How do small meaderies stay in business?

[capoeirista13]

So recently I brought a small sampling of one of my batches to a party with some friends (11 beer bottles worth), it was downed like water. Everyone loved it, they raved about it. I had people asking me to make and sell them some. I told them well that's illegal and on the off chance someone gets sick (due to allergies or whatever else) I can't sell it to you, but because we are all friends here I can just give you some. But it got me to thinking about small breweries and meaderies and wineries.
-I look at how much my batches cost me and when I broke it down into a per bottle cost I don't see how they can compete with the prices of larger and more well-known producers and still make a profit, especially because mead/cider isn't nearly as popular as wine/beer.
-Another problem I thought about when dealing with the time it takes to brew a good batch. If you make a batch and it sells out quick, wouldn't the stores/restaurants be out of your product for a long time until the next batch is ready? So then I thought that you would always need batches brewing. But if you are just starting out and you have no solid customer base then you don't know if you should be brewing that second batch or not. It seems like a huge gamble.
-Finally, it appears as though the startup costs are HUGE. It seems that costs like licensing, equipment purchasing, and probably the cost of buying/renting a new space would be some of the most prohibitive. It seems like you would already need a lot of money, or need significant income from investors.

 

[wildoates]

Day job. Don't quit it.

I was talking mead with a bunch of friends of mine last night and they told me I ought to sell it--they were surprised how much red tape there is to do so.

The government is here to help you be safe 'n stuff. Yeah, that's it.

 

[beninak]

One of the key things that you have to do is educate the public about your product. The meaderies around here are constantly offering tastings, getting involved in homebrew clubs, working with local chefs to hold dinner&mead pairings in local restaurants, organizing mead-making competitions, and use local ingredients as much as possible to create ties with the community.

If you make a great product, and people get to know that and appreciate it for what it is, the rest should be easy. Apparently people dont mind paying alot when they know they're getting a good product, because the meaderies around here charge ALOT for their stuff, which I can understand for the reasons that you listed, but that's what keeps me homebrewing

 

[akueck]

(again with my recent NHC visit, I know. can't help it....)

I went to the "going pro" panel talk at NHC last month and it definitely convinced me to not even consider it (unless a long-lost rich relative dies). The consensus was that you would need about 18 months of cash in order to survive before you could possibly start paying the bills with your revenue. And that was for a brewery, which obviously has much shorter lead times than a winery/meadery. Mead has one big advantage over wine, in that honey can be had more or less year round vs grapes which are harvested over only a short period of time once a year (unless you want to import from Australia or South America, then twice). Another thing the brewery guys were saying was that it was important to have two (at least) revenue streams, e.g. a restaurant or merchandise to sell. The consensus there was that selling shirts and hats is easier and cheaper, but the restaurant is much more effective (pulling in roughly half of total revenues and keeping people around longer to drink more). The answer to "how much does it cost to start" was a range from $250k for a production-only self-distributing brewery (not possible in all states) to a little over a million for a brewpub with a ~10 bbl system. A meadery would have lower equipment costs for the brewing, but much larger costs for storage vessels and space for aging the mead. But wine retails higher than beer....

Basically, you need to have a ton of seed money to keep you running before you can get to selling the mead. Time to find some avuncular neighbors with loose pockets. ;D

 

[beninak]

(again with my recent NHC visit, I know. can't help it....)

<snip>

Another thing the brewery guys were saying was that it was important to have two (at least) revenue streams, e.g. a restaurant or merchandise to sell. The consensus there was that selling shirts and hats is easier and cheaper, but the restaurant is much more effective (pulling in roughly half of total revenues and keeping people around longer to drink more). The answer to "how much does it cost to start" was a range from $250k for a production-only self-distributing brewery (not possible in all states) to a little over a million for a brewpub with a ~10 bbl system.

Thanks, that's some very good info!

Sounds like brew-pub + merchandising would be the way to go, at least until you get your feet on the ground. I wonder if there would be any legal obstacles to partnering up with an already established restaurant and just adding a brewery and wine cellar to create the brewpub.

 

[capoeirista13]

Wow man that really is some great information, thanks for filling me in!

 

[akueck]

I wonder if there would be any legal obstacles to partnering up with an already established restaurant and just adding a brewery and wine cellar to create the brewpub.

Personally I think that would be a great idea. I know I don't know anything about running a restaurant. The pro guys at NHC said that the restaurant should take up the lion's share of the floorspace, so tacking a brewery or meadery onto the restaurant would only require a few hundred sq ft of floor (vertical stacking is your friend). Or you could brew in a cheapo industrial park and bring it in (though the laws are different when brewing is off-site). And as they say "people come for the beer/mead/wine, but stay for the food." You need to keep them in the seats to get them to try lots of your product, so good food is a must. Might as well start there.

 

[Yo momma]

Adding to that good info, you could talk to some of the breweries/meaderies about brewing your recipe for a small charge and you just get the distribution liscense. Its not as expensive and its an easy way to get you started down that path, if thats the way you want to go. All you do is form the recipe, give it to the brewery/meadery and they pretty much takes care of the rest. Now you will not get rich doing this. So dont think that your going to be fortune 500 or anything but its a great way to get your mead out to other people and get your feet wet at the same time.

 

[beninak]

Adding to that good info, you could talk to some of the breweries/meaderies about brewing your recipe for a small charge and you just get the distribution liscense. Its not as expensive and its an easy way to get you started down that path, if thats the way you want to go. All you do is form the recipe, give it to the brewery/meadery and they pretty much takes care of the rest. Now you will not get rich doing this. So dont think that your going to be fortune 500 or anything but its a great way to get your mead out to other people and get your feet wet at the same time.

I'm not sure if its a wide-spread practice in other parts of the country or not, but around here its pretty common for local breweries and meaderies to sponsor various homebrew competitions throughout the year, with the grand prize being that the brewery (or meadery as the case may be) will take the winners recipe and brew a "special release" commercial batch under their label.

Granted I've never won "Best in Show" at any of these competitions, but I'm pretty sure that no money changes hands, just the winning recipe. I guess it would be an honor to have people all over town drinking a beer/mead with your name on it, and it would be cool to see how my homebrew compared to something made professionally, but I think I'd kinda be pissed that someone else was making money off of my recipe. ???

 

[Dan McFeeley]

I'd say that most of us who pass around good mead to friends have been asked about making it commercially. It's just a few that make the crossover from hobby to profession.

Mike Faul, Rabbits Meadery in California, started out small, think he had a few small fermentation tanks in a garage. I've heard of others who have done this, set up a small area that met zoning and federal standards and just produced small volumes.

An advantage to home meadmaking is being able to work in small volumes where the quality of the honey can be much better. Honey from a local beekeeper will have much less processing and packaging than honey produced on a large scale.

Going pro is very daunting, on the other hand, much of this is true for any start up business. They're going to require a business plan when you go to the bank for loans, lots of hard work and long hours to get it going, and it's best to keep that day job or night job going until the business begins to turn a profit. Usually it'll be operating at a loss until it's on its feet.

That says much for our guys who made it to the pro ranks. Nearly all of them were home meadmakers, just like us, who put in the hard work, worry and sweat to get their meadery going.

 

[wildoates]

That says much for our guys who made it to the pro ranks. Nearly all of them were home meadmakers, just like us, who put in the hard work, worry and sweat to get their meadery going.

Hear, hear.

It's hard enough to get a small business going, let alone one that a) has so many state and federal regulations, and b) takes so long to bring out even one completed product.

 

[capoeirista13]

Mike Faul, Rabbits Meadery in California, started out small, think he had a few small fermentation tanks in a garage. I've heard of others who have done this, set up a small area that met zoning and federal standards and just produced small volumes.

That sounds like the perfect situation to me. I'd love to do that, although somehow I doubt that PA doesn't have absurdly strict regulations to stop that sort of thing.

 

[CBiebel]

That says much for our guys who made it to the pro ranks. Nearly all of them were home meadmakers, just like us, who put in the hard work, worry and sweat to get their meadery going.

That's why I try to support the guys who have done this. I was able to get Redstone mead into the store where I work. It wasn't easy, but I did it. I did end up getting a few people interested in it (and one or two actually came in asking for it because I was able to list it on this site).

 

[JB175]

That sounds like the perfect situation to me. I'd love to do that, although somehow I doubt that PA doesn't have absurdly strict regulations to stop that sort of thing.

Thats not really PA's problem. I've been to plenty of wineries in the state that aren't much more than garage operations, usually in a small metal building or old barn. The real issue is sales. Since the state controls all wine/liquor sales, a small operation would have a real tough time making any profit by selling mead in stores. There's around 200 bonded wineries in the state and maybe 2-3 will have wines in any given store. The vast majority of wineries have a tasting room where they sell their wine, but I'm not sure how crazy consumers would be about buying mead out of a garage (although I certainly would!)

 

[capoeirista13]

Thats not really PA's problem. I've been to plenty of wineries in the state that aren't much more than garage operations, usually in a small metal building or old barn. The real issue is sales. Since the state controls all wine/liquor sales, a small operation would have a real tough time making any profit by selling mead in stores. There's around 200 bonded wineries in the state and maybe 2-3 will have wines in any given store. The vast majority of wineries have a tasting room where they sell their wine, but I'm not sure how crazy consumers would be about buying mead out of a garage (although I certainly would!)

What does 'bonded winery' mean?

Also, I second your garage enthusiam!

 

[akueck]

... but I'm not sure how crazy consumers would be about buying mead out of a garage (although I certainly would!)

I've bought wine out of garages, barns, and even some guy's kitchen in CA (Anderson Valley, Sonoma, Napa, and Livermore all have these, probably other places too). Makes it more fun!

 

[Brad Dahlhofer]

-I look at how much my batches cost me and when I broke it down into a per bottle cost I don't see how they can compete with the prices of larger and more well-known producers and still make a profit, especially because mead/cider isn't nearly as popular as wine/beer.
-Another problem I thought about when dealing with the time it takes to brew a good batch. If you make a batch and it sells out quick, wouldn't the stores/restaurants be out of your product for a long time until the next batch is ready? So then I thought that you would always need batches brewing. But if you are just starting out and you have no solid customer base then you don't know if you should be brewing that second batch or not. It seems like a huge gamble.
-Finally, it appears as though the startup costs are HUGE. It seems that costs like licensing, equipment purchasing, and probably the cost of buying/renting a new space would be some of the most prohibitive. It seems like you would already need a lot of money, or need significant income from investors.

Everything you say here is true.

Don't go into this business if you're just looking to make a living. It's really more of a lifestyle.

Brad

 

[Brad Dahlhofer]

Adding to that good info, you could talk to some of the breweries/meaderies about brewing your recipe for a small charge and you just get the distribution liscense. Its not as expensive and its an easy way to get you started down that path, if thats the way you want to go. All you do is form the recipe, give it to the brewery/meadery and they pretty much takes care of the rest. Now you will not get rich doing this. So dont think that your going to be fortune 500 or anything but its a great way to get your mead out to other people and get your feet wet at the same time.

A little bit of foreshadowing going on here?

 

[Brad Dahlhofer]

What does 'bonded winery' mean?

Also, I second your garage enthusiam!

The government requires wineries to provide a guarantee that they won't skip town without paying excise taxes. The winery purchases a bond (from an insurance company) or puts up collateral for the yet to be owed taxes based on estimates of production. The winery floorplan is then designated into bonded and tax-paid areas. Once wine moves from the bonded area to the tax-paid area, the taxes must be paid.

 

[BBBF]

I don't understand how most wineries stay in business. I mean, walk into a liqueur store and how many different bottles do you see on the shelf that you have never heard of.