Contract Brewing-Please Help

So,
I've considered entering a business venture with a friend of mine. Im an avid homebrewer and ive gathered several great recipes in my time two or three of which are great. I have always wanted to start a brewery, but would rather test my beer on the market first. Thats why i'm looking to possibly contract brew 20-30 bbls or so.

What i was wondering:

1. What am i looking at investment wise for a fairly standard batch of beer (recipe-wise) for 20-30 bbls w/ ALL expenses i would have to pay including packaging, brewing ingredients, brewery space rental, etc.

2. What kind of licensing do i need? Will the contract brewer take care of all that through my expenses?

3. I would like to be there during the brewing process to help and oversee the brewing. Im a brewer, not a business man, i want to do this primarily out of the passion i have for brewing and not to make a ton of money. Is it feasible for the orig brewer to be there?

Any info would be a great help, especially regarding initial investment costs, thanks.

Cheers!
-Zach

probrewer.com

http://thebrewingnetwork.com/shows/621

nicholsbrewing said:

So,
I've considered entering a business venture with a friend of mine. Im an avid homebrewer and ive gathered several great recipes in my time two or three of which are great. I have always wanted to start a brewery, but would rather test my beer on the market first. Thats why i'm looking to possibly contract brew 20-30 bbls or so.

What i was wondering:

1. What am i looking at investment wise for a fairly standard batch of beer (recipe-wise) for 20-30 bbls w/ ALL expenses i would have to pay including packaging, brewing ingredients, brewery space rental, etc.

2. What kind of licensing do i need? Will the contract brewer take care of all that through my expenses?

3. I would like to be there during the brewing process to help and oversee the brewing. Im a brewer, not a business man, i want to do this primarily out of the passion i have for brewing and not to make a ton of money. Is it feasible for the orig brewer to be there?

Any info would be a great help, especially regarding initial investment costs, thanks.

Cheers!
-Zach

Click to expand...

Well, contract to some place that can brew like you do and will use similar water, otherwise you may end up with a dramatically different beer than those you now consider great.

nicholsbrewing said:

So,
I've considered entering a business venture with a friend of mine. Im an avid homebrewer and ive gathered several great recipes in my time two or three of which are great. I have always wanted to start a brewery, but would rather test my beer on the market first. Thats why i'm looking to possibly contract brew 20-30 bbls or so.

What i was wondering:

1. What am i looking at investment wise for a fairly standard batch of beer (recipe-wise) for 20-30 bbls w/ ALL expenses i would have to pay including packaging, brewing ingredients, brewery space rental, etc.

2. What kind of licensing do i need? Will the contract brewer take care of all that through my expenses?

3. I would like to be there during the brewing process to help and oversee the brewing. Im a brewer, not a business man, i want to do this primarily out of the passion i have for brewing and not to make a ton of money. Is it feasible for the orig brewer to be there?

Any info would be a great help, especially regarding initial investment costs, thanks.

Cheers!
-Zach

Click to expand...

If you're not in it to make money, stop now.

Seriously.

Because unless you have the fortunate circumstance of being independently wealthy, you're not cut out for the business. Even a one-off 30bbl of bottles is tens of thousands of dollars, once you factor in licensing, label approval, printing, packaging, and - above all - marketing.

Actually, contract brewing is the easiest, lowest-risk way to enter the business. That's how Jim Koch got started - one contract-brewed batch of Sam Adams.

But, like Jim Koch, you need to not so much worry about the beer and instead worry a lot about selling your product. Clever labeling, finagling retailers for shelf space (and which shelf they put you on), schmoozing bar managers, hour after hour after day after day pounding pavement, racing up mileage on your car, selling your product. That kind of work absolutely requires 125% commitment. Usually that level of commitment comes from needing to make money on the product in order to eat.

That's why I say, "If you're not worried about making money, stop now before you piss away the better part of a decent mortgage."

Commit. Commit to being a businessman. Businessmen succeed in the business of beer. Brewers fail. Brewers have failed since the microbrewery revolution started in 1979, unless they are also businessmen or have partners who are.

Sorry if this is a bit harsh. I've heard this song soooooo many times before. I don't want you to lose your leg later, so I'm smacking you with a rolled-up newspaper now.

Cheers,

Bob

Bob said:

If you're not in it to make money, stop now.

Seriously.....Bob

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I'd take what bob is saying into careful consideration, he really does know to what he's talking about...click on the link in his sigline....that's not just decoration on his profile.

Obviously i'm in it to make money. I wouldn't even play with the idea if i wasn't going into it without being 100% sure im going to devote all my commitment to it. My buddy is a business major in entrepreneurial studies from the University of Wisconsin, thats why i'm bringing him on board. Im also a graphic designer and will do all my own packaging designs. Like i said im just getting the feel for what kind of investment i would have to make and if its even feasible.

nicholsbrewing said:

Obviously i'm in it to make money. I wouldn't even play with the idea if i wasn't going into it without being 100% sure im going to devote all my commitment to it. My buddy is a business major in entrepreneurial studies from the University of Wisconsin, thats why i'm bringing him on board. Im also a graphic designer and will do all my own packaging designs. Like i said im just getting the feel for what kind of investment i would have to make and if its even feasible.

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im not sure how much it would cost for contract brewing but if you were just using it as a jump start to operating your own brewery you are looking at about a million dollars for your first year at your own brewery if you plan on doing 7bbl's. its expensive to get into and since beer is under priced it isnt as lucrative as it should be. there are a few brewers out there that will help you if you send them an e-mail with your intentions of eventually opening up a brewery. they will be able to give you a much better idea of how much things are going to cost, the laws, money management, ect. some brewers are dicks and wont help you at all though. it never hurts to ask. i know peter at alesmith will go out of his way to help.

+1 on what hermit said. You seem serious, but you'll have to do some work to find a brewery that matches your style. In any case, definitely let us know how it goes. </OverMyHead>

I honestly think the best advice in this thread is to not look for this information on this forum. There's a probrewer.com for professional brewing.

There is that. Probrewer is the place to go for stuff like this. However, some of us can be of at least some help.

I'm glad you're saying you're serious about this. Because we're talking a lot of money. Not as much as building a brick-and-mortar brewery or brewery/restaurant, but still a lot.

You're looking at 250+ bbl per batch. There is very, very little excess capacity right now in the industry except at places like The Lion in NE PA. The Lion has...guess? A 250bbl brewhouse. That's 250bbl or 7,750 gallons or approximately 3,500 cases of beer per batch. Even at a conservative estimate, you're looking at ~$50,000 just for the beer. Now factor in transportation, label production, label registration with TTB, attorney fees, and - above all - marketing in the form of a shrewd campaign usually involving billboards, media spots in the target market, sponsorship, breweriana freebies like coasters and neons...You're easily in over $200,000 - and you will probably still fail. Them's is just the odds!

Here's the kicker - it's easier to get bank financing if you're after a cool mil to start a brick-and-mortar place than it is to get ~$200,000 for a project like this. With a brick-and-mortar business, the bank can seize the hard assets - building, brewhouse, restaurant equipment, furniture - but in your situation, there are no assets. What makes the effort singularly attractive to you makes it singularly unattractive for lenders.

There's a lot more to this, but now we're teetering on the brink of stuff for which I charge consultancy fees.

I wish you the best of luck - really I do. It's a fantastic way to break into the brewing industry. Like I said earlier, Jim Koch did it. Now he's got BIG production breweries all over the place. It's less exposure than building a real brewery. But it's still expensive to do it right, and nobody wants to lend to you. It's 80-hour-per-week work, and the odds are you'll still fail. But that's true for pretty much all small businesses, so what the hell?

Cheers,

Bob

Bob said:

and - above all - marketing

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That really is the bottom line. You can have a great beer but people have to know about it AND want it.

Hermit said:

That really is the bottom line. You can have a great beer but people have to know about it AND want it.

Click to expand...

+1

marketing beer is probably very expensive especially with all the big boys and their advertising campaigns and sponsorships etc.,etc

I am looking to start a contract brewing operation in Charlotte, NC. But my understanding of a contract brewer seems different from what I am reading.

I understand it to be more like a General Contractor. Where I would take care of the licensing and permits and brew for others to market, sale, distribute their product. Other than what the state would require for someone who sales their product regarding license and permits of course.

When my work would be done, they pay for their product. With a down payment to cover the ingredients. There is of course the initial investment for the equipment and such on my end and it would be my responsibility to market my services, but there would be very little cost associated with the actual brewing because I would collect enough money up front to avoid getting stuck with a bill or someone's beer.

So I have 2 questions.

1. is there actually a market for such services?
2. is my understanding off center on how this would work?

Thanks,
Stew

You've got it flipped. You're talking about brewing the product, about being a brewer.

I think you'll find it extremely difficult to operate focusing only on brewing under contract. In fact, I can't think of a single brewery which doesn't brew its own brands; contract brewing is done if the brewery has excess capacity. Some breweries may make most of their money by brewing under contract - The Lion in Wilkes-Barre springs to mind - but most craft-sized breweries only brew under contract when they've got capacity to spare.

If you're talking a small operation, one idea is to have your liquor lawyer investigate how easy it is to market and sell a particular beer as the signature beer of taverns. For example, you brew an Amber Ale and it doesn't sell very well. You may be able to sell it to McIrish Pub downtown as their "house" beer, which they call "Old McIrish's Special" or something. They agree to buy a whole batch and store the kegs themselves. For a 7-15bbl brewery that's quite feasible. And you can continue to sell it as "Stew's Amber Ale" in other streams.

Either way, yes, you have the expense of the physical plant and overhead. Yes, your contract would pay for the ingredients, etc. But it's not a free ride, and even if you're brewing your butt off it's a tough row to hoe. Y'know, just like any other small business.

Bob

Bob said:

Now factor in transportation, label production, label registration with TTB, attorney fees, and - above all - marketing in the form of a shrewd campaign usually involving billboards, media spots in the target market, sponsorship, breweriana freebies like coasters and neons...You're easily in over $200,000 - and you will probably still fail. Them's is just the odds!

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Pretty Things out of Massachusetts is a contract brewer and the only marketing they have is a slick website and a couple of people willing to sleep in their cars. But what they do have is really, really, really good beer.

nicholsbrewing said:

My buddy is a business major in entrepreneurial studies from the University of Wisconsin,

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Sorry, but this means exactly nothing. He may be a great guy and a genius but undergraduate (and a lot of graduate) degree training doesn't mean a thing.