Beverage Development on a Bootstrap Budget

By: Jorge Olson — Co-founder & CMO of Hempacco and Green Globe International

Starting a beverage business can be a daunting undertaking, especially for the uninitiated. One of the biggest challenges for someone wanting to bring their beverage idea to the market can be budget. The cost of starting and scaling any business can be high, and when one is developing a new consumable product, the costs can be astronomical if they are not privy to the ways of bootstrapping their new business.

  Regardless of the reason one has behind bootstrapping their business, it is a valid way of building any new venture from the ground up. By being savvy with one’s budget and careful to avoid overspending pitfalls, anyone can build a wildly successful beverage business.

Bringing One’s Vision to Life

  Any great beverage company needs to start with an idea. If one wants to build a business around a beverage, the idea needs to be solid, and it needs to be able to be created with consistency, meaning the formula being used should be set before bringing a beverage to the market. Seeking out the opinions and assistance of industry experts can help one avoid costly formulation mistakes. New entrepreneurs should also do their due diligence in researching the market and ensuring their beverage idea has a strong place in the market. While friends and family may all love what an entrepreneur comes up with, that particular product may not translate to a beverage that could find traction with the market at large.

  The formulation stage could lead to out-of-control costs if one is not going in well-researched and prepared. There can be a good amount of information online to help one research the industry, as well as quite a few books and workshops available that can help people with their beginning stages of business building — all for an affordable cost.

Estimating Startup Costs

  Even when one is bootstrapping a business, costs can very often exceed expectations. When diving into initial market research, a new beverage business entrepreneur needs to be realistic about how much it will cost to bring their beverage to the masses.

  To professionally formulate a beverage can cost upwards of $20,000 to $45,000. If one is planning multiple SKUs (stock-keeping units), costs can compound quickly. There are packaging costs, ingredients, shipping, and stocking costs to consider, all of which will add dollars to one’s budget and cut into their profits.

  Bootstrapping this amount requires careful planning and budgeting. Many entrepreneurs have started small and put any money they make back into their businesses. They set up booths at farmer’s markets and sell their beverages piecemeal to raise capital for professional formulation and growing the brand. Though this approach can take time, it is a great way to slowly build a brand without accruing any significant debt.

  Any business, regardless of budget, will often seek out cost-saving measures when it can. Overspending on aspects of the business that do not ultimately move the needle can spell disaster for any startup. Areas where a beverage startup can save include seeking out inexpensive ingredients, packaging options, or distribution avenues.

  Being that costs will rise as the business expands, how does one fund their business if they wish to create a national (or international) beverage brand? Several options are available, from personal loans, investors, and small business loans. Whatever funding options one chooses, entrepreneurs should always weigh all pros and cons to ensure the selected option is the right fit.

Finding the Right Source of Capital

  Any startup is going to need funding, and there are a number of options for receiving this funding. Bootstrapping typically involves forging relationships directly with retailers in order to get your beverage on shelves. This approach can be a slow burn but ultimately successful, depending on how much pavement-pounding you are willing to do on your startup’s behalf. When one doesn’t have the financial resources to fund thousands of dollars of marketing or development costs, that momentum has to be built bit by bit. Those entering the market with a bootstrap mentality must understand that patience is a virtue and that building the brand will take more time.

  Even if one begins with a bootstrap mentality, the fundraising stage may get to a point where one also wants to consider the investor route. However, finding the right investor deal for an idea can also be a long road. Going into pitch meetings with a robust business plan and vision for the future of the product can help entrepreneurs land the best investor partnership for their venture. Any pitch meeting should include samples of your beverage and an idea of how the packaging and the marketing will look.

  One of the best ideas for a small startup is to consider a larger pool of smaller investors instead of putting all of their eggs in the angel investor basket. For example, instead of trying to secure a few million dollars from one investor, work on securing $10,000 in investments from a collection of smaller investors. With those combined investments, one will not only have enough money to get their beverage idea off the ground but will also have a built-in support system from a variety of enthusiastic backers. Smaller investors ride out shifts in the stock market easier than large investment firms and venture capitalists. Individual investors also may request less control over a business than large investors often require.

  Finding the right investor(s) or funding route can make or break a new beverage business. As such, one should consider all options before choosing how they plan to fund their startup.

  With over 2,400 beverage companies operating in the US alone, startups will really need to communicate what makes their product special in order to court solid investment opportunities. Coming at the investor search with passion and an educated approach to the market will increase a startup’s chances of landing dedicated investors in it for the long haul.

The Beverage Industry has Changed

  The pandemic changed many industries, and the beverage industry has not escaped the post-Covid shift towards more direct-to-consumer sales and social media marketing. When the world shut down, beverage entrepreneurs could no longer visit investors or retail partners in person.

  With this in mind, those now seeking to step into the beverage industry with a great idea need to consider how reaching a target market has changed. Anyone looking to break into the somewhat crowded beverage market should work on establishing an online presence right away. Today, word-of-mouth marketing includes chatter online, meaning entrepreneurs could be leaving a lot of money on the table by failing to put effort into their digital marketing presence.

  Any startup should have a website that can be built for a small out-of-pocket cost. The brand’s website is its handshake and introduction to the market and should reflect its feel and personality. Along with a website, the brand’s social media profiles should tie into the entrepreneur’s overall marketing approach. Engaging with one’s target market is a low-cost way to build a buzz around their beverage.

  When building an online presence, one needs to consider what message their beverage and brand are sending. For instance, is the brand being built based on natural ingredients and a sustainable manufacturing approach? If so, its marketing is going to be different from a brand seeking to bring an energy drink to the market.

  Marketing is all about tapping into who the entrepreneur is as a brand, as a business founder, and who their consumers are. Authentic connection with one’s market can go a long way in building a brand, especially when one is not starting with a large amount of capital.

Fight Off Failure

  A staggering 42% of startups fail. With those numbers, it’s a wonder why anyone dives into the murky waters of entrepreneurship. Still, many do and succeed, but not without some hard work and research.

  For instance, many startups fail because they don’t research their target market. They bring a product to the market that no one is interested in or too closely resembles another product. Other startups simply run out of money, which is why it is so important to have patience while one is bootstrapping, thoughtfully invest capital, and seek out partnerships with investors that best align with the product and brand being brought to market.

  Bootstrapping any business starts with believing in a vision, first and foremost. When one is self-funding their startup, the passion for and belief in their product keeps them moving through the most difficult steps of the scaling process.

  The entire concept of bootstrapping is about hard work and perseverance. If market research tells the entrepreneur that their beverage idea is a winner, then it is time for them to roll up their sleeves and get in the trenches. This willingness to get one’s hands dirty sends a message that they are willing to stick with their idea, put in the hard work, and do what it takes to see their beverage hit shelves.

  Starting any business is not for the faint of heart. Bootstrapping a business could be considered insanity by some, given the difficulty of that journey. However, when the business ultimately succeeds and people all over the country — or even the world — are enjoying the beverage you created, all the hard work of bootstrapping will have been worth it.

  Jorge S. Olson is the author of “Build Your Beverage Empire.” He’s a beverage industry mentor and consultant who has launched over 1,000 consumer packaged goods and worked with over 100 beverage entrepreneurs, large and small. Jorge has owned companies in the beverage industry, wholesale distribution, import and export, and beverage development and sales. His over 300,000 newsletter subscribers share his insight into beverages, marketing, and growth. Jorge now mentors beverage executives and lives in San Diego, California.

Email This Post Email This Post

Leave a Reply

Your email address will not be published. Required fields are marked *