The craft beer industry has had an exciting ride, with a pre-Covid Compound Annual Growth Rate of 14.1% and a forecasted market valuation of US$107.85 billion by 2024, according to Business Wire. Knocked back just 7% in sales volumes during the height of 2020 lockdowns, according to Unleashed Software’s own data, the beer industry overall has shown remarkable resilience – for somewhat obvious reasons – and appears likely to continue its expansion.
However the easiest years of the industry may well be behind us, and the breweries that thrive in the coming years will be those that create the greatest competitive advantage. Leveraging the best manufacturing Enterprise Resource Planning (ERP) software, maximising productive efficiency, and accessing management expertise early, are the strategies that will set the best apart.
In this guide to growing a successful brewery, we will naturally – as software vendors with a strong base of independent brewery customers – touch on the technology elements we see as important. We’ll also break down the specific details of what it takes to build and grow a successful craft brewery business.
- Who this brewery business guide is for
- Auditing your business
- Areas to seek expert input
- Growing your brewery – dos and don’ts
- Brewery software: Enterprise Resource Planning for brewers
- Brewery software features to look for
- Case study 1: Epic Brewing Company
- Case study 2: Seven Bro7hers
Let’s begin by looking at who this brewery business guide is for.
Craft brewing is projected to be a US$107 billion industry by 2024.
Is this brewery business guide for you?
You’ve worked really hard and busted your backside to get where you are today. You might have started with a great recipe and a love of real beer, some capital and a dream. It was tough. Now it’s getting tougher – the craft brewing business has so many more breweries starting up and you need to compete smarter in this growing market, think about your customers more efficiently and focus on how to actually track and trace everything you need to make your beer. Then – most importantly – you need to ensure you can make a profit. And that’s just the beginning.
What you really want to do is get this idea off the proverbial launch pad; take on the competition and win. Maybe you want to play a less physical role in the business – you’ve done enough keg lifting already, but continuing to bring a great idea to market takes a number of important elements – and that’s where technology and expertise is vital.
In short, management expertise and access to the best systems and tools is what you need – along with a clear plan to follow.
That’s what this guide provides
Auditing your brewing business
Your mission, should you choose to accept it: a business audit.
This is the time to be objective and not emotional about your business. Passion is great – vital even – but you’ve got to take a cold hard look at what you’ve got. The challenge to get to the next level of business is more than about passion, it’s about numbers – some big numbers. It’s also about management: you and the decisions you make.
You need to clearly establish the foundation you’re building on. Where are the weaknesses? What will crack when your business takes off?
You might have it all in your head, but it needs to be expressed in writing and spreadsheets and accessible to your team; so get the right advice. This is how you get your craft brewery off the ground.
Take a critical look at your business.
Your audit checklist: Issues to look for
These are the areas you need to look at in particular as they influence your ability to compete at the highest level. Look at the past 12 months.
- Planning and forecasting
- How many times do you run out of stock due to demand exceeding supply?
- How many stock-outs due to demand exceeding planned production?
- Inbound supply chain (impacts ability to produce finished goods)
- Do you have a formal supplier approval process?
- How many inbound deliveries were late?
- How many deliveries were rejected?
Stock Control (materials)
- How many times did you run out of stock (e.g. caps, labels, bottles, kegs, ingredients) – are you ordering inefficiently?
- How many raw materials/ingredients issues/returns to suppliers were there – are you monitoring inbound quality?
- How many production breakdowns were due to equipment or machinery failure?
- How many were preventable by maintenance procedures?
- How many days were lost through waiting for replacement parts/ spares?
- What were your preventable staffing issues?
Finished product stock control
- How many stock-outs, an event that caused inventory to be exhausted?
- How many due to production failures?
- How many due to demand exceeding production plan?
- How many incorrectly picked orders?
- How many late deliveries to customers?
- How many due to being out of the stock they wanted?
- How many due to transport issues?
- How many product returns?
- Wrong product order details
- Product quality
- Other reasons
- Is cash flow under pressure?
- Are your payments to suppliers being delayed through lack of cash?
- Is your sales invoicing accurate?
- Number of disputed invoices?
- Is your cash collection period too long?
- List other business problems you have experienced in the past year
This list is by no means complete. In fact, you will probably not have access or records of all the data. To compete at the highest level, you need to have these numbers at your fingertips, at least on a monthly basis.
If you can’t measure it, you can’t improve it.
The right advice will set your brewery business apart.
Getting the right business advice for your brewery
Access to management expertise is critical if you want to grow a competitive craft brewing operation. These are the areas you’ll want to focus on, when recruiting or outsourcing for expertise.
- Supply chain management
- Production planning and management
- Sales forecasting, customer service and sales order management
- A qualified accountant to help you define your accounting system. If you have an accounting software supplier they should be able to provide you with a consultant to help optimise your use of accounting software. Experience in the brewing sector is a must.
- Your accountant can also ensure your accounts’ processing and cash management is efficient. You can run a business for years without profit, but not for long without cash. Without cash flow, at some point your craft brewery will simply fail.
Growing your brewery – dos and don’ts
This section is really about the don’ts, because if you follow these then you will be sure to do almost everything else properly.
- Don’t take advice from the guy in the bar unless it’s about your beer recipes, and even then be skeptical!
- Don’t try to expand too rapidly without adequate working capital – overtrading should be avoided
- Don’t accept business systems solutions that cannot easily be integrated to give you a smoothly flowing end-to-end business system. You need ‘pluggability’ so that the complete system can build and evolve with your business
- Don’t purchase any supply chain solution that is not Cloud or SaaS based. That means you can buy it as a remote online service (SaaS) paying typically by user per month, or buy and install the software on the cloud. Either way, you avoid the headaches, risks and costs of running your own hardware in-house
- Don’t buy any solution from a supplier that has no brewing sector experience
- Don’t buy a solution from a supplier that cannot provide reference site contacts relevant to your business
Be careful where you get your advice from.
Brewery software: Enterprise Resource Planning for brewers
You’ve done your business audit and engaged your advisors. You know what not to do, and what you should be doing. The next stage is where you put in place new or upgraded processes and systems, and you have a range of choices.
An ERP – or Enterprise Resource Planning system – is an all singing, all-dancing software package that allows you to run a closed loop operation across all your business processes. Different ERPs are either installed, or fully cloud-based, SaaS products.
However we don’t recommend small breweries opt for the former, as they limit agility / scalability and add cost, whereas a SaaS solution will more easily scale with your business.
A well integrated ERP maximises your productive efficiency, ensuring your whole business is linked, right through from marketing to production and purchasing. It’s key to growing a competitive advantage.
Enterprise Resource planning software is a game-changer for brewers looking to scale.
What Enterprise Resource Planning looks like in a brewery
- You know how much you can physically brew in the next 12-24 months (your brewing plan is a physical constraint unless you engage a contract brewer), and…
- You have your marketing plan in place…
- Which drives the sales plan by brand and…
- Your software breaks that sales plan down using Bills of Material recipes, to drive…
- Stock control and purchase ordering, including raw materials and packaging, and…
- You can evaluate this financially and ensure that your cash flow forecast stacks up, then tune it as necessary, to maximise your use of cash and assets (i.e. your brewing plant).
That’s the planning side, but the execution is just as neat, with actual sales rippling through the system to generate purchase orders for ingredients, bottles and so on. Changes to the plan are smoothly tracked and managed, and finished goods stock-outs can be predicted and worked around in advance. Shipment/availability dates can be predicted with confidence and customer satisfaction is increased.
Brewery software features to look for
Stock & Inventory Control
Using Unleashed software as an example we’ve assembled some screenshots that show what we think you should be able to see on your dashboard, anytime, anywhere, over the web.
Unleashed’s BOM (i.e. recipe) feature means that you can sell bundled products without having to pre-assemble them. Completing kitted orders enables you to track the value of stock used, giving you an accurate finished goods cost. Easily create recipes and include multiple levels of packaging, making the admin side a breeze when you want to create finished goods.
You can also quickly set up trial recipes to establish a final product cost, instead of using spreadsheets.
Costed Purchase Orders
Often there are more costs involved in acquiring stock than just the buy price. Unleashed lets you add these additional costs (such as freight and duty) for each purchase order during the receipting process. This means you know exactly what your products owe you. This is especially important if you import your goods prior to sale as any cost fluctuations are automatically incorporated into your margin management.
Serial and Batch Number Tracking
Assigning batch numbers to your ingredients as you purchase them in means you can track those ingredients through your whole brewing process, and into the kegs and bottles for sale. Are your kegs returned to you? Assign a serial number to ensure you know where they’ve gone and when they come back into your inventory. Unleashed’s serial and batch tracking is integral for craft breweries, who need to trace and report on every step of the brewing process to meet safety regulations. Our visual Dashboard gives you quick alerts on which batches are due to expire, too.
Stock by Location
Easily keep track of stock across multiple warehouses, in multiple locations (different countries, states or cities are managed with ease). Unleashed lets you know exactly what stock you have, where. Plus, you can segregate stock within your system to manage consignments or quarantined stock (such as bonded/unbonded).
Brewing beer isn’t just about the ingredients, bottles and labels – there’s often peripheral service and packaging costs. Adding costs to the assembly process is simple with Unleashed, and means you get a true representation of what each beer costs to brew so your margins are more accurate.
Software features continued: Sales Integration
Once your beer is created, you need to sell it. Those planning to scale up operations will want to use a number of sales channels including:
- Direct to retail (pubs, liquor stores, retail outlets)
- On-site retail shop
- Distributors local and overseas
- Distributors (online shops)
- Sales agents
- Online shop
Most integrated ERP systems cater for all these options but there may be some exceptions that you need to check for, depending on your precise needs:
- Brewery Shop: Point of Sale (POS) integration
- Your own online shop (eCommerce)
- Fulfillment and Shipping (e.g. you ship for an online distributor who doesn’t hold physical stock)
There are many, many robust and reliable packages which can fulfil these requirements and enable you to have the best-of-breed right across your integrated ERP system.
Consider all the different sales channels you’d like to target.
Make the most of the insight offered by real-time profit and loss updates within your system. Stock control isn’t just about quantities, but values too. By monitoring all stock and stock value movements, you can track exactly who has done what.
Other software systems brewers should consider
Accounting, Customer Relationship Management (CRM) and Human Resources Management (HRM) systems are key for overall success.
You likely already have – or are close to having – an integrated accounting system, but whether you need to automate CRM and HR depends on how you plan to grow.
For the kind of growth we’re talking about, you need an accounting system that will integrate with your supply chain and your business outputs – beer sales. At the very least you will need to:
- Produce a cash flow forecast automatically
- Ensure correct sales invoices go out on time
- Automatically match purchase order receipts to invoices
- Track actual cash flow
- Produce a regular set of management accounts
Tracking cashflow is critical as you scale.
If you sell through a few beer distributors and don’t sell direct to bars, liquor stores and retail outlets, then an integrated CRM system is probably not required. But you are scaling your business – right?
The question then is – how will you grow your business if you don’t expand your list of sales outlets: i.e. if you do not plan to re-balance your business model? So you need to cater for all the sales channels, adding them as you grow (see sales integration).
Most CRM systems typically provide a wide range of integrated, automated sales and marketing facilities, the most relevant ones for a craft brewery being:
- Salesforce automation (SFA): This delivers integrated sales processes and automation, including opportunity management, quote and order management, sales forecasting, order management, fulfilment, and incentive compensation management.
- Marketing automation: Automates the entire marketing process, including campaign and email management, sales lead reporting and analytics, website search engine optimisation and landing page and form creation.
- Customer support and service: Customer portals, complaint handling and communications management.
SaaS and cloud solutions are available for all of the above. Look for the capability to integrate with an ERP system. These solutions are usually installed as a follow up phase to ERP, and you should definitely talk to your ERP supplier before you commit to a particular CRM solution.
Modern HRM systems can take a lot of headache out of managing staff. Again many are available as SaaS and cloud offerings, but until you are employing maybe 25-30 or more people then you can postpone implementation. In the meantime make sure that you have a solid off-the-shelf, paper-based system, so that you can stay on top of the legal requirements of employment law, disciplinary proceedings and so on.
You may have a small team now, but that will change as you grow and your own workload needs to be managed more efficiently. Become trained or employ a part-time qualified HR Administrator – mistakes can be costly and embarrassing.
Mobile Sales Agents
If you’re not already using mobile sales agents to boost direct sales, you’re simply drifting through space, hoping to run into a customer by pure chance.
Your direct sales agent must be able to hook into your ERP sales and stock management system from their iPad when on site with a prospect (or on the phone or email). The next stage of your business growth will hook the agent in through CRM.
Whichever route in, they need access to real time stock availability data and need to agree the order immediately with the customer, including any promo discounts. They may also need to order promotional support materials – flyers, banners, flags, glasses and so on – there and then.
It sounds complicated, yet in reality it’s quite simple – if you choose the right ERP solution.
Connect your sales people with your live inventory system wherever they are.
We already talked about direct sales agents and they will be accessing the company’s system through a ‘portal’. It’s just a fancy name for a secure software door into a system, available over the web.
There are various portal models for various purposes, and the most common in the brewery business are those for direct sales, and customer portals.
We know what you are thinking – ‘Why do I want to let a customer into my ERP system?’
No worries, it’s a special secure area (usually enabled through CRM) which lets your customers place orders, track orders, check prices and invoices and – heaven forbid – log product or other complaints.
The great benefits for you are that it cuts down on staff workload and errors at your end.
So, once your direct sales person has signed up an account and logged the first order, then you encourage the customer to use the portal with his or her own unique access credentials.
Case Study 1: Epic Beer
Auckland’s prize-winning craft brewery Epic Brewing Company were facing a serious problem — they had no stock management system. All the information about their products, inventory and stock were in their brewer, Luke Nicholas’ head. The team at Epic needed to get that information into a system so Luke could focus on other things.
Epic Beer founder and owner Luke Nicholas.
The growing craft brewery was getting too big for guesswork. They could no longer function efficiently if all the inventory information wasn’t in a system.
Their supply chain also posed a challenge. With a focus on high-quality beers, they source ingredients from all over the world: malt from England and Germany, and hops from America and New Zealand; getting it all together can be a challenge.
Planning for the future was also a problem. Hops are ordered five years ahead so making informed decisions and forecasting is essential for production. Other factors like the weather can also impact demand. The weather is beyond control but a reliable inventory system reduces the seasonal fluctuations and uncertainty that go with Epic’s new recipes and their imaginative, talking-point labels.
Epic was already with Xero so they talked to their accountant, who confirmed that Unleashed Software was a good solution for them. While no off-the-shelf programme does exactly what you want it to do, most of the features they wanted were there, and it integrated with Xero.
The team at Epic took the time to understand what they wanted from Unleashed Software. They knew little things like naming conventions, handling raw materials and cases of beer would take time to iron out so they made sure those issues had a process in place. Implementing a structured inventory system would open a can of worms but it had to be done.
Unleashed Software was up in a week, and after some behind-the-scenes work, it was running well in a month. “Unleashed puts everything into stock on hand and you can see exactly what your costs and income are. And because we don’t own our brewery, it’s also helped with confirming which stock is ours. Once managing batch numbers is nailed, and you don’t have to rebuild one product as another product so you can get the excise duty rebated if an export order suddenly comes in, it will be very good.”
Unleashed delivers a journal that comes through with every sale, detailing the cost and income. Epic can see how much money they’ve made on a monthly basis and can plan accordingly. Before using Unleashed, they could use Xero to see, in dollar value, what their sales were, but had no way of tracking the actual costs of goods for a particular item.
Unleashed’s batch tracking feature was incorporated into Epic’s food safety program. With accurate tracking and tracing of all their products, Epic is easily accountable for all their beers, and it speeds up their food safety checks too.
Epic also uses detailed sales data and reports to guide business decisions and back up sales processes. This is especially crucial in justifying which beers to bring back, and what beers to make more of.
Since implementing Unleashed, Epic has grown year on year with the help of efficient inventory management software.
Case Study 2: Seven Bro7hers
Seven Bro7hers Brewery is a UK-based brewery run by seven brothers who all share a passion for beer. As avid home brewers, craft brewery runs in the family. But their passion turned into their business four years ago, over a pint of beer. The seven brothers realised the growth of craft beer and decided to take their passion to the next level!
Today, Seven Bro7hers Brewery sells their beer to hotels, restaurants, craft beer bars; they also sell their beers in their own craft bars.
Kit McAvoy, one of the directors at Seven Bro7hers Brewery.
Before Unleashed, the team at Seven Bro7hers Brewery were using Sage to manage their inventory. However, they were experiencing stock control issues and struggled to maintain visibility over every keg, bottle, and can. “Prior to using Unleashed, we had little idea of stock availability, other than doing a stock count,” says Kit McAvoy, one of the directors at Seven Bro7hers Brewery.
With stock going to different locations, they realised they need the ability to track every batch from production through to completion. With Xero as their accounting platform, they were looking for a cloud-based inventory management software that would integrate seamlessly to Xero.
The team at Seven Bro7hers Brewery now use Unleashed for many aspects of the business, especially production. “Production is hugely important to us,” explains Kit, “Unleashed tells us what our products cost, down to the individual count.”
They also took advantage of Unleashed’s API capabilities and built their own beer duty report, “our beer duty report used to take us a whole day to report. We can now produce it using a bespoke report at the touch of a button,” says Kit.
As Kit recounts, “Previously using Sage, we used to have a lot of stock related issues.” With Unleashed, the team have found it easier than ever to analyse margins and production costs. The reporting that used to keep Kit up all hours of the night is now a thing of the past!
Find out more about how leaving Sage for Xero and Unleashed can benefit your inventory management.
Resources and further reading
- New Zealand Trade and Enterprise has an excellent resource that’s specifically for New Zealand craft brewers, but that brewers everywhere will find useful. Download the pdf here
- Find out more about how Unleashed Software helps brewers
- Read our Q&A with specialist craft beer advisor Maria Pearman, a Certified Public Accountant based in Portland, Oregon – the home of craft beer
Article by Greg Roughan in collaboration with our team of inventory management and business specialists. Greg has been writing, publishing and working with content for more than 20 years. His writing motto is ‘don’t be boring’. His outdoors motto is ”I wish I hadn’t brought my headtorch’, said nobody, ever’. He lives in Auckland, New Zealand, with his family.