Nanobrewery..Road to failure

[theveganbrewer]

There was a guy in my town doing that. He closed down after less than a year AND he actually had decent beer. I just think he wasn't making any money between paying to have the beer brewed and having to sell it wholesale to bars. Not much profit margin.....

Yeah that was sort of my point. Un the shirt term no matter what you arw paying to have the beer brewed in a sense, be it in capital investments or contract brewing. If you take out all the garbage of capital and licenses and crap and you sit down with a scenario where you have finished beer and you have to sell it, can you? It helps put people in that position down the road when their dreams are realized and they gave beer in bottles, kegs, and cans. Now what? You aren't making much money on each sale and you've got little to no connections. How do you market, distribute, and profit?

It seems like you either go big or go local over your own bar.

 

[55chevydude]

Truth. Simply because of the low production volume, a nano just can't provide enough income to pay someone's salary. They're really good at paying for themselves, but not much more than that. It's a proof-of-concept hobby business.

Hmmm...then I guess all those nanos out there that have been doing this for a while should take note: Apparently you are all on borrowed time and doomed to fail. No exceptions. The experts have spoken

 

[daksin]

Sorry, but those guys ALL (pretty much without exception) have real jobs that pay their mortgage, like I do. The nano can be profitable, definitely, but if you're brewing 2 kegs at a time, you could have a hundred fermenters and it wouldn't make any difference. They're not doomed to fail, pretty much all of them are MAKING money (hey, a few make terrible beer and STILL make money) but ask any one of those nanobrewers if they're drawing a salary. Not a single one of them will tell you they are.

Since the business pays for itself and a bit more in profit, the brewer can keep a nano running as long as they have the time and energy to work three full time jobs (one to pay the mortgage, one as brewery owner, and one as head brewer- they all take 40 hours a week) plus tend bar on nights and weekends. Most of the money either gets reinvested in the business or banked away for a fuller looking bank account when it comes time to apply for loans.

All those nanos that expanded to full on production breweries? They didn't fund it with all that cash they were making hand over fist- the nano is a great proof-of-concept and an "in" if you have no experience in the industry because lenders want to see experience, and proof that the business is viable (read: plush bank accounts) before they will lend. All those expansions are on credit extended to them by banks. That doesn't make it a model doomed to fail- almost all businesses are built or expanded using loans from banks. It's a great way to "make your own experience" in the industry, a good way to prove to banks a craft brewery can succeed in your area, and a fun way to sell beer to your friends and neighbors, but it's not something to support a family on- it has to be a means to a greater end.

 

[Piratwolf]

I've stayed out of this largely b/c I don't see why the research I've been doing over the year should benefit those who are comfortable resting on their assumptions. So I'll content myself by saying that if you really go and look, there are a number of nanos doing well, period. They aren't brewing 10gal at a time--the ones I've looked at are doing 2-4BBL--but they are actually making a profit. I know of at least one that is paying salaries for 4 full time brewers (not people with 3 jobs) and distributing rather than selling across the bar. The regulations on this industry are so varied and so wide-ranging that those who can find the right niche sometimes are hard to comprehend from outside.

Don't mistake me: I think the general assessment of nanobrewing (either go broke or go big) is probably fair. However, the blanket statement that nanos don't work is, like almost all generalizations, flawed when it hits specific instances.

Now back to your regularly scheduled discussion....
Cheers!

 

[daksin]

I've stayed out of this largely b/c I don't see why the research I've been doing over the year should benefit those who are comfortable resting on their assumptions. So I'll content myself by saying that if you really go and look, there are a number of nanos doing well, period. They aren't brewing 10gal at a time--the ones I've looked at are doing 2-4BBL--but they are actually making a profit. I know of at least one that is paying salaries for 4 full time brewers (not people with 3 jobs) and distributing rather than selling across the bar. The regulations on this industry are so varied and so wide-ranging that those who can find the right niche sometimes are hard to comprehend from outside.

Don't mistake me: I think the general assessment of nanobrewing (either go broke or go big) is probably fair. However, the blanket statement that nanos don't work is, like almost all generalizations, flawed when it hits specific instances.

Now back to your regularly scheduled discussion....
Cheers!

I'd hardly call myself someone willing to "rest on their assumptions;" I'd love to see your data. It just doesn't line up with what I've heard from the nanobrewer's I've talked to or emailed over the last two years.

I think the regulatory environment here in San Diego is about as friendly as you can get for a nanobrewery (tasting room legal, self distribution, no DOH to deal with, pro-beer local government) and clearly there are people doing well here, but even Mike Hess, perhaps most successful of the nanobrewers, didn't start paying employees until the loans for the new 30bbl facility went through. I've talked to a LOT of nanobrewers and have gotten a pretty similar picture painted for me from just about all of them.

On the other hand, few places are as expensive to live in as Southern California. Selling at a similar price point ($5 pints) across the bar, you could probably make enough to live somewhere else, but distribution isn't a pretty picture for nanos, especially if you brew in a state without self-distribution.

Shoot me a PM- I'd love to see the data you're putting together. If anything, just to give me hope. My predictions put us in at making a pretty decent profit our first year, but who knows anything about predicting sales for an untested product, and the market has become increasingly overcrowded since we started this little venture. Oh well- some people have the cash to throw up a brewery in a months, and the rest of us have to work for a living!

 

[Piratwolf]

I'd hardly call myself someone willing to "rest on their assumptions;" I'd love to see your data.

I wasn't aiming that particularly at you. Moreover, if you read the last part of my post, I clearly agree with you that in the big view the generalization is accurate.

On the other hand, few places are as expensive to live in as Southern California. Selling at a similar price point ($5 pints) across the bar, you could probably make enough to live somewhere else, but distribution isn't a pretty picture for nanos, especially if you brew in a state without self-distribution.

This goes to my main point. Each of the several nanos I'm talking about have exceptional laws, regulations, or market factors that lower their costs one way or another. My hat is off to you, sir: opening a nano in San Diego takes much bigger cojones than I can bring to the game.

Shoot me a PM- I'd love to see the data you're putting together. If anything, just to give me hope.

Give me a few days to compile the things I've read and interviews I've heard & get you some links so you can evaluate for yourself. Much of it is compiled from lots of searching the interwebs or podcasts b/c I'm trying to get in the game myself, but I'm in a niche market (Virginia is not exactly San Diego) and have a number of things going for me because of that. It'll probably be the weekend before I get the PM done, but I'll shoot it your way as soon as I can.

My predictions put us in at making a pretty decent profit our first year, but who knows anything about predicting sales for an untested product, and the market has become increasingly overcrowded since we started this little venture. Oh well- some people have the cash to throw up a brewery in a months, and the rest of us have to work for a living!

The bolded words above are right in my wheelhouse--in theory it SHOULD work, but the uncertainty is what gives me nightmares. And I hope the last line isn't aimed at me--as a teacher, I'll be scraping together a little here and a little there.

Cheers!

 

[Brewmech]

If you aren't willing to hustle to get the proper funding and do the proper research into running the business then you shouldn't try to start that business.

you = royal you.

The money is out there. The market is prime. If you give up that easily then you are not an entrepreneurial type. Not everyone should run a business, especially not a brewery. Red tape is everywhere. If you just want to brew good beer, then go work at a brewery or homebrew. If you want to own/operate a business start hustling and learn everything you can. Again, not everyone should run a business.

 

[Phunhog]

I don't know if I said it in an earlier post or not but I believe nanos have MUCH more in common with small wineries than they do breweries. Limited production, limited distribution, unusual products, and an absolute passion for their product. What I think we can learn from them is that most of them were started by people who were successful in some other industry. They already had the money to put into the business to some degree and it's more a labor of love than it is a "career". In fact I would say that most small wineries are NOT looking to get bigger. I see nano's as an extension of a very cool hobby. Yes..it is absolutely a business but that doesn't mean you have to keep getting bigger as long as you enjoy what you are doing. My vision is something like this...http://carmelvalleybrewing.com/carmel_valley_brew/carmel_valley_beer_brewer.html

 

[daksin]

Unfortunately, the vast majority of us can't sell our product at $40/bottle. Also, small boutique wineries are still operating at production levels far above a nanobrewery, closer to a brewpub, which has minimum production mandated by law.

If your money is made and you need a neat hobby business for when you're retired, honestly I can't think of anything better. Unfortunately, I'm not retired and I have no money, but who cares!

 

[theveganbrewer]

Would brewing sours help at all? You could sell for more money and with aging have a big pipeline.

 

[daksin]

Would brewing sours help at all? You could sell for more money and with aging have a big pipeline.

Sours have an extremely limited market, and aging is actually the problem, not an advantage. They take months to be drinkable and years plus to be great. You'd have to have dozens of fermenters on the nano scale and build up a year long pipeline, more akin to aged whiskey makers (think 12yo scotch). Other more conventional beers turn around in two weeks.

Plus, go find the most expensive beer at your local craft shop. Dollars to donuts it's not a sour- they don't command high prices like big Belgians and crazy IPAs. Also, nobody buys sours. Just weirdos like us.

 

[hopstupid]

Sours have an extremely limited market, and aging is actually the problem, not an advantage. They take months to be drinkable and years plus to be great. You'd have to have dozens of fermenters on the nano scale and build up a year long pipeline, more akin to aged whiskey makers (think 12yo scotch). Other more conventional beers turn around in two weeks.

Plus, go find the most expensive beer at your local craft shop. Dollars to donuts it's not a sour- they don't command high prices like big Belgians and crazy IPAs. Also, nobody buys sours. Just weirdos like us.

cascade sours are 20 bucks a bottle

http://shop.cascadebrewingbarrelhouse.com/product.sc?productId=24&categoryId=2

well worth it they sell a ton online

 

[pdxal]

cascade sours are 20 bucks a bottle

http://shop.cascadebrewingbarrelhouse.com/product.sc?productId=24&categoryId=2

well worth it they sell a ton online

Cascade started out as the Raccoon Lodge and it was a long time before they started brewing sours. Not sure if they turn much profit, but Art Larrance started Portland Brewing too, and owns the Oregon Brewer's Festival so he's got other revenue streams. I doubt somebody could start a nano or brewpub as a sour beer brewery for the reasons mentioned.
I love their sours, and I'm a beer geek too, but I won't pay $20-$30 a bottle for their beers. I just drink them at the barrel house.

 

[Phunhog]

Sours have an extremely limited market, and aging is actually the problem, not an advantage. They take months to be drinkable and years plus to be great. You'd have to have dozens of fermenters on the nano scale and build up a year long pipeline, more akin to aged whiskey makers (think 12yo scotch). Other more conventional beers turn around in two weeks.

Plus, go find the most expensive beer at your local craft shop. Dollars to donuts it's not a sour- they don't command high prices like big Belgians and crazy IPAs. Also, nobody buys sours. Just weirdos like us.

I would agree that the sour market is pretty limited. However it would be something that distinguishes a brewery from others.....assuming your sour beers are outrageously good. I think the key to operating a successful brewery(any size) is to create an experience for your customers. This is where it can be hard for a nano to be successful....most nano's I follow have a little brewery/tasting room in some industrial park. Doesn't exactly ooze charm My city zoning laws are the same way...a brewery(not a brewpub) had to be located in the industrial part of town since it is considered light manufacturing.

 

[daksin]

Meh, I think the folks who frequent the nano scene really dig the industrial vibe. It's neat to set your pint down on a mash tun or FV. It's like being part of the process- a real cool way to be connected to the beer you drink. Definitely not for everyone- let me say that my parents and parents-in-law totally do not get it, but understand it's what people are doing now and have seen how crowded these places get, so they're supportive.

 

[morticus]

Except for some places you can't serve or consume the beer in the same area it's brewed. You have to have a separate tap room away from the brewery.

 

[daksin]

Except for some places you can't serve or consume the beer in the same area it's brewed. You have to have a separate tap room away from the brewery.

Yea, that really wouldn't work for us. Being able to sell at retail in our brewery is key.

 

[Carlscan26]

Depends on the location. There was a place here in town making good beer but it was all contracted. San Diego is a pretty beer snobby town and I think once folks figured out it wasn't being made here, and the only SD location was just an office, sales tanked. Otherwise, it's a pretty safe and inexpensive way to make beer. Thinner margins, but capital expenses are almost nil.

Who was that?

 

[daksin]

That would be Airdale.