How much interest would there be in a buying a brewery?

[Andy Williams]

So entertain me in reading this and let me know your thoughts.  This is a long short but something with real potential.  So here it goes.

Over the last couple of month two brewery's, specifically Renaissance and (just this week) Yeastie Boys, crowd funded to expand their equity.  They quoted the businesses at $3-5m and gave away little over 10% for over $500k (let me just note here that Yeastie Boys doesn't even have its own physical brewery!).  This shows that there is a real thirst (excuse the pun) for people wanting to own a piece of a brewery and take minor benefits for that (Renaissance gave away free beer; Yeastie Boys a discount online).

So this got me thinking and I did some research.  What happens if a group of people with a range of skills got together and are financially supported by crowd funding.  Call me crazy but I actually think its pretty exciting.  People with a desire for quality beer but bringing different skills to the table such as sales experience (particularly with large supermarkets), export, brewing, finance, leadership... etc.  We could offer prospective shareholders much more than just 10% of a company and offer a great product.

What initially got me thinking was seeing that a local brewery to me (I'm based in Dunedin) was up for sale following liquidation.  This is a full brewery set up with production capacity of 180,000 litres per annum and bottling capacity of 1,000 bottles per hour so some serious capacity.  The asking price is $350,000 (much less than what it would cost to purchase the equipment).  

There are lots of opportunities with this.  I think $600,000 would get the brewery up and running and give 18 months or so to turn serious sales.  $1,000,000 would open up much more opportunity around sales streams and something such as the Cassel brewery/bar could be looked into. 

I would see 60% being sold through crowd funding and the remainder being split between the individuals getting the business working or more shareholding to the people putting in the finance and salaries being paid (I think people are better motivated through shares personnally).

Look I'm not suggesting this with my eyes closed, this brewery went broke for a reason and it would need some hard work but with some people passionate about craft beer and business it might just work.  I see it as a great opportunity.

What are peoples thoughts?  Would people be interested in exploring this further?

[Ralph]

I think people are willing to give money to craft beer brands that have established themselves in the market and are keen to expand as Renaissance and Yeasties have. To get people on board a new venture that has no brand or distribution and an unknown range of beer with unknown quality... well I think you would struggle to get the funding as many people would perceive it as too risky to invest in? Just my initial thoughts... I may be wrong.

[Peter Smith]

Cheap to buy paint had to paint a masterpiece....

[Andy Williams]

Thanks for your comments Ralph. My

[Andy Williams]

thoughts would be that we would take over the Green Man brand which has been around for 7 years and has awareness in the industry.  Just needs to be pointed in the right direction.  I agree with you no one would invest in something that doesn't exist!

[Hamish Jones]

Have you read this article about the IP and recipes http://www.odt.co.nz/news/dunedin/326290/craft-brewer-green-man-ent... so the idea of continuing the brand wouldn't work unless you paid out royally for their recipes as well

[Nicholas Jones]

The green man brand is probably tainted to be fair, they have never produced good beer IMHO, I think you would want to rebrand to be successful. There is a reason they didnt succeed in a growing market when many others have.

[Andy Williams]

Thanks Hamish. Yes, I am aware of the IP being held in a seperate company. I believe the company is for sale not the assets which would give a brand.

Interesting insight Nicholas. There considerable quality issues years ago which I think they resolved. The failure of the business was effectively down to poor sales approach (trying to sell themselves to hundreds of stores is not possible). I would see it as green man being the product to bring investors and then building into another brand if required (maybe more down the funky route of garage project / yeastie boys).

[Hamish Jones]

sorry not sure I'm reading this right if I understand you correctly

"I am aware of the IP being held in a separate company. I believe the company is for sale not the assets which would give a brand."

So what are you trying to buy the IP or the brewery? from what you've stated your trying to buy a tarnished brand and a handful of recipes. have I misread this if so I apologise in advance, but if they can't make money by selling volume how do you propose for it to make money,

[Andy Williams]

Sorry - I was not making myself clear.  I referred to the company but meant the group (thus including the IP company - this would be reasonably priced as I doubt the shareholders have any use for it currently).  You have to have both the IP and brewery to make this work.  The tarnished brand is only in some individuals eyes in respect to the liquidation individuals would not be so bothered if the proposition was the right one.

It is buying a brand and offering some real return for shareholders rather than 0.01% of a company with returns in the long run.  The propositions on offer don't offer to shareholders anything near like the value proposition that could be offered here.

[Hamish Jones]

Andy I'm not trying to annoy you off just trying to make you aware of a few points so you don't go blindly into buying a brewery, I've stumbled on quite a few pitfalls myself as I am currently setting up a brewery and if it wasn't for the product we are going to be producing I wouldn't even think about looking at buying a brewery until we had at least 20 to 30 batches on the market and selling well for that matter, its a hell of a lot easier to sell 1200L of beer than it is $350k worth of second hand stainless.

you say the tarnished image is due to the liquidation, its not it had an average reputation well prior to that and on more than a few occasions quality control issues have been mentioned around here and other circles, so in all honesty the brand (or goodwill as the accountants will call it) isn't actually worth anything,

They are also looking at getting the product contract brewed so you buy a brewery but have to change its name anyway, or you may have your first customer, like I said if they couldn't make it work on 180,000L volume there's bigger problems than they have stated in that article as to their down fall,

There was a sexy 600L setup on trade me a few weeks back in Cromwell if your dead set on owning brewery it was about $75k for an almost turn key brewery, get a premise and a brewer and away you go, actually the Blue skin pub would be a good spot for it,

[Dene McDonald]

McDuff's (also in Dunedin) is forsale at the moment. I believe they have an asking price around the 600k mark, but would accept almost half of that. It's an established brand and includes plant. Not a household name but a better investment in as it could be built up from what it is now.

[Dene McDonald]

The Trade Me advert suggests that it's the business and plant, http://www.trademe.co.nz/business-farming-industry/businesses-for-s...