Would you invest in a brewery?

[jigidyjim]

I recently started thinking about participating in a beer investment opportunity. In the end, I chose not to, partially because my personality is risk-averse, partially because the min investment was more than I wanted to risk, but mostly because I realized that I had absolutely no idea if it was a good idea or not.

Would you ever consider investing in a brewery? If so, what would your criteria be for determining whether it was a good business plan or not?

 

[ReverseApacheMaster]

I thought about investing in black star co-op in austin a few years ago but it seemed like all you did was give them money and they gave you a discount on beer. I think the minimum investment was like $500. So I had to give them money and then spend more money at the co-op to "make" a profit. Not only is that absurd but impossible since I'm rarely down in Austin.

I don't think free or discounted beer is a great investment. (We all do it at home, right?) I want regular profit payouts and I either need some level of decision-making involvement or really know the owners have the qualifications to handle both the beer and business sides. It's hard enough for one or two people to earn a solid living off a brewery, especially with all the competition out there now, but to have to give up a cut to other people makes it nearly impossible. If the owner-operators aren't getting paid well then that's when bad stuff happens. They don't keep up with quality controls, cut corners, engage in illegal acts, etc. So there needs to be a serious business plan in place and serious businesspeople involved. I want to see people with prior business ownership experience or high level management. I want to taste good beers. I want to see the legal docs. I want to see the charter/partnership agreement. I want to see TTB and state approval. I want to see market comps and projections. I want to see how I get out. To forgo less risky investment opportunities I would need to see reasonable projections for a personal return in the double digits.

It's not that I don't think somebody can succeed without all the experience or formal business plans. I just don't want to invest in that risk myself and forgo less risky investment opportunities.

 

[onthekeg]

I agree with all said above by the Apache. Its not really any different than any other investment. If it looks good, and you trust the numbers are right, did your homework and thought it was sound, go for it.
If not, move on. There will be other opportunities.

 

[jigidyjim]

This particular situation was the real thing - a business plan, an LLC, profit projections, payout plans, experienced people, etc. I think maybe I'd feel better if I could pick from 5 plans side by side. Since this is the first one I've ever read, I don't have much to judge it with.

 

[VagabondBrew]

Right, we have talked about investors and what we've come up with is just your basic investment. You will get a return on your money and as any business if there aren't profits then there is no payout. What that return is etc various. We have an artist, granted good friend but is currently working for free. The agreement is X amount from X upcoming merchandise. While we have others that are looking to help finance us, that will be X return depending on whatever profits are ect and we've written up a business plan, operating agreement ect ect. I would find it awkward if we often someone just a discount on beer or any products as their return. If its a brewery do a mug club if you want to give discounts...

"I want to see the legal docs. I want to see the charter/partnership agreement. I want to see TTB and state approval. I want to see market comps and projections. I want to see how I get out. To forgo less risky investment opportunities I would need to see reasonable projections for a personal return in the double digits"

It all comes down to what stage someone is in on what they can share. IE if they are looking for an initial investment they might not have a building yet which in turn you can't get TTB and state approval and so forth.

To answer the original poster. Its hard to say if its a good idea or not. Business succeed and fail even if there is already competition. It comes down to the people running it and their plan, if you trust it, believe in it or want to chance it. As much as people say how much competition is out there, living in Oregon, I have yet to see that be an issue. Maybe its because the beer community is culture here and that most everyone helps each other, honestly not sure but all I continue to do is see breweries succeed even with terrible practices of their business and beer.

 

[CBXBob]

Nothing ventured, nothing gained. Low risk = low reward. I look at it like this, if I can't stand losing the investment, it's not worth the risk, no matter what the possible gain could be. I have risked, and lost, but I only risked what I was able to afford to lose. My safe bets are still earning, very little, but earning.
If you don't know the market your investing in, don't. The money I've lost in investments that I didn't do my homework in, is tuition I've paid to not make that mistake again. Not saying I ain't got more to learn, but I am way more cautious.

 

[Mongrel]

To answer the original poster. Its hard to say if its a good idea or not. Business succeed and fail even if there is already competition. It comes down to the people running it and their plan, if you trust it, believe in it or want to chance it. As much as people say how much competition is out there, living in Oregon, I have yet to see that be an issue. Maybe its because the beer community is culture here and that most everyone helps each other, honestly not sure but all I continue to do is see breweries succeed even with terrible practices of their business and beer.

It's really amazing how every new brewery here, at least in Central Oregon, is ready to expand right after opening. One of my friends who just started at one of our newer breweries told me there is so much out of state demand for Central Oregon beers they can hardly keep up. Most of this breweries production is getting distributed to Washington. And yeah, the competing brewers here have a great sense of community.

 

[rico567]

As other posts in this thread have suggested- know what you're getting into. I mean that very specifically; just investing in craft brewing because it's in a boom phase of growth isn't sufficient. Know who's doing this, their markets, how well capitalized they are otherwise. You cannot be too well informed in a situation like this.

We've been living in a sort of golden age of the expansion of craft brewing for over a decade now, with no limit in sight. However, there is always an end to growth. Speaking as one who's well along in his seventh decade on this planet, I've seen 'em come and go. I've seen the U.S. auto industry go from total dominance into the tank. I've seen the S&Ls go, the dot-com boom & collapse, and the latest mortgage imbroglio. It appears to be endemic in our system that markets undergo fast growth, and then there's a "correction." Don't get "corrected."

 

[GioGomez2010]

Absolutely agree with the statements made by some of the other members. You have to know what you're getting into before you invest and understand that there's risk involved with every investment. You have to have an idea of the industry, have good management, good organization, etc. I wanted to invest in a brewery without having to build one from the ground up so I checked out the RedHook Brewery in Washington that recently joined up with Widmers Brothers, and more recently Kona Brewing Co. out of Hawaii to form the Craft Brewing Alliance. Anheuser-Busch InBev (the company that holds Budweiser, Stella Artois, and other major brands) holds a 32.2% stake in the Craft Brewing Alliance's that includes a distribution deal. I no longer have funds invested with them (they trade with the symbol BREW), but I did for a while and was able to make a good profit. I'm not trying to give you any advice here on how you should invest your money (wether an already established brewer, or a start up) but an simply giving you an example of how I have invested in craft breweries. I think just about everyone on this forum dreams of one day opening a craft brewery, and maybe some of us will. I know I want to! Will it happen? I'm not sure, time will tell. I wish you the best in whatever you decide to do and hope everything turns out well.