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Nanobrewery - The Lessons I've Learned

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  • #16
    What about Contract Brewing?

    I am posting with the intention of receiving honest answers and hopefully clarity on a topic that I have not seen brought up in any posts on starting a Nano Brewery.

    What about Contract Brewing?

    I now know from reading hours of posts on nanos that you WILL have to keep your day job. What if, though, you were able to outsource your larger production(flagship beer(s)) to a contract brewer but keep the final kegged product on site until distributed or sold in house. At the same time be brewing smaller batches for on premise sales or for limited distribution. This is the route that I have been trying to look more into but have yet to see anyone mention on a Nano topic thread.

    Is it because of different state laws?
    Are the costs through the roof?
    Is there too much risk?
    Too small of profit margins?

    I am very curious to hear from anybody who has any insight for me (and I'm sure for others as well). I have been idolizing Parish Brewing Co. for a while now and appreciate the post since they are the real deal and know too well the pros and cons of starting small. I would be an idiot not to take any advice from the experts but I am curious if you (ANDREW GODLEY) ever looked at the option of Contract Brewing? Or anyone else for that matter.

    I live in Southern California, in between two beer meccas; San Diego and sort of Los Angeles. I am blessed to be able to self distribute (if I can start a brewery) and have a couple breweries that I could possibly contract to. I am looking to gain as much insight and thoughts about contracting your main product to a larger brewery but storing the product on site before distribution. I feel that this is the only way to make a Nano Brewery feasible and to grow in a timely manner, but I could very be wrong.

    So brewers out there I could use some advice and hopefully open this discussion up to possibly help alleviate some of the constructive criticism that might be holding any of us back from our crazy dreams of a Nano brewery.

    If you would like to contact me personally my email is bretburge@gmail.com

    Cheers to all of you,

    Bret Burge

    Comment


    • #17
      Well said

      I agree with the vast majority of what you summarized. I too receive a lot of mail asking for advice on starting a nano, and am careful to be honest and realistic while still be supportive.

      1, and 1b are dead on. I recite this to just about everyone who asks for advice. A nano is not a business model, but it is a great platform from which you can learn a lot about the industry, begin to build a brand and possibly launch a larger operation.

      Given that, do it as inexpensively as possible. Save your money for the inevitable larger operation. I was able to start my nano operation, Beetje Brewery, for a little over $5k. That carried me for nearly a year before I began the march toward a new space and a 7bbl system.

      Now The Commons Brewery, we (yes, I now have two employees) have been operating for about a year and are struggling to keep up with growing demand. After two years into this project, I see the real potential for me to quit my day job. Right. Remember the hard work and long hour part of the first post. Take it to heart, plan on it.

      I've been working a full time day job while trying to get this business rolling. That often means working 7 days a week, and 80 hour weeks are not uncommon.

      In short, be realistic, recognize that this is a business, and plan accordingly. It's an incredibly rewarding industry, but you will work hard to make it a success.

      Cheers,
      Mike
      www.commonsbrewery.com

      Comment


      • #18
        Testament from The Very Nice Brewing Company

        I can support this man's post. About to open a nano in Nederland, CO. We are starting in a small town with an unbelievably low rent, I highly suggest this. That monthly kitty is a gut wrenching stress ball. Reduce it as much as possible. As south park would say, "Thats why I moved to this redneck meshugannah quiet mountain town."

        We don't intend to get all our money back for a very long time, just exist in this glorious industry and own our lives again (we left corporate slavery for this). We are buying our freedom as slaves have done in the past.

        We want to exist and show income. Banks loved our idea and business plan. However, it's a joke to get money from them for a startup, just not going to happen. Show income over a few years, show that income going up year on year, then the banks will talk to you seriously about funding growth.

        Comment


        • #19
          Originally posted by Boardwalk
          I am curious if you (ANDREW GODLEY) ever looked at the option of Contract Brewing?

          Bret,

          Contract brewing is a very viable option for many startup operations. I can think of a couple that I respect greatly that started that way. I decided to steer Parish down a different path for many small reasons and one big one. Things like lack of contract brewing capacity, different state laws and %ABV restrictions, low margin or it loses money, and not learning anything about brewing operations and the complete business model (from grain to keg to distributor) were all factors. But I decided not to pursue contract brewing for one primary reason:

          No one else will brew or care for my beer like I do.

          Cheers,
          Andrew Godley
          Parish Brewing Co.
          Broussard, Louisiana

          Comment


          • #20
            No one else will brew or care for my beer like I do.

            Dude!!!!!!
            Tim Eichinger
            Visit our website blackhuskybrewing.com

            Comment


            • #21
              I suspect that when the inevitable shake out of nano breweries happens and the dust settles it would have been the suppliers of nano systems that would have come out ahead. I don't own a brewery but I do own a manufacturing company. And in manufacturing, if you can manufacture more for less than you will turn a profit. Brewing (or you could even say manufacturing) beer is really no different. Manufacturers are really on the business of selling their services and not making widgets. Same thing applies to breweries. The more beer (or widgets) you can "manufacture" at one time the easier running your business will be.
              Chicago Brewing Supply
              bmason@chicago-brew.com
              (773) 442-2455

              Comment


              • #22
                Just because you produce less, does not mean you have to miss out on price breaks. I purchased 10,000 labels, 4 pallets of bottles, etc.
                I purchase enough to get the price break. I will just be able to produce beer longer without ordering more stuff
                John McKissack
                Texas Big Beer Brewery
                Newton County, Texas

                Comment


                • #23
                  Bmason: your concept is correct from a business perspective, but what fuels us and probably other Nanos, is not simply business. there is a more altruistic motivation of wanting to be part of something that one "believes" in.

                  We have been raised to beleive that if you can make more money that is better. so we all go and do what can to make the most money with little regard for any other factors. so we end up working for some shitty boss who we think is an idiot and hate the time we spend at work but justofy it by saying "hey we're making good money." Well I got sick of justifying taking it up the #@% just to ake someone else a bunch of money.

                  I like having control and making decisions. I like being able to say, I don't like tha tplace so we aren't doing business with them. I like being able to make a product tath I think is th ebest and not have someone say th eprofit margin isn't great enough.

                  Its hard work on the mind and body but it fuels my spirit. Its hard to measure that kind of satisfaction.
                  Tim Eichinger
                  Visit our website blackhuskybrewing.com

                  Comment


                  • #24
                    Tim...can I call you Tim?

                    I think what you're referring to is in regards to the love of the craft. But let's be realistic, passion for your craft doesn't pay the bills. Ultimately, you need to turn a profit to sustain your brewery and yourself. The bigger the profit the easier life and all of it's passions become. $0.02
                    Chicago Brewing Supply
                    bmason@chicago-brew.com
                    (773) 442-2455

                    Comment


                    • #25
                      and when I say that you need to turn a profit I don't necessarily mean making money hand over fist. But if you can earn a living comparable to working for someone else then you are ahead of the "game" called life.
                      Chicago Brewing Supply
                      bmason@chicago-brew.com
                      (773) 442-2455

                      Comment


                      • #26
                        Originally posted by bmason1623
                        ... in manufacturing, if you can manufacture more for less than you will turn a profit. Brewing (or you could even say manufacturing) beer is really no different.
                        I would disagree to some extent to this mentality. While there is certainly a manufacturing aspect to the craft beer movement, there is also a local farm aspect. True, large national and even international farms, can generate much more profit, people still love to stop by local farms and farmer's markets for produce.
                        We're not necessarily talking about a commodity item here, it's more brand-focused.

                        And, we need to keep in mind that everyone's cost of living and standard of living expenses are different. One person's definition of "barely making it" is another person's lifelong goal. Another thing to consider is what people would identify as "profit". I've heard of many business owners complain about not taking a paycheck from their business for years, yet the kids are fed, mortgage payments are made, and household bills are not past due. If you define "profit" as money left over at the end of the month after all is paid for, then I think most people live never turning a "profit".

                        Check back with me in 6 months when this nano is up and running... I may have changed my tune by then.

                        Comment


                        • #27
                          NW Ohio Nano

                          We are in the process of opening a nano in NW Ohio just a 1bbl brewhouse. Our journey started a few years ago with loan applications, investor meetings and general capital raising. Most investors were interested but wanted to see actual brewery operations for at least 6 months before they would even talk about investment amounts. We started on the nano path to start on a shoestring and show local investors that our business model can work. We are lucky enough to find a restaurant that recently closed with all the nice SS health department equipment. Our rent is under $300 a month and the space is just big enough for our small brewhouse. There are investors out there that want to invest in something buzz worthy like a local microbrewery but its hard to sell a dream.
                          Flatrock Brewing Company

                          Comment


                          • #28
                            bmason: sure you can call me tim.

                            I don't think we are that far apart. I believe you need to have business acumen and awareness to make this work. you need to make a living.
                            but just as important to me is to make a living on my terms and be able to make decisions based on a balance of economic and ethical factors and choice.

                            So your concept is if you produce more you'll be able to make more. My concept is if your profit per unit is higher that production threshold that you're trying to get to is more attainable at a lower production point.

                            The trick is can you make a product like that and can you find a market?
                            Tim Eichinger
                            Visit our website blackhuskybrewing.com

                            Comment


                            • #29
                              In manufacturing, your overhead is almost always covered by the equipment that you run to manufacture your 'widget'. The equipment usually has an hourly rate associated with it. If we accept the notion that brewing 2 BBLs takes pretty close to the same amount of time as brewing 6 BBls, then brewing larger volumes allows you to ammortize (spread the cost) the equipment hourly rate across more barrels. For instance, if all of your overhead costs works out to $120 per hour equipment rate then brewing only 2 BBLs at a time over a 6 hour brew session means that each BBL costs $360 to brew (not including ingredients). If that same rate is applied to a 6 BBL system where your session takes maybe 6 hours then ($120*6)/6=$120 per BBL (these are just mathematical samples). Given this lower production cost you can either lower your per BBL price and hope to increase sales volume or maintain the same price as if you were brewing with a 2 BBL system and increase your margin. Which route you go depends on your business conditions I'm assuming.

                              Selling is always the hardest part of any business. This I agree with Tim 110%.

                              $0.02
                              Last edited by Chicago Brew Supply; 08-08-2012, 09:12 AM.
                              Chicago Brewing Supply
                              bmason@chicago-brew.com
                              (773) 442-2455

                              Comment


                              • #30
                                you know, it really comes down to one's preference. I know it's only my humble opinion.
                                Chicago Brewing Supply
                                bmason@chicago-brew.com
                                (773) 442-2455

                                Comment

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