Gauging The Growing Pains: The Hidden Costs Of Brewery Expansion

Gauging The Growing Pains: The Hidden Costs Of Brewery Expansion

March 29, 2018
12:00 pm
Brewery, Brewery Equipment, Equipment, Working Capital

As a brewer with a passion for your product, the last thing you want to do is stand still. If you make beers that people love, you everyone to have a chance to enjoy them. There’s no doubt, then, that you’ll expand your sales at the first opportunity. But before you do, you should be aware of the costly challenges that brewers face as they grow larger, including:

Big League Branding

As a local brewer, you had automatic authenticity with your customer base. You understood their culture, cuisine, and drinking habits, and could thus cater directly to them. But as you expand into other markets, you’ll have to start selling to people you don’t know as well. It will thus be an uphill battle getting them to try your beers instead of sticking to their current favorites.

To build authenticity in a community you’re not part of, you will need to conduct comprehensive market research and build a tailored publicity campaign. This strategy is expensive and takes time, so make sure you have access to flexible, affordable working capital to pay for a campaign every time you expand into a new market.

A Cornucopia of Codes

Brewers are subject to a host of health and environmental regulations, and those regulations vary across local, state, and (especially) national lines. Thus the more you expand, the greater your likelihood of running into regulatory issues. Your best bet is to research all the laws and statutes every time you move into a new jurisdiction, and do everything you can to comply with them ahead of time. But this can be expensive, especially if you have to invest in new equipment. Thus make sure you have either the savings or the working capital to make costly investments upfront.

Climbing Capacity

Expanding your operations frequently requires adding production capacity, which means investing in expensive capital equipment. The problem with such investments is that you have to make them months before you achieve any sales in the new market. Consequently, you’ll need to raise a large supply of cash as soon as you make the decision to expand. Unless you have ample cash on hand, working capital is likely the best way to raise this money. Even if you do have cash on hand, you might still want to use working capital, as it will prevent you from tying up all your money in expensive equipment investments.

To learn more about working capital for brewers and countless other businesses, contact Dimension Funding today.

Shocks To The System: Sources Of Disruption In The Brewing Industry

Shocks To The System: Sources Of Disruption In The Brewing Industry

To paraphrase Murphy’s Law, if there’s a chance that something can go wrong, sooner or later it will. No one needs to understand this maxim better than brewers. The brewing industry has to deal with a wide variety of disruptions that can raise costs, lower revenues, or otherwise threaten production. In order to weather these issues, you must maintain access to a steady source of working capital. This is particularly important if you are dealing with:

Sanitation Scares

No matter how diligent you are about keeping your brewery clean, there’s always a risk that there will be some sort of health or sanitation problem with your product. Often, such problems are the result of issues with your ingredients and other supplies, which you may have had no way of knowing about ahead of time. Regardless of the source, you’ll likely have to stop production for days or even weeks so that you can clean your equipment and replace any contaminated supplies.

Working capital is essential when you’re facing sanitation issues. Not only will revenues fall because you can’t sell your product, but depending on how extensive the cleaning is or how much inventory you have to replace, your costs may increase dramatically. With working capital, you can stay above water financially until your production lines are back up and running.

Climbing Costs

Besides health and sanitation issues, you may have to deal with sudden increases in the cost of key supplies. Perhaps there is a crop failure that reduces the availability of an ingredient that you rely on, driving up the price of remaining stocks. It’s also possible that the cost of maintaining and replacing brewery equipment will rise.

While you can adjust to costs increases by cutting costs elsewhere or raising your prices, it may take time before you are able to fully make up the difference. Working capital lets you keep your business running in the meantime, giving you the breathing room to get your finances in order.

Inadequate Brewery Equipment

Success in brewing means responding to new market opportunities, but sometimes your equipment can hold you back. Say you identify an untapped market for a certain type of beer, but you don’t have the equipment to make it. Unless you can get that equipment, you’ll lose that market to someone else. Working capital allows you to buy new equipment and pursue such opportunities whenever they arise.

Dimension Funding offers working capital and equipment leases for breweries and countless other types of businesses. Contact us today to learn more about how our capital can benefit your company.

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Sanitation Service: How Working Capital Helps You Keep Your Brewery Clean

How Working Capital Helps with Brewery Sanitation

Sanitation Service: How Working Capital Helps You Keep Your Brewery Clean

Of all the challenges that brewers face, none are more important than the need to keep your operations clean. As a brewing company, you have a responsibility to protect your customers and employees against diseases, harmful chemicals, and anything else that could impact their health. But it’s only possible to protect them if you have advanced brewery cleaning equipment, and small companies often lack the resources to invest in such devices. Working capital lets you make the investments necessary to keep your employees and customers safe and healthy.

Shoring Up Brewery Sanitation with Working Capital

Working capital gives you the money you need to make instant improvements in your brewery. This lets you raise sanitation levels on multiple fronts, including by:

Expanding Your Equipment– Keg washers and other advanced sanitation devices allow you to clean your brewing equipment more thoroughly and more quickly. With working capital, you will be able to buy this equipment as soon as you go into business. You can also update it whenever more advanced cleaning equipment becomes available, so that you can achieve continuous improvements in sanitation throughout your time in business.
Enhancing Maintenance Activities– Besides investing in quality equipment in the first place, working capital gives you the funding to conduct more inspections and repairs on that equipment. This ensures that you can continue cleaning your brewery effectively over the long haul.
Improving Your Ingredients– Health and sanitation are closely linked to the quality of the ingredients you use. Working capital gives you the financial flexibility to invest in the best possible ingredients, as well as the facilities to preserve them. This decreases the chance that anything will go wrong with the inputs you use.

In addition to helping you avoid sanitation issues in the first place, working capital makes it easier for your brewery to weather them when they do occur. Say that you discover there is something wrong with a batch of beer you produced. You will need to recall all that beer and stop production until you can figure out and eliminate the cause of the problem. All these damage control activities are highly expensive, making it harder for smaller companies with few savings to weather them. Working capital allows you to stay afloat financially until you have the problem under control and can get back to selling your brews.

Dimension Funding offers flexible working capital for breweries of all sizes, as well as insight into all the ways this funding can enhance your company. For more information or to request our services, visit our website today.

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Barriers For Brewers: Financial Challenges In The Brewing Industry

January 17, 2018
1:00 pm
Blog, Brewery, Equipment, Working Capital

From the smallest craft businesses to the largest operations, brewing companies invariably face an array of challenges. Not only do they need to produce beers and other brewed products on the right scale and schedule to meet all their clients’ needs, but they also have significant health, environmental, and branding requirements. In order to keep up with all these obligations, brewers must have access to a large and flexible amount of funds on a regular basis. Only then will they be able to:

Obtain Essential Brewery Equipment

Few industries have more pressing capital needs than brewing. From the kettles and stills needed to produce beer and other brewed beverages to canning and bottling lines that package them to supplementary equipment required to wash all of these devices, brewers must fill their facilities with a wide variety of expensive and complex machinery. This creates serious barriers to entry for new startups, which often lack the cash or mortgageable assets to buy this equipment and begin production. Such companies depend on access to affordable leases and working capital in order to get off the ground.

Carry Out Repairs & Maintenance

In addition to getting their hands on brewing equipment in the first place, brewers need to make sure that equipment remains in good condition for the long haul. That means conducting frequent inspections, repairing any devices that are even mildly damaged, and updating existing equipment with new technology as soon as it becomes available. The cost of this maintenance work is usually low, but it can go up if you discover a major problem or need to invest in an expensive but promising enhancement. Access to working capital is essential for brewers to perform this work and keep their equipment in good condition throughout their time in business.

Respond to Shifting Demand

Public preferences for beer and other brewed beverages can change on a dime. If brewers want to keep up with this changing demand, they must be able to expand or scale back production of different varieties with little or no notice. This means investing in flexible equipment that can switch to brewing different products quickly, as well as maintaining access to all the ingredients necessary to create each product on their list. All these actions are expensive, making working capital essential.

Promoting Health

Besides addressing changes in consumer demand, brewers must respond quickly to health concerns. This may require taking essential equipment offline for cleaning or inspection, as well as switching out ingredients. Working capital is necessary to insulate brewers from the cost of lost production while taking these health precautions.

For more information on working capital and other financial resources for brewers, contact Dimension Funding today.

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Tag: Brewing Industry