B.C. Beer Blog

The who, what, where, when, why, and how of B.C. craft beer

SYWTOABP: Top 10 Takeaways

with 5 comments

When I volunteered to write the “So you want to open a Brew Pub” blog post series, I had a rough idea of how many posts I was going to need to write, how much time I was going to have to spend researching costs and industry regulations, but in the end I probably spent a lot more time and energy on this series of posts than anyone expected. I tend to write lengthy rambling posts going into more detail than is necessary, so I often go back and rewrite the material into a short, snappy, Top 10 style list of key takeaways.

These are the key takeaways from the entire series:

  1. A brew pub will cost more to open than you and your friends think it will when discussing the idea over a pint of beer. I estimated minimum startup costs at around three quarters of a million dollars. This spreadsheet will help end arguments.
  2. In addition to more money it will take more time to get a brew pub open and fully operational than you originally estimate.
  3. The single most important decision you will make is choosing a location.
  4. “When applying for a liquor manufacturing license, a business plan, including financial statements outlining production and sales forecasts for a three year period, must be submitted.” I created a lot of spreadsheets for this series, but every business is unique and requires customized spreadsheets to maximize accuracy.
  5. The SYWTOABP series of blog posts provides more information on opening a brew pub than any book I’ve been able to find, but I didn’t write a complete brew pub business plan, however I did create a guide to writing a business plan.
  6. Consultants exist but it is in your long term best interest to know your business intimately including all key numbers.
  7. Your business plan and financial projections are only as good as your market and industry research.
  8. A brew pub is in the restaurant and foodservices industry, not the brewing industry.
  9. If you just want to be in the business of brewing beer, consider opening a small brewery.
  10. If you want to serve superior beer, hire a superior brewmaster.
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5 Responses

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  1. [...] The Top 10 Takeaways from my “So you want to open a brew pub” series of blog postings [...]

  2. With respect to #8, it is true that you shouldn’t operate a brewpub as a brewery. I also think it is true that you shouldn’t run a brewpub like a restaurant. This is what makes a brewpub more challenging than either of these traditional businesses on their own because it is a fusion of both, requiring a blend of skills from two very different industries.

    Brewpubs that aren’t showcasing their own beer by prominently featuring it on their menus, offering specials on the latest seasonal, or making it easy for patrons to take it home with them, operate like any other restaurant. So why bother brewing your own beer? You’d be better off doing what Sailor Hagar’s did, replacing the brewhouse with a liquor store and getting a production brewery to contract brew your beer.

    I think the best example we have in Metro Vancouver of a brewpub that is distinguishing itself as such is Central City Brewing. In BC, Spinnakers is setting the example for what a brewpub ought to be.

    BCbrews

    September 26, 2011 at 12:23 pm

  3. With respect, this is the short top ten format version of the entire blog posting series. ;-) I cut to the bone when editing, always a challenge for someone as longwinded as me.

    From a business analysis, or industry analysis point of view or in the eyes of the Government of Canada if your business primarily makes its revenue from brewing and selling beer, than it is in the brewing industry. Since every brewpub I’ve ever been to in BC has a kitchen and serves a variety of other beverages other than just beer brewed on-site, by definition they are in the restaurant and food services industry. Another way to look at this is the number of staff and what they do. Brewpubs have a brewmaster and maybe an assistant, they are the only staff that brew beer, every other staff member is in the service industry; they cook, they clean tables, they take orders, they pour beer etc. etc. The only way a brewpub would become a brewery in the eyes of Industry Canada and economists is if they are so successful at brewing and selling beer that they expand production and begin distributing their product extensively outside their own establishment.

    Pubs and nightclubs all fall into restaurant and foodservices industry at least according to the CRFA and other industry experts. It takes a lot more staff to serve 100-200 patrons food and beverages than it does to brew up to 22,000 hectolitres of beer annually. Once you go over 22,000 (or is it 16,000 hectolitres) then you’re no longer considered a craft brewer by at least one industry association. It is when you start brewing on a large scale that your head count goes up to a number in excess of that of say the Commodore Ballroom. If you look back at the numbers I presented, the biggest startup cost (ignoring elaborate tenant Improvements and real estate development costs) is the brewing equipment, which will cost more and more, the more beers you want to brew and serve. However once you’re open, staff and rent become the two biggest operating costs. COGS for beer is low and can be financed with even relatively modest sales.

    Sadly there are plenty of bars in BC that serve crappy beer. You can run a successful bar or restaurant serving cheap, generic lagers and ales. The reason these bars can stay in business is the scarcity of liquor licenses and how they act as barriers to entry for new competitors, the fact that many beer drinkers choose their beer based on price, and non-beer drinking decisions such as location, food quality, and quality of service. Consider the Number 5 Orange, what brand of beer is served there? Do you think their regular patrons demand higher quality beer? Poor service will keep people from returning even if you have superior beer. Entertainment is another way bars attract patrons. An out of the way location will not do as well financially as a bar on Granville or in a trendy neighborhood like Gastown or Yaletown. Mount Pleasant is becoming more popular thus why I suggested a brew pub could do well when Rize finally builds out the Kingsway and Broadway parcel. An Earl’s or Cactus Club could do equally well, but Broadway already has plenty of those, so personally I’d like to see someplace unique with character rather than a chain restaurant or generic clone bar.

    The reason people open brew pubs, besides the obvious they enjoy drinking beer, is to pursue a differentiation strategy. That is the business strategy they are pursuing in their venture. Perhaps I didn’t hammer it home enough. I believe I linked to the Micheal Porter research on business strategy at some point. A brew pub whether at Kingsway and Broadway or the other no longer secret location I identified while writing this series (in Comox on the site of the old Lorne Hotel) would be significantly different than all the nearest competing establishments in that it would brew and serve unique craft beers. Spinnakers and Central City have had enough success whereby there is demand for their beer in volume to be consumed at home. This of course is great from a business perspective, but when planning your business, getting open and generating revenue is more important than dreams of expansion or winning gold medals. In order to open you need to control startup costs, which means more modest brewing setups and no elaborate TIs like indoor waterfalls. Once open your location, service, and food quality will have a more immediate impact on your bottom line than offsite beer sales.

    Brewing beer is a learning process in addition to a manufacturing process. That is why Claire advocated two and a half months of fine tuning once the equipment was physically constructed and installed onsite. But even after two months, recipes can be further refined and once open, data can be collected about what sells best and price points can be adjusted. Eventually you may brew an award winning beer and demand may develop to the point where you need to expand the brewing operation and invest in canning or bottling equipment, however from a business planning point of view cost control and location are more important and your closest competition will all be in the restaurant and foodservices industry not Labatts, Molson, SABMiller, AmBev, or even a company like Storm.

    Knowing your competition and what differentiates your product and service from theirs is an important success factor. In the restaurant and foodservices industry, the distinguishing feature of a brew pub is the fact they brew the beer onsite and in many cases the only place you can consume their beer is in the pub, this exclusivity is an incentive or at least a selling point when competing for the public’s food and entertainment dollar. If you just want to brew great beer and don’t want to deal with customers daily, a small brewery is the way to go, it will be cheaper to get open, but faces much different hurdles to longterm success than a brew pub, distribution being the biggest challenge from my research.

    muskie

    September 26, 2011 at 2:01 pm

  4. Spoilage is a risk. Too often beer is for sale that has passed its prime. A lot of the biggest brands in the industry are packed with preservatives or at least critics will say they are. Freshly brewed beer is one of the biggest selling points of local craft beer IMHO.

    Operations doesn’t figure prominently in a business plan. It is experience you either have to earn or hire. Hopefully your brewmaster and front of house manager are experienced in demand forecasting or at least have some rules of thumb by which they’ve done business by.

    Some experts are against selling any beer but that which you brew on-site, but I’ve also been to brew pubs that have a guest tap or offer some premium brands in bottles especially in styles they don’t brew themselves. You need to offer the drinks people expect to be able to buy at a regular bar obviously but staff can be trained to feature and intelligently recommend the in-house brewed beer.

    In Vancouver a lot of the educating of consumers has been done, a brew pub in a more rural area of the province will have to do more of this, but I still think staff and marketing material have to provide a certain amount of information to help consumers appreciate the quality and uniqueness of the beers offered at most brew pubs.

    muskie

    September 27, 2011 at 4:11 pm

  5. Great round up here. Well done.

    Jim

    September 27, 2011 at 5:06 pm


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