Author Topic: Business Plan  (Read 1085 times)

Offline yso191

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Business Plan
« on: January 09, 2013, 11:17:59 AM »
So this quarter's class in the certificate in the Craft beer Trade program, is on marketing/business.  In partial fulfillment of the requirements thereof, I am drafting a business plan.  I also intend to enter the plan in a competition.  At best I'll win a couple of grand, at worst I'll get some great feedback on the plan.

The thumbnail sketch: contracting with an existing brewery to provide the majority of the beer, and using a small pilot system for new brews/slower selling brews.

My question is about normal or typical practices vis. the agreement between the two breweries, but there are too many variations to ask.  So how does it typically work?

Steve
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Offline nateo

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Re: Business Plan
« Reply #1 on: January 09, 2013, 03:42:29 PM »
There are a bunch of different ways it could be done. Some of them will depend on your state. Some states don't allow contract brewing, some states don't allow alternating proprietorships. So, if you're set on doing it in a particular state, figure out what the laws are there.

As far as minimums, batch size, recipe options, etc. that'll vary depending on the brewery you're contracting with. It might also be an issue getting your beer to all taste the same. Breweries usually have to spend a lot of time and effort making their beer consistent when it comes from multiple breweries.

You'll likely pay more per keg for contract-brewed beer than you would just buying wholesale from established breweries, so maybe have a pilot brewery to brew the fun/weird stuff, and just sell someone else's beer for the bread-and-butter stuff.
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Offline a10t2

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Re: Business Plan
« Reply #2 on: January 09, 2013, 04:34:36 PM »
I emailed several breweries in my state that I knew did contract work, asking if they would share a copy of their "standard" contract. Two out of the 11 (IIRC) were willing to send me one.
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Offline yso191

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Re: Business Plan
« Reply #3 on: January 09, 2013, 04:43:04 PM »
There are a bunch of different ways it could be done. Some of them will depend on your state. Some states don't allow contract brewing, some states don't allow alternating proprietorships. So, if you're set on doing it in a particular state, figure out what the laws are there.

As far as minimums, batch size, recipe options, etc. that'll vary depending on the brewery you're contracting with. It might also be an issue getting your beer to all taste the same. Breweries usually have to spend a lot of time and effort making their beer consistent when it comes from multiple breweries.

You'll likely pay more per keg for contract-brewed beer than you would just buying wholesale from established breweries, so maybe have a pilot brewery to brew the fun/weird stuff, and just sell someone else's beer for the bread-and-butter stuff.

Fortunately Washington State is one that allows contract brewing and Alternating proprietorships.  I'm already in conversastion with a local production brewery that isn't even open yet (will be in a couple of weeks though).  I'm just trying to get as much info about the process/language/issues as I can so that I can navigate things well, not look like an idiot, and win the competition!  Thanks,

Steve
Steve

Offline reverseapachemaster

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Re: Business Plan
« Reply #4 on: January 09, 2013, 09:18:05 PM »
From a competition standpoint I wonder whether the instructors will look kindly on your idea of outsourcing production for most of your product. I'm not sure what the requirements are for the assignment or who judges the competition but it seems like the kind of thing that wouldn't score big points in a competition unless you could articulate the economic advantage of that arrangement.
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Offline dean_palmer

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Re: Business Plan
« Reply #5 on: January 10, 2013, 08:45:06 AM »
From a competition standpoint I wonder whether the instructors will look kindly on your idea of outsourcing production for most of your product.

Seems to be working for BJ's Brewhouse all over the USA for 100% of their product :-) Most folks think the root beer tank behind the glass is the brewery, and not sure if the root beer tanks are real. The business plan is always based on how you'll make money, so there is proof that success is far separated from the moral dilema that "your product" may not really be made directly by you.

Offline yso191

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Re: Business Plan
« Reply #6 on: January 10, 2013, 09:52:44 AM »
From a competition standpoint I wonder whether the instructors will look kindly on your idea of outsourcing production for most of your product.

Seems to be working for BJ's Brewhouse all over the USA for 100% of their product :-) Most folks think the root beer tank behind the glass is the brewery, and not sure if the root beer tanks are real. The business plan is always based on how you'll make money, so there is proof that success is far separated from the moral dilema that "your product" may not really be made directly by you.

That and inherent in my original question (how does it work) is that I don't know what the range of service is.  could it be that a contract brewery just turns over the keys and I would brew at night?  Or I help them brew, or they brew according to my strict recipe and instructions...  None of these options are simply selling someone else's beer.

And yes, the business plan is just showing how the business will make money and motivating investors at the same time.

Steve
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Offline reverseapachemaster

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Re: Business Plan
« Reply #7 on: January 10, 2013, 07:59:07 PM »
From a competition standpoint I wonder whether the instructors will look kindly on your idea of outsourcing production for most of your product.

Seems to be working for BJ's Brewhouse all over the USA for 100% of their product :-) Most folks think the root beer tank behind the glass is the brewery, and not sure if the root beer tanks are real. The business plan is always based on how you'll make money, so there is proof that success is far separated from the moral dilema that "your product" may not really be made directly by you.

I'm not suggesting the idea doesn't work in real life. Rather, I wonder whether the competition judges, scoring an academic competition, will be as impressed by a business plan contracting away the heavy lifting than a plan that internally develops itself.
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Offline nateo

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Re: Business Plan
« Reply #8 on: January 10, 2013, 08:04:03 PM »
That and inherent in my original question (how does it work) is that I don't know what the range of service is.  could it be that a contract brewery just turns over the keys and I would brew at night?  Or I help them brew, or they brew according to my strict recipe and instructions...  None of these options are simply selling someone else's beer.

A contract brewery makes the beer for you. An AP lets you brew the beer. In either case, you'll mostly be a marketing company. How will your product be different/better than just selling someone else's beer? The main advantage is lower overhead, the main disadvantage is lower margin. If you're still planning on building a brewery, how will your overhead change? A 3bbl pilot system isn't a whole lot cheaper than a 10bbl system. Is it still worth it? Would it make more sense to completely outsource the beer, or to make all the beer in-house?
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Offline bazowie

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Re: Business Plan
« Reply #9 on: February 10, 2013, 09:33:15 AM »
Good discussion but i have to dissagree on a 3BBL system costing as much as a 10BBL system , the systems have quite a price gap and that doesnt include the space to put it in, the price of grain etc....., unless im pricing equipment somewhere different.
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Offline anthony

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Re: Business Plan
« Reply #10 on: February 10, 2013, 09:48:32 AM »
Good discussion but i have to dissagree on a 3BBL system costing as much as a 10BBL system , the systems have quite a price gap and that doesnt include the space to put it in, the price of grain etc....., unless im pricing equipment somewhere different.

Yes and no. If you start with jacked fermentation vessels, so you're doing glycol anyways, and you have to do work to get gas/electricity/water to wherever you're putting the system, the difference in 3BBL and something like 8.5BBL isn't going to be as dramatic because the equipment cost is a small percentage of the total cost. Paying trade labor to run a 1.5 million BTU gas line costs the same whether they run it to a small 3 BBL brewstand or a skid mounted brewhouse. Ditto on things like floor drains, hand sinks, and all the other associated BS that may be required for your locality.

Offline nateo

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Re: Business Plan
« Reply #11 on: February 10, 2013, 10:27:29 AM »
Anthony - exactly what I was getting at. The equipment itself might be cheaper, but there are a lot of costs you incur no matter what size brewhouse you buy.

Every business has a sweet spot for how much beer they should make to maximize profit (not just revenue). Just making the most beer possible isn't always the best option, but you need to keep in mind how economies of scale work too. The more units you make, the lower the per-unit cost. Conversely, the fewer you make, the more expensive those units are.

The whole point of the business plan is to figure out where that sweet spot is, before you start tearing into the drywall.
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Offline bazowie

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Re: Business Plan
« Reply #12 on: February 10, 2013, 12:13:24 PM »
True, there are a lot of factors that go in to all of this, im trying to go Nano 1BBL, definetly not for the money but more to get started and go from there, even this seem a daunting task some times when it comes to a buisness plan.
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Offline nateo

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Re: Business Plan
« Reply #13 on: February 10, 2013, 12:37:00 PM »
A guy I knew from college is a custom bicycle framebuilder. I think you can take what he says about framebuilders, and just insert "nano-brewers." The barriers to entry are lower than for brewing, so the fail rate is higher, but a lot of the same pitfalls await both.

http://waltworks.blogspot.com/2013/01/burnout-or-why-framebuilders-dont-last.html

"Start with 100 new framebuilders, all beady-eyed and eager to build bikes.
-Of our builder population, let's say:
20% are recent college graduates or dropouts living with their parents/roommates.
30% are naturally terrible at making things out of metal when they start (I was one of these).
50% don't remember trig from high school and think building good bikes is all about pretty fillets or Justin Bieber's initials carved into stainless lugs.
75% have no startup funds and have to order tubesets one at a time, file miters by hand, and work out of an unheated garaged (again, me).
80% have never run a business of any kind and are unable/unwilling to use math to figure things out - like how much money to charge, or what their costs are.
100% will sometimes screw stuff up, and 50% (or more) think they are perfect and won't accept blame for anything going wrong with a frame (whether it's a cracked tube, geometry not quite right, whatever) and will slowly (or quickly) accumulate angry customers. "
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Offline dcbc

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Re: Business Plan
« Reply #14 on: February 10, 2013, 05:47:11 PM »
From a competition perspective, I would consider keeping the pilot system for testing recipes and new products.  If something isn't selling fast, don't keep brewing it in smaller batches.  Stop brewing it.  As home brewers, we all have that beer we brew once per year, but not more often because we don't like it that much.  On the pro side, if it's not selling, let someone else brew it.
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