Category: Brewery

Breweries Making Hard Cider: Beware a Trap in the Regulations

Cyndi
waiter handing out drinks to guests

By: Brian D. Kaider, Esq.

Breweries are seeing increased demand for alternative products from customers who prefer a beverage other than beer.  Hard ciders are a popular choice both for flavor and because they are typically gluten-free.  However, it is crucial for breweries to familiarize themselves with the specific legal requirements associated with cider production.  In particular, there are three critical characteristics of a cider product that affect how it is regulated: alcohol level, ingredients, and carbonation level.  Moreover, there is an absurd structure to hard cider excise tax rates that results in one popular category of ciders having a dramatically higher tax rate than others.  For those unaware of this distinction, enormous outstanding tax liabilities and penalties could accrue.

Licensing Requirements

  For simplicity’s sake, this article will use the term cider to include both cider made from apples and wine made from pears, i.e., “perry.”  In practice, there are distinctions between these products, particularly when it comes to labeling.

  Some state licensing bodies regulate hard cider as a beer and do not require breweries to obtain any additional licenses or permits to manufacture hard ciders.  The federal Alcohol and Tobacco Tax and Trade Bureau (TTB), however, regulates hard cider as a wine.  Thus, before a brewery may begin manufacturing hard ciders, it must obtain a winery permit.

Alcohol Level

  When it comes to the alcohol level in finished cider products, there are three important numbers to keep in mind: 0.5%, 7.0%, and 8.5% Alc./Vol. (“ABV”).  Any cider product with an ABV in excess of 0.5% falls under the Internal Revenue Code implementing regulations (27 C.F.R. part 24), must be made at a qualified bonded wine premises, and, under the Alcoholic Beverage Labeling Act (“ABLA”), must include the Government Health Warning Statement. 

  Because the Federal Alcohol Administration Act (“FAA Act”) defines wine as having from 7% to 24% alcohol by volume, if a product is between 0.5% and 7.0% ABV, a Certificate of Exemption is needed, rather than a Certificate of Label Approval.  Further, the product is not subject to other FAA Act requirements, such as, advertising, trade practices, labeling proceedings, standards of fill, etc.  Instead, these products must comply with the applicable FDA food labeling and packing requirements, which include ingredient, nutrition, and allergen labeling requirements; though some small businesses are exempt from the nutrition facts requirements.

  Cider products in excess of 7% ABV, however, must comply with all FAA Act requirements, including COLAs and mandatory labeling requirements. (Note: if a product in excess of 7% ABV is not sold in interstate commerce, it can be covered by a Certificate of Exemption rather than a COLA.) 

As discussed more fully below, only ciders with an ABV below 8.5% are eligible for the hard cider tax rate.  Ciders at or above 8.5% ABV are taxed at a wine rate determined by alcohol content and carbonation level.

Ingredients

  It is generally understood that cider is made from the fermented juice of apples and perry from the fermented juice of pears.  But, even the simple addition of sugar above certain levels affects how a product is categorized, labeled, and taxed.  If other fruits are added, there are different classifications depending on whether the fruit is added before fermentation, after fermentation as a flavoring, or the wine of two fruits (e.g., apples and blueberries) are blended after fermentation.

  Taking the simplest case, a product can be labeled simply “cider,” “hard cider,” or “apple cider” if it is produced by the normal alcoholic fermentation of the juice of sound, ripe apples and is derived wholly (except for sugar, water, or added alcohol) from apples.  Even in this case, excess sugar or water can require special labeling (i.e., “specially sweetened cider”), formula approval, and application of a different excise tax rate.

  Any cider product that is made with fruits other than apple or pear or to which spices, flavoring, or coloring materials have been added will require a more descriptive designation, such as cider with natural flavors.  If two kinds of fruit juice (apple and blueberry) are fermented together, the statement of composition must be “apple-blueberry wine” or “blueberry cider.”  This product would not require a formula, because it would still be considered a natural wine.  A cider to which fruit juices, herbs, spices, natural aromatics, natural essences, or other natural flavorings are added after fer-

mentation would be considered a Special Natural Wine, would require a formula approval, and would require a statement of composition such as, “cider with natural blueberry flavors.”  If fermented cider is mixed with another fermented fruit wine, the product would be considered an “other than standard wine,” would require a formula approval, and would be designated as “apple wine – blueberry wine,” “cider – blueberry wine,” or a similar designation.

Carbonation Level

  A cider with a carbon dioxide level of up to 0.392 grams per 100mL is considered a still wine and may be labeled simply as a cider (assuming it meets the other ingredient requirements mentioned above).  If the carbon dioxide level is above 0.392 grams per 100mL, the cider must be designated as “sparkling” if the CO2 results solely from secondary fermentation within a closed container or “carbonated” if the CO2 is artificially injected into the product.  In order to be eligible for the “hard cider” tax rate, the CO2 level must be below 0.64 grams per 100mL.  For reference, a CO2 level of 0.392g/100mL or 0.64g/100mL is roughly equivalent to 1.98 volumes of CO2 and 3.24 volumes of CO2, respectively.

Excise Tax Rates

  Brewery owners are accustomed to a fairly simple federal excise tax assessment.  The first 60,000 barrels per year are assessed at $3.50 per barrel.  The tax rates for cider are not that simple.  In fact, there is an enormous trap in the tax structure that could cause serious problems for breweries that venture into cider production unaware.

  As explained above, the TTB regulates cider as a wine. It is important to note that the wine tax rates are assessed per gallon, not per barrel.  Although considered a wine, the regulations provide a special tax rate for “hard ciders,” of $0.226/gallon.  Like beer, however, there is a tax credit for small producers, reducing the hard cider rate to $0.164/gallon for the first 30,000 gallons.  But, the scope of products that qualify for this tax rate is very narrow.  It includes only products made from apples and/or pears that contain no other fruit product or fruit flavoring, have an ABV of greater than 0.5% and less than 8.5%, and a carbonation level below 0.64g/100mL (about 3.24 volumes of CO2).  Ingredients that impart flavors other than fruit flavors, such as spices, honey, hops, or pumpkins do not make a wine ineligible for the hard cider rate, according to Industry Circular 17-2 (even though pumpkins are fruit).

  If a hard cider product has any fruit other than apples and pears (and pumpkins) or has an ABV of 8.5% or higher, it does not qualify for the “hard cider” rate, and instead falls under the wine tax structure.  If the product has a carbonation level below 0.392g/100mL, it would be considered a still wine.  The tax rate for a still wine, under 16% ABV is $0.07/gallon for the first 30,000 gallons.  If the product has a carbonation level above 0.392g/100mL the first 30,000 gallons would be taxed as a “sparkling wine” at a rate of $2.40/gallon if the carbonation resulted from secondary fermentation in a sealed container, or as an “artificially carbonated wine” at a rate of $2.30/gallon if the carbon dioxide was injected into the product. 

  What may not be immediately apparent is the absurdity of this tax structure.  The following table should put it into perspective.  It shows five different products, their base tax rate, the tax rate per barrel, and the actual federal excise tax applied to a 6-pack of 12oz bottles.

Tax rate table

  Thus, if making a cider product that contains fruit other than apples or pears and that is carbonated above 0.392g/100mL (about 1.98 volumes of CO2), a manufacturer will face a federal excise tax more than 30 times greater than if the carbonation level was below 0.392g/100mL.  Failure to appreciate this distinction and to pay the appropriate tax rate could result in an assessment of stiff penalties and interest and could even result in termination of the manufacturer’s permit.

Conclusion

  Entering the realm of hard cider production requires breweries to navigate a set of regulatory issues that are likely to be unfamiliar.  Beer and cider are treated very differently by the TTB and it is critical to understand the categories that cider products fall into with regard to labelling, formula approvals, and particularly excise tax assessments.  For those considering an expansion into this area, it would be wise to consult with an attorney knowledgeable in these areas to ensure full compliance. 

  Brian Kaider is the principal of KaiderLaw, a law firm with extensive experience in the craft beverage industry. He has represented clients from the smallest of start-up breweries to Fortune 500 corporations in the navigation of licensing and regulatory requirements, drafting and negotiating contracts, prosecuting trademark and patent applications, and complex commercial litigation.

Is Your Brand Something to Talk About?

Cyndi
woman in shocked

By: Hanifa Sekandi

In the overly social world that we now live in, it can be hard to stand out. How does a brand become noteworthy? What makes a brand worth talking about?

  While you diligently craft your new alcoholic beverage, with hopes of becoming a formidable brand, it is important to remember as good as it may taste on the palate, it must also be as memorable to the imbiber. What do people see when they think of your brand? What feelings are evoked beyond an inebriated mind? Will people run to their local liquor store to purchase it? Now that production has finished, you know you have made a quality product. It is time to build a brand that is indeed something to talk about. 

  Fortunately, you have access to millions of people worldwide in the palm of your hand. One social media post can turn your brand into an overnight success. The truth is it does not happen overnight. There are strategies implemented before top-tier brands disseminate their marketing campaign to the masses. But, with just one post or compelling article written by a reviewer, a brand can quickly become a household name. Should you consider influencer marketing? It is an effective tool, but it is not necessarily the only way to spread the word. Instead, consumer reviews and testimonials are part of a long-term marketing plan for sustainable growth. View your customer as a micro-influencer who will host parties at their home, for example, and share your beverage with guests. They will also share photos and videos with their family and friends on social media. It is up to you to guide them, so let’s get started.

Build a Sustainable Strategy

  What most brands learned once social media became a tool to advertise is that it can be quite exhausting. Let us be honest; it is a free advertising tool that can yield impressive results when used wisely and innovatively. But guess what…social burnout is a thing! Most brands hit the ground running only to find out that they have run out of stamina and, more importantly, marketing content. It is important to build the ship before you set sail. Further, you must be building marketing materials that can be used for the entire year! If you are fortunate to hire an editorial or marketing manager, they will help you plan and execute marketing strategies that are viable daily, monthly and yearly. The biggest mistake that new and old brands make in modern marketing is thinking they can build as they go or create limited marketing resources. Remember, view your brand as a ship. Would you set sail with holes in your boat or without life jackets? Would you trust a captain who just goes where the wind blows or someone with skills, expertise and instincts? Of course, you will have to take risks, but your ship should still have an anchor. 

  So, how do you build a sustainable brand? Your first task is to discern the “why”? What makes your alcoholic beverage unique? Is it premium gin? Does your brand use sustainable production methods? Is it a family-owned business? You need to build the story to draw a connection to your brand. White Claw is a notable example of a low-cal RTD beverage that jumped in front of the line from what seems like out of nowhere. Their brand is built around a health-conscious consumer who enjoys drinking without worrying about the scale. They found their “why” and then focused on reaching their targeted consumers. Some consumers gravitate toward brands that have a compelling story. Some brands have attached their beverages to an impactful cause, pledging that a portion of their profits will go towards it. Back Country Brewing, a brewing company located in Squamish, BC, has effectively incorporated giving back to the community as part of its brand ethos. They have also effectively created a brand built off creatively thought-out branding. The continuous colorful and playful references to the outdoors are displayed on beer cans and paired with names that complement the brand’s rustic outdoors theme. Damn Alligator Just Popped and Don’t Cross the Streams are great beverage names that stand out but are in alignment with what their consumer would expect.

  Once you have figured out the “why” and what makes your brand unique, you can start to build marketing materials around this. It will also help you design a logo and select colors that you will utilize throughout your marketing initiatives. This stage is just as important as the product development stage. The same amount of care you put into ingredients, quality and taste must also be applied now. So, you are ready to get started. What is next? Consistency!

Stay Consistent

  Stick to your plan and only make minor adjustments. The foundation of your marketing strategy should be solid. It is okay to make minor variations, but your goal should be to build and evaluate your initial plan. It is easier said than done because this is a competitive industry. Do not forget your “why.” Focus on who you believe would enjoy your beverage and stay laser focused. Devise a marketing plan that includes a calendar that you religiously follow. Always be two steps ahead. What does this mean? Some months of the year have holidays or special days like National Pancake Day. When creating marketing materials with images, blogs and videos, mention and highlight these designated days.

  Unfortunately, there are no days off. There is nothing worse than looking up a brand online to find that they have not posted on their blog for a year or last posted on their social media a week ago. Curate behind-the-scenes features that allow your consumer to see how the beverage is made. You can also give them a glimpse into the trials and tribulations of your business experiences. Do you label your bottles by hand? Share this! It is easy to get discouraged initially. The idea that no one is looking will cross your mind several times. What you do not see during this time is the opportunity to push boundaries and try things that are out of the box before your consumer has an attachment to your product, and then there is little room for change. If you decide to build a blog to support your alcoholic beverage, view it as a mini-magazine and schedule a feature at the same time every week. Be sure to include it in your newsletter along with new product launches or sales. 

  As you build a consumer base, predictability is the only way to stay afloat. As stated above, White Claw appeals to the wellness consumer, and Back Country Brewing the outdoors consumer. There is no need to reinvent the wheel. Expand and elevate your initial marketing strategy. Add new elements or products that complement it. This will help you stay consistent, give you more time to engage with your consumers and build a brand that is not a one-hit-wonder.

Imagine Your Brand in the Future

  Where do you see your brand five years from now? Ten years from now? Do not get caught up in current trends. This is why a sustainable strategy and consistency are the gold standard. You may have wondered why that blush wine in the odd shape bottle still does well with little marketing. This is what long-term, effective brand development looks like. This vineyard’s goal was to design a bottle that was aesthetically pleasing to the eye so it would be a great decor piece, while at the same time elegantly displaying the wine. This is a brand that understands that it appeals to a consumer who likes the finer things in life. Consumers will stay loyal to a product because it is consistent and because they feel connected to the brand’s mission. 

  Will the consumer tire of your product in the summer? Or are you a lifetime brand, like many exemplary legacy brands built around sports or music? If you would like to be the go-to campfire brewer, keep an eye on this consumer’s changing habits and desires to grow with them. 

TAKEAWAYS

Strategy: A solid blueprint will steer you toward success.

Consistency: Keep going even when no one is looking.

The Future: Can you stand the test of time?

Carbon Dioxide & Nitrogen Play Important Roles in Craft Beverage Production

Cyndi
4 gas tanks

By: Gerald Dlubala

The production, delivery and packaging of beer and the use of gases like carbon dioxide (CO2) and nitrogen (N2) are inseparable. But because CO2 is also a natural byproduct of the brewing process, monitoring its levels during and in the delivery of draught beer is critical. Carbon dioxide has flavor characteristics that could cause your beer to undergo flavor changes if left unmonitored. Additionally, if pressures are left unchecked and become too low in the draught beer delivery system, the CO2 is allowed to leave the beer, causing the pour to be flat. Conversely, too high CO2 pressure results in over-carbonation, causing flavor flaws and a foamy pour. Either problem causes increased product usage and waste, increasing the brewery’s costs and decreasing an already thin profit margin.

Inline CO2 Sensors: Mettler-Toledo, LLC

  Dissolved CO2 sensors are inline sensors that continuously monitor dissolved CO2 in numerous applications, including the beer brewing process. Using dissolved CO2 sensors allows brewers to monitor key quality attributes of their product, ensuring a consistent product and all-important mouthfeel to their craft beers.

  Mettler Toledo offers its InPro5500i inline sensors, thermal conductivity sensors optimized for brewing quality control and monitoring the carbonation levels of the beer. The InPro5500i line uses digital technology to simplify handling, provide durable performance and offer increased product life, reducing lifetime sensor costs.

  Additional benefits and characteristics of Mettler-Toledo’s inline sensors include the following:

•   Helping the brewer maintain consistency and overall beverage quality control

•   Sensors are manufactured with a food grade, hygienic, intelligent design and diagnostics

•   The use of proven technology to accurately provide trusted CO2 measurement

•   Maintenance predictability

•   Process connection compatibility, available with three process connections: Variant Type N, TriClamp 2 inch and 29 mm with cap nut M42

For more information on Mettler-Toledo’s CO2 sensors, visit www.mt.com/analytical

Nitrogen Dosing for Shelf Life, Stability and Packaging Excellence: Vacuum Barrier Corporation

  While the applications for nitrogen dosing in the beverage industry have remained consistent, the products that benefit from being dosed have and will continue to grow. Cannabis-based beverages, the dramatic growth and variety of available RTD (ready-to-drink) cocktails and all nitro-style beers, coffees and teas benefit from nitrogen dosing in one way or another. Through its preservation and pressurization qualities, nitrogen dosing has allowed the explosion of new and flavorful RTDs to be distributed on a widespread basis to more markets. Pressurizing a can or PET (Polyethylene Terephthalate) bottle with nitrogen adds stability to the container, allowing for easier, more efficient and effective stacking and shipping. Additionally, the fact that nitrogen is inert and will not react with other substances or ingredients makes it ideal for use in beverage applications and industry because it doesn’t impact the aroma or flavor of the packaged liquid.

  “Adding a nitrogen doser to a filling line is a pretty simple process,” said Jim Fallon, international sales manager for Vacuum Barrier Corporation (VBC). “Our VBC dosers are designed to be bolt-on additions to a filler, with no requirement for complicated electrical or control integration. After determining the proper application for dosing, meaning pressurization, inerting or nitrogenating, the next step is to find the optimal location on the filler for installation. VBC application engineers also determine the appropriate dosing unit based on the available filler space, the brewer’s line speeds and the dimensions of the container that the brewer is using. Then, along with the doser, sensors and control panel, all that’s needed to start dosing is your power supply or compressed air supply, depending on the models used.”

  Fallon tells Beverage Master Magazine that the optimal amount of nitrogen dosing recommended for any application is found by looking at the associated needs.

  “In the beverage industry, these applications vary from pressurizing non-carbonated drinks for container rigidity to purging oxygen from the headspace for extended shelf life and nitrogenating a cold brew coffee or beer,” said Fallon. “VBC engineers collect necessary details about the container volume and dimensions, fill heights, line speeds and the brewery’s target specifications and goals. Equipped with that information, we can guide customers to the appropriate settings to ensure the dose is sized properly and, just as importantly, makes it into the container in a timely and consistent manner.”

  Fallon says that for many years, the only new advances in nitrogen dosing had to do with the availability of increased dosing speeds. But today, VBC dosing units can consistently and reliably dose up to 2,000 containers a minute, more than enough for most filling lines. Because of this achievement, VBC was allowed to shift its focus on advancing and improving the reliability and ease of adjustability of its dosers.

  “We’ve continued to build out the functionality of our Servodoser that we initially released in 2016,” said Fallon. “We’ve reduced the parts prone to wear along with maintenance needs of the long-life servo actuator, which has a cycle life into the billions. In addition, a servomotor on the valve stem allows for dose amount adjustment without changing any mechanical parts. These improvements reduce downtime and allow on-the-fly adjustment of dosing parameters. Vacuum Barrier’s modular aseptic dosing systems are quickly becoming the go-to design with OEM (Original Equipment Manufacturer) fillers integrating aseptic filling lines.”

  For more information on Vacuum Barrier Corporation and nitrogen dosing, visit www.vacuumbarrier.com

Gas Blenders for Draught Beer Delivery Solutions: McDantim, Inc

  To successfully dispense draught beer, you need pressure, and that necessary pressure generally goes unnoticed until something goes wrong. As far back as the early 1800s, that pressure was supplied by compressed air, but as all brewers know, oxygen doesn’t play well with beer. The solution to this dilemma was to use CO2, which was good unless you tried to use 100 percent CO2 in draught beer delivery systems that needed to push the beer over long distances from huge brite tanks that were only safety-rated for up to 15 pounds of pressure. Unfortunately, increasing pressure to push more beer only puts the tank over the intended safety rating or puts the brewer at risk of over-carbonating the beer.

  But by using blended CO2 and nitrogen gas technology in the appropriate amounts, breweries and taprooms can maintain and balance their beer storage and delivery systems to ensure the integrity of their draught beers glass after glass, maintaining product integrity without losing any quality of taste, aroma or mouthfeel, just as the brewer intended. However, premixed cylinders were found to be expensive and generally offered the wrong blend for the beer industry. McDantim Gas Blending Technologies was the first company to introduce a gas blender that was technically sound enough and appropriate for the beer industry. 

  “It started in the late 1980s,” said Kayla Mann, sales and marketing director for McDantim, Inc. “McDantim’s previous owner’s father was approached by Guinness to develop an on-site gas dispenser. Unfortunately, industrial blenders wouldn’t work well because they couldn’t handle low-flow needs. So, McDantim devised a blender optimized for low flow rates to ensure that the beer secured in your keg or brite tank is the same beer dispensed into the glass for your thirsty customers. Our goal is to improve draught beer consistently and continuously worldwide.”

  Mann said that McDantim Trumix® Blenders are generally maintenance-free, with a plug-and-play mentality that demands no electricity or cumbersome maintenance schedules.

  “The goal here is to set it and forget it,” said Mann. “Brewery or taproom managers already have enough on their plate without having to worry about gas blending. Trumix® Blenders are easy to install and set up with regulators and can be nestled in wherever a brewer decides to locate their gas storage. All our products are customizable for different CO2 and nitrogen blending needs, so no matter what beer you are brewing and serving, you’ll get what you need. We use six eager and local breweries as our testing grounds with our products, so we receive real-life and real-time situational help to ensure our blenders and products do what breweries need them to do. Our custom-configured blender solutions improve efficiency and decrease waste and are based on useable volume, including the length of delivery lines, the number of available taps and servers and the forecasted number of kegs per hour you can expect to use at any given time. It comes down to how many servers will be drawing out of how many taps simultaneously. Busy, large taprooms with several servers that stay busy for lengthy amounts of time will need a higher flow rate than the smaller craft breweries.”

  Mann tells Beverage Master Magazine that McDantim also offers a free downloadable app that can be used anywhere within the depths of a brewery because it needs no internet connection.

  “We’re all about education to improve the quality of the draft beer industry across the board,” said Mann. “The app is there for you to know what blend of gases is optimal for the beer you are producing or if you are struggling with pressure or specific lines. We can easily walk you through the app and teach you how it can help and improve your draught beer. It’s just another tool for everyone from the beginner through the seasoned professional, and it is valuable for those that may be hesitant to ask for help as well.”

Conditions included in the calculations are:

•    The beverage temperature in the keg.

•    The required keg pressure.

•    The CO2 content of the beverage.

•    Elevation above sea level.

•    The gas blend (CO2 percentage) of existing blender.

Your input conditions help determine the following:

•     The optimal CO2/N2 blend for your specific location and conditions.

•     What range of pressures you can safely apply to your beverages for optimal carbonation.

•     Easy U.S. and metric unit conversions.

•     The predicted CO2 content that will be maintained under unusual conditions, like high elevation production.

Additionally, McDantim’s free gas blend app includes helpful calculators for other areas of your draught beer process, including these:

•    The cost analysis calculator provides insight into how on-site gas blending with Trumix® blenders can save you money.

•    The gas usage calculator will forecast and determine how many kegs of beer you can expect to dispense using Trumix® Blenders or premixed cylinder gas.

•    The line restriction calculator helps brewers with their draught system design to get the correct restriction values to keep the beer from under or over-carbonation.

  McDantim’s Trumix® Blenders can be used equally well with all clean CO2 and nitrogen sources, including high-pressure cylinders, bulk tanks and separators. 

To contact McDantim or get more information on gas blenders, visit www.mcdantim.com

More Than a Pretty Face

Cyndi

Image Is Important, but so is Safety and Productivity

beer can lying on a flat surface

By: Cheryl Gray

While attractive packaging can draw new business for craft brewers, protecting what’s inside that packaging can make or break the bottom line. The same detailed attention is required to move products to store shelves swiftly. Fortunately, there are companies with specializations in each of these production areas.

  Among them is Industrial Physics, a test and inspection company considered to be a global leader in its field. Industrial Physics operates across a wide range of testing brands, each cornering a specialty. Those brands include CMC-KUHNKE, Steinfurth, Quality By Vision, Eagle Vision and TQC Sheen. Although it offers its customers multiple options, the company has a singular purpose: to guard the integrity of brands and products for manufacturers, production lines and laboratories across multiple industries worldwide.

  Steve Davis is the global product line director at Industrial Physics. He leads a team of experts who ensure that the company’s equipment protects the integrity of its customers’ metal packaging. Davis brings more than 20 years of engineering experience, with particular expertise in designing and developing metal packaging testing systems. He describes how Industrial Physics provides practical solutions for breweries large and small.

  “From seam inspection to label inspection, leak detection, code reading and abrasion testing, we’re here to protect the integrity of our customer’s beverage product.”

  Industrial Physics offers 40 testing applications and 2,500 products for a vast array of manufacturers, including breweries. Davis explains how the company leverages industry leadership to benefit its brewery clients:

  “The power and versatility of Industrial Physics allow us to support a broad range of breweries all over the world. And that really sets us apart from any other test and inspection provider. No matter the size of your brewery or the type of test you need to conduct, we can support you.

  The equipment allows organizations to test across a multitude of applications. Whether that’s ensuring that a can containing a fizzy drink won’t leak or that a cardboard box is strong enough to survive the turbulence of transit, the solutions are extremely diverse. We have a wealth of solutions available for the beverage space. From bottles to cans and kegs, we support beverage manufacturers of all sizes.

  But we don’t just provide equipment. At Industrial Physics, we’re equipped with some of the world’s finest minds within the world of beverage packaging and metal packaging. With an unrivaled portfolio of products that span so many specialties, we speak with our customers to ensure they’re discovering a solution that is suitable for their unique needs. With our equipment, we can help customers take their production and testing to the next level by investing in an instrument that will allow them to enhance their current setup and ultimately grow their offering by reducing waste and costs significantly.

  We also offer service solutions for our instruments, supporting customers with installation, calibration, preventative maintenance and repairs. No matter where you are in the world, we have local experts on the ground who can support your needs to ensure your instruments are operating efficiently.”

  One of the Industrial Physics brands is CMC KUHNKE. Davis describes its versatile options, all designed to save time and money:

  “Whether you’re a small brewery needing a compact and cost-effective solution like our useful CMC-KUHNKE seam saw, or a global giant within the world of beer looking for a more advanced, automated solution such as our CMC-KUHNKE Auto XTS, we can help you with this and everything in between!”

  Safeguarding the integrity of brewery products requires thought in every step of production. When it comes to keeping production lines moving swiftly and efficiently, Custom Conveyor Concepts promises to meet the needs of virtually any brewery. Matthew Gill, a co-founder of the company, has been in the packaging industry for some 40 years, working various floor positions before moving into management, sales and consulting. Gill explains how Custom Conveyor Concepts evolved:

  “In terms of the number of years in business, we are relatively new, as we were founded in 2015. However, Custom Conveyor Concepts (CCC) was formed after having been producing conveyors for more than 10 years for Exchange Team Advantage (ETA) and their customers. ETA was founded in 2005 as a used equipment supplier and OEM rep for virtually all aspects of liquid and powder packaging – depalletizing/unscrambling, filling, capping, labeling, coding, case packing and palletizing – literally, start-to-finish, turn-key applications. In doing so, we were requested to provide the connecting, often challenging, conveyor. After years of producing it for specific applications, the decision was made to make it available as its own commodity, and Custom Conveyor Concepts was born.”

  Gill emphasizes that his company’s products are designed to solve problems confronting breweries, whether accommodating tight spaces or tight deadlines.

  “We provide solutions. Whether it is space limitations, the need to expedite size changes or how to increase output, the only essentials required are your needs. Tell us what you want to do, and we will work with you to make it happen. We have worked with many startup companies, as well as very large, universally recognizable companies, and helped them grow. Our conveyors are versatile and expandable, as you can easily add, remove or re-route them. We only offer stainless steel, and our conveyors are constructed out of 11 ga., providing solid, durable equipment that will stand up to the harsh cleaning chemicals and offer ease in cleaning.”

  Gill adds that Custom Conveyor Concepts understands how to help breweries maximize their equipment investment while, at the same time, staying within budget.

  “We have worked with 600 cpm breweries down to 3 hd. fillers and manual crowners, when bottles were more prevalent. Our defining quality, in addition to the quality product we provide, is the attention we give to our customers and helping them achieve their needs, often providing options to help them stay within or define their budgets. We provide specialty equipment and service at ‘regular’ pricing. We don’t charge extra for non-stock items or detailed line layouts for placing the equipment. 

Our entire team’s product knowledge and industry experience are irreplaceable for providing application solutions. We do where others say it can’t be done. Many of our competitors don’t want to be bothered with small, low-dollar projects or small projects that require you to seek a solution. We excel at those.”

  Among the most popular products from Custom Conveyor Concepts are its serpentine conveyor and accumulation tables. Gill explains that while space is at a premium in most production facilities, it is more so in smaller operations. These two items, he says, offer ready solutions.

  “Utilizing a serpentine conveyor can convert the space a 5-foot conveyor consumes into 15 feet. The ability to make a roll change on a labeler without shutting off the filler makes the ROI for inline accumulation tables worth every penny.”

  Creating the bottling for breweries worldwide is the role of BPS Glass, a company based in Panama City, Panama, with its U.S. office in Atlanta, Georgia. As a family-owned business that began some 60 years ago, BPS Glass now boasts a reputation as one of the leading suppliers in the glass packaging industry. At its core is an emphasis on investing time, resources and effort in training its team members to create viable, innovative solutions for clients. Isidoro Cherem, a spokesperson for BPS Glass, says that the company works with breweries and distilleries that range from small craft operations to large commercial facilities. Cherem adds that dedication to optimal customer service sets the company apart from its competitors.

  “Thanks to our amazing team of experts and our commitment to excellence and creating long lasting relationships with our customers, we have grown to be the largest packaging supplier in the South and Central American region. We are constantly working towards expanding into the USA, and we are sure that we can replicate our success in the North American region.”

  BPS Glass offers more than 150 types of glass bottles for multiple industries, along with custom bottle designs. It also promotes services that include client-specific packaging and assistance with logistics to ensure timely, secure delivery of orders at the most cost-effective rates.

  Label design is another service BPS Glass provides its clients, with a focus on label colors and shapes, materials, textures and other aesthetic components. The company adds that it equips its clients with real-time marketing analysis, keeping an eye on marketing trends to help clients choose the right bottle, label and packaging for a product.

  Multiple choices in bottle closures are also on the company’s product roster. It points to its decades of knowledge in the chemical processes, physical considerations and industry safety standards to help clients safely package a product for consumers.  

  Whether using cans or bottles, breweries must factor in how best to protect the integrity of their product, both in terms of taste and safety of consumption. In addition, the efficiency of a production line depends upon investment in the right equipment that can move products swiftly and safely to store shelves. These considerations require the expertise of companies that know how to help breweries achieve these goals on time and within budget. 

Good Beer Makes Great Whiskey

Cyndi

By: Kris Bohm, Owner of Distillery Now Consulting

The idea to start a craft distillery can come from many places. If you talk with almost any brewer they will tell you the idea of a distillery is one they have considered. The tools needed to start a distillery are so similar to a brewery that much brewery equipment is identical to the equipment found in a distillery. Brewers who want to jump into making distilled spirits have most of the knowledge, tools and skills needed to manufacture spirits. One skillset brewers lack is in the art of operating a still but have no fear we are here to help. Let’s talk about selecting the right still for a brewery to make amazing, distilled spirits. Afterall good beer makes great whiskey so if you have a brewery why wouldn’t you do it?

Designing a Distillery

  As the dream is put down on paper and planned for the specifics start to come into play. Are you going to make whiskey, vodka, gin , rum or do you plan to make all of them? What do you want your still to look like? Will it be a shiny copper showpiece or a stainless economical work horse? What ingredients you plan to utilize to produce distilled spirits is very important to consider when selecting the right still design. The equipment for distilling potato vodka is very different from that used to distill malt whiskey. If you are unsure where to start here, this may be a good point to bring in an expert to help you make these choices.

Selecting the Right Still Size

  The first question many folks ask when selecting a still is something like how big of a still should I get? Should I get a column still or a pot still? What is more important to consider about how big is how small is too small? A common issue with many new distilleries is that they start off far too small. In fact some distilleries start so small that they outgrow the capacity to produce enough product within a year. The opinion held by most whiskey distillers is that a still any smaller than a 250 gallon will hinder your distillery from growing. Depending on the configuration of a still and the ABV of the wash a 250 gallon still can produce a single whiskey barrel per day. This key number is important to consider. Why this matters is that a larger still only costs slightly more than a smaller still. Secondly the larger your still is the less you will spend on labor per gallon of spirits produced.

Key Considerations

  It can be easy to underestimate the real quantities of spirits a distillery needs to produce to be successful. This is especially true if you plan to distill any spirits like whiskey or brandy that need to age for years before they are ready to bottle.

Some of the best whiskies from around the world like bourbon, or single malt whiskey spent years in the barrel before they were bottled. If the products you plan to make are going to taste as good as other products on the market they will need to age as well. There are no proven shortcuts to age spirits faster, but there are plenty of examples of so called “rapid aged” products that were not successful. The point of all this is that you have to plan years into the future. If you buy a still that can only produce enough spirits to meet the demand you are planning for today this still will not be able to make enough spirits to age to meet your demand several years down the road. The more whiskey you are putting in barrels every day the more potential you have to grow. To put a cap on growth by selecting too small of equipment can be a costly mistake.

  Selecting the perfect size still or stills is not an easy decision to make. There are a multitude of  factors that must be carefully considered to make these decisions with confidence.

Budget is the critical factor. Budget not only for the cost of the still but also other equipment needed to support the still is important.  A budget for operating expenses is also helpful as once you get the still it takes capital for raw materials, labor and overhead to operate the equipment.

  Another consideration to take in is the size of the facility.. If you only have 500 square feet of space for your equipment, then it is unlikely that a 500 gallons still is going to fit well into your building and still leave room for the operation to function. You should not select your equipment until you know the amount of space you have for the equipment.

  Production Goals are a critical factor that must be given thought and planning. If you want your distillery to be producing 1000 barrels of whiskey every year then there is no way a 250 gallon still can get the job done. Sizing the still for the long term production goals of a distillery will help you stay ahead of your growing pains. The size of the still will directly determine the quantities of spirits you can distill.

  Skilled labor is an essential part of the equation. For a brewery to make the best spirits possible it is a wise investment to bring in an experienced distiller to help guide the process and handle the distilling. Although there are many similarities between the brewing and distilling, there are also vast differences in the process and in the regulation of the industries. A skilled distiller will bring the knowledge and experience to the table to help you make the best whiskeys possible and also ensure it is done in a way that is compliant with regulations.

Lets Make Whiskey!

  Building a brewery is an expensive endeavor and most brewhouses in a brewery are not run constantly. The addition of a still can create the opportunity for a brewery to run its brewhouse more often to create distillers’ beer to be distilled into whiskey. This is good for the business as it can create greater economies of scale. To do this effectively is it paramount to select the right size still to meet your goals. This is a huge opportunity for most breweries and one that can create immense new value and also open new markets for a brewery. If your brewery is ready to take the leap into distilled spirits now is the time to do it. After All most brewers love a good whiskey and good beer can be transformed into great whiskey.

Three Commonly Overlooked Legal Issues for Breweries

Cyndi
beer rest on a flat surface beside a gavel

By: Brian D. Kaider, Esq.

Breweries have to deal with many legal issues, including licensing requirements from various federal and state agencies, formation of a corporate entity, negotiating contracts, and registering trademarks.  With so many new skills and requirements to learn, it can be easy to miss something.  Below are examples of three legal issues that are often overlooked.

Failing to Require Employment Agreements

  There are a million things to do when starting a brewery.  Finding and hiring staff checks off a significant box on the list and it can be easy to overlook the need for an employment agreement for these early hires.  Later, there is little enthusiasm to impose these agreements retroactively or to apply them to new hires when they were not required for original employees.   Yet, employment agreements serve a variety of functions that are so essential that their omission can cause substantial problems down the line.  

  As a preliminary matter, an employment agreement defines the relationship between the parties.  Often breweries will try to categorize workers as independent contractors as opposed to employees, because this distinction allows the brewery to avoid providing certain benefits that are required for

employees.  But, the IRS does not care about the brewery’s characterization, it cares how the worker is treated, and the key determination is control.  An independent contractor is hired to provide a function, but has significant autonomy to perform that function when, where, and how they see fit.  Often they will provide their own equipment and set their own hours.  By contrast, if the brewery exercises control over the worker by imposing certain work hours, requiring the job to be performed in a certain way, and providing the equipment used, the worker is considered an employee.

  There are many important sections of an employment agreement, including designation of at-will employment, requirement to abide by rules set forth in the employee handbook, etc.  But two often-overlooked sections relate to confidentiality and assignment of intellectual property.  Although the brewing industry is far more collaborative and congenial than most, it is still a competitive business and certain information should be treated as confidential and/or trade secret.  Employees should be made aware that unauthorized disclosure of business plans, growth plans, customer and supplier lists, recipes, and marketing ideas, to name a few, can cause harm to the business.  This section of the employment agreement not only serves that notice function, but can set up more enforceable consequences if the terms of the agreement are breached.

  Breweries generate a significant amount of material that can be protected by trademark or copyright registration.  Label designs, beer names, domain names, and social media accounts are all valuable assets that should belong strictly to the business.  An assignment of intellectual property section in an employment agreement sets forth the understanding that anything created during the term of employment is the sole property of the business.  As an example, if an employee has artistic talents that are used to develop designs for labels, those artistic designs should be assigned to the company.  Otherwise, the employee would have the right to sell the same designs to other companies or individuals who may use them in a way that is detrimental to the brewery’s brand.

Failing to Secure Music Licenses

  Music is such a common part of the brewery experience that many people take it for granted.  However, breweries must obtain the proper licensing to play copyrighted music in their establishments or they could face a copyright infringement suit and potentially crippling statutory damages that could be as much as $150,000 per instance.

  Under U.S. copyright law, the owner of a piece of music has the exclusive right to control its use, including whether or not it may be played in a public setting.  Typically, however, while the artist may own the copyright, s/he delegates the task of licensing its use to a Performing Rights Organization (PRO) such as the American Society of Composers, Authors, and Publishers (ASCAP) and Broadcast Music, Inc. (BMI).  In some cases, a single artist may have some of its songs licensed by one PRO and others licensed by another.

  So, is a license required for every song played in a brewery?  Generally, yes, in order to publicly play any piece of music, a brewery must obtain a license from the PRO that has the piece in its catalog.  Below are some common situations where a license is required, followed by some exceptions to the general rule, and one very simple way to stay in compliance.

  Disk Jockeys by their very nature play a variety of pre-recorded music.  Although it may be the DJ that selects the pieces it plays, because the venue derives the benefit of the music, it is responsible for obtaining all necessary licenses. 

  Bands that play “cover songs” written by another artist fall under the same category as DJs.  But, what about bands that play only original songs?  The brewery should ask the band whether it is affiliated with a PRO.  If so, even if the band is playing its own music, the venue needs a license for the performance.

  Purchased music is only licensed for private use.  Many people assume that when they buy a record, CD, or digital audio file that they own the music and can do anything they want with it.  In reality, the purchase price of that music only covers private use and does not entitle the owner of that copy to broadcast it to the public.  So, even if the brewery owner brings in her own collection of vintage vinyl, she must obtain a license to play the records in the taproom.

  Generally, music licensing fees are not terribly expensive, but vary according to the size of the establishment and the type of music being played.  In some cases, discounts may be available.  For example, the Brewers Association has negotiated a discount with BMI of up to 20% for its members.  

  There are a few exceptions that will enable music to be played without a license, but they are narrowly construed and must be followed carefully.  Music that is broadcast to the general public over the radio, television, cable, or satellite services may be played in a brewery without further license if the establishment is smaller than 3,750 gross square feet, including all interior and exterior spaces used for customer service.  Larger spaces may also qualify for license-free performance, but other restrictions apply, such as: the music may not be played over more than six loud-speakers or more than four in one room; there may not be a cover charge to enter the establishment; and audiovisual content may not broadcast over more than four televisions or more than one in a single room.  Music may also be played in the brewing space or offices for the benefit of employees, as long as it is not audible to the patrons in the tasting room.

  By far, the simplest way to get music in the brewery is to use a commercial streaming service, such as Pandora For Business or Sirius XM For Business.  The fees for these services include performance royalties and do not require any additional license.

Failing to Report Changes in Proprietorship or Control

  It should come as no surprise that when forming a brewery the TTB will want to know exactly who owns the business and who is in charge.  It should be equally unsurprising, then, that if there is a change in ownership or control of the business, the TTB must be informed.  Yet, this is an often-neglected requirement and failure to adhere to the letter of the law can have serious consequences. 

  It is important to understand the distinction between a change in proprietorship and a change in control.  A change in proprietorship occurs when there is a change in the entity that owns and operates the brewery.  The obvious example is if the brewery is sold to a new company.  Clearly in that situation, the TTB must be made aware of the new ownership and the law requires that the notification be made well in advance of the proposed change.  Specifically, 27 C.F.R. §25.72 requires that the successor brewer “qualify in the same manner as the proprietor of a new brewery” before beginning operations.  Less obvious examples might be the conversion of an LLC to an S-Corporation or the folding of the brewery business under the umbrella of a parent corporation that has the same owners and officers as the brewery business.  Both those situations involve changes to the proprietorship and must be cleared with the TTB before operating under the new structure.

  By contrast, a change in control occurs when there are changes in stock ownership, LLC membership unit ownership, or major changes in the corporate officers or directors of a corporation.  The same business entity continues to operate the business, so there is no change in proprietorship, but there is a change in who controls the business within that entity.  In this situation, an amended Brewer’s Notice is required to be submitted within 30 days of the change.  Further, if a new LLC member or stockholder holds more than 10% interest in the business, a new Personnel Questionnaire must also be filed.  Common situations that involve a change of control may include the removal of a founder, death of a member, addition of a new corporate officer with ownership interest, addition of new members through a round of fund-raising investments, or the buy-out of previous investors.

  Failure to abide by the notice requirements for changes in proprietorship or control can have serious consequences, including forced shutdown of operations until the licensing matters are resolved and possible monetary penalties.

Conclusion

  These are just three of the legal issues that breweries often overlook.  There are, of course, many more.  Engaging an attorney that understands the industry early in the process of starting a brewery and maintaining the relationship throughout the life of the business is the best practice to ensure compliance with all requirements.

  Brian Kaider is the principal of KaiderLaw, a law firm with extensive experience in the craft beverage industry. He has represented clients from the smallest of start-up breweries to Fortune 500 corporations in the navigation of regulatory requirements, drafting and negotiating contracts, prosecuting trademark and patent applications, and complex commercial litigation.

Craft Beverage Philanthropy: Brewing with Purpose While Giving Back

Cyndi
person giving alms

By: Alyssa L. Ochs

Of course, the primary goals in the craft beverage industry are to drive a profit, make money and sustainably secure the business. However, an increasing number of breweries and distilleries have become so entrenched in their local communities that it only makes sense to give back to charitable causes when possible.

  Craft beverage philanthropy is on the rise in the U.S., and there are many creative ways in which brewers and distillers can embrace this trend of doing good while drinking well. There are some valuable lessons to learn from beverage businesses that are focusing a portion of their efforts on philanthropy, which are inspiring if you are looking to host a charity event or donate a portion of sale proceeds to raise money for local causes in your community.

How Breweries & Distilleries Can Approach Philanthropy

  Breweries and distilleries can take a variety of approaches to add a charitable element to their operations. The level of community involvement may vary based on the owner’s interests, the size of the craft beverage establishment and the number of staff members available to help with projects outside the realm of making beer and spirits.

  Some craft beverage businesses are skilled at hosting events, partnering with local nonprofits and using social media to get the word out about needs in the community. Other establishments are willing to try profit sharing with partner charities and give direct donations to organizations working in specific fields of interest, such as early childhood education, homelessness or workforce development. A craft beverage producer can also give back to the community through beer or spirit collaborations, supporting local growers by purchasing homegrown ingredients and hosting art shows featuring local artists. Meanwhile, some beverage producers choose to focus on their own internal sustainability practices instead to make their operations eco-friendlier through recycling, water conservation and energy-saving programs.

  Besides just feeling good about what you do and what you brew, there are many benefits to embracing philanthropy in the craft beverage industry. Getting more involved with local causes increases exposure to a business and builds brand awareness. A brewery or distillery can build greater support among like-minded and community-supporting patrons while engaging with customers on a deeper level. Adding a philanthropic element to a business can help create a more community-centered taproom, generate good press to compensate for a past issue and even result in valuable tax benefits at the end of the fiscal year.

Examples of Craft Beverage Philanthropy

  All across the country, you can find excellent examples of how craft beverage businesses engage in philanthropy without sacrificing product quality or putting a compromising strain on their budget. For instance, Ex Novo Brewing, which launched in Portland, Oregon and also has a presence in New Mexico, was the first nonprofit craft brewery in America and has referred to itself as a “permanent fundraiser to support causes.” Charitable causes supported by Ex Novo include Oregon Wild, Friends of the Children, Mercy Corps and Impact NW.

  Deschutes Brewery in Portland, Oregon, teamed up with Dovetail Workwear to support women’s success in pursuing non-traditional occupations.

  The Phoenix Brewing Company in Mansfield, Ohio, has been involved in philanthropy since it opened in 2014 through special beer releases, apparel sales, sponsorships and fundraising events. It has supported summer camps for children with special challenges, a community theater, a winter coat drive, a homelessness initiative and a brain cancer research organization. Phoenix Brewing is unique in that it accepts requests for donations and sponsorships directly through its website and is a non-tipping establishment. If customers leave cash behind as a tip, the brewery donates it to a designated charity each month.

  Pennsylvania’s Tired Hands Brewing Company is another beverage business that streamlines the funding process and outlines its donation guidelines and application protocols on its website to be refreshingly accessible to local charities.

  Service Brewing, started by an army veteran who served in Iraq, is a Savannah, Georgia brewery that has donated a portion of brewery tour profits and promoted charities that include police, fire and first-responder organizations. Over the years, the brewery has raised over $110,000 for local, regional and national groups.

  Franklins, a family-friendly brewery in Hyattsville, Maryland, is dedicated to giving back to its local community and donated over $200,000 through a fundraiser program for local schools, environmental groups and progressive advocacy organizations. It also supports its community by partnering with local farms to source ingredients and the town’s art alliance organization to showcase the work of local artists.

  Finnegans Brewing Company in Minneapolis, Minnesota, has a policy of supporting local food banks and helping food banks work with farmers in the area.

  In Milton, Delaware, Dogfish Head is a large and well-known brewery that launched a Beer & Benevolence program to support over 150 nonprofits annually. Funded organizations include the Delaware Historical Society, Delaware Nature Society and Nature Conservancy.

  To dip a toe into the realm of philanthropy without going overboard right away, breweries and distilleries might consider centering giving around just one special, limited-release beverage.

  For example, an Ashland, Virginia brewery, Center of the Universe Brewing, made a Homefront IPA and donated all proceeds of the beer to a nonprofit that helps military troops and veterans. It often makes the most sense to link a beverage company’s history and the founders’ interests to philanthropic engagement.

  An example is SweetWater Brewing Company in Atlanta, Georgia, which started a long-term, multi-year clean water campaign to improve the local water supply and focuses its giving on environmental groups in the region.

  You might also tap into the intersection of craft beverages and art, like Horse Thief Hollow in Chicago, Illinois, which has partnered with a neighborhood art alliance to turn the business walls into an impromptu art gallery that displays the works of local artists. 

  Another way beverage businesses can boost community involvement is to partner with local sports teams. In Indianapolis, Indiana, craft breweries have created beers that pair with the charitable efforts of local sports teams, including the NFL’s Indianapolis Colts. The local brewery and bistro, Triton, created a Pink Ribbon Saison with pink and white peppercorns to celebrate Women’s History Month and compliment the breast cancer research funding of the city’s professional football team.

Creative Ideas and Looking Ahead

  For breweries and distilleries that have a handle on their essential operations and are ready to take the next step in community involvement, now is a great time to establish partnerships with local charities. Business owners can harness the trendiness and popularity of craft beer to spark awareness about people, animals and natural resources in need of attention.

  Yet there is no shortage of challenges that come with pairing craft beer and spirits with philanthropy. Selling products must always remain the top priority for these businesses to stay operational, and there will always be public scrutiny about which charities they support and transparency with regard to how the money is used. The quality of the beer and spirits produced must come first so that customers keep coming back and supporting the business and the affiliated charities. If the quality declines, craft beer fans may just as well donate to charities on their own without any craft beverage connection.

  There are also challenges with finding staff members who can manage charitable work, getting the word out about philanthropic efforts, establishing donation guidelines and having enough money to go around. However, this is an exciting time to get involved in the world of craft beverage philanthropy because of how prominent beverage producers have become in their local communities and the potential power and influence they hold for rallying community members to enjoy their favorite drinks with a greater purpose.

  As a craft beverage producer, one of the best ways to launch a philanthropic campaign is to learn from the examples of what other breweries and distilleries have done in the past and contact their teams for details, feedback and mentorship. If corporate philanthropy is an interest within your ownership and staff, it may also be worth reaching out to the local community foundation in your area to discuss options for opening up a fund, donating to specific programs or starting an endowment. Most major cities and even broader regions serving multiple counties have well-established community foundations that can offer advice, resources and training about taking a more philanthropic angle as a charitable side venture.

  Despite hard hits from the pandemic, recession and labor crisis, specialized companies are also emerging to connect the business industry to the nonprofit sector. One example is Positive Legacy, a collective group of nonprofit and event industry professionals that created the Pours for Positive campaign to engage craft beverage companies in nonprofit engagement and outreach for mutually beneficial results and a more vibrant and sustainable community. The Brewers Association also provides resources and tips for producers navigating the complex world of philanthropy. Industry-specific recommendations include adding an online donation request form to your website, hosting events that bring a charity into your business and ensuring donations boost taproom sales with silent auctions and gift cards that draw more business to your doorstep.

Beverage Development on a Bootstrap Budget

Cyndi
man in glasses thinking

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.

How to Recession Proof Your Beverage Business

Cyndi
recession proof statement

By: Raj Tulshan, founder of Loanmantra.com

Despite a recent pandemic, record-high inflation, and several years of economic uncertainty, entrepreneurship continues to thrive, with more than 31 million entrepreneurs in the U.S. In fact, Americans’ confidence in small businesses has reached record highs, even exceeding confidence in the military, the medical system, public schools, and the U.S. Supreme Court. But is your business recession-proof?

  Since World War II, the U.S. has experienced 12 recessions, averaging one every six years. Recessions are more common than most people realize, and most people will encounter several over the course of their careers. Therefore, it’s crucial for business owners to prepare to survive the next (inevitable) recession.

  A recession is defined as a significant decline in economic activity – including gross domestic product (GDP), income, employment, industrial production, and wholesale-retail sales – and can last anywhere from two and 18 months. While recessions are common, they can be incredibly stressful for business owners, who will very likely experience some business disruptions. The key to surviving the disruption is to plan, differentiate your business from the competition, cut spending, and create additional revenue streams.

  In addition, here are ten tips to survive – and thrive – during a recession.

1. A downturn doesn’t mean doom and gloom for every business. Nearly 75% of public companies with $50 million or more in annual sales had declining revenue growth during the last four economic downturns, but 14% actually accelerated revenue growth and increased profitability. The different outcomes depended largely on the type of products or services the companies sold and how well (or poorly) they met customers’ needs. Remember that even during economic downturns, customers still buy essentials (e.g., food, utilities, household items, etc.) and need certain services (e.g., healthcare, car repairs, etc.). “Recession-proof” your business, providing what people will continuously need, to maintain sales.

2. Plan for a recession. Ebbs and flows are a normal part of the business cycle, so plan accordingly. Focus on maintaining revenue, preserving cash flow, and generating demand. For instance, running out of cash is a major concern for business owners, so assess your cash balances, expenses, and incoming cash flow. Work within your budget. Track your key performance indicators and adjust if you aren’t meeting target metrics. Pay down debt. Reduce financial waste.

3. Prepare for the unexpected. You’ve likely heard the advice to establish an emergency fund to cover personal expenses, and this is a wise move for businesses, as well. Create an emergency fund that can cover up to six months of essential costs, including payroll, inventory, rent, and utilities. Proactively collect outstanding receivables. Talk to a financial advisor about whether you should consider revolving loans, alternative financing, small business loans, and/or other options.

4. Operate efficiently. Reducing operating expenses can be a challenging task, especially as you must continue providing extraordinary products and services. Whatever expenses you cut should be invisible to customers. Determine where you can make small tweaks that can add up to big reductions, such as leveraging early pay discounts from suppliers, automating manual tasks, and renegotiating supplier contracts.

5. Multiply revenue opportunities. This strategy will require some creative thinking. Brainstorm ways to capture new revenue without making any major investments. For instance, expand your brick-and-mortar retail store’s reach by selling goods online. Adjust your business model. For example, a bakery could start offering take-home kits for birthday parties. Or a bar could sell merchandise and specialized beer onsite and online, in addition to selling drinks and food.

6. Modify offerings. Adjust what you’re selling to make it more attractive to customers and prospects during tough economic times. Think of how restaurants changed their business models during the COVID pandemic to sell to people when they couldn’t dine onsite. To adjust to the changing climate, restaurants started offering more delivery, takeout, and curbside pickup options. And, as more people worked from home, clothing retailers adjusted, offering more loungewear instead of formal suits. During a recession, pivot accordingly. In addition to altering your business model, consider changing your pricing structure and offering more incentives to entice people to buy, even if they have less disposable income during a recession.

7. Strengthen relationships. Acquiring a new customer can cost five times more than retaining an existing customer. Create and maintain strong customer relationships. Understand their changing needs and give them what they want. Offer the “value add” that they can’t get from your competitors, whether that’s free shipping, personal shopping, or a willingness to place special orders on their behalf. At the same time don’t forget your valued vendors, partners and associates. When times get tough those relationships could save the business. Or you could help save someone else’s business. Whether it’s extra time on a delivery due to supply chain issues or just a pep talk, remembering those relationships is essential.

8. Stretch your tech. Most businesses purchase technology to be more efficient and productive but haven’t taken the time to maximize the full benefits of the system or appoint an expert that can fully leverage its benefits. Before you are investing in new systems, stretch your current tech. Tech tools can also help you change distribution methods, such as pivoting from in-person tutoring, which limits you to a specific geographic radius, to online tutoring, which expands your reach.

9. Continue marketing. You may consider cutting marketing to save a few bucks but resist that urge. To maintain revenue, you’ll need to stay in front of your key audiences with social media efforts, online ads, positive news stories, compelling blogs, etc. Launch (or continue) loyalty campaigns to recapture past customers and increase touchpoints with your current customer base. Target your messages to align with customer pain points in an uncomfortable economic climate. Spotlight loyalty programs. Incentivize customers and prospects with discounts, BOGO, and other deals. Maintaining visibility via marketing can help you increase market share, particularly if your competitors pause their efforts.

10. Insulate Finances. Consult financial experts, like those at Loanmantra.com, to develop a plan to become recession-proof. They’ll help you determine how to cut costs, adjust your business model, and secure any necessary loans. If you need a loan to boost your company’s financial health, they’ll help you calculate how much of a loan you’ll need (and qualify for). Financial experts can advise you on all aspects of the loan, including the application process and what types of information you’ll be required to provide.

Raj Tulshan is the founder and managing member of Loanmantra.com, a one-stop FinTech business portal that democratizes the loan process by providing corporate sized services and access to entrepreneurs, small and medium sized businesses. Connect with Raj and Team Loan Mantra at 1.855. 700.BLUE (2583) or info@loanmantra.com.

OH! Canada

Cyndi
people dining outside

By: Tod Stewart

Dubbed the Great White North, Canada has stereotypically been viewed as a country perpetually shrouded in snow – where herds of caribou and roaming packs of wild wolves play survival games in the streets, where the inhabitants (clad in parkas and donning toques and snowshoes) emerge from their igloos to dine on seal blubber and polar bear meat. And beer.

  Okay, that’s pushing it a bit far. Anyone who lives in all but the most northern reaches can regale you with stories of asphalt-melting, paint-peeling summer heat. Interior British Columbia’s Okanagan Valley has literally caught fire on some occasions, with daytime temperatures reaching higher than 120 degrees Fahrenheit. In Winnipeg, Manitoba, you’re more likely to be eaten alive by ravenous hordes of summer mosquitos than a murderous hibernation-starved grizzly. No, the country’s really not a wasteland of frozen tundra. That being said, when it comes to the distribution and sale of beverage alcohol products, Canada has a ways to go before it really emerges from the Dark Ages.

  For example, there are antiquated liquor laws that haven’t changed dramatically since being imposed in the 1920s, combined with an inability to shake off the chains of the Ghost of Prohibition Past. Health Canada has recently proclaimed that no amount of alcohol is safe, and any more than two drinks per week – yes, you read that correctly – increases your odds of being dead). Additionally, federal and provincial government bodies have gotten rather intoxicated on the gold they have mined from drinkers. All of these things together to create an odd cocktail of private, public and government interests. So, how does this all affect a producer – perhaps you – who wants to break into the Canadian market?

  First, it’s important to understand that alcohol importation, distribution and, ultimately, sales are pretty much the sole domain of government liquor monopolies (“liquor boards”). Each province behaves somewhat differently in its approach, but all function in a fundamentally similar way. Let’s focus on Ontario (mainly because that’s where I live, and my knowledge of “the system” here is probably better than the workings of other provinces).

  Second, it’s equally important to understand that provincial liquor boards exist to feed provincial government coffers. That’s it. That’s all. This wasn’t always the case. The Liquor Control Board of Ontario (LCBO), for example, was originally envisioned as a transitional mechanism to ease the province from prohibition (via a system of “controls” – many of which would likely today seem in violation of personal privacy if not being downright racist) back into the private retail sector. It wasn’t supposed to be still with us today. Of course, the original mandate was rethought over time as successive governments realized that in controlling booze sales, they had given birth to a proverbial golden revenue goose.

  The upshot of this is that, though you may be convinced you’ve developed the most wondrous elixir thus far known to man (confirmed by family and friends), it really means nothing to the liquor board. What matters is how much money your concoction will rake in if the decision is made to give it a shot in the market. As with many other businesses, the salaries and bonuses of LCBO executives (which are substantial) are directly tied to “corporate performance” (read, sales numbers). If you can’t help them, they can’t help you.

  There’s a saying: “If you want to make a small fortune in the wine industry, it’s best to start with a large one.” The same is true with trying to break into the Ontario market. Having a decent chest of loot socked away to market and promote your product – primarily through LCBO-controlled programs that you will be “strongly encouraged” to participate in – will significantly up the shelf space ante.

  “Okay,” you say, “I get it. It’s all just business…but I still want a piece of Ontario action and I’ve got the resources to give it a serious go. So, how do I do it?”

  Assuming you are a producer of “craft” products and don’t have a global corporation with an international sales force to help you, you will need someone in Ontario to act on your behalf. A “manufacturer’s representative” (aka, an “agent”) essentially acts as your sales and marketing (and often PR and government relations) wing in Ontario. A good agent likely has a decent working relationship with LCBO buyers (and possibly LCBO executives), knows how to navigate the system and work through the reams of often byzantine paperwork, knows which LCBO sales channel (and there are several) would work best for you, knows the market, can assist with pricing decisions and – perhaps most importantly – has the patience of a saint and the tenacity of a limpet. While you may luck out and get a bite on your first cast into LCBO waters, this typically isn’t the case.

  Suppliers often become frustrated and blame their agents for the lack of LCBO purchase orders. Truth be told, it’s very rarely a failure on the agent’s part. Even the most seasoned of them are often left scratching their heads when it comes to explaining why a product was rejected, though there’s really no mystery (see “provincial liquor boards” paragraph five above).

  Agents come in various shapes and sizes, from a one-person shop servicing Ontario only to corporations representing producers in each province and territory. Each type has its upside and down. Larger agents have a greater range, bigger budgets and more salespeople in the field. It’s also no secret that the LCBO tends to favor larger agencies when it comes to new and subsequent listings. The downside is that, as a craft producer, you may not have the volume of product to meet a large agent’s financial needs. Also, large agents often give the most attention to the suppliers in their portfolio that generate the most income. This might not be you.

  A smaller agency, while not having the range or resources of the big guys, typically has a smaller portfolio and can dedicate resources to building your individual brand in the market. In any case, any agency will be projecting a bottom line and weighing the effort needed to reach it before taking on any new supplier.

  Having an agent (of whatever size) doesn’t mean you can simply sign an agreement and then sit back and watch the revenue roll in. You and your agent must present a marketing plan to convince LCBO buyers to take a chance on an unknown brand. This chance will be better if your marketing plan includes numerous accolades and high scores from critics and the media.

  Once accepted, you still have to physically get your goods into the province. Large orders – or orders within reach of convenient co-loading ports – are usually easy to deal with. In fact, the LCBO will take care of most of the shipping and customs clearance responsibilities (while marking up any incurred costs and applying that to the cost of your shipment). Looking to ship in five cases of craft spirit from upstate New York? Though Ontario might literally be just across the lake, getting these cases into the province can pose challenges and requires that you, the supplier, do some homework before attempting to ship.

  Of course, once the goods do arrive, it’s not like the items are immediately shipped out to stores or offered for online purchase. The LCBO chemically analyzes all beverage alcohol products destined for sale in the province. It also holds the agent and supplier to specific labeling requirements (details here: https://www.doingbusinesswithlcbo.com/content/dbwl/en/basepage/home/quality-assurance/quality-assurance-policies—guidelines/labelling/-lcbo-product-packaging-standards-and-guidelines-for-chemical-an.html). Lab testing isn’t provided free of charge. If your product fails well, you have the option of having it shipped back (on your dime) or destroyed (also on your dime). If “corrective labeling” is required to make your labels compliant, you’ll be charged for that, too. Be forewarned, the time it takes to have your stuff available for sale once it landed can be frustratingly long, and the reasons given (or typically not given) for the delay will almost be guaranteed to cause further frustration.

  You might also be (unpleasantly) surprised to find out what the retail price of your product will be once it’s available for sale (though, to be fair, you will know this before you even decide whether a sale to Ontario is worth the bother). To quote the LCBO’s website: “The price that is seen in a store or online is a combination of the supplier’s price plus import duties, freight, levies, a standard markup, HST and container deposit.”  The “standard markup” on spirits is a modest 139.7 percent. The Harmonized Sales Tax (HST) is 13 percent. All of these costs are passed on to the end consumer.

  Things aren’t much easier if you’re a craft brewer. You might have heard of The Beer Store (TBS) and think this might be a way around the burdensome LCBO process. Think again. TBS is simply another monopoly, only rather than being run by the government, Canada’s three big brewers run it. If you think they are interested in offering competing products on their store shelves, keep dreaming. As with distillers, foreign brewers really have no choice but to deal with the LCBO.

  Finally (at least as far as this story goes), getting your product into the LCBO system is no guarantee it’ll stay there. You’ll be expected to meet sales quotas. If you do, reorders are likely – probably in larger amounts than your initial order. If it looks like you can’t, well, you can always try throwing more money into marketing, promotion and advertising. But in the end, if the consumer judges your product to be a dog or has no interest in trying it, it’s off the shelf – which is really no different from most retail products.

  Believe it or not, I’m not trying to discourage any beer or spirits producer reading this from trying to get a toehold in the Ontario – or Canadian – market. Personally, I’d love to be able to sample your wares. It won’t be easy, but it could be worth it, given the adult populations of major centers. Look on the bright side, if things go well, you might be able to unload your entire annual production on one customer – and with that customer being a government agency, payment is hardly ever an issue. Or you might decide that the LCBO is just another four-letter word.