Microbrewery - Startup fact finding

[PommyIan]

Hello everyone, I'm looking for some help!

I'm investigating starting up a microbrewwery the first step being the financial analysis of course. I'm not after world domination just a small brewery producing great beer with the smallest amount of "fuss" needed.

I'm looking at replacing my current salary with the brewery and hence working backwards from the amount of profit to the amount of beautiful beer needed to be produced. for example if i were to make 50c per liter profit and i wanted a $50,000 salary that's 100,000 L per year. This will determine equipment sizing, spare to rent etc etc.

I intend to sell to bottle shops and some over the cellar door as such. but i need to know the following, so if anyone has any experience please let me know:

1) What mark up the bottle shop typically needs
2) Cost of bulk ingredients (malt hops etc)

I'd also welcome anyone thoughts and opinions on anything to do with starting a microbrewery.

 

[brewtrekker]

Good luck mate live the dream we all wish we had the financial balls to give a go. My suggestion would be to stop into one of the younger micro breweries like here in Sydney-Batch or Willie the Boatman. Just soak up some info from them. They are both less then a year old. The only way I could do it is with 3 or 4 partners.

 

[Truman42]

Whatever you think you need, triple it. Lots of hard work and government red tape to get licenses and all of that and even worse in NSW from what I understand.

And dont expect to pull much of a salary if anything at all for the first few years.

Do a search on here as there are a few discussions about it includin som that have succeeded.

Also read this blog for some ideas. www.caseybeer.com.au

Also read "Brewing up a business" by Sam Caligione from Dog Fish head. Its a good read.

Good luck with it though.

 

[Philthy79]

Hi PommyIan,

Not trying to sound rude - this issue has been covered quite a few times on AHB, do a search and have a look....

Then, negotiate local council, state liquor licensing laws, your water authority for usage and waste and the best of them all, the ATO. Excise needs to be paid once you have finished fermenting.

Speak with suppliers such as Joe White for your malt and you wiull be able to work it out from there.

A good investment maybe to do a course such as the short course in Brewing and Malting they run at Federation Uni in Ballarat - they impart a huge amount of knowledge on how to start up a brewery - especially the cost involved.

Good luck! :beerbang:


Cheers
Phil

 

[Ciderman]

Your biggest hurdle will be freight. You can start out delivering out of your own ute, but you'd be looking at $10 a case in basic freight costs once you use a company.

You would want to land your cost at $60 including tax ($15.00 per six pack) for the retailer to be able to price your six pack at $20 making 25%. To be honest they'd probably be chasing around 30%. Depends on the store I guess, but with the influx of chains independents are focusing more on margin so you need to be sales focused. Giving someone the opportunity to make more margin out of your beer rather than a competitor gives you a sales edge. Case sales are not strong so the retailer could go for 10-15% mark up.

 

[Bribie G]

When I was in Kiwiland, and also looking at Bacchus Brewing in Brisbane, they more often seem to go the keg route, brewing draught beers for restaurants and "lane way" bars rather than having to sell to a myriad of bottle shops. That way your product is right there on the bar in front of the drinker rather than lost in a mess of other brews on a bottle shop shelf.


ed: where are you located?

 

[mje1980]

Get some advice from someone who understands the legal side of things, and the reality of it all. Home brewers are passionate about beer but do you think ahb is the best place to get advice on starting up a business ?

 

[PommyIan]

Thanks for all the feedback, I've done extensive research in other areas and even got the time of a consultant, however they are expensive so the more i can do alone the cheaper it is in this early stage.
Fully understand the legal and red tape areas and whats involved. All that has been done to date, it's now just the financials. The start up costs are covered no problem it's now really looking at cash flow etc etc.

 

[djar007]

Do you currently brew mate? Or just looking at it as a completely new venture?

 

[mje1980]

You've done extensive research but come to a home brewing forum to find out the price of bulk ingredients?

I have a used car I think would be perfect for you...

 

[Ciderman]

When I was in Kiwiland, and also looking at Bacchus Brewing in Brisbane, they more often seem to go the keg route, brewing draught beers for restaurants and "lane way" bars rather than having to sell to a myriad of bottle shops. That way your product is right there on the bar in front of the drinker rather than lost in a mess of other brews on a bottle shop shelf.


ed: where are you located?

Very competitive with taps. You get a tap on and next week it's gone. After all if any of us owned a bar, would we keep the same beers on?

 

[PommyIan]

Yes Beer God I've been a AG home brewer for many years.

Thunder - Of course the best place for the raw ingredients is the suppliers and that's who i talking to as we speak. Just wasn't sure on the bottle shop markup... Simply couldn't find "Aussie Bottle Shop Owners" forum, so i just thought maybe here some may be in the business. I own and operate a business now however I want to slow down and take it easy. I'm not looking for business advice simply threw it out there didn't think it could hurt. I meeting with a few bottle shop owners tomorrow and just wanted to go in with a little knowledge. That used car..... what is it....Classic FJ Holden? It would look great cut in half on the brewery bar wall........ummm

 

[mxd]

what state r u in ?

 

[PommyIan]

NSW

 

[Truman42]

Yes Beer God I've been a AG home brewer for many years.

Thunder - Of course the best place for the raw ingredients is the suppliers and that's who i talking to as we speak. Just wasn't sure on the bottle shop markup... Simply couldn't find "Aussie Bottle Shop Owners" forum, so i just thought maybe here some may be in the business. I own and operate a business now however I want to slow down and take it easy. I'm not looking for business advice simply threw it out there didn't think it could hurt. I meeting with a few bottle shop owners tomorrow and just wanted to go in with a little knowledge. That used car..... what is it....Classic FJ Holden? It would look great cut in half on the brewery bar wall........ummm

Mate I think if your wanting to slow down and take it easy your heading into the wrong game. Then again I dont know what your currently doing but running a micro brewery isnt what I would call taking it easy by any means. Especially if your wanting to bring in a 50K a year salary.

 

[PommyIan]

Mate I think if your wanting to slow down and take it easy your heading into the wrong game. Then again I dont know what your currently doing but running a micro brewery isnt what I would call taking it easy by any means. Especially if your wanting to bring in a 50K a year salary.

currently on the road 6 days a week in a sales role(both domestic and international), highly competitive industry so anything is a slow down from this. 50K was just numbers for easy maths.
All this info is great but i need to back up everythign with fact and figures both positive and negative so all your thoughts create a good starting point. Cheers

 

[wide eyed and legless]

I agree with Truman and if you are currently running your own business you will know that you are looking at about 3 years of hard work to establish your self, I don't think there is a huge mark up on slabs the small bottle shops make their money on 6 packs or individual bottle sales. I have seen a Duncans franchisee buying from Dan Murphys when they have specials on when I asked him why he was buying from Dans he told me it was cheaper than what he could get it for.
I could certainly think of a lot more businesses where you could make easy money with little work.

 

[Josh]

I could certainly think of a lot more businesses where you could make easy money with little work.

I'd be keen on that.

PommyIan, where in NSW are you looking to brew?

 

[davelovesbeer]

I would think that targetting restaurants to sell your beer is a better idea. Restarants have huge markups on the beer, lots of people are willing to try a new beer at a restaurant as opposed to buying a 6 pack at the bottlo, and you could target a number of them in your local area, as opposed to the number of bottle shops.

 

[///]

May know a bit about this, focus 110% on your cellar door. Most small independant bottle stores are a bit slow on paying the bills ... its all about cash flow ...

 

[mb-squared]

might be worth a trip up to six-strings brewery. they are going gangbusters now, but if you ask around you'll hear how it took them more than 3 years to break through all the red tape. best of luck!

 

[Blind Dog]

Gage Road publish their financials on their website under Company Information / New and Reports. Its not a direct answer to your question but there is heaps of information in them. In FY12 they spent $11.2m on raw materials, consumables and delivery to brew about 10m litres of beer.

they also sold it at a little more than $2.5 a litre.

add financing costs, employee costs and the rest and they made $862k profit on $25m of sales, or about 3.5% net profit (which oddly is also the return on equity invested). thats a net profit of 8.6cents per litre - you may make more, but they're 25% owned by woolies so have direct and probably preferential access to Dan's, BWS, all the woolies owned hotels and the contract to brew woolies own label beers

 

[///]

Wonder how that $826k went with thier dumping of a few hundy thouso litres due to a brewhouse infection ...

Cents per litre on raw materials is real easy, try and do one for you services .... that aint so easy to figure out a kw/l when you have a retail and producition facility.

 

[JB]

Wonder how that $826k went with thier dumping of a few hundy thouso litres due to a brewhouse infection ...

Wow!

 

[Online Brewing Supplies]

500,000 L worth of WOW

 

[Blind Dog]

Wonder how that $826k went with thier dumping of a few hundy thouso litres due to a brewhouse infection ...

Cents per litre on raw materials is real easy, try and do one for you services .... that aint so easy to figure out a kw/l when you have a retail and producition facility.

The $826k is a major improvement on prior years - they still have $10m of accumulated losses to date.

As to the kW/l, or any other measure you want, it's just a matter of having the data. Perhaps the real issue is whether that data can actually give you any meaningful insights, or whether it's just a number for your accountant's wet dreams. If kW/l helped you brew better beer your posts suggests that me placing money on you finding a way to work it out, would be a safe bet.

 

[Cecil Brai]

Go to a brewery and chat. I work at a brewery and we get a few people a year touring brewery to brewery asking questions. Starting small is a great way to go but we did and after winning awards at aiba we couldn't and can't keep up with demand. So expansion is starting. It costs a lot to get started but if your confident in your product more is less

 

[doon]

Would a brew pub type set up be more realistic where most of the product is sold over your own bar?

Seems like the packaging/distribution and late accounts is the biggest headache for a brewery

 

[///]

Absolutely, hencewhy in the US 2/3rd of craft beer is pub brewery ...

 

[brewtrekker]

Wow chill out on the dude! He is to be first congradulated on stepping into something we all aspire to do. I am sure he knows the pitfalls.
I myself being from a city that has 36 microbreweries ( Portland Oregon ) would say most of all is prepare for the down side! Right now craft beer is on the up up and up in AUS!
However here in NSW in about 5 years or so I would say that things will reach a saturation point and people will not buy into every new craft beer.
So I think we can enjoy the ride right now its all new beer everywhere! However its the five year point that will separate the men from the boys.