Category: Archived Articles

How Beverage Business Owners Can Achieve Financial Freedom

Cyndi
man enthusiastically jumping on high fist

By: Raj Tulshan, Founder of Loan Mantra

They say money can’t buy happiness, but it can help create peace of mind by alleviating stress in professional life – especially if you’re a business owner! Professional financial freedom means taking control of your finances and amassing enough cash and savings to manage daily operations, handle emergencies, drive growth, expand and maybe even sell the business one day.

  For beverage business owners, knowing that payroll can be met, a second location of your bar or location could be opened, staff and vendors can be paid – and there is still enough money set aside for any emergencies can provide stability. We’re all familiar with certain strip malls or vacant locations where different businesses seem to come and go, unsuccessfully. In contrast, towns and cities are identified by the bars, pubs and restaurants that are landmarks, meeting spots and seen as a local staple in their areas.

  Financial freedom offers a variety of benefits that go beyond financial control. A recent study by Harvard Business School found that having more money reduces intense stress, brings greater control, and leads to higher life satisfaction. Other benefits of financial freedom include improved mental health, better relationships, more opportunities, an elevated lifestyle and greater independence.

  The path to financial freedom. We all want financial freedom so how do you get there?

  Become a business owner. Simply becoming a business owner provides an essential freedom that can’t be explained unless you are one. As countless entrepreneurs attest, many people prefer to work for themselves rather than for someone else because they have more control over their future – and their finances. A Baylor University professor found that despite the challenges of business ownership – including long hours and high stress levels – entrepreneurs report consistently higher rates of happiness vs. people who work for others.

  Create a budget. Develop and stick to a budget. Outline operating income, receipts, expenses, loans, rent/mortgage, insurance, utilities, payroll, supplies, equipment, etc. Carefully track spending to account for every dollar. Negotiate where possible, switch vendors or gain better rates for your phone and cable services. Determine which of your products are the best (and worst) sellers and adjust stock accordingly.

  In addition to tracking budget, there are common questions each business owner should ask themselves to manage their financial health. For instance, do you have outstanding accounts? Do your clients pay on time? Have you spoken with your top clients in the past 90 days? Do you have your documentation prepared in case you need to apply for a loan? Loan Mantra’s financial health checklist is a great tool to monitor ongoing questions that will not only help you track your budget, but your continued success.

  Make it “to go” and be in the know. A report released in June 2023 by the National Restaurant Association found that more than half of millennials (62%) and Gen Z adults (52%) would pick a restaurant for takeout if alcohol beverage options were included. Currently only ¼ of adults order alcohol beverages online due to availability or state legislation, but that is changing leaving room for opportunity. It’s also important to know the upcoming industry trends. For example, that same report states that it reaffirms the associations predictions that local experiences would be this year’s hottest trends – 79% of beer drinkers would participate in a tasting event at a restaurant.

  Establish authentic customer relationships. According to the US Chamber of Commerce nearly everyone has been affected by Covid Fatigue over the past couple of years leaving people emotionally drained and physically worn out. As a result, consumers want their shopping and dining experiences to be easy, convenient and satisfying. Satisfied customers are repeat customers. In addition, customers are looking for a deeper emotional connection and a personalized experience.

  Use digital media. For brands to build and maintain customer loyalty, the digital experience matters but it must not make things more complicated for the consumer. Whether a customer is ordering online or on-site it must be intuitive and easy. People find the new hottest brew, bar or pub on social media so having a presence online is a must. Post images of the business with indoor/outdoor dining space, food and drinks. Post happy hours, specials, trivia nights, special tastings, etc. and publicize them. Encourage satisfied customers to leave reviews. Allow customers to order food or make reservations online. Make services like DoorDash or OpenTable available.

  Be frugal. Consider how business magnate, investor, and philanthropist Warren Buffett purchased a $31,500 home in 1958 and still hasn’t moved out of it, even though his net worth is currently $104 billion. He can obviously afford a bigger, more expensive house, but he’s famously frugal. Conversely, controversial rapper and designer Kanye West is known for his extravagant lifestyle. He lives in a $20 million mansion – and rented Madison Square Garden for a stunt with his clothing line – despite being $53 million in debt. In a bizarre move, he asked Facebook founder Mark Zuckerberg for $1 billion on Twitter.

  This is clearly an extreme example, but it shows how financially responsible Buffet amassed a tremendous fortune and achieved financial freedom, whereas financially irresponsible West spent money he didn’t have, wound up in massive debt, and begged a tech guru for a financial handout on social media. While you’re likely not in the same tax bracket as mega-successful billionaire entrepreneurs, you can learn a few lessons from them. Don’t spend more than you have. And keep your endgame in mind. It may be easier to save money when keeping your eyes on the prize.

  Invest.  Go for a long, slow simmer vs. a quick sear. Most investments are like an Italian grandma’s Sunday sauce – they need to simmer for a long time to be any good. Know that you’ll be in it for the long haul. This won’t be a quick sear type of situation, where your money will be tied up only for a short time. While there’s always some risk and market fluctuations involved in investments, putting some of your available funds toward stocks, bonds, mutual funds, Roth IRAs, 401(k)s and other investment opportunities can help grow your wealth and put you on the path to professional financial freedom. Talk to a financial expert about how to build an investment portfolio and choose the investments that will best fit your specific goals.

  Focus. Focus on factors you control. Over the past few years, we’ve seen headlines about banks collapsing, an impending recession, plummeting stocks, and other doomsday stories about how our financial futures are in crisis. Don’t panic. Everything that’s happening today is just part of the normal economic cycle. There will always be recessions, wars, and fluctuating interest rates. Take a deep breath. Unemployment is down. Banks are protected. There’s been recession chatter for years, and it hasn’t happened. Prices and the stock market will fluctuate over time, which is out of your control. Focus on what you can control on your path to professional financial freedom: creating a budget, saving money, and investing.

  Have an emergency plan.  Create an emergency plan, ensuring that you have enough savings to cover daily and unexpected business expenses. Without adequate funding in place for emergency expenses (the air conditioning breaks, the plumbing isn’t working, the roof leaks), as well as for the inevitable periods of higher spends (e.g. extra products and staffing around the holidays, etc.), you’ll get stuck in a cycle of borrowing to fund necessary operating expenses or to repair what has been damaged, rather than using capital to look ahead to the future.

  Find financial partners.  Who is your banker, attorney and loan officer? Does the banker have a vested interest in your community? What are the financials? Does the bank have good leadership? Do you have an attorney in case you need legal advice, or someone should make a claim against your business? What about a loan officer or provider? If you need assistance with funding to cover the business in a pinch, to handle an expansion or to keep you aware of current government subsidies that you might take advantage of.

  Having the right partners in place before you need them can mean the difference between a quick phone call and financial mayhem. Find a financial team that will be trustworthy, provide insight and are available when needed.

  You should have complete confidence in their knowledge, experience and capabilities. Talk to them about your business financial status and goals and create a financial plan to help you achieve financial freedom and long-term financial health.

  “For business owners, becoming financially free is a desirable – and achievable – goal,” Tulshan explained. “It takes dedication, determination, and consistency, but follow these tips and you will be well on your way to financial independence.”

About the Author

  Neeraj (Raj) Tulshan is the founder and managing partner of Loan Mantra, a one-stop FinTech platform that democratizes the loan process by providing corporate sized services and access to new entrepreneurs, small and medium sized businesses.

Scaling Production with Precision

Cyndi
manufacturing machine for beverages

By: Kris Bohm of Distillery Now Consulting

Many beverage businesses start off with the owners or the founders serving in production manufacturing and in sales roles. As the business grows it is no longer feasible for the founders to serve in many of these roles as the needs of the business change with growth. One of the challenges many founders face in scaling their business is maintaining consistent manufacturing practices when they are no longer the person who is responsible for those practices. Training for new employees in small businesses can sometimes be inconsistent or informal.  When training is not implemented cleanly enough that a newly hired employee can fulfill their responsibilities fully it can be frustrating for all involved. Lets take a look at some easy to implement solutions that can help your employees do the best job possible.

  One solution to this problem is creating Standard Operating Procedures (SOP). When you detail in writing each step of the manufacturing process in a document that is readily available to those performing the task, you should get more consistent results. Standard operating procedures can be tedious to create but will save you time in the long run and give your employees the confidence to perform complex tasks with ease. In the process of beverage manufacturing there are many complex steps. Without a set of standard operating procedures it can be extremely difficult for a new hire to fully grasp their roles and responsibilities.

  The optimal steps in training a new hire are the following. Create a written set of operating procedures that are clear and easy to follow. Review the SOP with employees and discuss the steps with them as well to confirm understanding. Once an employee has a basic understanding of the operating procedure the person training the employee along with the new employee should go through the process detailed in the SOP together. By having the trainer first complete the process while following the SOP it will fully demonstrate for the employee how the steps are done. This on hand training will often bring up questions from the employee being trained that might not otherwise come up. Once the employee being trained has seen the process completed following the SOP it is best for them to then complete the procedure outlined in the SOP in the presence of the trainer. It is critical at this step that the trainer does not work hands on with the new employee but is there to only observe and answer questions. If the trainer at this point feels that the employee grasps the SOP and is able to complete it then it is time to move on to additional training. Although this method of training can feel arduous and redundant for an employee, training like this will build their confidence in performing a task that may seem difficult for them. Training this way will also ensure that the manufacturing process will continue to be performed to the correct standards. Implementing a training of this type for all complex tasks will give the creator of the SOP trust in the individuals tasked with completing the process in the SOP.

 Let’s take a look at what a standard operating procedure looks like for a process in a business and talk about some of the key points that you will find in an SOP.

  Let’s go through the practice of generating an SOP:

1)   Go through the process yourself of completing the task that needs a SOP.

2)   Write down all steps and processes required to complete that task.

3)   If there are certain measurements critical to completing the task such as volume temperature or time, include this info in the steps.

4)   If there are complex controls or tools in the process include pictures to help further clarify the written steps.

5)   Place notes in the SOP if there are any hazards in the process or safety concerns.

6)   If there are many steps it can be helpful to add a checklist to accompany the SOP.

7)   Once the SOP has been written, seek feedback on it. Have another person read the SOP ask if they could perform the task.

8)   If the feedback is positive implement that SOP by training your employees.

9)   Put the SOP in a binder or place where it is nearby the location where the task is performed.

  This process of putting in the work to create easy to follow operating procedures, will make work better for everyone. An SOP will guide your employees as they do tasks and give them the confidence that will require less oversight by you. This does not mean that an SOP can replace a manager. The true purpose of an SOP is to provide a resource to ensure complex activities can be done correctly by all who perform it. As a business grows and scales new employees will need to learn how to do their job. The better SOP program you have the faster a new employee will be able to work independently.

Software Options Available for Breweries and Distilleries

Cyndi
woman swiping card in cashier

By: Alyssa L. Ochs

As the craft beverage industry continues to grow, many tech companies are focusing on the needs of breweries and distilleries around the country. There are many benefits to incorporating software into a beverage production business, including reducing human errors, automating repetitive tasks, getting staff organized, harnessing the power of data and ensuring quality control. Software is available for accounting, inventory, packaging, purchasing and scheduling. Breweries and distilleries also use software for sales, quality control and legal compliance. Mobile app software is an option in this industry, as well as all-in-one management software that takes a comprehensive approach and handles various functions. Meanwhile, some producers embrace a more manual process and rely basic spreadsheets and paper recordkeeping.

  So, what are today’s breweries and distilleries using for software, and how are those products working for them? Representatives from two breweries and two distilleries weighed in on this topic and told Beverage Master Magazine about their experiences with software. 

BOSQUE BREWING CO. Albuquerque, New Mexico

  One brewery that Beverage Master connected with on the topic of software is Bosque Brewing Co., which has multiple New Mexico locations in Albuquerque, Bernalillo, Santa Fe and Las Cruces. With a history dating back to 2012, it is one of the largest brewing companies in the state and has grown from a small startup producing 350 barrels the first year to more than 10,000 barrels annually.

Bosque’s production manager Tim Woodward told Beverage Master Magazine that his brewery uses Ekos for inventory and production management. He also uses a few self-built spreadsheets for forecasting, sales and analysis. The brewery handles accounting with separate software not directly tied to Ekos functionality.

  “Bosque has been using Ekos since 2015,” Woodward said. “At the time, it was very affordable and relatively simple to use. The tools in Ekos addressed what we needed most: inventory management. We are able to track inventory, manage orders, invoice sold product, track costs, review pertinent data and oversee production steps with relative ease.”

  But while fully functional, Woodward said he often runs into little “Ekos glitches” that can be frustrating, such as the services being laggy.

  “Cleaner, more functional report systems with intuitive interfaces would be wonderful,” Woodward said. “I pull a lot of data from Ekos on a daily basis, and sometimes manipulating the report parameters to pull accurate data can be cumbersome. Ekos has done a wonderful job developing product planning calendar with drag and drop features, which is very lovely. They have other modules, such as order hub and keg asset tracking, which we do not use or have not found to work with our particular business model but are helpful pieces. Another offering which would be nice is perhaps a more robust server system to support software operation.”

ALVARIUM BEER CO. New Britain, Connecticut

  Nick Palermo, the head brewer of Alvarium Beer Co., told Beverage Master about the software programs his team uses in New Britain, Connecticut. Alvarium launched New Britain’s first microbrewery, founded on the principle of creating an inclusive and communal taproom while revitalizing a historical city.

  On the brewhouse side of things, Alvarium Beer Co. uses Beersmith to fine-tune recipes and DIY templates on Google Sheets for its calendar and brewing schedule, individual brew sheets and inventory of raw materials and packing materials. Alvarium uses Google Drive to store nearly everything related to production, from brew logs to SOP’s, manuals, inventory and supplier contact information.

  “Beersmith is one of the founding tools that many brewers have used in a homebrew or production setting, allowing quick integration and easy ways to edit recipes with something that is fairly familiar and quick to learn,” Palermo said. “We ended up choosing to use Google Sheets and Drive because of the ability for company-wide visibility and editing capabilities.”

  “We are an increasingly growing brewery in Connecticut, and such quick growth over the last couple of years has led to use needing to be able to combat the ebbs and flows of this industry,” he said. “Whether we need to make a quick change to the schedule, edit a recipe from home or have different departments be able to access information without complication, we found our method has been working really well as we expand.”

  “I’d say the biggest challenge we face with our method is the need to manually enter all of our data and make changes in the templates as we see fit,” Palermo said when asked about challenges with Alvarium’s current software. “Lack of auto-entered data does take up a little more time when it comes to keeping track with inventory and can lead to some mistakes.”

  In the future, Palermo would like to see more flexible software plans for different brewery sizes and needs, with costs to match. He said that having a method to integrate software programs more easily into companies with a system in place or smaller staffing structures would also be helpful.

  Cherokee Robbins, the director of sales for Alvarium, told Beverage Master Magazine about software this brewery uses for other purposes.

  Robbins said that Alvarium uses Google Business software, such as Gmail and Google Drive for recordkeeping, Google Sheets for reporting and inventory and Google Docs and Google Calendar for events, appointments and employee schedules. She says these pieces of software are user-friendly, easy to access and meet requirements for digital storage. Alvarium uses Untapped for Business to store information about brewed beers, to allow customers to view beers and check in and to use the menu board to list available products. Robbins said this software is user-friendly and great for keeping track of customer reviews, archiving past beers and helping other businesses find products.

  Alvarium uses Square POS in the taproom for on-premise and online transactions. The team likes this software because it is easy to add, customize and categorize items with an online store that is set up as an extension for customers to shop. However, she has noticed that sometimes items can “disappear” in Square POS, or if they are intentionally hidden, customers can still find them online and order something that is no longer available. After experimenting with various email marketing platforms, the brewery uses Mailchimp for analytics and to monitor communications with its customer base. However, sometimes these emails have ended up in spam folders even after the team has certified and legitimized its domains.

  After interviewing approximately nine different CRM/ERP-related software companies, InSitu hit the four major categories of importance for Alvarium’s sales and distribution team: QBE integration for accounting, inventory management, mileage tracking and logistics for sales routes and customer relations.

“This is a relatively newer software for us, as we started using this in February of this year,” Robbins said. “There is much to learn with all of its functions, but there are times when we may have delayed connectivity issues with its integration to our QBE. Our account representative has been great with staying in communication and finding resolutions for us when we need help, so that is a huge plus. Sometimes support teams with software can be hard to get in touch with when you need something fixed right away.”

  Other types of software the Alvarium team uses include Adobe Illustrator for signage and labels, Canva for business cards and marketing and QuickBooks Desktop Enterprise for accounting and payroll. It uses Prolific as its delivery-routing software to optimize routes for delivery drivers with self-distribution, Eezycloud’s remote desktop for multiple users to access QBE and Workable and Glassdoor for job postings and recruiting.

  When asked what she would like to see in future brewery software offerings, Robbins said, “It would be ideal if all of the platforms we use can be lumped into one software for a brewery our size, especially because we have a hybrid business model with the taproom, self-distribution and now working with a wholesaler. I know there are options like Encompass or Lily Pad available, but those can be pricey and are geared more towards larger distribution networks. I have also heard of a few software platforms that other breweries have worked on creating themselves in the past few years that fit close to what we ideally would need, but there seems to be an important element missing such as integration to QBE, delivery routing software logistics or the CRM portion for our sales force.”

MUDDY RIVER DISTILLERY Belmont, North Carolina

  Caroline Delaney, co-owner and CFO of Muddy River Distillery, told Beverage Master Magazine how her company approaches software in Belmont, North Carolina. Muddy River is the oldest rum distillery in the Carolinas and launched in 2011 with 500 square feet of space in an old textile mill before growing its production from 35 bottles per day to more than 1,200.

  Delaney said that her distillery uses QuickBooks for accounting and payroll and Square for POS and retail sales. She noted that QuickBooks is straightforward for day-to-day accounting, and Square has the lowest credit card processing rates without a monthly fee. She was familiar with QuickBooks from previous companies and says while it can be limiting, the next step up in accounting software is much more expensive, and most offerings require contracts.

  Yet running sales reports with multiple customers, states and distributors can be tricky and lengthy, she said, plus QuickBooks raised its payroll fees this year.

  “It seems like once you are signed up with Whiskey Systems or similar systems, they have all your data and it would be hard to switch back or to another software,” she said. “And the monthly fees are quite a bit higher than POS systems, so that will add up. Since we were pretty limited here in North Carolina, we weren’t able to sell unlimited bottles and cocktails until late 2019. We are under construction on a building where we will actually have a bar and event space, so I am looking into changing payroll and POS systems.”

  Delaney shared that Muddy River Distillery does not use distilling software for federal reports but that her husband, Robbie, developed his own system for that purpose and is still using it with the distillery’s production manager. 

  “I know he has spoken to some of the companies, but has not made the switch because of the monthly fees and not wanting to get into a system and get stuck with them,” she said.

STILL 630 St. Louis, Missouri

  Another spirits producer that shared details about its software usage with us is Still 630, which makes award-winning, handcrafted spirits in downtown St. Louis, Missouri. David Weglarz, the owner and distiller of Still 630, uses as many organic, local ingredients as possible in his spirits, with an old-world double distillation method that captures all the flavors while consistently embracing the adventure of experimentation. 

  Weglarz told Beverage Master Magazine that he uses Google software for his distillery’s spreadsheets and recordkeeping. He chose this option and still likes it because it is free and not localized to just one computer that could be damaged.

  “It allows us to edit simultaneously from different locations, and since it’s not based on one physical computer, it’s more safely guarded against a catastrophic loss,” he said.

  However, Weglarz acknowledged that Google Docs and spreadsheets are not specifically built for distilleries, so challenges have inevitably occurred while using this strategy.

  “It’s just an excel-type format so I had to build my own spreadsheets to make it work correctly,” he said. “But I did that, and now I have my own personal distillery software. It’s certainly not as fancy and sleek as the pre-packaged software solutions, but it works and the price (free) is right!”

  In the future, Weglarz would like to see more cost-effective software options offered in the distillery industry. He says that his distillery is priced out at the moment, something many craft beverage producers can likely relate to.

Conclusions and Opportunities

  Based on our conversations with craft beverage producers across the U.S., a few things stand out about what is working for software and where improvements can be made. In general, craft beverage producers are pleased with user-friendly software that offers multiple applications, features analytics to optimize processes and gives multiple users access to shared data. Affordability is paramount for craft beverage producers, and if software seems too costly, they often settle for free solutions that require more manual entry and monitoring despite the extra labor and risks.

  There is a need and demand for software for small breweries and distilleries with limited budgets and modest distribution networks. Many current solutions cater to large operations and are financially out of reach for smaller and emerging businesses. Integration is important to brewers and distillers, yet many of these businesses feel that they understand their needs better than what any software provider could provide and prefer to take a DIY approach, creating their own internal systems to get the job done internally. Therefore, there are significant opportunities for software companies to focus on the basics and adjust their offerings with tiered options to connect with breweries and distilleries in mutually beneficial ways.

Cheers to New Beginnings

Cyndi

How Start-Up Distilleries Can Get It Right the First Time

bronze distillery machine

By: Cheryl Gray

Starting a new distillery can be a daunting task. Failing to do it properly will inevitably cost the owner time and money.  

  The industry is flush with experts to guide start-up distilleries in the right direction when it comes to equipment, building, layout, local health regulations and environmental requirements – virtually everything to consider when launching a well-tooled distillery.

  Few companies know better what a start-up distillery requires than VITOK Engineers, headquartered in Louisville, Kentucky. The global consulting engineering firm, launched in 1967, offers a singular source for multiple engineering disciplines and targets a wide range of chemical plants and manufacturing facilities, including distilleries.

  In its early days, VITOK Engineers was local. Still, its engineering expertise was far-reaching, with a client list that the company says included the United States Navy, for which VITOK designed and built CO2 scrubbers for the Navy’s nuclear submarines. By the mid-1980s, new leadership at the company introduced the distilling industry to VITOK, which already had a solid foundation for the design of a complete chemical processing facility. In the 40 years since, VITOK touts a solid reputation for designing and optimizing every aspect of distillery production, with more than 500 distillery projects sprawled across the United States, Canada, Mexico, the Caribbean and Africa. The projects range in size from small craft distilleries to more established facilities and some of the world’s largest and most recognized distilleries that manufacture up to 50 million proof gallons per year.

  CJ Archer is Vice President of Marketing for VITOK Engineers and has been with the company for nearly two decades. As an electrical and controls engineer licensed in more than 20 states and the Caribbean, Archer points out what sets VITOK apart from its competitors.

  “What sets VITOK Engineers apart from other companies is our ability to serve all engineering disciplines within our organization,” he said. “Continuity and flow of information between engineering disciplines is important for the successful completion of a large project.”

  Archer says that with distillery start-ups, it is important to gather critical information up front, beginning with what kind of spirits the distillery will produce and the proof gallon output the client desires.

  “Our engineers will then produce a Process Flow Diagram (PFD),” he said. “This helps to determine the vessel sizing, pump sizing, still size, boiler size and chillers.”

  The next steps, Archer says, are evaluating current infrastructure, such as available sewage, water and power, to help determine any additional power distribution equipment, water treatment or RO requirements that may be needed.

  “This PFD and supplemental infrastructure equipment will reveal the size, scale and types of equipment. From there, our staff can calculate and perform a Total Installed Capital Cost Estimate for the facility.

  VITOK Engineers can design and optimize every element of the beverage distillation process, from the receipt of raw materials to the proofing and bottling. Our staff can design the process, specify the equipment, design the building, define classified areas, specify and design instrumentation and controls and program the controllers, even tablets. We can also help you with the intricacies of environmental permitting.

  Our depth of experience enables us to provide clients with an expansive overview of projects, as well as a unique, cross-disciplined perspective on the design process. As an employee-owned company, the staff members of VITOK take a vital interest in building loyal client relationships. We are constantly striving to improve our services and technology while providing cost-effective solutions for project challenges,” he said.

  Archer points out other equipment and protocols distilleries can deploy to optimize production. Examples include automated control instrumentation, which serves the dual purpose of standardizing the process and freeing up labor. Another factor to consider is achieving maximum energy efficiency, which saves money. Archer explains that this means distillers will want to know if they can achieve an energy benefit from chillers, versus a cooling tower or aquifers. Examining the mash cooling systems and techniques are also on the checklist. Distillers may want to look at introducing solar to enhance so-called “green” branding, which Archer says is not a significant increase or decrease to the overall cost of implementation.

  Another point Archer mentions is installing power efficiency equipment to help save on energy costs. The power efficiency equipment helps distilleries coordinate with utility and correct for any apparent power overages. Also, comparing continuous operation, versus batch operation, as potential energy savings is another area to consider. Finally, Archer says that examining the number of shifts, timing and staging process of operations can help improve energy efficiency.

Another expert company that assists distilleries with installing equipment for both short- and long-term use is Trench Drain Systems, which manufactures and distributes drainage systems for distilleries, wineries and breweries. Engineer Michael Schroer started Trench Drain Systems in the basement of his home in 2004, selling only about three products. By 2017, the company had purchased a 10-acre property with office and warehouse space large enough to service a clientele that now spreads throughout all 50 states, Canada and the Caribbean. Schroer explains why his firm is different from others in the industry. 

  “When buying a drain system for your distillery, winery or brewery, you will most likely have to go through a distributor who interfaces with a manufacturer,” he said. “Your distributor usually won’t have the knowledge base to cover all the particularities of the drain and its installation. Trench Drain Systems is both a distributor and manufacturer of drainage systems. We have a full understanding of all brands of drainage systems. We can make custom drains when needed. We have a full engineering department and provide drawings for your installation, something that a distributor doesn’t do. In short, we are specialists in drainage systems. We have the flexibility to handle many product lines while being able to customize your drain when needed.”

  Schroer describes what key steps his company takes in helping new distilleries make the right choices when it comes to installing a drainage system that meets specific needs. 

  “I like to start this discussion by asking who owns the property where the project is being done. The reason being, if that facility is rented, the process is going to be a five-year project, and if the owners see themselves going to another location that they will own, the trench drain can be downgraded a bit. There will be differences in the drain channel chemistry, in general, when we are speaking about the drains of beer vs. wine vs. distillate manufacturing.  

  However, if you have a five-year lease on a building and have to foot the bill for the trench drain, consider a drain that will last as long as you need it. When you get into phase two of your project, where you own the building, it makes sense to have a longer vision for the drain design. That includes having a system that will handle the rough and tumble start-up period when construction equipment may be involved. It also is good to look at your future development when you may want to showcase your process and change your look from something industrial but practical to something more commercial or customer-friendly and aesthetically pleasing.

  After that detail is revealed, we need to consider the temperature and chemical demands of the process on the trench drain system. Breweries are the most demanding on drains, as they have high-temperature solutions and a wide range of chemicals that are put into the drain. And breweries will have differing drainage needs in different parts of the facility, depending on how the consumer will interface with the operation. Wineries and distillates don’t see the high volume of daily cleaning and temperatures as does a brewery. They generally don’t need drain systems that have high-service demands. Generally, these facilities have a lower drain budget unless the owner is going for an aesthetic, which costs more,” he said.

  Yet another company that helps new and existing distilleries make critical equipment choices for the long and short term is Della Toffola Group. Headquartered in Italy but supported in the United States by Della Toffola USA in Santa Rosa, California, the company positions itself as a global frontrunner in designing and manufacturing state-of-the-art technology solutions for a wide range of beverage products. Della Toffola recently entered the distillery market by acquiring Frilli Srl, another worldwide company founded in 1912 that specializes in designing, building and refitting distilleries and distillation systems.

  Experts agree that careful equipment planning is the key to a successful operation, no matter the size of a distillery or whether it is a start-up or a more established production house. Those experts also agree that success begins with a thorough consultation with a company that respects a distillery’s immediate needs and what it will take for the operation to expand.

What Beverage Producers Should Know About Hoses and Tubes 

Cyndi
beverage brewing equipment

By: Alyssa L. Ochs

Hoses and tubes are used for various purposes in a craft beverage production setting, including transferring liquids, washing containers and connecting essential pieces of equipment. Over time, this equipment can begin to show signs of wear and tear, or it can cease to be adequate for growing operations during times of expansion.

  Industry experts from companies specializing in these products weigh in on what breweries and distilleries should know about hoses, tubes and related accessories, plus how to choose the right options for your business.

Hoses and Tubes for Breweries

  Breweries benefit from using specific hoses to transfer and mix liquids at various levels and avoid contamination risks. All-in-one brewery hoses can be used to brew multiple beverages and eliminate manual labor tasks from mixing and transferring. Crimped hose fittings, clamps, gaskets, mounting bridges and hose barbs are hose accessories that help clean and maintain brewery vats and barrels.

  The most common materials used in brewery hoses are chlorobutyl, FDA UHMW, PVC, nitrile, silicone, EPDM and Teflon. Chlorobutyl hoses are common in brewery settings because they meet sanitary compliance standards and are ideal for non-oily applications and clean-in-place tasks. Yet it is crucial to ensure that the hoses you use can withstand specific temperature ranges and pressures. A food-grade, temperature-insulated, pressure-rated, 1.5-inch insulated brewer’s hose will accomplish many brewery tasks. But you might also look into highly rated hoses for resistance if they are placed in a high-traffic area where the hose could become kinked, twisted, or crushed. Tubing connects large components in a brewery to send waste products outside the production area.

Hoses and Tubes for Distilleries

  Craft spirit distilleries also use hoses to transfer products safely, hygienically and in a way that ensures excellent taste. Distillery hoses must meet industry sanitary requirements and FDA and USDA certifications. It is beneficial to use hoses specially designed for suctioning and delivering alcohol up to 96 percent.

  Clear tube hoses help ensure quality and cleanliness, and specific distillery hoses are designed to be odorless, so as not to alter the spirits’ taste. A higher working temperature allows for steam sterilization after use. Using hoses with a chlorobutyl or UHMWPE tube and EPDM cover in a distillery setting is common. Distilleries may want to look for kink-proof and compression-resistant hose and tube products to maintain flexibility under cold temperatures.

Alliance Hose & Rubber Co. Offerings

  One company that specializes in this industry is Alliance Hose & Rubber Co., an Elmhurst, Illinois-based company that has been providing construction and industrial supply products since 1932. It serves a variety of industries, including beverage, chemical, transportation and construction, with products that include industrial hoses, flexible tubing, couplings and fittings. Rob Williams, the sales manager for Alliance Hose, told Beverage Master about how craft breweries and distilleries use his company’s products.

  “We currently serve breweries in multiple ways,” Williams said. “One way is custom-cut and coupled hose systems, including a product hose, chemical hose, washdown and tubing to mate with the variety of connection options available, standard and special fittings, pumps and hose reels. Alliance Hose also serves breweries, distilleries and wineries with education on product knowledge and safety in person, at conferences and through webinars and podcasts.”

  He said nearly all Alliance Hose’s beverage products are also used in distilleries.

  “We do focus on the right hose for the distilling process, from front-end mash to the final high-proof product to be transferred,” Williams said. “Distilleries vary on what they like to use best. We just like to share insights and any additional knowledge that will help make their final product the best it can be.”

Kuriyama Offerings

  Another industry leader in industrial hoses, couplings and accessories is Kuriyama of America, Inc., which opened for business in 1968 and is located in Schaumburg, Illinois. The Kuriyama of America group of companies has eight subsidiaries and six distribution centers. It works through numerous distributors to provide thermoplastic, rubber and metal hose products and accessories, including couplings and fittings, for commercial and industrial applications.

  Tim O’Neill, marketing manager for Kuriyama, told Beverage Master Magazine that his company is best known for its high-purity, food-grade Kuri Tec® brand, clear vinyl hose and tubing products within the brewing industry. Most breweries use clear vinyl tubing, and Kuri Tec is a popular choice because it effectively maintains the purity of the materials that  the hose and tubing are made from. He explained that to ensure a high standard of quality and purity, Kuri Tec hose and tubing meet a wide range of safety standards, such as FDA, USDA, 3-A, NSF and USPS Class VI. To ensure compliance with these standards, Kuri Tec makes its own materials to manufacture its hoses and tubing, allowing for complete quality control.

  “An important consideration brewers should keep in mind when purchasing hoses and tubing is to understanding the difference between products that are simply considered ‘food grade’ and ones that are considered “high purity.” Often, brewers will hear the term ‘food grade’ and assume the hose will meet all their needs. However, the term only implies the product meets the basic standards of the FDA CFR 21 for food contact safety. It does not ensure the hose will not impart taste or smell on the ingredients or beer that pass through.”

  O’Neill said that the 3-A Sanitary Hygienic Standard, which originally started as a quality standard for the dairy industry, is quickly gaining acceptance in the brewery industry as the standard of choice to ensure the safety and purity of transferred materials. 

  “The 3-A standard defines additional criteria, such as ensuring low-extraction materials, as well as ensuring cleanability by reducing areas where materials can become stuck, potentially resulting in bacterial growth. Hoses, fittings and assemblies meeting the various 3-A Sanitary Standards have become a requirement at many craft and commercial breweries.”

  More recently, Kuriyama introduced a rubber “vat to vat” transfer hose under the Aflagomma® brand, called “The Brewt™.” In addition to meeting the 3-A standard for rubber purity, the hose provides a more flexible alternative to the heavy rubber hoses commonly used at larger breweries.

  “We found a lot of the smaller breweries were using the same heavy rubber hoses initially designed for larger commercial breweries,” said O’Neill. “The Brewt was designed to exhibit a similar ability to withstand the dragging and high-temperature cleaning to which these hoses are exposed, but to be light and flexible enough to work well in smaller craft breweries that may have space limitations.”

Common Hose Issues Among

Breweries and Distilleries

  Williams from Alliance Hose told Beverage Master Magazine that the most common problems that breweries and distilleries encounter with their hoses all relate to safety. These problems include pressure and temperature issues, trip hazards and finding the proper hose, tube and fitting for a particular application. These problems exist with product, gas and chemical transfers.

  “We address these needs by asking the right questions and recommending the safest option for that particular application,” Williams said. “We are not a click-of-the-mouse and a shopping cart. We ask questions and connect on a personal level with the beverage community. Concern for our customers safety and quality of their product is a high priority.”

Choosing the Right

Hoses and Accessories

  There are certain questions that brewery or distillery owners should ask themselves when buying a new hose. Williams from Alliance Hose uses the acronym STAMPED to get essential information from customers and provide the correct hoses and fittings for the application.

S    (size) What is the hose I.D./O.D. and length needed?

T    (temperature) What is the max fluid temperature inside the tube? What is the external atmosphere temperature?

A    (application) Where and how is the hose or tubing being used? What are the surrounding conditions?

M   (media) What is going through the hose or tube?

P    (pressure) Pressure product is being conveyed?

E    (ends) What fittings are required to make the connection?

D    (delivery) When do you want the hose or tube?

  “If we don’t have all the information we need, we will press in to gather those details as they are important to the hose system and overall brewing process,” Williams said.

  While discussing the topic of craft beverage hoses and tubes with industry experts, we found that there are few, if any, new technologies or innovations for brewers and distillers to be aware of. These are well-established and reliable products that get the job done, but there are differences in product quality and customer service to keep in mind.

  “I recommend talking to a hose professional instead of just relying on e-commerce to provide you what you think you may need,” said Williams from Alliance Hose. “I’m always available to talk product knowledge and especially safety.”

  O’Neill from Kuriyama said that the most important thing a brewery or distillery can do is ensure they have a good local hose supplier they trust to provide them with the right product for their needs.

  “The difference between using the right hose and one not best suited for a particular application can result in premature hose failures, causing lost production time,” O’Neill said. “Having a hose supplier that will understand your particular needs, rather than simply providing whatever hose they happen to have on the shelf, will improve overall operations.”

How to Scorecard Brewery Taproom Performance

Cyndi
Barrista preparing beer

By: Kary Shumway and Andrew Coplon from TaproomSuccess.com

In sports you need a scoreboard to understand if your team is winning or losing. The same holds true for measuring the financial and operational results of your taproom. You need a scorecard to keep track.

  In this article we’ll walk through the steps to create scorecards for your taproom so that you can measure and improve outcomes.  It’s not difficult, and it can transform your taproom financial results.

Let’s start with some basics: What is the point of the scorecard?

  The purpose of a scorecard is to show the goal or goals you most want to accomplish. It can be as flexible as you like. It can present financial or non-financial numbers. It is designed to capture and quantify your most important numbers.

The scorecard should:

1.  Keep the goals front and center every day

2.  Be only one page (or one number) so that it’s easy to see how you’re doing at a glance

3.  Use numbers (key metrics) to communicate

     the goal

First: Measure the Most Important Thing(s)

  Deep inside, we all know what the most important thing really is. Whether it is in our taproom business or in our life, we know what it is. The problem is that we forget.

  The most important thing is remembering the most important thing. The scorecard helps you identify what is most important and remember it every day.

  It is a simple tactic, but very effective if you follow it. The scorecard provides focus on how you’re doing towards what’s most important.

How to Figure Out the Most Important Thing

  If you are struggling to figure out what is most important, try a few focusing questions:

●   What keeps you up at night?

●   What is the biggest opportunity to take advantage of?

●   What is the biggest problem you need to fix?

  Here’s Kary’s story…cash keeps him up at night.  More specifically, running out of cash!

  So, Kary designed a one-page scorecard to monitor our business cash position every day. It shows the bank balances, borrowing balances, upcoming spending and expected receipts. It shows borrowing ability and future cash needed to fund growth. 

  The cash scorecard helps Kary sleep better at night because he’s focusing on the most important thing.

  Figure out what your One Thing is, measure it, and put it on a scorecard. 

The Process to Communicate & Educate

  The scorecard alone won’t achieve the goal. You need to take action to get things done. Often, you need action by your managers and employees – your team. 

  The process below is an effective way to communicate anything you like, and it works well with the taproom scorecard:

1.   Know the Score. To know the score, you have to SHOW the score.  Don’t play hide and seek with your scorecard or bury it in a desk drawer. Share it with those that can help you win.

2.   Educate your Team. Teach your managers and employees how the scorecard works and how they can make a difference. People want to contribute, teach them how.

3.   Set a Goal to Improve. Use your past performance + set a goal to do better.

4.   Monitor the score, track Progress. Provide regular updates or people lose interest.

5.   Celebrate the win. Free beer works well when you hit the goal!

  Taken together, the 5 steps presented above are an effective method to make sure you get the most out of your taproom scorecard and achieve your goals.

Use Process and Outcome Metrics

  We are a results-oriented society. We like to get stuff done.

  However, it is useful to focus on the Process of getting stuff done in addition to the results or the Outcome. The idea here is to use “Process and Outcome Metrics” on the scorecard.

  Process means the action taken, or steps that need to be followed. We can’t always control the outcome, but we can control actions, effort, following a prescribed routine.

  For example: Teach your taproom staff to ask for the sale and offer an item to upsell.

  Teach them to ask for the customer’s email so you can tell them about new beers or special releases. Send out marketing emails and make social media posts on a regular basis. These are things you do to drive sales, increase profits, or achieve the most important thing.

  Outcome means the actual results. The Outcome is a by-product of actions. If you’re not getting the results you want, experiment with the actions.

Consider measuring both Process and Outcome goals on your scorecard. We all measure the result, but sometimes we need to measure (and reward) the process to get there. 

Scorecard Templates

  There are different scorecards for different needs.  For example, if you want to increase taproom sales, the scorecard will show key metrics to achieve that goal.  If you want to improve the customer experience and satisfaction, you can create metrics to support that goal as well.

Below, are three types of taproom scorecards:

1.  Sales Focused Scorecard

2.  Engagement Scorecard

3.  Motivation Scorecard

#1 The Sales Focused Scorecard:  As the name implies, the Sales Focused Scorecard is laser focused on key metrics to support sales.

Typical Key Metrics to support sales:

●   Total Sales $ / by day / week / month

●   Sales by category / product / service

●   Sales per BBL

●   Customers per day / week / month

●   Average ring per customer

The Chart below shows an example of the Sales Focused Scoreboard:

Chart shows an example of the Sales Focused Scoreboard:

  The Actual Month LY (last year) column presents the results from the same month last year. The Trend Month TY (this year) column presents where we are currently, and how sales are trending. The Goal Month TY shows what we want to achieve this month.

  In summary, the scorecard shows the type of metric to measure. It shows where we’ve been (past results), where are now (current results), and where we want to be (the goal).

#2 The Engagement Score:  This scorecard combines similar elements of the Sales Scorecard, but takes a greater focus on how well your staff is building relationships with your guests. Your ability to understand the below engagement metrics can result in improvements on your sales metrics.

Typical Key Metrics to monitor engagement:

●   Tip percentage

●   Flight sales

●   Tab size

●   To go beer sales

  Your team members’ average tip amount correlates directly with their level of engagement. We see the staff member that offers a high level of engagement receive an average tip of 27.1% vs a staff member that offers a low level of engagement only seeing an average tip of 24%.

  While flight sales may not be an obvious sign of engagement, flights are an opportunity for a staff member to educate a guest further about your beers, and brewery. When staff suggest a flight, guests spend an average of 20% more, and also a tip a point higher.

  Additionally, because a staff member providing a higher level of engagement is seeking to build a deeper relationship with their guests, they are by default more likely to include more upsell opportunities in their interactions (i.e. suggested additional beverages, to go beers). This results in not only higher tabs, but also more meaningful connections. These guests are more likely to recommend your brewery to others and return sooner.

#3 The Motivation Scorecard:  This is a staff-specific scorecard. As a manager or brewery owner, the more successful you are at understanding your team’s needs, the better you will be able to motivate them.

When you are able to create successful

strategies to motivate your staff, you will see:

●    Greater passion from your staff

●    Greater teamwork

●    Higher tabs

●    Higher retention

●    Your job becomes easier

●    Greater taproom success

  But what metrics can you monitor to gauge how well you are motivating your team?

Typical Key Metrics to support motivation:

●   Frequency of rewards

●   Frequency of recognition

●   Frequency of team meetings and trainings

●   Growth opportunities

●   Length of employment

  While offering your team fair base pay is where to begin, it is also important to regularly reward your staff for a job well done. Motivation isn’t a one-time to go beer sales content. Motivation is finding a plethora of metrics, many from the lists above, that you can use to track and reward your team’s performance. The number and frequency of reward opportunities will correspond with how well your team is motivated.

  Through conversations with your staff, you will learn that some people are motivated by rewards, while others may be motivated by recognition. Your repertoire should include both physical rewards and recognizing team members who hit specific goals.

  While it is important to regularly reward and recognize your team for desired behaviors, hosting regular meetings and trainings is vital to provide them with the skills for success. These are opportunities for you as a manager or owner to connect with your team. The more your team feels connected, the more motivated they will be to work together for organizational goals.

  Increases in your team’s average duration of employment at your brewery correlates directly to the quality of their experience, and thus how well you are motivating them. Length of employment can also represent you offering staff the opportunity to grow with your company. This could come in the form of offering staff educational/certification opportunities, or providing them the ability to climb in rank at your brewery.

Wrap Up and Action Items

  The taproom scorecard is a powerful tool to help you increase the sales and profitability of your taproom. It measures the most important thing, the most important goal(s), and keeps it in front of your team every day.

  To get started with your taproom scorecard, determine your most important thing. Maybe it’s growing sales, profitability, or customer satisfaction. Whatever is most important, get it on the scorecard, and set a goal to achieve it.

  Engage your team in the game of reaching the goal. To know the score (and win the game) you need to SHOW the score. Don’t play hide and seek with your sweet scorecard. Share it with your team so that they can help reach the taproom goals.

  You’ve got the intel, and you’ve got the taproom, get out there and build an awesome scorecard today.

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.

Go BIG or Go Home

Cyndi

Selecting the Right Size Still for Your Distillery

brewing beer machine

By: Kris Bohm of Distillery Now Consulting

The craft distilling movement is growing larger every day in North america. In 2003 there were approximately 60 operating distilleries in the USA. Fast forward to today and there are over 2200 active distilleries. When it comes to starting a distillery one daunting challenge every business owner faces is equipment selection. Selecting equipment is often done by forecasting demand. Without any sales history this forecast is tricky to create. Most folks go about deciding what equipment to buy based on budget and what kind of quantities of spirits are expected to be sold. If you ask almost any distillery owner if they are using the same size equipment they started on they would tell you no. Nearly every established distillery has needed to add on additional equipment or sell their existing equipment to bring in larger equipment to meet demand. Selecting the right size equipment is a critical decision, which I would like to help you make. To better inform you let’s explore common equipment sizes and examples of distilleries expanding.

  The first question often asked by a new business in planning is how large of a still do I need?

The answer to this question will not be the same for any two people. Instead of trying to provide a definitive answer let’s talk about the potential output of different size stills. To first define the potential output it is essential to decide on product line up. The still used to distill rum is very different from that for vodka production. If you are planning to distill gin, you certainly do not want to use the same still for distilling whiskey. What I can tell you with certainty is that you will outgrow a homemade 50 gallon still before you even open the doors of your distillery to the public. Let’s also explore the potential output of stills to compare and contrast their potential capacity.

  A 100 gallon still often much less expensive than larger stills and is the size selected by some start up distilleries that are starting lean. A still of this size can only produce small quantities of distilled spirits at a commercial scale. Further a 100 gallon still requires considerable time spent in labor operating it with not very good returns for the labor. Although a 100 gallon still is going to be less expensive than bigger stills, it is likely that demand for spirits will outstrip the capacity of a still of this size quickly.

  A 500 gallon still has the capacity to produce a solid amount of distilled spirits. In fact a 500 gallon pot still is one of the most common size stills you will find in new craft distilleries. A still this size has the capacity to produce 2 barrels of whiskey per day if well managed. This is plenty of whiskey for a startup distillery. Depending on your business model a 500 gallon still may provide plenty of capacity for several years. A strong successful distillery will likely outgrow the capacity of this still within 5 years.

  Continuous column stills are measured based on column size diameter For simplicity we will call them column stills in this paper. An 18 inch column still will process 9 gallons per minute of wash. This means on a given work day this still has the capacity to produce up to 25 full size barrels of whiskey in a single day. As you can gather, this is vastly more efficient than a pot still.

For a column still to operate it will take a sizable quantity of mash to produce this much whiskey and therein lies the largest challenge for a small distillery. To grow into running a continuous column still requires immense resources in capital and real estate compared to a column still.  A distillery running a column still will need much larger, cookers, fermentors, heating and cooling capacity then is commonly utilized when operating a pot still.

  For many established distilleries who are selling a decent volume of spirits the addition of another pot still may not be the best choice to increase the production of your distillery. For many whiskey producing distilleries the logical leap is to grow your production by adding a continuous column still. If the intent of your distillery is to be a regional or multistate distributed business a column still might be your best choice.

Lets Look at Two Examples of Growth in a Distillery

  At Grand Canyon Distillery they launched their business in 2017 with a single 250 gallon still. With goals to produce grain to glass bourbon, single malt whiskey, vodka, rum and gin. These ambitious plans and diverse portfolio quickly stretched the limits of their production capacity very early on. Within 9 months of launching their spirits the distillery worked out a large distribution deal that landed them in nearly every liquor store and grocery store in Arizona. If the distillery was going to meet their growing demand for white spirits there would be almost no room to distill whiskey to age. With whiskey being the primary long term goal, an expansion of equipment was needed. To increase capacity Grand Canyon added additional distilling equipment far sooner than anyone expected. With the addition of a 500 gallon still to support the demand for production, the folks at Grand Canyon got back on track to be able to distill enough product to meet demand. Only 3 years after the second still was added to their equipment Grand Canyon added a 3rd still to increase capacity even further.

  At Finger Lakes Distilling they launched their distillery in 2008 with a single Holstein pot still.

Only 3 year after launching the distillery had outgrown their capacity to produce enough whiskey to meet demand. Finger Lakes took a big step up in production and added a 12” column still new cooker and larger fermentors to their equipment lineup. With the addition of this still Finger Lakes Distilling had increased their capacity 10 times. In the 10 years since they added this column still the distillery has consistently been able to meet demand with a much lower labor cost per proof gallon produced. In this example the addition of a column still allowed Finger Lakes to gradually increase their production without the limitations that come with a pot still.

  As new distilleries move from establishing their foothold in local markets to growing state wide and beyond. A strong growth in demand will often follow this growth in territory. In many instances especially with whiskey the demand will outstrip supply and action must be taken to increase production. For anyone who has been to any of the bigger distilleries in Kentucky or Tennessee, you would have seen that every big distillery operates a continuous column still for whiskey production. A continuous column still is vastly more efficient on many levels. Continuous columns have much larger output per labor hour and use much less energy than a pot still per proof gallon produced. Stepping up from using a pot still to a continuous column still is a logical evolution and is a step that nearly every whiskey producer will make at some point when they reach a certain size.

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?

Bank Failures: What are They and Why do They Happen?

Cyndi

By: Raj Tulshan – Founder and managing member of Loanmantra.com

In March 2023, two U.S. banks failed, this triggered plummeting stocks, a fast response by regulators to prevent additional fallout, and concerns from many Americans who wondered if their money was safe. These banks, Silicon Valley Bank and Signature Bank, had depositors withdraw more money than the bank had available. Silvergate Capital Corp., which had significant crypto holdings, soon followed. And on April 28th, 2023, First Republic Bank was rumored to be the next to fall, with stocks plummeting over the course of days. What did these entities have in common? Each failed, in part, because they made high-risk loans, loaned too much within one industry (technology) and didn’t have enough assets to back the loans.

  In the aftermath of this news business owners can feel uneasy. Understanding what a bank failure is and why they happen can help ease the stress and allow for better decision making. Here are some key financial terms surrounding these events from the experts at Loan Mantra.

What causes a bank failure? – A bank fails when the market value of its assets declines to an amount that is less than the market value of its liabilities. The insolvent bank either borrows from other solvent banks or sells its assets at a lower price than its market value to generate liquid money to pay its depositors on demand.

So why does a bank fail? – A bank fails when it can’t meet its financial obligations to creditors and depositors. This could occur because the bank has become insolvent or because it no longer has enough liquid assets to fulfill its payment obligations. This might happen because the bank loses too much on its investments.

What happens during a bank failure? – When a bank fails, the FDIC is required to use the least costly solution to resolve the failure. It will often sell the bank’s assets to another bank. The FDIC may sometimes provide reimbursement beyond its coverage limits.

Who pays for a bank failure? – Despite what is discussed in the media, the taxpayers are not financially liable when a bank fails. Most often, bailout of a failed institution is covered by the FDIC reserve, which is replenished through special assessments to existing banks. However, small businesses are stakeholders in the process and can be adversely impacted by a bank failure. Often, bank failure(s) can lead to disruption in inventory, payroll and availability to get cash to cover costs or improvements.

What’s a Bridge Bank? – A bridge bank is an institution that has been authorized by a national regulator or central bank to operate an insolvent bank until a buyer can be found. It is charged with holding the assets and liabilities of the failed bank until the bank is acquired by another entity or is liquidated.

How a Bridge Bank works – The FDIC has the authority, using a bridge bank, to operate a failed bank until a buyer can be found. Bridge banks may be employed to avoid systemic financial risk to a country’s economy or credit markets. They can assuage creditors and depositors and prevent negative effects, such as panics and bank runs.

How do I know my bank is safe? – Go to the FDIC’s BankFind database, where you can search for your bank by name. In the most recent wave of bank failures, aggressive lending can be a sign that your bank is not operating in a fiscally responsible way.

What’s the difference between a credit union and a bank? – Banks are for-profit, meaning they are either privately owned or publicly traded, while credit unions are nonprofit institutions.

What happens to my loan if my bank fails, is my loan forgiven? – Unfortunately, no. Loans held at banks that have failed are still your obligation to pay. Borrowers should be notified within a few days of a bank closure of where and when to send all future loan installment payments.

What are four warning signs of an impending bank closure? –

1.   A drop in deposits – If you notice a large drop in deposits this may be a signal. The FDIC website contains year-to-year comparisons of total deposits for a bank. A sharp drop means other people are heading for the exits. (FRB)

2.   Delayed financial reporting – if earnings are delayed when it comes to reporting financials they could be struggling with changes in valuations.

3.   Cuts in services – healthy banks try to provide incentives for loyal customers. In a struggling bank, cost-cutting outweighs relationship-building.

4.   Desperate Deposit Accumulation– Banks that are desperate to hold onto your deposit relationship may offer terms that are too good to be true. Likewise, if a bank does the opposite, hiking fees to get the most out of their customers, this may also signal trouble.

  In addition, here are some key terms and definitions:

Bank Failure – A bank failure is the closing of an insolvent bank by a federal or state regulator.

Liabilities – the state of being responsible for something, especially by law.

Insolvent – unable to pay debts owed.

Deposit – a sum of money placed or kept in a bank account, usually to gain interest.

FDIC – The Federal Deposit Insurance Corporation (FDIC) is an independent agency created by the Congress to maintain stability and public confidence in the nation’s financial system.

Receiver’s Certificate – a debt instrument that is issued by the receiver of a business and that may have priority over other liens against the business.

Creditors – a person or company to whom money is owed.

Investment – the process of investing money for profit

Bridge Bank – a temporary bank set up by federal regulators to operate a failed or insolvent bank.

Bank runs – A bank run is when many clients of a bank or a financial institution withdraw their deposits at the same time over fears about the bank’s solvency.

Set off Clause – a legal clause that gives a lender the authority to stop a debtor’s deposits when they default on a loan/when you miss payments for a specified period.

Solvent – having assets more than liabilities; able to pay one’s debts.

Liquid Cash/Asset – an asset that can easily be converted into cash in a short amount of time.

  These bank failures have nothing to do with thousands of other banks that are still running successfully. Community banks are in extremely good shape and banks are still issuing loans. It’s important to remember that the FDIC is in place to protect a certain number of deposits – and the people who made them. Additionally, the federal government created the Bank Term Funding Program on March 12, promising to return all depositors’ money, which helped stabilize unsteady markets. Although many people are concerned about the security of their deposits, there are many protections in place to keep your money safe.

  Know that the FDIC protects your money. The Federal Deposit Insurance Corporation (FDIC) started after the Great Depression to protect depositors’ money. The FDIC automatically insures up to $250,000 in deposits per depositor and per insured bank. During a bank collapse like we saw in March, the FDIC ensures that bank customers will receive their insured funds, which is any deposit up to $250,000. In the unlikely event that your bank fails, the FDIC will reimburse your insured deposits, up to the $250,000 per person limit, if they are maintained with an insured bank or credit union.

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