer sales without proper distribution channels in place but obviously they aren't doing much in the way of regulating their own website. I'm sure the TTB and/or the IRS will come knocking soon enough.
As long as self distribution is legal in their state, everything should be fine as long as the customer picks up the beer at the brewery. If beer is being shipped to customers, they have to deal with receiving state laws as well. But shipping could be done following the procedures of a beer of the month club. And if they're not paying TTB/IRS taxes, then that's really a separate issue.

The issue is that the website is facilitating beer sales to the final customer and taking a cut of what is received, which sounds like retailing. The website is doing business across state lines which makes it subject to federal jurisdiction, hence the TTB involvement.
Title: Re: CSB (Community Supported Breweries)
Post by: kylekohlmorgen on December 11, 2013, 05:59:53 PM
The issue is that the website is facilitating beer sales to the final customer and taking a cut of what is received, which sounds like retailing. The website is doing business across state lines which makes it subject to federal jurisdiction, hence the TTB involvement.

A retailer profits from the purchase and sale of product. The website isn't buying anything, its just providing a service to the brewery. The more times the service is provided, the more profit is earned. Seems more like the "Square" app used by Tasting Rooms to accept credit cars. 
Title: Re: CSB (Community Supported Breweries)
Post by: morticaixavier on December 11, 2013, 06:13:52 PM
The issue is that the website is facilitating beer sales to the final customer and taking a cut of what is received, which sounds like retailing. The website is doing business across state lines which makes it subject to federal jurisdiction, hence the TTB involvement.

A retailer profits from the purchase and sale of product. The website isn't buying anything, its just providing a service to the brewery. The more times the service is provided, the more profit is earned. Seems more like the "Square" app used by Tasting Rooms to accept credit cars.

+1, if taking a cut of monies earned by selling alcohol were any different than any other sale things would be very difficult for credit card processors, payroll processors, tax preparers, delivery companies...
Title: Re: CSB (Community Supported Breweries)
Post by: Jimmy K on December 11, 2013, 06:25:19 PM
The issue is that the website is facilitating beer sales to the final customer and taking a cut of what is received, which sounds like retailing. The website is doing business across state lines which makes it subject to federal jurisdiction, hence the TTB involvement.

A retailer profits from the purchase and sale of product. The website isn't buying anything, its just providing a service to the brewery. The more times the service is provided, the more profit is earned. Seems more like the "Square" app used by Tasting Rooms to accept credit cars.

+1, if taking a cut of monies earned by selling alcohol were any different than any other sale things would be very difficult for credit card processors, payroll processors, tax preparers, delivery companies...
Ticket sales to beer festivals would be a similar situation. Money is exchanged over state lines, but the beer is not. Online ticket vendors don't need liquor licenses.

- Sent by my R2 unit