Forecasting Sales For Your Brewery: A Primer

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!

Happy (Small-World) Birthday, Beau!

There are some interesting things you find out when you open a brewery. For example, there is a virtual army of breweriana collectors in Eastern Europe. Every week I get about 30 emails that read something like this:

hi,
my name is IVO and i am beer labels (and coasters & crown caps) collector from CROATIA ... i have a collection of 18000 different beer labels but i don`t have any from your brewery ...
please if you can help me and send me few of your brewery labels ... please send them
to my address :
IVO SPEC
MANDALINSKIH ZRTAVA 11B
22000 SIBENIK CROATIA
the smole things are very pleased to me!!!
thank you in advance .....
IVO

Or one of my personal favourites, which I have received at least once a week since we launched the website. It cracks me up, because; well, we don’t even have any labels.

I AM NAGY ZOLTÁN ,HUNGARIAN COLLECTOR. I'MINTERESTING ABOUT YOUR PRODUCTION AND,I WOULD LIKE TO SEND ME SAVE FROM THASE ADDRESS:

ALGYŐ FAZEKAS UTCA 60 6750 HUNGARY
THANK YOU YOUR FEVAR

The first week we were on the web, we were so blown away that our reach had made it all the way to Poland that we were actually responding to every single one, explaining that we weren’t in bottles yet, but if they were patient we’d send them one as soon as possible. After a couple hundred, we got the picture and now we make a quick joke and hit delete*.

*Note: there are a lot of legit breweriana collectors, and we’re careful to respond and always send out what we can if you send a SASE!

On the flip side, we’ve been making contacts with all sorts of Beaus, Beauchesnes and people who grew up in Vankleek Hill who are tickled pink that there is a Beau’s All Natural Brewing company out on the East siiide, yo. Here are a couple of examples:

Danielle and Jacques Beauchesne from St. Isidore were first to get in touch with us after hearing about our company.

Julie Beauchesne recently sent us an email to get in touch from North Carolina, US.

Kelly-Ann Benoit sent us an email telling us how, after trying our beer at the Priests Mill in Alexandria, she drove up to VKH to see the brewery. No one was there at the time…we hope to have regular hours soon, by the way.

And then there is the email we got from Judy Conway…She got in touch when she was out at the Earl of Sussex with her son, whose name is Beau. According to Judy, Beau was excited to hear that there was a beer that shared his first name, and thought the beer was pretty tasty to boot. Beau’s birthday was coming up, so Judy wanted to know if she could buy some Beau’s merch as a present.

So, here’s where things get funny… She explained that he was a bodybuilder from the same lineage as Canada’s famous strongman, Louis Cyr (see right), and sent in a picture of her Beau (see left).

Coincidentally, my grandmother’s maiden name is Cyr and I grew up being told that I was from the same lineage, too. I’ll let you be the judge…

So, happy birthday to my long-lost relative Beau, I’m glad you dig the beer and I hope you like your present, too.

Organic Tastes Better (and Sells, too!)

Entrepreneur.com: Organic Foods on the Rise

By Sara Wilson
November 17, 2006

America has a growing appetite for all things healthy. From zero trans-fat snacks to fortified foods with added health benefits, if it’s good for the consumer, it’s most likely good for business. Even candy is being loaded with omega-3 fatty acids, healthy extracts and vitamin C. But the real buzzword is organic. According to the Organic Trade Association, based in Greenfield, Massachusetts, organic food sales in the U.S. totaled nearly $14 billion in 2005, with double-digit growth expected from 2007 to 2010. According to the association’s press secretary, Barbara Haumann, consumers--especially the Generation Y crowd--are happy to do away with added hormones, antibiotics and genetic modifications.

Not sure there's room for more competitors on the organic playing field? Have no fear. Opportunities abound, especially in niche areas like alcohol (according to the Organic Trade Association, organic beers grew from $9 million in 2003 to $19 million in 2005), candy, condiments and sauces, not to mention food for kids, babies and pets.