External and Internal Factors in Opening a Brewery Essay

In a world where large, corporate breweries rule the market, craft beer is created to please an audience that applauds the styles, techniques and flavors.

Though craft beer can be purchased through several different outlets, the best place to thoroughly enjoy the entire experience of the specially made beer is in the brewery where it was made. The article titled, “In Lean Times, a Stout Dream” in The Wall Street Journal1 states that, despite the hard economic times and consequent consumer cutbacks, sales of craft beer, the industry’s fastest-growing segment, rose 6 percent by volume, and dollar sales jumped 10. percent to $6. 3 billion, according to the Brewers Association. The article also states that craft beer has shown continual growth year after year in the last 10 years and data shows that U. S. craft beer sales totaled $7.

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6 billion in 2010. This is good news for a brewery that is considering opening soon. Using Griffin’s Model to analyze the general and task environment of this ever expanding market will help to determine if it is a good idea for a potential craft brewery, in this case Bob’s Bohemian Brewery, to be a viable business venture. EconomyOne of the first and most important aspects a potential new business needs to consider before deciding to open a location is the economy. Everyone is well aware that the current economic health of our county and state is dismal at best. According to The Bureau of Labor Statistics2, as of January 2012, the current California unemployment rate is at 10. 9 percent, but the regions of San Diego, Carlsbad, and San Marcos carry a slightly lower unemployment rate of 9. 3 percent.

That is encouraging news if you plan on doing business in the San Diego region.Also, according to the U. S. Census Report3, the median household income between 2006 and 2010 in San Diego County was $63,069. That is $2,186 over the California median household income average of $60,883, another positive indicator. Unfortunately due to inflation and The Bureau of Labor Statistics4 states that the areas of San Diego, Carlsbad, and San Marcos CPI-U in the second half of 2011 was 253. 368, which is a 2.

7percent increase over the first half of 2011’s CPI-U for this region.However, this is only a slight concern because inflation is constantly on the rise. Overall the general economic statistics for the region are above average compared to the majority of the country which is a good outlook for businesses looking to open in the area. San Marcos Restaurant Row is a popular destination for people interested in food and beverages. It is surrounded by a healthy assortment of local businesses, two college campuses, and is also located on the busy West San Marcos Boulevard, so traffic flow abundant. Showcase. om5 shows that leasing rates on West San Marcos Boulevard vary, but to be near or on restaurant row, the average price to lease a retail location is approximately $30 per square foot per year.

Although $30 per square foot per year is not cheap, San Marcos Restaurant Row is a prime location to have a business involving food or beverages. Also, most leasing rates are listed as “negotiable. ” Although it is not cheap to be on Restaurant Row, this is the place to be for a brewery looking for great exposure to potential customers.Although the overall economy is struggling, the craft brewing industry is currently growing. Brewersassociation. org6 reports that although American beer sales decreased by 1.

3 percent in total volume in 2011, the craft brewing industry actually increased by 13 percent in volume and 15 percent in total dollars. Brewerassociation. org6 also states that the craft brew retail dollar values surged ahead $1. 1 billion compared to 2010, rising from $7. 6 billion in 2010 to $8. 7 billion in 2011.This implies that consumers are unwilling to sacrifice premium beer for low cost, inferior substitute products, and that people want to treat themselves to a higher quality beer when they do decide to drink.

This means there is economic opportunity present in the craft brew industry and that it could be a profitable place to do business. Socio-Cultural If you’re a beer drinker looking for a variety of imported and local craft beer, San Diego County is one of the best places to be.In fact, in 2009, The Men’s Journal7 named San Diego the number one city in the U.

S for beer in its article, “The Top Five Beer Towns in the U. S. ” Beer drinking has become a passion within the culture of San Diego, especially with the rising popularity of craft beer. Beer drinking does not come without concerns, however, as the society within San Diego tends to link drinking with personal health issues and issues revolving around the well being of others, all of which goes against the customs, mores, and values of certain individuals living in the area.Like most any industry, the beer brewing industry sparks concerns regarding health, environmental impacts, and the well being of those living within society.

Many people believe that drinking beer has a great impact on personal health. Studies have shown that consumption of alcohol presents major health risks including cancer, cardiovascular disease, cirrhosis, depression, nerve damage, and pancreatitis. Other concerns with beer drinking refer to the rise in obesity within the U. S. giving way to such labels as the dreaded “beer belly. While many of these health risks are linked to alcohol consumption, The National Center for Biotechnology Information8 article “Beer and Obesity: A Cross-sectional Study” states that, the University College London observed a random sample of 1,141 men and 1,212 women showing that frequent beer drinking was not related to increased BMI (body mass index) or WHR (waist-hip ratio) and actually found that drinking one beer a day lowers the risk of heart disease. These are only the health concerns from drinking beer; however there are other things people worry about as well.

Another concern with consumption of alcoholic beverages comes from a non-profit organization referred to as MADD, or Mothers Against Drunk Driving9. Their main concern is the prevention of driving related accidents due to drinking and driving. For this reason, the serving staff at Bob’s Bohemian Brewery will have extensive training on preserving a safe drinking environment for customers through the promotion of securing a designated driver, as well as, contact information for transportation alternatives including public buses, taxis, and limo services.The U. S. Environmental Protection Agency10 is another organization with concerns about the the production of craft beer. Its Waste Wise program lists waste reduction and reuse as its top priority in the management of solid waste.

Since Bob’s Bohemian Brewery will produce a large amount of solid waste, after every brew cycle efforts will be made to recycle these waste products. They will do this through the use of a brewery waste ecycling company called Purpose Energy, which collects spent grain and wastewater and converts it into a gas for usable energy. By making sure the brewery eases societal concerns, it will be able to keep all of its customers happy.Political-Legal Federal In order to open a brewery, there are various political-legal conditions that must be met on a federal, state, county, and city level. To satisfy federal regulations, CalGold’s11 “Permit Listings” article states that new businesses must acquire an Employee Identification Number from the I. R. S.

and be able to prove that their employees who were born after November 6, 1986 and prove that they are legally eligible to work in the United States. According to The US Department of Labor12, if workers work more than 8 hours in one day, or exceed 40 hours in one week, or work on seven out of seven days, then as a business we must give these additional hours time and a half pay. Additionally, if workers work in excess of 12 hours in one day or over 8 hours on the seventh day of consecutive work, then the brewery must grant them double pay.It is crucial for the brewery to be aware of and comply with federal pay regulations. State California also has its own set of specific laws and ordinances for breweries and businesses alike.

To comply with these state regulations, The US Department of Labor’s12 “Wage and Hour” article states that, breweries must pay at minimum the California state minimum wage of $8 per hour to employees on a typical day.In addition, in Calgold’s11 “Permit Listings” articles says that, the state of California requires all businesses to be equipped with Worker’s Compensation Coverage, have an injury and illness prevention guide, make a filing with the Secretary of State’s office, be aware of all California discrimination laws, obtain an EPA Identification number and be aware of EPA regulation standards, submit registration tax forms to the Employment Development Department, and acquire the proper state income tax forms.According to the Multineer Magazine13 article “California Governor Signs Brewery Tasting Room Bill”, California recently passed AB 1014 which allows breweries that only have tasting rooms to be able to legally bypass these extreme regulations, which can save a business thousands of dollars in unnecessary expenses. In return, the breweries must agree to only offer pretzels or crackers to customers. This new law is aimed at helping breweries shows that the California state government is applying a pro-business sentiment toward breweries.It is important to understand the current state laws in order to be in compliance and take advantage of AB 1014.

Being a startup business with a limited budget, Bob’s Bohemian Brewery will be taking advantage of the newly passed law and bypass these extreme regulations, by only having a tasting room for our customers. County Being located in the county of San Diego, the brewery had to be approved for several permits and licenses before opening its doors to the public.In San Diego County, breweries need air tank permits, an Alcohol Producers Permit, an Alcohol Sellers Permit, and an Alcohol Beverage License. A Seller’s Permit is obtained from The State Board of Equalization14, the Alcohol Beverage license is given through The Department of Alcoholic Beverage Control15 and the Alcohol Producers Permit is granted by the county. Calgold’s11 article says that breweries and businesses alike are required to file a Fictitious Name document, get Environmental Health Permits, and attain a Permit to Operate.The county monitors many important permits and rules for breweries, so it is imperative that these ordinances are followed and understood by the brewery. City In addition to the federal, state, and county requirements, the city of San Marcos has its own requirements to opening a brewery within its city limits. Calgold’s11 “Permit Listing” article states that, the city demands every business to have Construction Permits, a Business License and Tax Certificate, a Fire Department Permit, and permits for signs, land usage, and zoning.

An important zoning requirement that must be obeyed is found in Ordinance Number 85-654, Section IV of the San Marcos Municipal Code16 which states “No bar and/or cocktail lounge shall be established within five hundred (500) feet of any building operated as a church, public or private school, or youth-oriented institutional activity. ” A brewery in San Marcos must meet the city’s requirements or risk being shut down. Bob’s will make sure all of the federal, state, and local requirements have been met in preparation for its grand opening celebration.International Since distribution of craft beer is highly regulated by the U. S.

government, Bob’s Bohemian Brewery will not be seeking distribution channels abroad; however, there may be international competition that the brewery needs to be aware of. Currently there are no international breweries located in the San Marcos area but imported beer is available at almost every restaurant and bar in Restaurant Row. These other alternatives will not be a major threat to the brewery due to the popularity of craft beer in San Diego County.Through advertising and customer loyalty, the brewery’s threat of international competitors will be low. Technology Traditional beer is generally made the same way as it has been for centuries. However, as the craft brewing industry has grown there are many technological advances that have been affecting the craft-brewing world that the brewery must keep up with in order to be successful. According to IBIS World17, most these advancements are centered on becoming more eco-friendly. Some advancements in the works are, creating more efficient boiling systems and reducing the energy consumption of brewing systems.

IBIS World17 states that these systems have become more eco-friendly by recycling the water it takes to brew beer, so it is available to reuse for other batches. The brewery will need to acquire one of these eco-friendly systems in order to save on water costs and do its part to take care of the environment. Also according to IBIS World17, development on the horizon for the industry is the use of solar energy in the brewing process to supplement purchased energy sources.

The brewery will need to keep up with this growing technology in order to keep up with their competition and remain profitable.Technologies used to distribute, store, package and keep track of beer products are also changing constantly, giving an indirect boost to the industry, by lowering final prices through decreasing middleman costs. IBIS World17 states that, electric and hybrid fleet vehicles are being adopted by distributors and new inventory management software is being used by warehouses.

Technology helps the industry provide consumers with lower-cost beer so the breweries technology will need to be precise and consistent in order to be successful in such a competitive industry.By using these technological advances the brewery will be able to promise consistency in their beer that will prevent them from disappointing their customers. Being a small start up brewery can be a risky idea in San Diego where there are lots of competitors that have already established themselves as well as their customers, but that doesn’t mean the brewery does not have a chance. By taking advantage of new technology, offering great beers that are always consistent and getting to know their customers, a new brewery can generate its own customer following. Customers AgeUsing the consumer profile on ReferenceUSA. com18 to measure the age of consumers in the population within a five mile radius of Restaurant Row, we can see that most consumers are aged 30 to 34 with close to eight thousand people, followed by just above seven thousand aged 35 to 39 and only four thousand consumers aged 25 to 29. Interestingly, according to IBISWorld19, most beer consumers are aged 35 to 44 with the largest portion of the population at 23.

2 percent. This group is closely followed by consumers aged 25 to 34, who hold 22. 8 percent of the market segment.

These figures only confirm that a brewery located in San Marcos will thrive if it was targeting consumers ages 30 to 39. However, IBISWorld19 also mentions that despite the fact that consumers aged 21 to 24 only hold 9. 5 percent of the market share, “the largest growth segment for beer over the five years to 2012 has been the youngest portion of the population of drinking age: those aged 21 to 34. ” IBISWorld19 claims that, this recent growth is a result of recent spending cuts from college students and young professionals who “saved by switching to beer from wine or spirits. Using these facts, the brewery will aim to attract customers in the youngest portion of the population that will bring the most beer sales to the business.Gender Another interesting aspect of the beer consumer population is gender. According to IBIS World19, men are statistically, and stereotypically, responsible for beer consumption at about 58.

0 percent of the population. However, that number is expected to even out with women consumers in the next five years due to an “increase in marketing and certain beers, including the popular beer Blue Moon. The gender of the population surrounding Restaurant Row reflects the beer consumer gender ratio.

In San Marcos, there are approximately 34 thousand men compared to 21 thousand women. When opening Bob’s Bohemian Brewery, the founders will embrace both genders as they are equally viable to the company’s growth. Suppliers Suppliers are important because, by building good relationships with key suppliers, the brewery will be able to make sure they always produce consistent, high quality beer and be able to rely on its suppliers.The main ingredients in beer are hops, barley and yeast.

The brewery has done extensive research and has acquired reputable suppliers to ensure quality and availability of key ingredients. Hops Hops are a key ingredient in every style of beer, giving the planet’s most popular alcoholic beverage its characteristic bitterness and punchy aromas. According to Fed Ex20 article “The Base of the Beer Supply Chain”, more than 75 percent of America’s hops were grown last year in the Yakima Valley, and they’ve been the life’s work of generations of farming families.Bob’s Bohemian Brewery has chosen Hopunion to supply their hops. Hopunion is a recognized leader in the hop industry and is located right in the heart of Yakima, Washington.

One reason the brewery has chosen Hopunion as its supplier is because, according to Hopunion. com21, they offer more than 1,000 years of growing experience and represent six generations of hop farmers. Also, Hopunion helps form the supply chain of the industry, buying hops from farms and shipping them to breweries around the globe.There are a handful of other hop dealers in the valley, but one major reason the brewery chose Hopunion apart from other hop growers is because they choose to shun the large brewing conglomerates like Anheuser-Busch and MillerCoors, and instead provide the fast-growing segment of smaller, independent craft breweries with that key ingredient. The brewery’s decision of Hopunion as their supplier will be a good choice for them in the long run because of all of their experience and ability to produce high quality hops without being subjected to the high-volume pressures of the big brewers.Barley Bob’s Bohemian Brewery has decided to get its barley from Great Western Malting Co.

, founded in 1934, it is the oldest malting company in the western United States. The brewery chose this company because according to Greatwestern. com22 article “What we do”, they use two-row barley from a variety of growing regions in seven western states for a diversified supply of high-quality barley. Also, according to The Brewers Market Guide23, all of Great Western’s maltings are supervised by knowledgeable maltsters with attention to detail.

This is a good supplier for the brewery because they will provide high-quality ingredients and have been a trusted name for many years in the brewing industry. Yeast Yeast is credited by brewers as accounting for anywhere from 75 to 90 percent of a beer’s flavor. Bob’s Bohemian Brewery has decided to choose White Labs as its provider of yeast.

According to Whitelabs. com24, it is one of the world’s premier providers of brewing yeast for both commercial and home brewers and is conveniently located right here in San Diego, which is a big bonus for the brewery.White Labs liquid yeast is a high-quality brewer’s yeast that can be added directly to a 5 gallon batch of wort. According to Morebeer.

com25, each White Labs’ vial has over 100 billion yeast cells when it leaves the lab, which means that there are more healthy cells ready to go to work by the time the brewery receives their White Labs vials. A major benefit for Bob’s Bohemian Brewery is that White Labs produces multiple strains, therefore, by having White Labs as the breweries provider the brew masters will be able to make more beer and make sure that it remains consistent.Competitors Competitors are important to consider when opening a brewery. Through examining Bob’s Bohemian Brewery’s closest competition, the brewery will be able to understand what they are doing and find ways to differentiate itself from them. The Lost Abby The Lost Abby is one of Bob’s Bohemian Brewery’s main competitors. The Lost Abby was founded in 2006 and produces craft brew under the direction of co-founder and World Champion brewer Tomme Arthur. According to Lostabby. om26, there are five beers issued under the Lost Abbey label year-round: Avant Garde, Lost and Found, Red Barn, Devotion and Judgment Day.

Additionally, a number of seasonal and specialty releases are offered at various times throughout the year. Their beers are universally recognized for their complexity, unique flavors, and bold, boundary-pushing styles. Since opening its doors, Port Brewing and The Lost Abbey’s beers have won more than 100 medals in regional, national and international competitions. Ratebeer. om27 ranks the brewery number three in the world, and six of its beers are among the 100 best beers. In order to stand out Bob’s Bohemian Brewery has recruited brew masters that have been in the industry brewing their own private stock of exquisite craft beers with unique flavors the San Marcos region has yet to have the privilege of experiencing, until now. Stumblefoot Another big competitor for Bob’s Bohemian Brewery is Stumblefoot. Stumblefoot is a small brewery located in San Marcos and according to Stumblefoot.

com28, it is run by two brothers who built the business from scratch with only 6 employees.The pair attributes their brewery’s unique name to the ten plus years of self-teaching they’ve undergone to craft the perfect beer. According to the San Diego Reader29 article, “Beer Touring: Stumblefoot Brewing Company”, Stumblefoot recently opened in March of 2012 and still use the brother’s home brewing equipment to produce Stumblefoot’s line of craft beers. Stumblefoot prides itself on being the home of the “original chipotle stout”. Because they are such a small brewery and just started up, this will be one of the breweries main competitors.To stay ahead of this competition, Bob’s Bohemian Brewery will differentiate itself by making sure it astonishes its customers with unbeatable service and a high quality beer that is a unique expression of the personality of the brewer that made it. Regulators There are a variety of city, county and state organizations that regulate diverse aspects involved in the running of the business, but it is the Alcoholic Beverage Control Act that specifically regulate brewery activities. California Constitution, Article XX&2230 states that, the Alcoholic Beverage Control Act is an amendment to the State Constitution.

It is a collection of regulations and statutes from a number of State Codes as well as sections from both the State and Federal Constitutions. The “Act” creates the Department of Alcoholic Beverage Control (ABC) which is responsible for licensing and regulating the manufacture, importation and sale of alcoholic beverages in the state. According to abc. ca. gov31, ABC Investigators are peace officers empowered to investigate and make arrests for violations of the Business and Professions Code that occur on licensed premises’.

To ensure compliance, ABC can issue formal warnings, file disciplinary actions, impose fines, as well as suspend or revoke a business’s license. ABC often works in conjunction, or coordinates their enforcement actions, with other enforcement agencies such as County Health and local law enforcement. According to sos. ca. gov32, although the California State Senate would most accurately be described as a regulator, they moved to the position of ally recently when they unanimously voted in favor of Senate Concurrent Resolution No. 66, declaring February 2012 as “California Craft Brewery Month”.

Interest Groups The California Craft Brewers Association (CCBA), also known as the California Small Brewers Association (CSBA), monitors legislative activity at the State Capitol and represents the interests of all of California’s craft breweries. According to leginfo. ca. gov33, they recently sponsored a bill to make it easier for breweries to install tasting rooms. Signed by Governor Jerry Brown in August 2011, Assembly Bill No. 1014 amends California’s Health and Safety code to exempt beer manufacturers’ tasting areas from the costly and restrictive codes applied to food service locations.

Additionally californiacraftbeer. com34 states that, the CCBA provides services for the craft brewing community, including addressing business and supply issues, promoting California produced craft beer and offering events to help foster communication and education among our family of brewers. Strategic Allies Stone Brewery The brewery is currently investigating a strategic partnership with Stone Brewing Company, who has successfully partnered with a number of different small brewers to create “collaborative” beers. This partnership would allow he brewery to at least temporarily; have one of its brews offered on tap at their bistro as well as the use of their bottling line equipment to produce it. CSUSM Art Gallery The brewery has reached a decision to partner with California State University San Marcos (CSUSM) Art Gallery to exhibit the work of students and faculty in our tasting room. It is going to be on a rotating basis in an effort to increase visitors to the brewery as well as promote the appreciation of the arts. This exhibit is free to the public and includes drawings, paintings, mixed media, as well as, a limited number of three-dimensional pieces.

Conclusion After weighing all of the aspects necessary to open a new brewery, the founders of Bob’s Bohemian Brewery decided the opportunity was too good to pass up and will be moving forward with their grand opening. The brewery knew the competition would be tough here in San Diego due to the confidence that with time, their brewery will be successful. The brewery will finally have the opportunity to share its passion for finely crafted beer with its customers.

With all of the legal factors settled, the economic conditions worked out and the right technology, all the other aspects are falling into place.After researching every dimension and looking into the little things, the brewery managed to snag great suppliers, some strategic allies, and get the attention of craft beer fans everywhere. Sure the brewery will be small to start out, but it’s not about quantity, it’s about quality, and that’s what the brew masters behind Bob’s Bohemian Brewery will offer their customers. So, after much research and planning, Bob’s Bohemian Brewery will open its doors and intrigue customers with their own distinctive approach to finely crafted beer.1 Kesmodel, David. In Lean Times, a Stout Dream. ” The Wall Street Journal. 18 Mar.

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