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Old 07-16-2012, 05:55 PM   #1
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Default Nanobrew concept: would this work?

I'm hoping to get some feedback on a nanobrew concept. I've been doing some recreational reading (like I'm sure many of you have), and had this idea. What do you think?

A typical nanobrew invests in their brewing and serving capacity, then tries to recoop those costs through beer sales. It's a very risky venture (one I'm definatley not willing to take!)

Some nanobreweries will rent production time from an exisiting brewer, but still try to build their own brand via a tap room or selling to distributors (many examples of this). Still risky.

But, the number of people who are brewing great beer and are interested in great beer far exceeds the number of people willing to go open their own business. So, what if the traditional model were inverted?

Could a nanobrew derrive MOST of it's income from the rental of their brewing capacity? I am imagining a licensed tap room with brewing capacity whose PRIMARY business is to lease their equipment to craft brewers for limited productions, and then offer those craft brewers the opportunity to sell that product in the tap room with a revenue sharing formula.

In this model, initial funding would be raised by selling and scheduling production and sales time to craft brewers who want to utilize the brewing equipment and the tap room.

I see this as a win for ownership (securing funding ahead of time, less risk) and for craft brewers who want to experience selling their product commercially without any expense or committment beyond the batches that they brew.

Ok, there's the idea. Can I clarify anything? Criticism and feedback are welcome.

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Old 07-16-2012, 06:02 PM   #2
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There's a place around here that does this. They have their own brewery and taproom, but in the same facility contract brew for 4 or 5 other small breweries.

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Old 07-16-2012, 06:04 PM   #3
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I am no pro brewer, but the first question I would have to ask is where are you going to located. Is there enough people in your area to sustain such a endeavor?

Also what kind of scheduling were you having in mind? Like 10 different brews a month? 20 Brews?

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Old 07-16-2012, 06:22 PM   #4
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Quote:
Originally Posted by tally350z View Post
I am no pro brewer, but the first question I would have to ask is where are you going to located. Is there enough people in your area to sustain such a endeavor?

Also what kind of scheduling were you having in mind? Like 10 different brews a month? 20 Brews?
Tally, good questions - I'm in Northern Colorado outside of Fort Collins. We are a big beer community. We actually have at least four homebrew stores that I know of in a 15 mile radius, a hops farm, a number of clubs, and I've lost count of the taprooms and breweries we have. The number of hobby craft brewers must be strong to support the market already in place.

As far as the number of brews a month, I haven't run any financials, but I would think having between 5 and 7 on tap at a time would probably be enough for a typical visitor to the tap room, especially if you want to give your craft brewer an opportunity to recoup their batch expenses. More than that, and I think that would put your craft brewer at a disadvantage.

I could imagine, however, that if a craft brew is well received in the tap room that you could renew it for another run, and maybe even strengthen the opportunity for the craft brewer. Or, if that craft brewer is well received, then s/he could produce something else at another date with their name attached to it.

Does that help?

BigBeer - yes, I've seen those models too. I'm suggesting that that 4-5 rental contracts become the primary business as opposed to secondary, and that you give those contracts access to your taproom for sales. Is that the same as what is in your area?
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Old 07-16-2012, 06:58 PM   #5
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It sounds good in theory. That's a lot of capital you want to raise ahead of time though and I just don't see it happening. You would have to charge a lot for brewing time and that would probably scare off most people right there. If brewing time is too expensive, the customer won't make much profit on their beer. On the other side of the coin, if brewing time is economical enough to make it worth while, you won't get enough capital up front to fund the project (and that's if you even find some people that are interested). Even if you keep the brewing set up simple and cheap and find a cheap place to lease, you still need fermenters, kegs, cooling equipment and refridgeration. The customers (and yourself) will need somewhere to ferment and store their beer in the interim and that's where most of your capital will be spent. Personally, I think you would need a viable nano first and foremost and then lease brewing time on the side if production allows in order to make some extra money while your equipment sits idle. Just my $0.02. I'd love to start a nano myself. I have a one bbl set up already, but the rest of the stuff you need is just way out of my budget.

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Old 07-16-2012, 07:25 PM   #6
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BBL - You're thinking along the same lines as me. That entry-point price to the brewer is really the key. Rather than them trying to make a profit, I think the bigger issue is them breaking even on their upfront costs through sales in the tap-room.

I don't think I would take the big plunge into my own nano until I was either retired or independently wealthy!

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Old 07-16-2012, 07:31 PM   #7
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Since your in a location with alot of nanos, and micros, how are you going to differentiate yourself from the others. I am sure that some of them around that area do this on the side so you are going to have to be cheaper than them which may not be economical for you. Like BBL said it is going to take a good number of fermenters which will take up space and your potential to sell your commercial beer.

What size system are you considering? Will it be 5BBL? 7BBL? One thing you could look at is if you do have a large system I am sure you must have a pilot system to test the batches. Maybe you could get people from the community to produces there own beer on that system. Even if it is 1 BBL or maybe smaller.

People who are interested in doing this may look at producing 5 or 7BBL as a large feat and may be scared away from it. Remember you want to keep as wide of a market as possible.

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Old 07-16-2012, 08:14 PM   #8
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Tally - in regards to size of system, I have no idea. The inverted concept as the primary business, however, is one that I haven't heard of before. I'm sure there are people who rent out their systems, but not who rent and also serve (as far as I am aware!)

The intention was really to target hobby and craft brewers who would never be able to brew and sell their beer, but would want to try at a manageable scale and controlled cost with a tap-room already set up for distribution. I do think people would "pay" to brew a batch or two of their beer commercially to see it in a taproom and enjoy the experience of people buying and commenting on their beer. And then, build a schedule of said brewers over a year.

The tap-room market becomes people who are interested in a continually rotating selection of beers, or who are fans of particular craft brewers (again, people who aren't even up to the nanobrew scale).

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Old 07-16-2012, 09:22 PM   #9
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how would the legal stuff work? Who would have the license and be responsible for the tax payments? Could the brewery be separate legally from the brewer? I'm not sure how the tax and license folks will like that. They want to be sure that they get every last bit that they are owed.
The other thing, is who will pay the overhead on the taproom if several of the on-tap offerings are terrible at the same time?
It sounds like fun, but I don't see a business case that would get me to invest..there are too many uncontrolled variables.

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Old 07-16-2012, 10:15 PM   #10
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Campings: I appreciate your response. I really don't know the answers, but for sake of conversation, I'll make an attempt:

1) I assume everything would be done under the brewery/tap room license and tax ID. Think of it more as a craft brewer paying to have their recipe brewed at the brewery, and then reimbursed based on sales. The tap room is really in control of everything.

2) Regarding taxes, I think they all belong to the brewery - an indivdual craft brewer would probably fall under the "hobby" sections of the tax code, which has specific provisions when they file. The brewery could probably provide an end of year statement for the craft brewers individual return. I do not think the brewery would be responsible for any witholdings on the craft brewers behalf. The craft brewer, if anything would probably have a "hobby loss" or net zero. Any income to the craft brewer would probably be so small that it wouldn't make a difference.

3) Regarding taproom overhead, here's my rationale (feel free to point out the flaws) - when a brewery makes a batch, they hope to sell the whole batch to recoup their production costs plus overhead. For easy math, let's say you typically get 240 pints out of a barrel, which you sell for $4 each. A 1 barrel batch has as a $960 income potential, and all overhead is paid from that income upon sale of the beer. (Am I totally off on that? Because tell me if I am). So, if you pre-sell that barrel to a hobby craft brewer (let's say for the same $960), then the majority of the brewery's overhead would be covered by that transaction with the craft brewer. Then, the majority (all?) of the income through the sale of the beer on tap would go to that particular craft brewer (really just offsetting their $960 investment). These numbers could be fudged to make them fair and workable (Maybe less up-front on behalf of the craft-brewer, but a different split of sales).

4) Regarding "poor tap offerings" - great point. Four thoughts: 1) from the brewery's perspective, income from that batch has been maximized (it was paid by the brewer beforehand), and so if it doesn't sell, the craft brewer wouldn't recoup their expense. 2) The biggest damage to the brewery there is reputation (customers not wanting to come back). 3) I think if there was an equipment malfunction, then either you brew again at the brewery's expsense or return the craft brewer's money. (Fair is fair). 4) How fun would it be to sample hobby brewers recipies and then invite good ones to brew one at this tap room?

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