Unlike savings accounts and the job pool, there is at least one thing that has grown throughout America’s economic recession: craft breweries.
The Brewers Association (publishers of CraftBeer.com) recently reported that in 2011, small and independent American brewers saw gains both in market share and number of breweries in operation—1,989 to be exact. Despite the skyrocketing numbers of consumers choosing flavorful craft beer from small producers, capital funding for these main street businesses has not come easy.
Erin Glass, Brewers Association membership coordinator and brewery detective says there has been a shift in how prospective brewery entrepreneurs are raising funds.
Traditional Brewery Funding Sources
- Conventional Bank Loan: Often considered difficult to secure in today’s economic climate.
- Small Business Loan: A small business loan can be easier to obtain because a portion of the loan can be guaranteed by the Small Business Administration, whereas with a conventional loan, the business owner is responsible for the entire loan if they default.
- Family and Friend Investors: These loans can put a strain on personal relationships if the venture does not work as planned.
- Angels and Private Investors: When wealthy individuals (or groups) invest on brewery ideas that they like, or have a “gut feeling” about. This investment is a boon for an entrepreneur whose business plan lacks sparkle in the eyes of more conventional investors, like banks. Another plus—the angel-type investor is typically uninterested in ownership or management rights common with venture capitalist groups.
Today, Detective Glass includes the addition of community-based fundraising to this list and says the route has been popular for some prospective craft brewers. “Social media funding like Kickstarter and IndieGoGo is somewhat new and can be a great addition to raise money while gaining loyal fans at the same time,” said Glass. “Most of the successful online fundraising has been by smaller nanobreweries or folks who used this method of funding for only a small portion of their project.”
One avenue craft brewers-to-be have found to raise capital is Kickstarter, which is an all or nothing funding platform for what the website describes as “creative projects,” meaning that unless the funding goal is met, no money is exchanged. Projects that are selected to be featured on the Kickstarter site also pay a percentage back to the site if their project reaches its goal. Still, participants say the value of community involvement and promotion makes it worthwhile.
Brewery Projects Seeking Funding
Alpine Dog Brewing Co.
Alpine Dog Brewing Co.’s visionary Gardiner Hammond on his Kickstarter campaign: “The truth is, I am nervous about the Kickstarter campaign as I have a very long way to go and am not moving at a fast enough pace to meet the goal by the deadline as of right now. That said, I want it to work because of the community feel I believe it will bring to the brewery. I am really excited about getting some dedicated, enthusiastic customers in to work on beers with me, and have all of the backers feel like they are a true part of the brewery, rather than simply a patron, and be able to take pride in the brewery and its success.”
Greg Rapp on why he chose to create a Kickstarter campaign: “Six months ago, I decided I would start a small brewery and planned to fund it personally. Members of my community wanted to know how they could help, so the Kickstarter campaign was created to help build the taproom for the brewery and other expenditures necessary for the build out.” Rapp says that he is waiting on local approval and expects to have a final push to meet his goal for Rapp Brewing at an upcoming local craft beer festival before a grand opening.
Successfully Funded Projects
Community Beer Works
On the verge of opening, with first sales slated for April 20th, Ethan Cox, president and assistant brewer for Community Beer Works in Buffalo, New York, says the nano met the Kickstater goal they set on December 14. Community Beer Works reports they are on the verge of opening and brewing pilot batches. Cox, who says that the Kickstarter campaign was a small portion of the total amount needed to launch the brewery, provided four factors necessary for a successful Kickstarter campaign.
Kickstarter Success Tips
- Choose the amount or goal you’re asking for wisely and realistically.
- Consider the importance of the reward structure you will fulfill to investors. Remember that investors are interested in supporting your dream firstly, not getting amazing rewards. Still, it is important to choose rewards that are meaningful and experiential.
- Start building a following well before starting a fundraising campaign.
- Know your market. “Buffalo, New York is not San Diego,” explains Cox. “It’s just us.”
Hijinx Brewing Company
Hijinx Brewing Company a nanobrewery in planning in Allentown, Pa., met their Kickstarter goal in August 2011. Owner Curt Keck plans to open this spring. He described his campaign as supplemental, but adds that without it, the brewery would not be possible. He is using the community funding for licensing fees and fermenters.
Other Successful Projects
Funded and Launched Breweries
An early adopter of the Kickstarter route, Mystery Brewing began their campaign in May 2010. Its success and owner Eric Myers were mentioned by other Kickstarter hopefuls as inspiration for their own campaign. Now, just a few months after the grand opening, Myers says the young brewing company is starting to roll and credits Kickstarter for helping to build interest in his ultimate goal of opening. “Friends of friends of friends contributed to the campaign, while the funding was important, building a network of supports was even more valuable.”
Now open, Mystery Brewing looks to face the many other challenges that small brewers face, including access to market—convincing a bar manager to give the brewery a tap handle in a very competitive market.
Other Successful Launches
Back to the Drawing Board
“There is still good news for those that don’t meet their funding goal on sites like Kickstarter,” says Glass, “Plenty of non-successful Kickstarter campaigns have still made it to opening day!”
Black Shirt Brewing founders Chad Miller, his wife Carissa and brother Branden will take artisan craft brewing in a unique direction once their tasting room opens in a few months. Their desire to create one beer that everyone can appreciate has spawned the Red Ale Project—what Miller describes as “Biere de Terroir,” focusing on truly local, Colorado ingredients and the result of countless tweaking and testing of a recipe for a singular beer.
Although the initial campaign did not meet its goal, Chad says Kickstarter was still tremendously successful because it “mobilized a community.” Miller estimates that 50 percent of the investors were from outside the trio’s circle of friends and family, thus, Kickstarter helped build a larger network of supporters. Even now Black Shirt continues to get offers from as far away as overseas to volunteer at the brewery.
As the number of U.S. operating breweries grows, it will be interesting to see if success on sites like Kickstarter will translate to a success in business—time will tell. If these breweries can make an impression on beer lovers at the tap, just like they did online, it seems possible.
Brewers Association Director, Paul Gatza warns that there are plenty of challenges that small brewers face besides initial funding. “A couple of years ago, the issues were access to ingredients. Now for brewpubs, it is probably the economy, or in some cases, high debt service. For packaging brewers, it could be shelf-space maneuvering by category captains, or the combination of bad distribution relationships and franchise laws that don’t allow brewers to get out of a bad distribution arrangement. “
In any case, Gatza warns that the one thing will help to determine the eventual success of any brewery is making quality beer. “If you don’t have that, the success of the company is at risk.”