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View Full Version : Is it a bad time to start up a brewery



MattMac
11-26-2007, 08:10 AM
I have been a homebrewer for a few years with a dream of setting up my own brewery. I am now in a financial position to make this happen, but given the current price of grain and scarcity of hops would I be right in thinking that now would be a very bad time to try?

Coast
11-26-2007, 08:18 AM
How timely! We have been wondering the same thing ourselves except we already went and opened one. I will say it has come as quite a shocker. We placed our first order of grain and hops no problem. Prices weren't too bad, supply was there. Then the next time we went to order WHOAH. In fact Hop Union isn't even talking to us as we had only placed one order so I guess we can't even get a contract with them, so I am unsure on what we will be doing when it comes to hops. So far, the grain supply is there but at a much higher price. So, I can't answer your question as we don't even know the asnwer. Except, wait and see how our local consumers respond.
Good Luck if you decide to take it further!

billk
11-26-2007, 08:26 AM
I would suggest talking to suppliers and seeing what is available and at what price. Figure that into your business model and see if it's worth it with the margins you need to make.

PMR
11-26-2007, 01:24 PM
I'm about a month from brewing my first batch, so I'm one of those people who are vulnerable to the current hop / malt situation. It's not a great time to open a brewery from a materials standpoint, but it is a good time from a demand standpoint. The demand for craft beer is stronger than ever, and if our customers are willing to pay a bit more for their beer, then we should all be in good shape as long as we are able to get hops. I have enough for about 1000 bbl right now (my estimated yearly production for 2008), and am looking for more.

If you are just starting to build your business plan, then you're presumably 1-3 years from brewing your first batch. In 3 years, the situation should be better than it is now, but expect to pay for hops (at least $12 a pound to take a guess). In 1-2 years, we can only hope for a better situation, but most people are thinking it'll get worse in that timeframe.

MattMac
11-26-2007, 02:27 PM
Thanks for the prompt replies, guys.

I would have been about a year away from opening. But recent events might change that.

I pretty much have my business plan written and it looks pretty good. Money-wise the increased prices will affect my projected profits but the plan still looks viable. The only thing that concerns me is scarcity - the possibility of simply not being able to source hops.

For the record, I am based in the UK, currently living in England. The plan is for my wife and I to move north to Scotland and open the brewery there. The brewery will be part of a cottage industry business, so we will not be relying on it solely for our livelihood, but it is a significant part of our plans and is certainly the thing that I really have my heart set on making work.

beauxman
11-26-2007, 02:36 PM
In the same boat. I had to make the same decision earier this year whether or not the situation was a deal breaker. I determined that it was not. The alternative is to wait, ok, so how long? Next year, the year after? In my opinion there will always be obstacles and challenges. Right now it is hops and malt, soon it could be energy (even worse than it is) and increased taxes (depends on state), and then later...who knows what.

One positive opportunity for new breweries is that we have yet to set prices and product lines. You can factor the market situation into your business plans. Established brewers are having to make pricing, recipe, and strategy adjustments. Set your prices and product lineup accordingly to account for the situation, with flexibility to change when need be. I'm not saying you make all small beers with light hops, just be smart about how you put together your recipes.

Really dig into your financial projections and models. Look at your raw material pipeline and secure contracts if possible. Of course, if you cannot get hops, then you would have no choice but to wait.

At the end of day, it is a business. Every other industry deals with similiar situations at some point. Craft brewing is in strong demand, the market can bear a little upward price movement. The trick is to keep our margins and not choke the momentum of the craft beer movement.

-Beaux

AlexisScarlett
01-30-2008, 12:43 PM
Moving this discussion over from BA

If you had to go back and look at S.W.O.T. and Porters Five Forces in a business plan and had to address downturn in the economy, what would you do?

A recession is definitely a Threat so what is the Opportunity? We have a different situation than most posters because we have hops and barley. But will we have drinkers? I wanted local foods and ingredients without pricing down, but this depends on folks having discretionary income for chevre stuffed portabellas.

Pricing and positioning beer as a staple not luxury are part of the response, but what else?

Thanks

Jephro
01-30-2008, 03:21 PM
As i was once told "Beer is a great business to be in because even when times are tough, or especially when times are tough, people always find money to drink".
While i find this mostly true i think it is subjective to your market, i.e. who you are marketing to and where your target market is in relation to your location.

jmlinmn
02-19-2008, 08:15 PM
I think this is a great time to start! I am starting up in Minnesota and will have beer in the bars within 18 months or so.

Are hop prices bad? Yep! Some of these hop suppliers are running around like chickens with their heads cut off.

There are positives in the negatives:
- I have beer recipes that I've been crafting and refining. The recent shortages and extreme elasticity in pricing has given me the opportunity to tweak my recipes to use more widely available hops before my beers ever hit the market. This is great because I'm not creating a new Coke for folks dedicated to a specific recipe (there are none!) and I'm building in a certain degree of price tolerance into my recipes that WOULD NOT have otherwise been there.

- If you can build a business and flourish in the "bad" times, you should be able to really kick a** in the good times.

I'm geared up about it and I'm positive on the craft market in general. Use this as an opportunity to strangle your costs as much as possible from the very beginning. People want to drink good beer. Brewers want other brewers to make good beer. We're going to get that 10%, just watch.

Joe James
02-24-2008, 08:09 PM
Good Luck you will need it!! I homebrew and can make 2 cases for the price of 1 craft beer. Beer stores I talk to say craft and import sales are WAY DOWN. It is a real shame because I used to buy lots between my own batches but at 30 bucks a case, I buy PBR or Strohs. Use the savings to buy better ingredients for my homebrew. I saw the hop shortage coming last year and filled my freezer with hard to get varieties like Cascade, Centennial, Nugget, ect. I will go into the beer business one day but now is NOT the time!

beauxman
02-24-2008, 11:19 PM
A recession is definitely a Threat so what is the Opportunity?


Overall market share gains, year after year. Major breweries losing market shares year after year and emulating craft breweries. Craft is hot and it is not a fad. Once you go craft, you don't go back! I am speaking of long term success and opportunity, not short term. Also, I think it depends heavily on your local market. Some areas of the country will behave different. In my market, we tend to be insulated to a certain degree. This does not apply to all markets, as they say, your mileage will vary and objects shift during flight!

-Beaux

HumanFish
02-29-2008, 11:54 AM
Moving this discussion over from BA

If you had to go back and look at S.W.O.T. and Porters Five Forces in a business plan and had to address downturn in the economy, what would you do?

A recession is definitely a Threat so what is the Opportunity? We have a different situation than most posters because we have hops and barley. But will we have drinkers? I wanted local foods and ingredients without pricing down, but this depends on folks having discretionary income for chevre stuffed portabellas.

Pricing and positioning beer as a staple not luxury are part of the response, but what else?

Thanks


Yes indeed. I see 2 opportunities at the moment.

1. Prices of Equipment. Strange I know since steel prices are still very high. Craft Brewing is a "dream" industry for many (including myself) and it is often the first business people enter into following regular employment. I think in a recession environment there will be fewer people taking the plunge, giving up that regular safe income and entering a high risk industry. I think this will flow through to the demand for brewing equipment, which may result in some suppliers sharpening their pencils. Also, in any recession the weakest players tend to get wiped out, if there is a shift away from craft beer it may make some businesses that bit less viable. This may also shape the market for equipment, although this would be 12 months or so away. A similar thing happened in the used equipment market following the last downturn.

2. The weakness of the USD. I think the OP referred to a UK brewery. I am also looking at starting a brewery in Europe and the EURO/USD exchange rate also has an impact on the capital equipment side of things. This may lead to an increase in demand for US equipment (against what I said above), but I know that in my business plan the cost of capital equipment has shifted downwards once the US suppliers entered the picture with the new exchange rate.

anyway... just my 2 cents


HF