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CSB (Community Supported Breweries)

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morticaixavier:
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.

micsager:

--- Quote from: morticaixavier on December 06, 2013, 08:54:43 AM ---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.

--- End quote ---

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.

morticaixavier:
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.

Jimmy K:
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...

morticaixavier:
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.

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