Onsite Sales vs Distribution

Discussion in 'General Chit-Chat' started by jmcnamara, Sep 22, 2016.

  1. jmcnamara

    jmcnamara Well-Known Member

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    so a friend and I are butting heads a bit on which is the best option to pursue for a new brewery.

    He thinks we need to get our name out there as much as possible and distribute to bars and restaurants.

    I'm of the mindset that we need to grow our brand onsite first, where we can control everything from grain to glass. I think with social media as it is, people will respond to that much better than just seeing a random new tap in their local bar. Plus, onsite sales would be more money directly in our pocket. I've read and heard that onsite you can get around 4 to 6 times more money off of one keg.

    Granted, I understand that the brewery couldn't stay open like a bar could, and that more places that serve our beer equals more money for us.

    As far as production costs, those would be the same regardless. But, if we were to distribute (most likely self distribute), we'd need to factor in gas, vehicles, time, and the cost of extra kegs into the equation. I'd imagine that we'd need to keep at least 1 or 2 kegs on hand for every 1 we sold to a bar or restaurant.

    I'm also a bit worried about keeping up with demand. Some new breweries near me are having a hard time supplying their tap room, let alone outside accounts. I can't imagine a bar or restaurant being forgiving or understanding if you can't make a delivery. I'm still a bit undecided between a 5 or 10 bbl system, but I'm leaning towards 5 bbl, with a few 10bbl fermentors in case we decide to double batch.

    I know this is really dependent on local laws and such, but what do you guys think is the best option to start with? Eventually, I can see distribution as part of the picture, but that's a bit down the line.

    I should also add that he doesn't really brew or visit breweries nearly as often as I do, he's more into the bar scene.

    I appreciate any responses or thoughts, but please don't respond with "don't open a brewery" or something similar

    Thanks!
     
  2. Ozarks Mountain Brew

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    well first several licensing would have to be purchased, federal and local, you would be classified as a manufacturer and distributer. beer should be pasteurized, an LLC should be set up further protecting you for your safely from people sewing you, and I think a definite recipe brewed to perfection ahead of time and can be reproduced exactly the same is very important
     
  3. jmcnamara

    jmcnamara Well-Known Member

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    ok, assuming we can legally do all this and we have good recipes.

    should we focus on onsite sales or distribution in the beginning?
     
  4. Ozarks Mountain Brew

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    distribution is the better money maker
     
  5. jmcnamara

    jmcnamara Well-Known Member

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    why do you think that is? i can't seem to wrap my head around it.

    you'd have to sell several kegs offsite to equal 1 keg onsite in terms of revenue. is it because once it's out the door, you don't have to worry about it anymore?

    I guess maybe there's a tipping point where there's enough outside accounts to offset the smaller revenue per keg?
     
  6. Ozarks Mountain Brew

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    local bar sales doest even scratch the surface of continuous contracts with restaurants or convenience stores,or what ever the client . those contracts are the money maker
     
  7. Nosybear

    Nosybear Well-Known Member

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    You'll make more per pint for beers sold over your own counter, all things being equal. As mentioned above, your income will be more stable via distribution but you'll make less per pint. If I were creating a brewery business model I'd try to pay the bills with distribution and buy my few necessary luxuries with in-house sales.
     
  8. LlewellynBrewHaus

    LlewellynBrewHaus Active Member

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    We have 10-15 local craft brewers in our area they range from 1 bbl to 30 bbl breweries. Its my understanding that they all started along the lines of your thinking Jmac. Brew 3 good consistent flagship beers to establish your brand and get people excited about telling others the great experience and the beer that they had at YOUR taproom. Pints consumed in house go directly into the brewery pocket instead of a portion into the distributors pocket. At a point in there brand demand will dictate self distribution to local bars and further down the road packaging and full distribution into the surrounding area by a third party.
    I would start with a 3 bbl system and look to move from there; reasoning for this is a 3 bbl is the ideal pilot size for larger scale (10-30 bbl) production.
     
  9. jmcnamara

    jmcnamara Well-Known Member

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    that was kind of my thinking when sizing the system. the company i talked to said their 5bbl system could go down to 3 or 3.5, so you could still do small run, trial size batches, and double batch to 10bbl when need be

    of course, the raw numbers will dictate things. looks like i'll be reading up on my spreadsheet use
     
  10. Ozarks Mountain Brew

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    start with a good size pilot system similar to how you would brew on a bigger scale, say 30 gallons, big enough after waste to fill a clear 10 or 20 gallon commercial kegs, thats your pilot system an prototype system for the future
     
  11. LlewellynBrewHaus

    LlewellynBrewHaus Active Member

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  12. LlewellynBrewHaus

    LlewellynBrewHaus Active Member

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    ^^shiny!! my favorite color :D
     

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