In Loudoun County, we have a lot of breweries, and even more are slated to open. The business-friendly local government and plethora of flex warehouse space pretty much guarantees the majority of new breweries are going to open here. I am happy for the success we have had, and I think we will do fine even as the market passes saturation and some breweries begin to close. However, in my experience in the last three years I have seen an alarming amount of misconceptions about running a brewery, and I think if some people realized the inevitable endgame shaping up here, they might think twice about opening a brewery this late in the game.
First, a 10-15 BBL brewery is not going to make you a wealthy person. If you have a head brewer on payroll, you are losing a big chunk of your profits. Your scale isn’t great, it’s a ton of work, and you pretty much have to be an operating owner putting in 50-80 hours per week to make it work. You might be reading that and thinking “I’m OK with working that hard.” OK sure, but for how long? How long until you start to miss spending any time with your family? I’ve seen it happen. Also, you might think you don’t have to work that hard. Some people don’t. They also don’t do even close to the revenue that we do. In my opinion, if you invest in the plant, you put it to use. If you don’t care about making any money, I would urge you to not open a business and take away revenue from people that need it.
Second, your numbers for distribution should be very conservative. I have heard some just insane numbers from people opening/who have opened breweries. The distribution market is so completely saturated at this point. People have told me all sorts of things, like 200 BBLs/month in draught with no sales rep off the bat, or 420 BBLs/week on a 15 BBL system. Ain’t happening. What galls me is that I politely try to help people, but it is never well-received. Well, I have been there and done it. I spent all summer taking first shift brewing and then doing sales until bedtime. All to move 6-8 BBLs of beer in distro per week. I had to twist peoples’ arms to get them to put us on tap, and we make some decent beer. I have done everything I can to help our accounts and distributor move more beer. Now our stuff is moving and we have a rep, but that was not something that happened overnight. I have heard rumors of some 40 BBL breweries in planning with zero industry experience. That is insane. No one should be opening with a 40 BBL brewery at this point in the game.
Third, if you are not brewing the beer yourself and selling it yourself, you’d better hire a real ace team. You probably want to pull a brewer from a really good brewery–just a suggestion. The beer industry has a lot of intricacies, and figuring out sales can be tough. Your MBA is not going to be of much use here. I handle brewing, production management, and sales management myself. It’s nice in the aspect that I can coordinate planning across all three, but I am working essentially three jobs. Sales has been the most maddening to figure out. Constant rotation at bars means I may be selling a decent amount of beer, but I still can’t definitively tell you where we are on tap currently.
Lastly, here is the big one. If you ever want to sell your brewery, its value will only be in relation to its profits. If your brewery isn’t profitable, it will be worth its fixed assets, which currently get you about 90+ cents on the dollar. Well, just wait a year or two. That number is going to go way down.
You may think your brands or IP will be worth something. Nope. First, there is zero loyalty right now with thousands of breweries putting beer on shelves. Unless you are pretty big, your brands are not worth anything. Second, who wants brands or IP from a failed brewery? I have seen two breweries for sale with asking price way over their fixed assets (and I have no idea what their debt is.) What exactly would I be paying for here?
I hope if you’re planning a brewery and any of this was news to you, you don’t tune it out and think somehow none of this applies to you. The next five years are going to be very interesting, and I am already seeing some surprising things. Better bring your A-game.