BREWERY AS A BUSINESS: Important Points to Consider

By: Jess Perkins

As an experienced brewery owner or manager, you will agree that starting a brewery is easy; running one is not. There are many different things to consider and plan for when running a brewery, and many of those things only become immediately apparent once you are running a brewery. This article will discuss the major issues that any brewery needs to consider. They are not all equally important; some may even be seen as trivial, but each case has been a stumbling block for at least one brewery in the past.

Staffing

  Employees of a brewery are so crucial to the success or failure of a brewery. There are several points to consider when hiring employees for your brewery. You will want people who are motivated, responsible, professional, and of course, good at their job.

  It’s important to remember that if you have a small number of employees, you must compromise on at least one of these positions because there aren’t enough people out there with the skills of a great brewer, accountant, salesperson, and bar-tender all rolled into one. It’s not unusual for a brewery to have several business partners who take on different business roles, but this leaves some positions understaffed or unfilled.

  An important point to consider when hiring is that not all employees want to work full-time hours. You need to be able to offer flexible schedules and part-time positions as well as full-time ones. Employee scheduling and planning for business needs/periods throughout the year is a difficult skill and something that requires good time management.

  Employee training is crucial in the brewing business. It is expensive and time-consuming to train new employees, so you want to ensure that the person you hire will be successful. You don’t generally find people willing to work for free, so training costs do fall on the brewery. The more money you invest in your employees, the better they will perform their jobs — it’s as simple as that.

Labor Laws

  It would be wise to familiarize yourself with labor laws in your geographical location, country, and even state/province (if applicable). The U.S., for example, has very different laws in each state, resulting in a complex web of labor laws that can be difficult to navigate through. There are also different laws for different types of employees, e.g., full-time vs. part-time or salaried vs. hourly.

 Breweries that hire non-exempt employees (i.e., those who get overtime pay) should become familiar with the Fair Labor Standards Act (FLSA), which outlines the rules and regulations relative to paying overtime, minimum wage, and child labor.

  Breweries that hire exempt employees (i.e., those who do not get overtime pay) should become familiar with the Internal Revenue Service’s guidelines of what qualifies an employee for “exempt” status. For example, managers may be eligible as exempt under some circumstances, but it is wise to consult with a tax professional if you are unsure.

Pricing

  There are many different ways to price your beer. There is a powerful perception in the craft brewing industry that all breweries sell their product for “too cheap,” and part of the job of a brewery is to educate consumers on what good beer costs. In fact, some brewers go as far as saying that if you can’t afford their beer, you probably can’t afford craft beer.

  There are many factors to consider when deciding on a price for your product, not the least of which is competing in your market. Price too high and no one will buy your beer, price too low and you may lose money or have to discount the beer very frequently to move it off the shelf — another challenge altogether.

  In addition to that, you have to take into account other factors such as overheads costs (keg size, pour size). You should also understand the difference between pricing off-premise and on-premise bottles and cans. At Untappd, there’s a beer pricing guide that is worth a read for future reference.

  Regardless of how you price your beer, it is a fact that the craft brewing industry is a volume or “spread” business. Very few breweries make money, but those that sell beer to enough people make a decent income at a good spread. If you look at the National Brewers Association’s list of the top 50 craft breweries in the U.S., it becomes apparent that volume is king. Very few of these breweries make significant profits, but they are still thriving because the spread between their production costs and retail prices is greater than most other beer manufacturers.

Branding

  Branding is an essential aspect of running a brewery that includes everything from your logo and beer labels to where you sell your beer. It also involves how you market, advertise and promote yourself. An excellent way to think about it is the total image or “face” of your business. Breweries also have to think about consistency in their branding across multiple locations.

  There is a lot of money and effort involved in making sure that all your beers, logos, labels, and promotional materials are consistent from location to location. If you own more than one brewery, it is almost impossible to create a consistent image between them.

  Craft brewing is an industry that has been growing exponentially for several years. While it is a great time to open a brewery, staying relevant and growing your business can be equally challenging. Many challenges have come along with the current craft beer explosion, not the least of which is keeping up with demand. It’s no secret that many breweries find themselves struggling to meet the demand for their product.

Taxes

  Breweries have a general misconception that they don’t have to pay taxes on top of the price increases they charge for their beers when in fact, they do. You can avoid paying taxes somehow, but it is not advisable, and the penalties are severe if you don’t follow proper procedures by filing quarterly estimated tax returns.

  Brewers must also pay close attention to the Alcohol and Tobacco Tax and Trade Bureau (TTB).

  Once a brewery has sold its first keg of beer, it will need to get Brewer’s Notice required for breweries to sell beer. The TTB also requires brewers who produce more than 100,000 barrels per year to file an annual report and pay a fee.

Tax rebates for breweries are rare, but there are some. The primary way breweries can reduce their taxes is through tax credits usually applied to capital expenditures or new equipment. These credits are offered by the federal government yearly, and every brewery should apply for them.

Competition

  Brewery owners should always think about how they can differentiate themselves from other breweries in their local market. The more you know about the competition, the easier it is to compete with them. You will need to consider your price points, your unique selling proposition, and what makes your brewery stand out from others. To do this, you’ll want to collect as much information as you can about your competition. It doesn’t end there. Once you have a large enough customer base, you’ll notice that many of them will want to know how your beer is made, especially if they are true connoisseurs.  

  Brewery owners should also be aware of what their competitors are doing and what the market will bear. You have to know when to compete with other breweries and when you should let them fight amongst themselves while you keep your focus on growing your customer base. Brewery owners who are too aggressive in competing against other breweries may alienate customers and create bad press for their company.

Growth and Expansion

  Growth is vital for breweries, but it shouldn’t be the only focus. You need to think about how you can grow your brand and maintain your current customer base while still maintaining product quality and consistency and avoiding the depletion of raw materials as much as possible. Successful brewery owners know that growth is not always good and that some microbreweries have been forced to close their doors because they grew too fast.

  Brewery owners should think about the total market for craft beer and how it is evolving, not just your little bubble of sales. They need to be aware of what the current trends are and stay ahead of them. As new breweries pop up, you’ll want to ensure that your brand is strong enough to stay relevant in your local craft beer scene. Making sure that you are always ahead of the curve will help your brewery grow and look forward into the future rather than behind at all of the things you used to do

  Brewery owners and managers can’t just rest on their laurels and expect success to keep coming. They have to engage in the marketplace actively and stay ahead of trends or be one step behind them. You also need to try new things that you think will work despite what your competition is doing. Most importantly: never lose sight of your goals and vision and stay consistent with it. No plan will be perfect, but that shouldn’t stop you from trying your best to get there.

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