brewski business plan
TRANSCRIPT
Table of ContentsBusiness Description .......................................................................................1
Business Overview ......................................................................................1Location .......................................................................................................1Facilities.......................................................................................................2Business History ..........................................................................................2Ownership Structure ....................................................................................2
Operations .......................................................................................................3Products .......................................................................................................3Services........................................................................................................3Production System .......................................................................................3Customer Service.........................................................................................4Inventory Management ................................................................................5Licenses, Permits & Regulations .................................................................5Patents and Trademarks ...............................................................................6Risk Management ........................................................................................6Environmental Issues...................................................................................6Quality Control ............................................................................................6Implementation Timeline.............................................................................7
Financial Plan..................................................................................................8Historical Performance ................................................................................8Financial Projections ...................................................................................8Capital Request ............................................................................................8
Attachments.....................................................................................................9
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Business DescriptionBusiness OverviewI will produce craft beer in 12 oz. glass bottles in kegs for serving on tap. I will be distributing my product directly to restaurants and bars located in the Bay Area. The size of the business will be a 3.5 bbl. nano brewery, producing 28 bbl. per month and 336 bbl. per year.
LocationThe brewery will be located in Gilroy, California, in the south Bay Area.
Ariel view of Gilroy, California
Gilroy is a good location for the brewery. Rent is relatively low and should expansion become necessary in the near future, land prices are still relatively
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low. It is easy to transport beer to San Jose, where most of my clientele will be located. Its prime agricultural land will allow me to source most of my own ingredients locally, enhancing the value of the beer.
FacilitiesI am renting a 1,000-2,000 square foot facility with 10-15 foot tall ceilings that meet the requirements and standards for a brew operation. The facility has running water and power. The equipment needed will be one 3.5 bbl brew-house, two 7 bbl fermentation tanks, one 7 bbl bright tank, a mill, and a water distiller. For bottling I will use a manual bottling and capping machine and an automatic label machine. All equipment will be purchased new.
Business HistoryIn the summer of 2014 I interned at Coleman Ag. I gained work and managerial experience in hop production and learned about the different hop varieties, flavors and aromas.
I have made multiple batches of home brew beer. I have been perfecting old recipes and experimenting with new ingredients, some of which are rarely used in current craft beer production.
Ownership StructureI am the owner of Brewski. The business is a Limited Liability Company operating as a sole proprietorship.
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OperationsProductsInitially I will produce two different kinds of beer. One is a Chocolate Stout and the other is a Citrus Amber Ale. A dark and an amber beer provides enough variety and differentiation for a start-up nano brewery to begin with. Each beer is unique in flavor and can successfully be paired with a variety of foods. Since I will be wholesaling my brew to restaurants, I am emphasizing unique and flavorful beers.
ServicesThe brewery has a very small tap room where patrons can enter, tour, talk and drink beer.
Production SystemOn brew days I will be brewing two 3.5 bbl batches back to back. Brew days will take place once a week. Due to having two 7 bbl fermentation tanks, I will do my best to time the fermentation process to the point I am able to make one 7 bbl batch per week, totaling up to 28 bbl per month. I will be using the all grain method for producing beer. This method will allow me to produce beer at a much cheaper rate, despite the more expensive startup cost. I will be using distilled water instead of tap water to ensure the best quality and tasting beer.
Since I mainly want to distribute to customers within the Bay Area, most being in San Jose, this will greatly reduce my transportation costs. I will be personally delivering my products to the restaurants and bars in the back of my work truck. This is doable since I am dealing with boxes of 48 12 oz. bottles, not 31 gallon barrels. My delivery hours will be flexible as I will be available to deliver my product at any time I am not brewing or bottling beer. I plan on spending anywhere from two to four 12 hour work days each week working at the nano brewery, depending on what tasks that need to be accomplished and what stage the beer is in.
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3-barrel brewhouse
Profit margins are relatively small, so at this time I am not contracting with suppliers. This will allow me to be flexible enough to opt for a better deal or opportunity. Even saving 1 penny per bottle, label, or per pound of ingredient, can result in an annual savings of many hundred of dollars.
Customer ServiceI will be taking multiple kinds of feedback from the customers that I conduct business with. If they truly enjoy the quality of my current beers, I will be open to suggestions of producing brand new kinds of beer that my customers would like me to produce. I am always open for new ideas. If multiple customers begin to complain with a distaste for a certain kind of beer I produce, I will debate whether to change the recipe or remove that specific kind of beer all together.
I will always have a planned set amount of beginning inventory at the beginning of each month. This will allow me to see where I stand and how much I need to produce based on the current demand for my product. It takes about a month to produce a single batch of beer, depending on the type of beer. It is important to be aware of how fast my customers are running through my beer. Having the perfect timing of a ready batch the moment a customer requests it is crucial and challenging.
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I will not be providing any guarantees or warranties before the sale of my beer. Worst case scenario, if enough customers complain about the quality of the beer, I will have to analyze the beer myself and see what went wrong in the final taste of my product. Depending what that issue is, I will provide a discount for their next purchase.
Inventory ManagementInventory managements and storage is especially important to my business. I will need a constant supply of ingredients each month. My business will require a fixed amount of ingredients in storage. Timing for purchasing ingredients is crucial. I will have a storage facility for the beer that has been bottled. Beer can be stored at room temperature and can have its shelf life extended if stored in refrigerated conditions. I do not plan on storing beer longer than its expected shelf life at room temperature. Once the product is ready for consumption, it would be in the company's best interest to sell it as quickly as possible.
I will be maintaining an inventory of raw materials which include specialty grains, hops, and other ingredients, most of which have been dried. These materials can be stored for long periods of time. I will be contracting with new input suppliers.
Licenses, Permits & RegulationsThere is a qualification process for new breweries. I must register for a permit in order to conduct my business. I must provide TTB with information that fulfills the application requirements of the Internal Revenue Code and, labeling and advertising requirements of the Federal Alcohol Administration Act. All TTB regulations regarding beer is located in the Code of Federal Regulations Type 27 part 25. I will be receiving a Type 23 Brewing License and this allows me to produce up to 60,000 barrels per year. In the end, all licenses and permits should total out to $300-400.
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Patents and TrademarksThe business name "Brewski" and the names of the different types of beer that I produce are being trademarked.
Risk ManagementMy business is an LLC and I will also be insured to minimize the liability risks involved with brewing. I am working with an attorney to review all the paperwork and regulations involved with brewing. I will store all information regarding the brewery, such as financials, customer data, etc., on a cloud data system. Having an outside investor will reduce risks in the case of financial emergencies.
Environmental IssuesThere are regulations listed in the Code of Federal Regulations that specifically deal with environmental issues regarding breweries. I am following these guidelines and there will be a TTB official who will be monitoring my work.
Quality ControlThe brew industry is heavily regulated by the Alcohol and Tobacco, Trade and Tax Bureau. Once I file the necessary paperwork to begin operations, there will be a TTB official who will be monitoring the quality of my products. The TTB official can enter my premises at any time during normal working hours and will be requesting samples of my product for testing. This ensures that the quality of my beer is the best it can possibly be.
My employee(s) will be well-trained in all safety protocols and regulations set by the TTB.
We have a duty as brewers to produce the best beer we possibly can for our customers. One method of doing this is to distill tap water to increase the quality of the beer and reduce unwanted natural elements that can cause distaste in the beer.
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Implementation TimelineThe first phase of my operations is securing a 1,000 to 2,000 square foot facility and applying for the proper permits and licenses associated with brewing. Immediately upon receiving the permits and licenses, I will begin ordering the equipment and ingredients needed to begin production. I expect the brew facility to be fully operational within one to two months of placing final orders for the equipment, which includes the time of shipping. I will also be ordering the first 5 months of ingredients and bottling materials.
Phase two will begin the day following the completion of phase one. Here I will begin brewing my first batch of beer and continue brewing from here on out. Phase two will end when my first month’s production of beer is bottled and shipped to my buyers.
Phase three will begin halfway through the year as I purchase ingredients for the second half of the year. Here I will be conducting a financial analysis of my company. Now that I have actual price per units and number of units sold versus the standard $/unit and #/unit sold, I can see where my company is being stressed and how I can improve efficiency across the supply chain and improve overall profits.
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Financial PlanHistorical PerformanceHistorical performance is usually a good indicator of future performance. However, since this business plan is for a start-up operation, a conventional description of historical financial performance (a balance sheet) is not possible. The relevant historical performance is my extensive experience working with hop production and brewing beer.
Financial ProjectionsProjected income:
The enterprise budget shows the projected net income in a typical year for the nano-brewery. Annual beer production of 336 barrels generates $171,864 in sales. While the gross income is not high in absolute terms, the percentage that is retained is significant and makes the operation a worthwhile economic activity even on a small scale.
Projected cash flow:
The brewery equipment is purchased in the first month of operation and will begin producing income by the second month. The cash flow and labor requirements are constant and on average will not fluctuate substantially from month to month. The annual cash flow will be very similar for the next three years.
This small brewery is a single, highly focused craft beer production enterprise. All ingredients are purchased locally rather than produced.
Capital RequestI am requesting a start-up loan for $40,000. This loan will contribute to the initial purchase and installation of the brewery equipment. I am also requesting a $10,000 operating line-of-credit.
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Attachments
1. Enterprise Budget for Brewski Nano-Brewery2. Projected Monthly Cash Flow for Brewski Nano-Brewery
Nano-brewery Production Enterprise BudgetASSUMPTIONS:
Batches / month = 8 Gallons / BBL = 31.0BBL / batch = 3.5 12 oz. bottles / BBL = 341
ANNUAL GROSS INCOME: $/unit Units / BBL $ / BBL $ /yearBottled beer sales $1.50 341 511.50 171,864Other beer sales $0.00 0 0.00 0
Total gross income = 511.50 171,864ANNUAL OPERATING COSTS: $/unit Units / BBL $ / BBL $ /year
Barley malt (lbs.) $0.25 40.0 10.00 3,360Yeast / (L) $50.00 0.5 25.00 8,400Hops (lbs.) $5.00 0.8 4.00 1,344Specialty grains (lbs.) $1.40 10.0 14.00 4,704Misc. ingredients $5.00 2.0 10.00 3,360Transportation (miles) $0.60 30.0 18.00 6,048Water (HCF) $3.28 5.4 17.71 5,951Labor (hrs.) $15.00 6.3 94.50 31,752Electricity (monthly) $50.00 1.0 1.79 600Fuel (monthly) $50.00 1.0 1.79 600Taxes (per BBL) $18.00 1.0 18.00 6,048Bottles & caps (each) $0.18 341.0 61.38 20,624Labels (each) $0.25 341.0 85.25 28,644Operating loan int. (%/mo.) 0.50% 500.0 2.50 840
Sub-total operating costs = 363.91 122,275ANNUAL OWNERSHIP COSTS: $/unit Units $ / BBL $ /year
Space rent (@ $/month) $1,000 1.0 35.71 12,000Term debt service ($/mo.) $623.45 1.0 22.27 7,481Repairs ($ / yr.) $600 1.0 1.79 600Taxes & Insurance ($/yr.) $400 1.0 1.19 400Other overhead ($/yr) $250 1.0 0.74 250
Sub-total ownership costs = 61.70 20,731
TOTAL PRODUCTION EXPENSES = 425.61 143,006Management & Investment INCOME = 85.89 28,858
INITIAL INVESTMENT Term LoanWort Chiller 250 Principle = $40,000
2 7 BBL Fermentator tanks (ea) 6,000 Interest rate/yr. = 8.00%3.5 BBL brewhouse - 3 vessel 14,500 Term (yrs.) = 7.0Bright Tanks 7 BBL 6,000 Principal & interest payments:Crankandstein 328D 500 Debt Service /mo. = $623.45Bottling/capping machine 2,000 Debt Service /yr. = $7,481.38Automatic Labeler 700 Other related expenses:Water distiller 2,000 Brew license & facility fee 351Installation, etc. 4,000 Other startup costs = 500
Equipment sub-total = 41,950 Other related expenses = 851
Brewski Nano-Brewery Projected Monthly Cash Flow Statement (Year 1)CASH INFLOWS: Month => 1* 2 3 4 5 6 7 8 9 10 11 12 Total
Beginning balance => 5,000 303 228 654 330 1,255 2,181 4,606 7,032 9,458 11,883 14,309Bottled beer sales 171,864 0 14,322 14,322 14,322 14,322 14,322 14,322 14,322 14,322 14,322 14,322 14,322 157,542
Other beer sales 0 0 0 0 0 0 0 0 0 0 0 0 0 0
Loan proceeds 40,000 40,000 40,000
Total Cash Inflow = 211,864 45,000 14,625 14,550 14,976 14,652 15,577 16,503 18,928 21,354 23,780 26,205 28,631 197,542
CASH OUTFLOWS:Barley malt 3,360 280 280 280 280 280 280 280 280 280 280 280 280 3,360
Yeast 8,400 700 700 700 700 700 700 700 700 700 700 700 700 8,400
Hops 1,344 112 112 112 112 112 112 112 112 112 112 112 112 1,344
Specialty grains 4,704 392 392 392 392 392 392 392 392 392 392 392 392 4,704
Misc. ingredients 3,360 280 280 280 280 280 280 280 280 280 280 280 280 3,360
Transportation 6,048 504 504 504 504 504 504 504 504 504 504 504 504 6,048
Water 5,951 496 496 496 496 496 496 496 496 496 496 496 496 5,951
Labor 31,752 2,646 2,646 2,646 2,646 2,646 2,646 2,646 2,646 2,646 2,646 2,646 2,646 31,752
Electricity 600 50 50 50 50 50 50 50 50 50 50 50 50 600
Fuel 600 50 50 50 50 50 50 50 50 50 50 50 50 600
Taxes (per BBL) 6,048 504 504 504 504 504 504 504 504 504 504 504 504 6,048
Bottles & caps 20,624 1,719 1,719 1,719 1,719 1,719 1,719 1,719 1,719 1,719 1,719 1,719 1,719 20,624
Labels 28,644 2,387 2,387 2,387 2,387 2,387 2,387 2,387 2,387 2,387 2,387 2,387 2,387 28,644
Operating loan int. 840 70 70 70 70 70 70 70 70 70 70 70 70 840
Space rent 12,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 12,000
Term debt service 7,481 623 623 623 623 623 623 623 623 623 623 623 623 7,481
Repairs 600 50 50 50 50 50 50 50 50 50 50 50 50 600
Taxes & Insurance 400 33 33 33 33 33 33 33 33 33 33 33 33 400
Other overhead 250 250 250
Equipment** 41,950 41,950 41,950
Other start-up** 851 851 851
Total Cash Outflow = 185,807 54,697 11,896 11,896 12,146 11,896 11,896 11,896 11,896 11,896 11,896 11,896 11,896 185,807
Total Cash Available = -9,697 2,728 2,654 2,830 2,755 3,681 4,606 7,032 9,458 11,883 14,309 16,735 11,735
New short-term borrowing = 10,000 0 0 0 0 0 0 0 0 0 0 0 10,000
Repay borowed funds = 0 (2,500) (2,000) (2,500) (1,500) (1,500) 0 0 0 0 0 0 (10,000)
Ending cash balance = 303 228 654 330 1,255 2,181 4,606 7,032 9,458 11,883 14,309 16,735 11,735
Notes: * = no beer produced for sale in initial start-up month; ** = a cash expense only in the start-up year