Sunday, July 29, 2012

So now what???

The brewery is finally operational and we are finally making some sales.  In fact we just finished up our first month of sales.  So now what?  Sit back and watch the profits roll in?  Get ready for the inevitable calls from bigger breweries wanting to buy me out so I can retire to an island in the Caribbean?  Not exactly.  Let's just say month #1 was not a profitable one.  No worries though, I didn't expect it to be....and here's a spoiler alert:  month #2 won't be any better.  But that's OK because I have planned for this to be the case for a while.  So instead of sitting back with my feet up on the desk do I just sit around and pull out what little hair I have left worrying about how to pay the electric bill?  Nope, no time for that either (well maybe a little bit of hair pulling).  See getting up and operational and making those first few sales is only "Phase 1" of the plan. 

As much as I would love for the opposite to be true; self-distributing draft only product, in Ohio only, as a one man operation is NOT a viable success strategy long-term (or even short-term for that matter).  As much as it sucks to say it, the old adage that the beer business is a "volume game" is pretty much a universal truth.  There is a slippery slope that exists between the quest for volume and having the funds to do what's necessary to increase that volume.  To sell more beer you need more avenues to market but to do that you need more equipment/personnel/etc.  Of course as soon as you have to buy more equipment you now need to make more money to cover those costs thus you need to sell more beer.  You can see how "chasing volume" can quickly become an out of control spiral .  But let's back up for a second so that I may define the term "success" as I see it in this endeavor.  The success of Blank Slate Brewing Company is defined by the following (in no particular order):

1.  Make the best quality beer that we possibly can.
2.  Always be approachable to our customers and never forget where we came from.
3.  Further the local beer industry as best we can through our words and actions.
4.  Make enough money to pay the bills with enough left over to keep a roof over my family's head, food on the table, and take my wife on a vacation somewhere farther than 10 miles away sometime in the next 5 years!

There's undoubtedly a few others that I have missed but that basically sums it up.  I'm not in this industry to get rich.  If I wanted to do that I would have stayed in the plastic factory.  I'm not looking to become the next Greg Koch or Sam Calagione.  My version of "success" is pretty meager by most standards.

So if selling kegs of beer out of the back of my Ford Ranger isn't going to get us the volume we need to be even marginally profitable then what's the plan?  Well as I said so far Phase 1 is complete.  Now it's on to Phase 2.  Unfortunately Phase 2 is where things start to get a little hairy.  We need to increase our avenues to market and that means bottling.  And before you ask, I will be bottling, not canning.  For a number of reasons canning doesn't fit into my business model and I am currently ruminating on a whole post dedicated to that discussion so I will leave it alone for now.  The fun thing about bottling is that it nearly doubles the complexity of the entire brewing process.  First you have all the wonderful branding and packaging design that has to be done.  Different designs for bottle labels and six-pack carriers for every brand gets complicated quickly.  Then you have to find someone to do the printing of all of these items and usually it's not the same company doing all the printing on the different medias.  Then you have to get case boxes made...and don't forget the bottles themselves.  All told I will be juggling more vendors for the bottling process than for every other part of the brewery combined.  This of course doesn't take into account the bottling process itself which adds a lot more labor than coupling a keg to the tank and letting it fill.  Plus it's a lot easier to just stencil a keg with the brewery name and get some tap handle stickers printed and be done with it!

But that's not even the "hairy" part.  Now that we can sell beer in more places with bottles we are forced with the biggest decision of all.  Can we sell and distribute all this ourselves (and still have time to make it and bottle it) or do we need to get a distributor?  Distributors take a cut of the sales which means you now need to sell more beer to make up the difference.  However to distribute to more places on your own you need more employees and more delivery trucks (that aren't a Ford Ranger) which means you also need to make more beer to recover those costs.  To top it all off you can't self-distribute in Kentucky so you MUST have a distributor to sell beer there even though the brewery is less than one mile away from the state line.  Remember that slippery slope I mentioned before?  Why do I feel like the floor is suddenly covered in banana peels?

The distribution question is an even bigger decision when you factor in franchise law which means that when you sign with a distributor you don't just do it for a 2 or 3 year contract.  It's forever.  The distribution dilemma is a whole issue in and of itself which I will take on in a later post down the road so stay tuned for that.

Once we get Phase 2 worked out, it'll be on to Phase 3 - TAPROOM!  That's yet another discussion for another day....

So for now me and my ever receding hair line will keep working out the details to get bottled product out to the market in the next few months while still brewing, kegging and cleaning out the couch cushions to pay the water bill...