With constantly increasing prices on beer and spirits, many operators are expanding upwards into their supply chains to keep their costs in check and profits high. This strategy is largely dependent on the rules local governments have over the production, control and sale of products produced in house. In Alberta, the province in which I reside, recent changes in the laws regarding minimum brewing requirements have opened the door for producers to enter the market for very little start-up costs compared to what they were in the past. [Editor’s note: Don’t let the author being Canadian keep you from absorbing and considering his advice.]
While the biggest obvious benefit of obtaining an alcohol producers and manufacturers license is being able to produce products at lower costs than your suppliers, cultural changes have mean it’s easier than ever to get in-house produced brews and spirits consumed at rates that were not possible just a few short years ago. If you are looking for a new way to improve your profit margins, here are three reasons why you may want to consider applying for an alcohol producers and manufacturers license.
Controlling Costs
While the initial investments in brewing equipment, real estate, and a knowledgeable brew master and distiller may seem high, the long-term benefits of having production in house can mean major savings. In Canada, some producers have reported brewing a bottle of beer for as little as $0.75 per unit. Compare that to a store-bought beer that can cost as much as $1.75 to $3.00 per unit. That $1 to $2 savings per unit adds up quickly, particularly if you are moving between 200 and 500 units per week.
There are some distilleries that are now offering courses on how to distill their own spirits (vodka, gin, etc.) for a unit cost of less than $0.70 per ounce. Considering brand name vodkas can be as expensive as $0.90 to as high as $1.90 per ounce, the cost savings can be tremendous for bars that sell a lot of ounces on a week-to-week basis. Producing your own products is a great way to cut your costs.
The Craft Beer & Spirits Movement Has Primed the Market
As little as 4 to 5 years ago, craft beer and spirits would probably not have been well received by the market. But now, with the craft beer movement becoming mainstream, customers are much more receptive to trying out new beers, new spirits and cocktails with names they may not have recognized in the past.
In fact, it is very common now for consumers to ask bartenders to make informed recommendations compared to a few years ago when guests would normally just come in and only ask for what is familiar. The market is now perfect for operators to introduce products that have unique qualities they can produce in house, make a higher margin on, and encounter little to no resistance during the sale.
Liquor Manufacturing Gives Guests Something New to Experience
Having a portfolio of unique products to offer your guests keeps your bar fresh in the eyes of your guests. Also, from a promotional viewpoint, if your bar is constantly creating new beers and spirits, that gives you an opportunity to throw a party every time you launch a new product. Furthermore, the fact that the products are of your own creation gives you exclusivity in the supply of the product. If your guests develop a taste for your own craft creations, this increases the probability that they will choose your venue over the competition simply due to the fact that they cannot get your products in any other bar.
It may not be quick or easy to brew a new beer, distill a new spirit, or apply for an alcohol producers and manufacturers license, but those things that result in great success are rarely simple.