Should I open a Supply Shop?

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wolf08gang

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Okay, I'm giving some very serious consideration to opening up a homebrew supply shop in Excelsior Springs, MO.

I have some capital, I shouldn't have to borrow. I have found a storefront for a very reasonable amount of rent in a 100 year old building in our historic downtown district. The city has spent tens of millions renovating downtown, and has a festival about every other month on the street that I would be located at. I've requested info from a couple of the supply houses. The nearest homebrew shop is 20 miles away. The nearest competent homebrew shop is 30 miles away.

The downside: I'm pretty nervous about blowing through my life savings on a business that has the potential to fail miserably. The historic downtown district is not exposed to huge amounts of traffic on a regular basis.

I figure I would have to run a real storefront, and a cyber storefront. I think to be succesful, I would have to advertise locally, and on the web. I think I would have to get tied in with the Kansas City area brewclub, and host events for them. Perhaps look into offering tastings and demonstrations during the festivals.

Give me some advise. Talk me out of it. Push me over the edge. Shopowners, share some sagelike wisdom.

Oh, and the concrete company I have worked at for the last 3 years just went up for sale. My job isn't looking really stable right now.

Thanks,
Wolfie
 
Do it. Create your customer base. People don't just drive around and spot a homebrew shop, then pull over and buy supplies. They come to you with a plan in mind. Advertise the hell out of it, run specials on beginner kits, treat every customer like they are a king, and you should succeed.

Oh, and don't expect to make a lot of money.:D

Also, I reccomend selling tobacco or something that keeps customers rolling in even if the brew business is slow.

Good Luck!
 
I'm not big on Missouri beverage laws and such, but is it possible to combine this in any way with a specialty beer? They do it in WA state in a few places?
 
My LHBS isn't very friendly.... so I only go if I HAVE to. Otherwise I order.

So I'd say good customer service would go a long way. Also is there a demand for a LHBS where you are at? Do you know a lot of local brewers?
 
If you have any brew pubs then try to do a survey and see if you have many brewers in town. You need a certain following if you are to make a go of it. Maybe first try to organize a brewing club and see how many apply. At least you will make friends and see if there is interest.
 
If you can offer a service as well as the goods then you'll keep and attract customers.
Make them feel welcome.
I'd do it.

And make sure you have good inventory.
 
I think you better do a lot of research before you invest any time or money. I'm from NJ and the only successful brew supply house that I'm familiar with in Jersey ( and we are the most densely populated state in the country) also doubles as a brew on premise. Excelsior Spring, MO doesn't sound like a thriving metropolis. Do you have a big enough demand within a commutable area. People are not going to travel too far when they can order on the internet. How are you going to get the word out to the brewing community? Are there any brew clubs in the area? You must ascertain what your demand will be? Don't count on recruiting new brewers, I don't think you can talk people into brewing, you may get a few, but the curious don't equate to repeat business.
 
PS If you want to start a new business, the only thing that sells is sex, pets and kids. If you can figure out how to combine all three you may have a gold mine.
 
Only people who are going to buy are homebrewers. I'd do some serious research and see who is in area interested in brewing. Of course there will always be new people brewing, but if you've got 2 brew supply stores within 30 miles, I'd say the market was already saturated. I have to drive over an hour to get to one (but a nice one!)

If you think you can make a go of it, advertise like hell! You HAVE to get people to know where you are, and what you are selling. Then make sure you treat people right. nobody likes an uppity LHBS person, even if they know what they are talking about. It's too easy to buy online nowadays. Which leads me to the last point:

Sell online. There will be some initial outlay of cash to do this, but from there it's a great way to reach out without spending much money.
 
One idea is to combine your homebrew store with another popular item.

Not sure about your area, but wines are always a good bet these days. Find out how hard it is to open a good wine shop and then offer homebrew stuff as well.

Have monthly wine tasting, cheese nights, .... whatever it takes to get people in.

It would be neat to have a brewpub but I bet it is easier to sell bottled products than to serve alcohol. Plus, you could offer quality microbrews to the locals. It would be your choice to sell BMC ;)

Bonus is that you will be in the Antique District. That almost always boosts the perceived quality of your product.
 
Brew-Happy said:
Bonus is that you will be in the Antique District. That almost always boosts the perceived quality of your product.
Click to expand...

I have no advice of value to offer, but this caught my attention in your OP too. It sounds like a perfect location if you choose to go ahead. :)
 
Special Hops said:
Make sure there are enough homebrewers around your area to keep your business afloat.
Click to expand...

This is definitely important, but can be solved with beginner's classes in homebrewing!

Offer a free class in brewing beers from extracts as soon as you open. Advertise it as "Ever been interested making your own beer? Join us on Sat to watch how it is done! It is as easy as boiling water....almost :)"

Then offer monthly classes on High OG vs Low OG beers, going AG, First Time Keggers, Seasonal Beers,.... even Sodas! The benefit is building your own customer base AND selling the kits and equipment to those who jump in after the class. The biggest bonus is that YOU get to take the beer home for yourself, families, or friends!

I think helping the noobs in your area will build your best loyal customer base. Also, try to develop a monthly e-mail flyer to keep them reminder you are in the area.
 
Some useful information from the Home Wine and Beer Trade Association.

Want To Open A New Homebrew & Winemaking Shop?

Before you spend too much time on a business plan, here are a few calculations to determine if your market is likely to support a retail supply shop.

The first rule in deciding whether or not to open a homebrew supply shop is DON'T MAKE ASSUMPTIONS. The second: DO YOUR HOMEWORK. If your reason for opening a shop is "there isn't one in town and I have a lot of friends who like to brew," that may not be reason enough.

Demographics are accurate -- you may bend them, but you can't break them. The easiest demographic to find and work with is population. Experience shows it takes between 250,000 and 500,000 people to support a "stand-alone" homebrew supply shop. Here's how the numbers break down based on industry estimates.

There are between 500,000 and 1 million homebrewers in the United States. There are estimated to be at least 4 million home winemakers in the United States.
The average homebrewer spends between $100 and $150 per year on his/her hobby. (This represents an average of those who get a kit for Christmas and never brew, to those who brew every week for a while.)
The average home winemaker spends between $100 and $150 per year on his/her hobby.
It takes a minimum volume of $100,000 per year at retail to support a shop. Here's why:
Cost of goods, including freight ..... $60,000

Rent & utilities ...................................... 12,000

Promotion ............................................... 6,000

Net ......................................................... 22,000

And you haven't paid anyone a salary yet.

If you are the owner/operator, $22,000 may keep you alive, but it may not be enough to make you a happy, independent business owner. However, if you double your volume to $200,000, the net rises by $40,000 because the cost of goods is the only number that applies to the second $100,000.

What does it take to get volume to $100,000 given the above parameters? Using the most conservative numbers, you'll need 1,000 brewers and home winemakers spending $100 per year for a volume of $100,000. If there are one-half million brewers and winemakers, then one in about every 500 people in the country is a brewer or winemaker. If you need a population of 500 to get one brewer or winemaker, you need 500,000 people to get 1,000 brewers or winemakers. If you estimate that each brewer/winemaker spends $150 per year, you need a population of 333,333. If you think there are 1 million brewers/winemakers in the country, and each spends $100, you need a population of 250,000. At the most optimistic, if you estimate 1 million brewers/winemakers spend $150 per year, you would need a population base of 167,000 to make $100,000 in annual revenue.

It's our best guess that the low end of these numbers is too optimistic and the high end too pessimistic, but we are not far off. This example only brings you to $100,000 in volume. To reach the more desirable $200,000 mark, double everything. At the very best, if you'd like to open a shop and have it produce meaningful income, you'll need a good quarter million people in your potential customer base, at least in your market area, free of competition.
 
Austinhomebrew said:
Some useful information from the Home Wine and Beer Trade Association.

Want To Open A New Homebrew & Winemaking Shop?

Before you spend too much time on a business plan, here are a few calculations to determine if your market is likely to support a retail supply shop.

The first rule in deciding whether or not to open a homebrew supply shop is DON'T MAKE ASSUMPTIONS. The second: DO YOUR HOMEWORK. If your reason for opening a shop is "there isn't one in town and I have a lot of friends who like to brew," that may not be reason enough.

Demographics are accurate -- you may bend them, but you can't break them. The easiest demographic to find and work with is population. Experience shows it takes between 250,000 and 500,000 people to support a "stand-alone" homebrew supply shop. Here's how the numbers break down based on industry estimates.

There are between 500,000 and 1 million homebrewers in the United States. There are estimated to be at least 4 million home winemakers in the United States.
The average homebrewer spends between $100 and $150 per year on his/her hobby. (This represents an average of those who get a kit for Christmas and never brew, to those who brew every week for a while.)
The average home winemaker spends between $100 and $150 per year on his/her hobby.
It takes a minimum volume of $100,000 per year at retail to support a shop. Here's why:
Cost of goods, including freight ..... $60,000

Rent & utilities ...................................... 12,000

Promotion ............................................... 6,000

Net ......................................................... 22,000

And you haven't paid anyone a salary yet.

If you are the owner/operator, $22,000 may keep you alive, but it may not be enough to make you a happy, independent business owner. However, if you double your volume to $200,000, the net rises by $40,000 because the cost of goods is the only number that applies to the second $100,000.

What does it take to get volume to $100,000 given the above parameters? Using the most conservative numbers, you'll need 1,000 brewers and home winemakers spending $100 per year for a volume of $100,000. If there are one-half million brewers and winemakers, then one in about every 500 people in the country is a brewer or winemaker. If you need a population of 500 to get one brewer or winemaker, you need 500,000 people to get 1,000 brewers or winemakers. If you estimate that each brewer/winemaker spends $150 per year, you need a population of 333,333. If you think there are 1 million brewers/winemakers in the country, and each spends $100, you need a population of 250,000. At the most optimistic, if you estimate 1 million brewers/winemakers spend $150 per year, you would need a population base of 167,000 to make $100,000 in annual revenue.

It's our best guess that the low end of these numbers is too optimistic and the high end too pessimistic, but we are not far off. This example only brings you to $100,000 in volume. To reach the more desirable $200,000 mark, double everything. At the very best, if you'd like to open a shop and have it produce meaningful income, you'll need a good quarter million people in your potential customer base, at least in your market area, free of competition.
Click to expand...

Some of this doesn't make sense to me. You say there are between 500,000 to 1 million home brewers and at least 4 million home wine makers. Lets assume 500,000 home brewers and 4 million home wine makers. Thats 4.5 million people who form the national customer base for homebrew supply shops. There are currently 300 million people in the U.S. 300 million / 4.5 million = 67, so one in every 67 people in the U.S. is either a homebrewer or home winemaker. If they spend $100 per year on average, then you only need a local market population of 67,000 to generate $100,000 per year in revenue, much less than the 250,000 you came up with. Am I missing something?

Some people both brew and make wine, so there would be fewer than 4.5 million unique people in the national customer base. But its probably not unreasonable to assume that people who do both tend to spend more on average than people who do only one.

Something else that should be noted. If wine makers outnumber home brewers by 4 or 8 to 1, then wouldn't a successfull LHBS have to cater more to wine makers than to homebrewers?
 
Makeyourownathome.com
a place close to me
They are kind of a DIY food place. Make your own jerkey, yogurt, beer, wine, ice cream, etc. Im the "beer guy" but people come in for loads of other stuff there.
 
To me it's all about customer servive and prices...naturally.

When I say "customer service" I mean the salespersons experience and knowledge. How experienced are you? Rhetorical question, you don't have to answer.

Our one and only LHBS caters mostly to wine makers.

I've known for years that I can't go in there with a question because they don't know the answer. Usually I just call them and ask it they have a particular item in stock and for them to hold it for me.

I'm not a beginner so my questions are far and in between, but a beginner should be asking all kinds of questions about brewing products, which ones are better than the other, what an ingredient does, what's the result if that ingredient isn't used, etc. If the salesperson can't answer the most basic questions beginners will be asking you will lose your customers fast.

Will you be selling kits, extracts and all-grain? If so, that's a lot of knowledge you need to know up front in order for your customers to trust your replies.

Good luck.
 
While I think it's a great idea, let me play Devil's Advocate and throw out a few things you need to consider:

1) your profit margin will be minimal, most local LHBS that I have seen are a part time operation with hours in the evenings and weekends.

2) with the continued hop shortage you may have a hard time getting a hops contract and the contract you do get may be extremely limiting in how far you can grow your business

3) with the current economic situation, people are looking for ways to cut down on their spending and hobbies are typically the first things to go.

I'm not saying don't do it, I'm just saying now might not be the most opportune time to start.
 
Next year hops will be few and far between. I have to buy next years hops this year or there will not be any hops. 2011 looks like the end of the hop crisis.

There are a lot of country wine makers that will only come in for advice. They don't even use yeast. You will have nothing much to sell them.

The report I posted was dated but still useful.

Let me know if you have any questions.

Forrest
 
+1, I'm more like a $150 per MONTH person myself.

I want to open a LHBS, or at very least, work for a LHBS, but our local doesn't hire, he runs it himself, and the market here is just not terribly booming. I'm guilty of doing most of my shopping online, though, so I'm not exactly helping the situation.

I'd also like to get involved with a brewery, but we only really have two operations in town - one is big, and already has a TON of employees active in homebrewing, so if I really wanted to get on there, it'd be part time and I couldn't sustain myself. The other ... well, I've never liked their beer, and frankly think it tastes infected/faulty most of the time.

I just wanna stare at beer all day, is that so wrong? :(
 
A lot of people have had some great bits of advice. Doing your homework is essential with any business, as is making sure you've got the clientele to keep you in business. It's not like having a gym, where someone gets a membership and pays you even if they don't show up to work out.

Maybe a good idea would be to start with an online business and operate it out of your home, thus reaching a good sized clientele, and when there's consistent business, give it an actual physical storefront?
 
Another idea is to try partnering with an already thriving business that can give up some of their retail space. Sharing overhead is nice. If you have any liquor stores in the area, especially ones that have a decent beer selection would be nice.
 
Bobby_M said:
Another idea is to try partnering with an already thriving business that can give up some of their retail space. Sharing overhead is nice. If you have any liquor stores in the area, especially ones that have a decent beer selection would be nice.
Click to expand...

+1 to that. I live in Fairbanks, AK, with an area population of about 100,000. We have TWO homebrew stores in town, and both are housed within liquor stores. They don't have the best stock, but I always check there first to pick up what I need, both to support them, and to save on shipping. I would think that would be a workable solution, and would also give you a chance to try things out before you jump in....not that there is anything wrong with just jumping in :D
 
Bobby_M said:
Another idea is to try partnering with an already thriving business that can give up some of their retail space. Sharing overhead is nice. If you have any liquor stores in the area, especially ones that have a decent beer selection would be nice.
Click to expand...

As a retailer, although not in the home brew arena, that would be my advice. How hard would it be to get a liquor license in your area as well? That way you may have the opportunity to spread the costs out a bit. Expect to have to hire someone if you do. Deliveries come in the morning, and business comes after lunch, and long into the night. Expect an market average markup to be in the 15-20% range.

In this area the beer sales are still 70% BMC, upscale beers are coming on strong, but not there yet. Again in this area, that is where your better markup comes in.

Do you have another hobby that you could tie into this? Someone mentioned home made stores, home made yogurt, cheese, wine, candles supplies.

If it was me, and I was hell bent for a home brew only store, I would rent the smallest commercial building that I could find and start selling internet first, and offering limited (weekend) shop hours. Before you do so, please take a look at what your markup will be in the kits and products that you are buying from someone else. COGS, I suspect, is going to be a deal breaker.
 
Thanks everyone for the encouragement, and criticisms.

Please keep it coming.

Fortunately, my overhead will be fairly cheap. I'll only be paying $500/month for 800 sq ft + the stone cellar. In looking into wholesalers, most require a physical storefront. I do think internet will have to provide the bulk of my business untill I build a customer base.

As far as offering other products, I'm giving some consideration to aquiring a liquor license to sell premium beers, as their is no local competition on that.

I've also considered getting a microbrew license and selling my own product (beer, wine, and maybe sodas), but I think that may have to wait till I get established.
 
I can't imagine opening a homebrew store. Of course, location is everything, and mine presently stinks. I absolutely applaud you for doing the homework before jumping into a pretty risky business proposition.

How many homebrewers do you know in the local area? Is there a club that might be able to become a sort of instant clientele?
 
+1 on getting in with an established brew club

another +1 for either getting in with an established liquor store or starting your own.

The LHBS here in Corpus (well...there's 2 but one of them is SOO bad that I don't even consider them) is part of an existing local chain of liquor stores AND tied into our brew club. It's also kinda cool bc they have a guy come in from the club every Friday and Saturday evening to just hang out and answer questions....to my knowledge they do it for free and rotate who does it.

Good luck!
 
For all the legitimate cautions mentioned, there aren't too many businesses where you can say "I know this will thrive," but someone is opening a new business every day in the US. If after additional research, you're still on the fence, I'd say go for it.
 
If there is no local brewclub (you should know by now as a brewer and if not, shame on you for not wanting to brew socially ;-) then you would want to start one and use the shop as a meeting location for as long as you can.

I'd also offer as many brewing classes as possible to drum up interest.

I'd consider doing it part time if possible so you can work full time to pay the bills. I think you'll be lucky if your HBS income was enough to cover your expenses at first.
 
Don't know much about staring legit business, but I'd say if you do it, don't blow your life savings. Get loans and use your savings to pay them off if need be. At least you're still getting interest on your savings. Then again interest on the loan is probably more but at least if you have to cut n run, you'll have some cash in your pocket.

Maybe consider a L.L.C. just incase it fails so you wont be f&$ked for the rest of your life.

I'm taking a business class this fall which means I don't know jack. :drunk:
 
+1 to the advice to combine homebrew supply with something else. I have personally been to two different homebrew shops, both of which are combined with other things. One is also a coffee shop, the other is also a liquor store.

If you can get a place on main, then I would recommend the coffee shop or ice cream parlor combination. Turn it into a gallery where local artists can hang their work on the walls and sell at a commission. Then your brewing equipment can take up a corner in the shop and you'll be able to give your customers some personal support.

Have an online section and be willing to ship at-cost to your customers. Places that jack up shipping (or their prices to account for shipping) are statistically less-successful. Have a healthy stock of basic equipment, specialty and base grains, dry and liquid malt extracts, and kits (either pre-packaged, or of your own design).

The key will be advertising. Give people a reason to come to your store, rather than go to even a closer store. Be there as often as you can personally, and introduce yourself as the owner. Give some random people discounts, and I guarantee you they'll be coming back. Also, crush their grain for them free.

My 2cents, hope it helps!
 
How many HB shops are in KC and are they any good? Your close enough to KC that if there arent any good supply shops people will drive out there. Especially if you make it worth their while with good customer service, fresh ingredients and competitive pricing. There is a guy here in STL that has a no store front business. He has quite a large inventory and he buys grain by the pallet for AMAZING bulk rates. (40 bucks for a sack of MO 25 for reg 2 row) He also carries everything else that you would expect a HB shop to supply except he basically runs it out of his basement.
 
Bobby_M said:
If there is no local brewclub (you should know by now as a brewer and if not, shame on you for not wanting to brew socially ;-) then you would want to start one and use the shop as a meeting location for as long as you can.

I'd also offer as many brewing classes as possible to drum up interest.

I'd consider doing it part time if possible so you can work full time to pay the bills. I think you'll be lucky if your HBS income was enough to cover your expenses at first.
Click to expand...

+eleventymillion

if there is no homebrewclub, start one, get em hooked on brewing beer then supply the drug.. i mean supplies. :)
 
Keep in mind with an Internet storefront you have access to customers worldwide & not just locally. Meaning don't let local population sway your decision too much.

I'd assume your highest margins will come from equipment as opposed to ingredients. Newer brewers tend to spend alot of money on upgrading their equipment (I do).

Being a "generic" homebrewing shop will put you in direct competition with all other online homebrew sites. Find a niche within the brewing community. Be the one store everyone goes to for XYZ be it service, specific equipment or otherwise.

There are alot of brilliant minds on HBT and several of them build their own brewing devices. One idea might be to tap into their expertise & labor by helping them sell their parts/services through your storefront.

I'd say building a niche among the brewing world would be the most beneficial for a new homebrew store. Example: I go to store A for most my ingredients & stuff, but Store B (your store) is the best place to get product or service XYZ. Hope that makes sense.
 

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