Investing into a Brewery

[OddGuy]

How would you make money? Would it all be on paper until you sell, or is there any cash income for you along the way?

 

[HarryHawk]

How would you make money? Would it all be on paper until you sell, or is there any cash income for you along the way?

I was thinking along the same lines. Assuming EVERYTHING goes according to plan, how long before you have received double your money?

 

[RunningBum]

Along those lines, how well do you trust that the owner won't just increase his salary and/or bonus if it gets profitable? Or just skims the money off some other way.

If they pull more investors in, will that dilute your share?

 

[Aerides]

In this case, the OP's personal FIRE situation is very relevant.

If he were comfortably FI, to where $50k one way or the other really doesn't matter, and it's largely a passion play, a big play-money bet, go for it.

But based on earlier posts, it looks like OP is still saving, and still has a bit of a ways to go. So the question is...where else is a better bet for that $50k? The first word of the title of this post is "investing"... so with that focus, this proposal is a bad idea.

$50k saved now in any good fund, with a 10 year retirement horizon is likely ~2 years of retirement covered.

So the question is, does OP want to gamble with his retirement date to pursue this...investment.

 

[jazz4cash]

What is the distribution of shares?

 

[ExFlyBoy5]

Beer breweries are SOOO 2018. All the kids are opening and/or going to distilleries now...a "bourbon boom" if you will. I personally wouldn't pursue an opportunity in the microbrew world right now as they are about as common as Starbucks.

And let's not forget some of the recently popular trends in adult beverages: seltzers, premium liquors, and now...canned wine (belch!!!). A lot of headwinds for a microbrewery that just does beer.

 

[Magus]

Beer breweries are SOOO 2018. All the kids are opening and/or going to distilleries now...a "bourbon boom" if you will. I personally wouldn't pursue an opportunity in the microbrew world right now as they are about as common as Starbucks.

And let's not forget some of the recently popular trends in adult beverages: seltzers, premium liquors, and now...canned wine (belch!!!). A lot of headwinds for a microbrewery that just does beer.

Yes - try finding blantons, pappys or EH Taylor made by Buffalo trace ANYWHERE besides fine restaurants. I used to be able to reliable get Eagle rare at least but now even that’s like once every 6 months I’ll find a bottle somewhere that just put it out. Bourbon craze is legit (and tasty) - guess I’m a 40 y/o kid

 

[Souschef]

Beer breweries are SOOO 2018. All the kids are opening and/or going to distilleries now...a "bourbon boom" if you will. I personally wouldn't pursue an opportunity in the microbrew world right now as they are about as common as Starbucks.

And let's not forget some of the recently popular trends in adult beverages: seltzers, premium liquors, and now...canned wine (belch!!!). A lot of headwinds for a microbrewery that just does beer.

In my town of about 100,000, there are 3 brewpubs within a mile of me.

 

[COcheesehead]

In my town of about 100,000, there are 3 brewpubs within a mile of me.

In my town of 65,000, I can walk to six.

In respect to the OP, all are busy. So are the distilleries. It’s a boozy time in America.

 

[jazz4cash]

Too bad Brewer12345 is no longer around to provide some insight but it seems like everybody is crapping all over this idea without any numbers for guidance. The gluten free piece is special IMO but may not be special for long. Just don’t get in over your head.

 

[troutnut1]

I hate “partnerships”. I won’t even do them with sober people.

 

[swakyaby]

Two of my former colleagues went into business together 6 years ago to open a small brewery in town. It was a well thought out business plan with a master brewer and plenty of willing partners at the facility my medical group provided services for. One of the main partners did say it took 3 years for their business venture to begin to turn a profit. I saw cases of their beer being sold at the local Costco, prominently displayed. I think they’re doing well now.

 

[OldShooter]

Two of my former colleagues went into business together 6 years ago to open a small brewery in town. It was a well thought out business plan with a master brewer and plenty of willing partners at the facility my medical group provided services for. One of the main partners did say it took 3 years for their business venture to begin to turn a profit. I saw cases of their beer being sold at the local Costco, prominently displayed. I think they’re doing well now.

Not to take anything away from @swakyaby's friends, but you rarely see posts describing business failures despite the fact that statistically half have failed after five years. Nassim Taleb calls the missing information "silent evidence."

 

[Winemaker]

I make wine, brew beer, and enjoy a sip or two every once in a while from my bourbon collection. My wife has been celiac diagnosed since 1981. While not FDA approved, one can make a gluten-free beer using a certain enzyme that breaks down the gluten protein in brewed beer. The enzyme is sold for that purpose, and enabled DW the ability to drink various brews without getting sick, and she is pretty sensitive. So are her sister and some GF friends she has made over the years. The FDA's position is that it had gluten when the brew started, so they say has to still have some in it. The sorghum, millet, and rice beers taste like swill to us; every brew I make DW, DSIL, and friends can imbibe.

Anyhow, we have about 6 wineries, 4 distilleries and 4 microbreweries in our county of 200,000+. I volunteer at one winery, and a regular back door guy at a distillery. I was offered a chance to invest in 2 of them, and I offered to invest in 2 of them. When Covid hit, I was sure glad I didn't have a nickel invested. All businesses are still in operation, thriving now, and one is opening a second location. The biggest issue is getting decent people to work for you, and some establishments need to sell food in order to have repeat glass/mug sales. That's a whole other can of worms. Does it become a eatery or a brewhouse?

Until recently the cost of grapes/grains/glass bottles was cheap, and readily available. A dozen wine bottles used to sell $8, it's now $18/ dozen if you can find them. I'm glad I turned them down and they turned me down. DW and I still volunteer doing tastings, and at the crush pad when it's wine season.

 

[Magus]

Not to take anything away from @swakyaby's friends, but you rarely see posts describing business failures despite the fact that statistically half have failed after five years. Nassim Taleb calls the missing information "silent evidence."

And if you further shrink this down to a good return after 5 years (>10% CAGR on equity with owner appropriately paid per hour working), you are probably sub 10% with decent returns (5-10% CAGR) another 15% or so (1/4 with decent to good returns). Just having the lights on after all the sunk cost from the 5 preceding years isn't that impressive.

 

[braumeister]

Having been involved in the brewing industry for decades, I get this sort of question a lot. Let me just throw out one statistic: In round numbers, for every seven new breweries that open each year, five close.

So, while the numbers are increasing, it's a risky business, with a low profit margin.

 

[ExFlyBoy5]

Too bad Brewer12345 is no longer around to provide some insight but it seems like everybody is crapping all over this idea without any numbers for guidance. The gluten free piece is special IMO but may not be special for long. Just don’t get in over your head.

The numbers are out there, I just didn't include the ones I saw. I would assume that someone would do some due diligence prior to dropping some decent change on any kind of business. But, for other readers the consensus that I have seen is that beer consumption is down and seltzers, premium liquors, etc. are up.

 

[ERD50]

The numbers are out there, I just didn't include the ones I saw. I would assume that someone would do some due diligence prior to dropping some decent change on any kind of business. But, for other readers the consensus that I have seen is that beer consumption is down and seltzers, premium liquors, etc. are up.

While that's probably true (I'm just guessing, based on the amount of hard-seltzers and hard-ciders I see in the stores lately).

But I'm not sure that's the same for brewpubs. Do people go out for special, made-on-premises seltzers? I'd guess not.

So I don't think brewpubs are feeling all that direct a hit from what people may drink when they are not at a brew pub, though it probably has some effect.

I'm still skeptical of Gluten Free being a path to success, but you never know. And while I also don't doubt the failure rates of brewpubs being mentioned here, I was surprised that the ones that I followed as they opened (I knew, or knew of, the brewer/owners), are all doing gangbusters years later.

-ERD50

 

[RobbieB]

The only experience with brew pubs I had was when I'd go see my buddy in Jackson, MI.

First time we got a couple of half gallon "growlers" and man, that stuff rocked!

So when I saw him again a year later, "let's get another round" and we did and I'll never get another one. One (two) and done. I dunno what happened or what changed or maybe a bad batch, but hey, they make it on site eh?

Never gonna know how the next batch will taste.

 

[USGrant1962]

...

And while I also don't doubt the failure rates of brewpubs being mentioned here, I was surprised that the ones that I followed as they opened (I knew, or knew of, the brewer/owners), are all doing gangbusters years later.

-ERD50

I'll second that. My exurban county has about a dozen craft breweries. All of them have been around for at least 4 or 5 years. The only one I'm aware of that failed was a chain brewpub/restaurant.

I'm friends with the owners of one that has expanded to two locations and is distributed in both Maryland and Virginia. I once thought about investing, but quickly determined it is a low margin business, suitable for an owner taking a salary and profit share, but not for an investor.

 

[HarryHawk]

A question for the general beer drinking audience, how many of you who can drink regular beer have a hankering to try or switch to gluten free beer?

 

[Out of Steam]

A question for the general beer drinking audience, how many of you who can drink regular beer have a hankering to try or switch to gluten free beer?

Might try one, but almost certainly not to switch.

A gluten-free brewery would also have trouble running a taproom because of the need to keep gluten out of the whole premises. Hard cider, which I do drink, may be the 800 pound gorilla of gluten free alcohol.

A population of Irish descent may be important to such a business, as celiac is common among Irish people-including one of my nieces.

 

[Mr._Graybeard]

Might try one, but almost certainly not to switch.

A gluten-free brewery would also have trouble running a taproom because of the need to keep gluten out of the whole premises. Hard cider, which I do drink, may be the 800 pound gorilla of gluten free alcohol.

A population of Irish descent may be important to such a business, as celiac is common among Irish people-including one of my nieces.

Interesting; I noticed while visiting Ireland that cider is quite popular there. I remember a Rick Steves travel show that had a focus on cider. IIRC, some pub owners told him they didn't serve it because it made drinkers inclined to fight.

 

[Winemaker]

According to the literature we were given back in 1983 when my wife was diagnosed, from The National Celiac Association, and Celiac Disease Foundation, people of Welsh ancestry carry the gene. Discovered during WWII, intestinal distress/ symptoms were greatly reduced because of the lack of flour, bread and other food items that were coated, made of flour. Symptoms returned after the war when diets resumed to normal.


"A population of Irish descent may be important to such a business, as celiac is common among Irish people-including one of my niece".

 

[Out of Steam]

Interesting; I noticed while visiting Ireland that cider is quite popular there. I remember a Rick Steves travel show that had a focus on cider. IIRC, some pub owners told him they didn't serve it because it made drinkers inclined to fight.

There are some sweet, (relatively) cheap ciders sold in both the UK and Ireland that have a bad reputation for such problems.

https://www.bbc.com/news/business-42080891