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Posts Tagged ‘recession’

A quick note / addition to Kell’s post last week. I started following @MyBeerPix on twitter today, and immediately saw a sweet post on their blog talking about a Wall Street Journal article entitled “In Lean Times, a Stout Dream”.

The line to get into Great American Beer Festival. People love to drink good beer. Period.

The line to get into Great American Beer Festival. People love to drink good beer. Period.

The article starts off wonderfully, filling the hearts (and hopefully kegs) of people like me.

The economic crisis has stifled entrepreneurial activity in many industries. But it’s done little to dent the ambitions of those who dream of brewing their own beer and offering it to the world.

They have a lot of stats and whatnot, some not so encouraging. But here’s another excerpt that reaffirms my current research and feelings:

Last year, 42 brewpubs closed in the U.S., the most since 2005, the Brewers Association reports. But only nine microbreweries shuttered, the lowest figure since 1995.

Remember, we’re opening a brewery, not a brewpub. I’m not interested in opening a restaurant. I just want to make beer.

Lastly, to quote a quote in the article,

“I got to a point in my life where I kind of realized I should be going for something I am passionate about,” says Mr. Karaway.

Couldn’t agree more Mr. Karaway.

Thanks @MyBeerPix for showing me that article. If anyone else comes across a good article about brewing, be it good or bad news, send it along!

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Starting a new business costs money. Obviously. There’s the loss of a secure salary if you quit your job to run the new company, the increased taxes from being self-employed, and the slew of costs, from overhead to supplies to payroll. Starting a small consulting business, or shirt designing firm, or a new social networking website, are all expensive in their own regards. But what we’re attempting to do here is an entirely different level of expensive. Give me $20k, I can quit my job, find a few friends, and start a web development company. It would fail, because I’m not interested in it, but I could start it.

While we haven’t run the numbers yet, our current guesstimate is in the $500k range. That’s a big number. It’s hard to swallow. And it’s going to be hard to get. I could ask 10 of my friends to take their paychecks every two weeks for a year and deposit them right into an account, taking nothing out, and it wouldn’t be $500k (gotta love entry level positions…).

Why so much, you might ask? A brewery is in the business of making beer. Manufacturing it. Basically, it’s a beer factory. We need an industrial zoned warehouse in a good location (because we’re manufacturing a product that can be used on premise, location matters), with lots of big shiny tanks and vessels. Each batch of beer contains hundreds if not thousands of pounds of grains, pounds of hops, and swimming pools of water. There’s a lot more than that as well, but that’s the big stuff.

There are a variety of sources we’re considering for funding. A bank loan backed by the SBA is going to be one of them. We’re working on an airtight business plan right now, in the hopes that a banker won’t look at us, look at the number with all those zeroes, and laugh us out of the bank. Other sources will hopefully include friends and family. I wish we could stop right there, but I don’t think it’ll be enough. So we might need to get investors. People who will give us money, but take some control of the business, at least until they’re paid back with interest. I’d prefer to keep control of the company, but this is definitely an option we might have to take.

I suppose the dream situation would be for an angel investor (any reading this? hint hint..) to give me a call, offer a half million dollars at a low interest rate payable over the next [insert long period of time here], and request no control, just a beer whenever he or she comes by the brewery. So to any and all people of this nature who might be reading this, Hello, My name is PJ, I’d like to meet you.

Anyway, this is just a preliminary posting on finances. Like I said, we haven’t run the numbers yet. I’ve met with a banker to talk about this dream, but haven’t gotten into the nitty gritty of what it’s going to take. I haven’t even asked friends and family for the pledge of money yet, let alone a check. Except for a few comments about costs here and there, we really haven’t even begun to tackle the issue. So the pessimistic tone isn’t meant to be so.. pessimistic. But this is part of how I feel right now.

On the brighter side, even with the economy not doing to great and all that, things aren’t as bad as they seem. The liquor industry as a whole is somewhat safer in a recession than some other industries. Beer sales, and specifically craft beer sales are on the rise.

Small independent craft brewers are gaining alcohol market share due to a shift toward full flavor beer and increased support for local breweries. From 2007 to 2008, estimated sales by craft brewers were up 5.8% by volume and 10.5% in dollars. Overall share of the beer category from craft brewers was 4.0% of production and 6.3% of retail sales. More than 1 million new barrels of beer were sold in 2008, and close to half of those barrels were beer from craft brewers.

http://www.beertown.org/email/BA/pressreleases/growthrelease2009.htm

Denver

Denver

We’ve got some serious passion working in our favor. I sort of only talk about beer, brewing, and the brewing business these days. We’ve got youth working in our favor as well. When I’m 40 or 50 I probably won’t be excited to work 80 hour weeks on the brewery. Today, at 25, I cannot wait. And we’ve got the support of our friends and family. Yes, people suggest we keep our jobs in these current economic times. But the overall momentum of support is in favor of getting this brewery open and pouring. Lastly, we’ve got Denver. Denver is primed for beer. There are already breweries here. People like good beer. We don’t need to convince people that our beer tastes better than the macro breweries. The already know it. And let’s not forget about that little annual event called the Great American Beer Fest. It’s a good town to make beer.

Personally, I can’t wait.

As usual, we have open ears and open minds for any and all ideas. If you know someone who has money burning a hole in a nice pair of pants, just waiting to fund a start up, I’d love to buy him or her some lunch. Likewise, if you have an idea or contact or anything you’d like to share with us, we’re all ears.

Maybe I’ll win the lotto. I should probably start playing first…

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Rising unemployment, massive credit crunch, rising commodity prices, out of control state and federal budgets, DJIA plummeting, and that’s only here in the US.  Wow, I need a beer.  A lot of Americans have been saying the same thing, and somewhat amazingly, they are looking for craft beers, not just Key-Light and PBR (not that there is anything wrong with these two fine examples of American Lagers).  But don’t take it from me, check out some of the news I have found from just the last few months.

“Americans love beer — one of the world’s oldest alcoholic beverages. According to the Beer Institute, if you average it out, every American over 21 drinks more than 30 gallons of beer annually, and the beer industry is one of the few sectors not having its worst year since the Great Depression.”

“The Boulder-based Brewers Association reports that craft beer sales grew almost 6 percent in 2008 – the only area of noticeable growth in the beer biz.”

“The craft brewing industry generates $6.3 billion each year, according to the Brewers Association. The volume of beer produced through craft brewing, which includes brewpubs and microbreweries, grew by 5.8 percent in 2008.”

Yes, we know this is former German chancellor Gerhard Schroeder drinking a beer. But its the only appropriate image we came up with when we Googled businessman drunk.

Yes, we know this is former German chancellor Gerhard Schroeder drinking a beer. But it's the only appropriate image we came up with when we Googled "businessman drunk".

Not only is it a brewer’s market right now, it is also a good time to venture out on your own (in many industries), according to numerous experts.  It might sound risky to a lot of people, but I attended an entrepreneur panel last week at Colorado College and left with a renewed belief in the drive of American entrepreneurs.  During that discussion I also learned that 3 of the 5 panelists started their businesses in a recession, and they have made it work.

“Regardless of what people around you (including the media) may say, right now is the best time to get into business. Just go back and look at the economic slowdowns throughout history. Most recessions in the post-World War II era last an average of 10 months, followed by growth cycles that last an average of 50 months.”

“We’re Americans. Entrepreneurship is in our DNA. You’re right that when the economy tightens, fewer people are likely to start businesses. But what that means is that you can do a competitive regional analysis and know that your niche is protected, for a while at least. Grand openings, ribbon cuttings, and groundbreakings are likely to get a lot more media and general attention in your community.”

While the future is certainly uncertain, I am fairly confident that the economy will begin to recover by the time we get all of our ducks in a row and we will be able to launch at an opportune time.  Now finding funding could be the tough part.  As one of the esteemed CC alum entrepreneur panelists put it, “Without funding your vision is just a hallucination.”

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