Since we’ve launched the brewery, website and blog, I’ve been getting a lot of email from people looking to start up a brewery. Aside from a bit of encouragement, which I’m always happy to give, almost all of them ask if I can help them get a handle on the sales-forecasting side of their business plan. I think I’ve sent out about a dozen individual responses so far, so I figure that makes for good blogging. I’m going to talk about the draught (draft) market in this blog entry, and look at other retail channels another time.
In building the forecasting model for Beau’s, I looked at 3 different components: 1) the market, 2) our production capacity, and 3) our sales capabilities.
1) The Market: We took a look at how many bars and restaurants there are within our region. A Yellow Pages search turned up about 800 bars and restaurants in our closest major centre (Ottawa). We later on found a document from the government that listed every single liquor license holder in the province, and found that there were about 1,000 in the area we were concerned with.
My dad and brother visited about 100 bars (10% of the total) to get a sense of how receptive they would be to a local brewery and how much beer they move of a variety of brands. This gave us a sense of what we could expect each account we landed would be able to sell. We also took a look at the total population. Ottawa has about 800,000 people, and Eastern Ontario has a population of about 1.5 million.
This research was relatively easy to get my hands on. Now I knew how many bars there were, and how much I could expect one bar to sell. Next it was time to look at how much we could physically produce.
2) Production Capacity – It may sound obvious, but you can’t sell more beer than you make. If you already have a brewery purchased, this part is easy…but if you are still planning then this can be a bit difficult to nail down. The bottleneck in brewing is in the fermenting/aging department. If you plan to offer more than one brand this can really get tricky because you will need beer in the system for each of your bands. The other important variable is the type of beer you brew. Our style of beer takes about 5 weeks from brew to package, which basically means it sits in a tank while I sit impatiently waiting for it to be ready.
Anyways, using Beau’s as the example, we have a 15 barrel brewhouse and 6 unitanks each sized to 15 barrels as well. So at any one point in time we can have 6 batches of beer at some stage of production. I’ll simplify slightly and say that each batch of beer takes one month from start to finish so, 6 unitanks x 15 barrels each = 90 barrels per month is our maximum capacity before we need to increase our tankage.
Next take a look at your labour capacity…tanks need cleaning, the beer needs to be brewed, filtered and packaged, which are all time consuming tasks. If you are planning on doing all of this yourself, plus taking on selling, marketing, and administration, then think carefully about how much time you can realistically spend hunting down new accounts and servicing the accounts you have.
3) Sales capacity: This is where it all comes together for me. How much time will your company have to spend on selling? Will your brewer also be the president, the marketing dept and the sales dept? Or will you have a dedicated sales person? We took a look at all of the tasks required to sell…prospecting, cold calling, networking, following up, etc. The more time selling, the more sales you will have. Also consider whether you will separate the delivery and account maintenance function or if it will be the salesperson’s job as well. We figured one full time sales person could handle all account maintenance and deliveries and close approximately one account per week. This was somewhat a guess, but we figured out something like this: in week one, 1 salesperson could make 20 cold calls which should turn into about 10 warm prospects, which should turn into 5 sales visits, which should land one account. Next week the salesperson would do 20 more cold calls, follow up on the other 5 warm prospects from the week before plus new prospects from this week, get another 5 sales calls, etc. etc.
Now that we know that, we can expect to grow 1 account per week for each salesperson we employ. We already had an idea of how much beer per account we’d sell and we had an idea of what we wanted to charge for the beer. The rest is just math…
Now keep in mind that to sell that 0.5 keg in week 1, you had to brew a 15 barrel batch of beer 4 weeks earlier. It also took time to brew, and ingredients had to be ordered several weeks in advance…I’m going to have to blog that out separately though!
Anyway, this should give enough to get started on for building out a sales forecast for those of you looking to launch a new brewery. Good luck!