spk_1:   0:02
Welcome to the craft Brewery Finance podcast, where we combined beer in numbers to provide you with tips, tactics and strategies to improve financial results in your brewery. I'm your host. Carry Shumway A C p. A CFO for a brewery and former CFO for a beer distributor. I've spent the last 20 years using finance to help improve financial results in our beer business. And now I'm helping other craft breweries do the same. Are you ready to take your brewery? Financial results to the next level. Okay, let's get started. Hello, And welcome to the craft Brewery Finance podcast. My name is Carrie Shumway, and I'll be your host today. I sit down with Chris Fireman from Small batch. Standard small batch Standard is a craft brewery, consulting, accounting and financial strategy company. You can learn more about them. It s b standard dot com and you can connect with Chris if you like, via email it. Chris, it s b standard dot com. So we talked about a number of subjects facing the beer industry, the brewery industry these days, Among them the need for really good cash flow, planning for financial forecasting and re forecasting. We share some tips and some tools, you can make that process a little bit easier. We also dive in on some breweries that were maybe better able to withstand this financial crisis than others and what those brewers look like, what they may have done differently and some things that you may be able to learn from going forward in your brewery. So for now, please enjoy this wide ranging discussion with Chris Fireman from Small Batch Standard Chris Farmland. Welcome to the podcast.

spk_0:   1:50
Thank you, Carrie.

spk_1:   1:51
You talk to a lot of brewery folks on I'm interested. You know what are the main concerns you're hearing from them? And you know what questions there needs to you tend to hear more often than others

spk_0:   2:04
know. So I like to break this whole situation by timeline. And what what's actually happened over the last since I called ST Patty's Day? ST Patty's Day Week is what I consider Week zero is. One thing started to shut down and people really started to freak out. And, you know, all of our customers had a outstanding ST Patty's Day week. They had a smashing in ST Patty's Day week number one because of the holiday number two because people were starting to stay home and stockpiling. And number three, there was a push for local. So everybody was going to their local vendors and purveyors and supporting. So that was weak. Zero next week was week one. They saw continuous, you know, strong taproom sales. They saw continuous decent distribution sales. At this point, distributors were little confuses what was gonna happen. But beer and the chains and the sea stores continue to deplete very, very fast. So by the end of week, one which is really weak to they, the distributing breweries realized that they had a play here with their packaged product. It was gonna be less than before, but it was going to be It was gonna be good. They were gonna be able to maintain it. We to of this whole situation, you know, Taproom sales stable, stabilized, and breweries got to the point where they were able to start predicting how much to go beer. They were going to sell some rain out of crawlers, and that gave him a little breathing room to try toe source and find crawlers. Distribution kind of chugged along here. We are in week eight. I think some people we cake some people. Week seven and I would say that a majority of the breweries that I work with are doing just fine. Financially, right? They have pared back sales. Excuse me. They appeared back. Labor. They have maintained some normalcy of sales. They've kept production labor where they needed to be in the beer quality going, Um, I would say the fear has really subsided for the most part. Um, I would say the biggest fear right now and this just came to on my radar about 48 hours ago is what happens when everything opens back up. So states are starting to reopen now at 25% 50%? Well, that's enough, in my opinion and my customers opinion for all of the people who put payments on hold I e. Landlords utility companies to knock on the door and say, Hey, you're open. It's time to start paying well. The slow stepladder toe comeback is not going to equal the rent payment and you till the food ran the full utility payment. So looking ahead, it's balancing the reopening and the ramp up period and cash flow. No doubt that's the big concern right now.

spk_1:   5:16
Yeah, that's a good point. All those deferred expenses feel pretty good right now, but they're gonna come dio and they're gonna come come crashing down some cash. Well, I think planning for that, you know, really, modeling that out is important.

spk_0:   5:29
No. So tell me a

spk_1:   5:31
bit about, um, in your business, what you're seeing right now, this forest clients increased decrease. What? What's going on for your business?

spk_0:   5:44
For my personal business? Yes. So we are. We're very lucky right now that we're seeing ah, big need for the specialist numbers guy I call us or I call us a financial agency for craft because it really goes past the debits and credits. And it goes into having the owners back when it comes to the financial decision making. Whether that's modeling out the sales reps, compensation or taproom, manager's compensation or advertising spend cost of goods sold. I'm really diving into cause Presque you right now. Ah, fully loaded cost of goods sold. Rescue to figure out what that margin is. Is that skews? Still reliable? Is it still profitable in this day and age? So back to your question. I went off on a tangent there. But back to your main question. We are very lucky to say that we're having a great demand for our services, Um, at the moment. And are, you know, putting our resources together with hiring and reworking our or charge really service our existing customers and are the ones that are coming on the pipeline?

spk_1:   7:00
Yeah, I think that's a great point about the specialist to when I'm sensing is, you know, this crisis has really ramped. It is pushed the accelerator down on a lot of things. There's someone mentioned was talking about appear in the industry earlier today and they said You're taking our three year plan and compressing it into two months So everything is accelerating, speeded up. And I think it's also shining a light on those areas of our business, the brewery business that we would say, Yeah, you know, financing accountings important. But, you know, I really would focus rather focus on, you know, producing more beer or new brands and things of this nature. And it's really maybe shifted that priority. So I like what you said there that you know there's a big need for that, that specialist and I'm glad you're there toe to fill it and help folks out of you know that's that's exactly what they need.

spk_0:   7:49
Yeah, can I say one more thing on that point? Please do if, um if the admin role or the accounting role, which it rarely is, was one of the ones that needed to be furloughed at the brewery, we have come in and replace that that that service a diffraction of what it costs have it internally, and it it's being handled by experts. So it really is a win win because you, typically a brewery, will start. And over time the tapper manager will move into ah pseudo leadership role and really the keeper of all information. And they move into a studio accounting role and they're faking it. And everyone's okay with them faking it because the CPI is gonna clean it up at the end of the year, where we really get ahead of the numbers on an accurate basis, Um, a month in and month out. So it's ah, it's a good a good investment in the brewery.

spk_1:   8:47
That's that's great. And it's that's a good resource and I make sure the link back to your contact information so people can get in touch. If that's if that's of need for them right now. And and I would agree. I think the, uh, wearing of multiple hats that that's in any small business in particularly small brewery. Um, and now you know that margin for error that may have been there before if we had a profitable taproom and so forth the margin of areas really slimmed way down. So I'm Crist. Do you have any specific tips or must lose for brewery owners or managers? Right now, any financial skills now that you would recommend any information that maybe they can think about to navigate this crisis?

spk_0:   9:33
Yeah, So we were talking about cash flow earlier. We have a cash flow tool that we put out, and we had a pretty win lengthy webinar that we also published with it, showing people how to use it. That's a huge tool right now, because it's pretty dynamic in the sense that you can remove interest payments for the time that you're not paying interest and you can bring interest payments back in. And at the time we released it. I wouldn't say it was premature, but people were anticipating PBP loans. They were anticipating other grants. And now that that's coming on, everyone's kind of going OK, we've got all the cash we're gonna get, what now? And our tool has a place to put in additional funds, whether it's debt, whether it's and you can rank those in list. Um, so you know what It's it's Ah, it's a quick look based on historic ALS of cash flow on what's coming up and, of course, decrease in revenue. So that's that's one tool that I'm. I'm telling people to really go out and and use, and I'll get you a link to that put in the show notes. Or, um, it's a good, good resource. Other other other tools that I am I'm speaking to two owners about is really just maintaining a sales forecast and understanding what's coming in. And then what's going out on on a webinar? Yesterday I spoke to about the the Big Five, which is your you're all materials, your packaging, your labor, your lead, your yeast on your rent. Those were your big Five that, um, breweries really cannot go without and they must have. And you need to model out 4 to 6 months of what that's gonna cost to figure out how much is coming in. And none of this has to be a science right now. This has to be just estimates. Um, speaking of the P p p, we also released a calculator for that, and we're getting a lot of detailed questions. Well, for most people, we just started that the covered period. So it's just a estimate. It's just ah, first glands with over time, we will, we will get we will develop the actual forgivable now. So, um yeah, that's that's really what I'm what I'm talking about these days and, um, just and honestly outside. So that touchy feely stuff is just trying to stay positive. Um, I spoke a lot yesterday about the doom and gloom media out there When in reality, uh, most small craft breweries air just fine. They're doing fine. They're they're they're running cash flow, neutral cash flow, positive. In some cases, they're doing more business out of the tap room. Now, you and I were talking about it before the show that average ticket sizes 30 to $50 versus 8 to 20 or 8 to 22 to be more specific per customer. And they seem to heat coming back. Um, I think the brewery's another stop right now. As you know, as we leave our our house arrest, it's another is another opportunity for a stop for the person who's out getting a central groceries, getting a central food, getting dinner to go. I know we have friends that every Tuesday night they do a local restaurant in a local brewery. They could be on opposite parts of town, but they support in both. Um, it's a big It's a gathering of of a couple of families. I don't know if I should say that, uh, in this sector, distancing, but only is that gather and they throw down every Tuesday.

spk_1:   13:10
Nice. Yeah, that's great. I mean, I think the sense of community people really helping each other, it's always been evident in the brewing industry, and I think the larger community as well everybody's realizing, you know, we're certainly stronger together, and hopefully we can maintain that. And, uh, and right out of this, you know, I wanted to ask you about, um you know the crisis blindsided everybody. For the most part, I attend a joke that it probably didn't blindside the insurance companies because they've largely written pandemics out of their, uh and of their coverage is certainly for business interruption insurance. But do you know of any breweries that we're better prepared than others to deal with a situation like this and maybe not pandemic specific about a financial crisis like this? And if you do you know what? What do they do differently and what? Maybe you can other breweries learn from that for the future.

spk_0:   14:05
Sure. So none of the breweries that we work with or no and there's a lot we're ready for this O. R. Knew this was coming. No one had a crystal ball. But with that being said, we do work with two distinct profiles, just general profiles. And and one is that the one profile is a brewery that has little to no debt in moderate cash flow. Okay, And the second profile is a brewery that has healthy debt and outstanding cash flow. And really, those are the two models which are are sustaining just fine, right? They've been run with fiscal responsibility they're not over leveraged. They and the ones even with healthy debt, are in most cases if it's an SP a product or having having some additional relief right now. And the catch float really hasn't decreased. So it's very interesting that the customers that we work with do operate with fiscal responsibility, and they lead with the liquid and quality. And, um, you know, one of our biggest mottoes is just building deep, successful relationships. And I have found that we've aligned ourselves with breweries with same thing and the good guys win, right? The good, the good people, the good, honest people win. And, um, it does help that we're selling alcohol. Uh, it does help that alcohol is not a luxury. It's a must have. You know, it does help that people are drinking earlier and people are drinking because their home schooling their kids. So it was a lot of factors in play here. I think I heard that that ST Patty's Day week that the two big boys sold more beer that week than they sold in the 1st 2 months of the year. I think

spk_1:   16:04
yeah, or it was one of the biggest weeks on record? Certainly. Yeah,

spk_0:   16:10
yeah. So there was the fear. Right? Craft is premium alcohol. It is alcohol, but its premium alcohol will premium be affected. I don't know many people in my age range of my generation that can go back to drinking anything but craft if their beer drinker there's. But the problem is, there's many options for that. There's many, many options for craft these days, so once again, I'm going off on a tangent. However, I would say that the profile No. One, no one was prepared for this. I will say that the pivots and the business model spin up that I have seen happen, and the announcements and the awareness that they brought to their new business model phenomenal. I'm really, really proud of our customers as to how quickly they had pivoted and been successful at that.

spk_1:   17:03
It's interesting. I think I'm seeing that is more anecdotal on my end. But I'm certainly seeing that more and more that we're seeing more emphasis on the business side of the brewery or equal emphasis. I'll say as opposed to, you know, I got a passion and a homer. I just want to start a brewery. Now it's well, I need a business plan. I need a financial model. I need understand my cost structure. So I think certainly is a is a county guys a C P a. That warms my heart. But I think that's a good sign for the future of the industry, as well as being in a circle back and underscore the two profiles that you an outline. And I think, you know, nobody can prepare for zero revenue or 1/2 loss of your revenue overnight. But those two profiles you just said those with low debt, moderate cash flow, those with a healthy amount of debt and really good cash flow of the ones that air really in a better position toe whether that so, I think that's a good model, a good framework for folks to think about, you know, as we come out of this is just that, you know, fiscal, financial discipline. It never feels great at the time, right? You want toe by that extra can you know that fancy canning line or whatever, but having that fiscal responsibility can really pay off. So, you know, I'm curious what you are learning personally through this crisis, and you can answer this anyway. Like whether it's, you know, financial lessons, business lessons, crisis management preparedness. Is there anything in particular? It's kind of struck you about this time. Anything you've learned that you'd like to share.

spk_0:   18:36
Yeah, I, um I've been I've been talking a lot about patients, care and fiscal responsibility. Um, and applying those to your business, um, as a whole. Right. So the business owner that applies care, care to the product, care to the team, care to the vendors, care to the customers, patients not wanting everything to happen right now and then fiscal responsibility will end up coming out on the other end. Right? There may have to be some hard decisions that are made, and they may have to be some tough conversations that have, but I've, uh I've just I've seen some really amazing care taken during this. Um, a lot of our customers are They're doing whatever it takes to keep as many people on staff as possible. They're they're fighting for the fighting in local government for certain measures. They're fighting for grants. They're fighting for loans there. So it's, um they certainly are not sitting back and throwing their hands up in the air. We work with a few non brewery. I hate to admit this, but there have been working with them for a very long time there in the medical industry. And they stopped by my office weeks going. I just threw their hands up in the year. One is an elective surgeon. Once a dentist, I kind of threw their hands up in there. Was like, Yeah, well, just see emergencies. They come through. Never heard that with worry. Um, it helped that breweries were labeled a central business. But boy, when they were given that little when they were given that inch, they just kept pulling and sprinting and sprinting and sprinting. Um, so, uh, there's that, um, you know, I have been a huge opponent of the doom and gloom. I'm a client. Called me on. This is in the podcast yesterday with a webinar yesterday. Client called me from a very large market on the West Coast is in. I have been tasked by our local guilt Teoh report to the Senate, This state legislator, Senator, whatever about the state of the brewing industry and how bad it's been affected, and I don't know what to say. What are you seeing out there? And I kind of looked around and I was like, I'm seeing aces. You know, I'm not seeing the mass closures and the carnage that some of the media outlets are putting now, Is that coming down the pipeline? I don't believe so. I have scratched through every scenario that could go through my mind. And my mind usually doesn't rest, um, of what could come down in the future. But, um, I would just say this is a really honest, persevering industry, and I'm I'm so happy that I'm a part of this and just cranking with him,

spk_1:   21:37
no doubt, but just scrappy entrepreneurs. I mean, everybody's used to bootstrapping out there, and this is an extreme version of it. So my money's on these guys, um, shifting gears a little bit and talking about e commerce. That sort of been resurrected, um, these days to help kind of maintain or even gross sales. What? What are you seeing out their relative to how breweries air using e commerce, you know, we hear about curbside online sales and so forth. Any tactics, creative or otherwise that you've heard of that have been particularly effective.

spk_0:   22:15
Yeah, I would say that in general, breweries are going to include online sales as a permanent means of revenue Moving forward, right. They're going to take to go beer a lot more seriously. The package the cool package section in the tap room is is gonna be updated and elevated. Um, I think that when when we reopen, there is going to be a group that you are comfortable sitting indoors or outdoors. Upper Re. And there's going to be a group that isn't and it's gonna take coming and picking up package to go and seeing the other people there to build the confidence that's needed to bring whether family or pets or whatever to the to the tap room to drink. Um, when I was talking about yesterday, a lot was How do we how the brewery that figures out how to take the tap room experience home We'll win, I typically, when you hear people drinking craft beer, they're sharing their telling stories. They're recalling other craft experiences and vacations. So it truly is a community building good consumer, good people drinking alone, But most of time they're showing off their, um, having people come taste this taste that, uh, the brewery that can it somehow figure out how to take the tap room experience home? It's gonna win. And here's a couple examples. Ah, brewery I work with Does peanuts and peanut shells on the floor. They've been doing it since day one. They include a bag of peanuts with every to go Where? Okay, um, so I would say that looking around, I Excuse me, another brewery. Here's another example. Another brewery does, um, d j night, where the owner spends his own music at the tap room. Very are odd concept with a brewery cause usually is live live music band, But this is turns into, ah, pseudo club. Um, but they're doing, um, live stream or webcast id d J sessions to the customers. So the big thing is, is how do we transfer that experience to to the house on? I think breweries have to rethink packaging. They have to rethink marketing. They have to rethink experience, experience at home, experience at the brewery, to really capture and stay relevant.

spk_1:   25:00
Absolutely. It Speaking of packaging, I'm in a lot of smaller breweries taproom only draft only, um, you know, having to shift to pat whether that's growlers or crawlers or rapidly trying to get into cancer bottles. Do you have anything to share from clients or other other things that you've heard relative to those breweries shifting to package? You know how they've done it, how they have fared in that and maybe any anything in particular they've been able to do to kind of accelerate that process.

spk_0:   25:32
Yeah, So if you have a canning line right now, I would say that you're in a good spot. If you have any sort of packaging, bottling or canning, you're probably in a good spot. Um, and a tip to that would be make sure that thing keeps running because there's gonna be a lot of opportunity in the future to pack for yourselves and potentially other other people, Um, the ones that don't have canning lines. It's a bit tougher, right? You're typically beholden to a mole mobile system or you're beholden to a crawler machine, and I've seen breweries crank out a ton of crawlers ahead of time. Every day, someone's just filling in steel in filling and sealing, and that is time consuming and so on. So on. Um, if you, uh if you don't have either that's a very tough situation to be in because some breweries have done away completely with the growler fills because it's more of an open vessel and so on. Um, I've seen some local breweries, um, purchased the beer of other brew reason to attack takeover in their own brewery to try to promote some of that draft. But at the end of the day, that's only gonna move so much product, right? It's not really that much. Um, we've also seen short that the ones that do have crawlers. We've seen a shortage of crawlers. We've seen a lot of brewery's run out and then try toe get him our order to them and their be long lead times. Um, yeah, I would say if you're in a situation right now where you can't afford a candy line because they're very expensive and you don't have a crawler machine, I would contact um, a crawler company and see how quickly you could get one you know, installed and up and running and begin promoting those. Um, if you do have the crawler machine and you, You know, you're not ready to move into a cannery, don't have the other camp packages. I would say, you know, do, um, make make your reality work, make your reality work, And I know that's easier said than done, but there's a ton of breweries that are doing it. Um, yeah,

spk_1:   27:41
Cool. So last question, or next to last question for me is ah, any parting words of wisdom, hope encouragement for brewery owners and employees out there?

spk_0:   27:52
Yeah, I said a lot of this yesterday in the webinar Me. I think for the most part, you're gonna be fine. If you fit with close to one of those two profiles, you're gonna be OK, is a business. And if you operate with care patients and fiscal responsibility, Um and I don't think those words are too fluffy. I think those words pay back dividends. I could be fluff here, but no, I've really thought about those a lot. Um, I would also say that beer is a necessity. It's not. Ah, it's a must have. It's not a luxury. So with the, uh people being home and commute times non existent anymore, people are drinking. Earlier because your only choice is to work or hang out. The family on the people that are homeschooling are certainly drinking earlier. I know I'm us. We're living example of that. So these are all good signs. And yep, as long as you stay in front of the customer and understand that you're really not annoying anybody by the continuous engagement and, um, customer interaction, you're not annoying them. They want it they want to hear. If they don't want to hear you, though, they'll go away themselves. But until they do, um, you know, keep reminding them of who you are and where you are, which offerings are, and I think everyone's gonna be okay.

spk_1:   29:15
Great. Appreciate those words of wisdom and just in parting, if people want to connect with you, reach out, get in touch. What's the best way to reach you?

spk_0:   29:25
Sure, I really recommend everyone join our conversation, which is our email list because we're putting out a ton of tangible content on there were putting up metrics and benchmarks and and even if we do, we do some soft conversation as well. We do some interviews and and so on. But if you go toe SB Standard Eyes our website sp standard dot com. You can email me Chris at SB standard dot com and we'll be happy to put you in the right direction to get get in touch with us and be part of our conversation.

spk_1:   29:58
Fantastic. Chris, I really appreciate the time. A lot of useful information here for folks. Let a good, good take away. So thank you very much. Are you okay? All right. Until next time Thank you for listening to the craft Brewery Finance podcast where we combine beer in numbers so that you could improve financial results in your brewery. For more resource is tools, guides and online courses. Visit craft brewery finance dot com. Don't forget to sign up for the world famous Craft Brewery Finance newsletter until next time. Get out there and improved financial results in your brewery today.