So many questions, so many vague answers. The process of acquiring a building and planning for the move of our retail operations to that new building has reminded me just how much people seem to crave certainty. At least that is my interpretation of questions like:
What is the open date?
You are keeping the Sammy Davis Jr. picture, aren’t you?
How long is it going to take to get moved?
Are you still going to have popcorn?
For those of you seeking greater certainty, I suggest you go stick your head in the sand for I have less.
Long story short, we want to be around for another 100 years. When considering the forces of a more saturated market and slower than expected growth my analysis concludes that spending money like a hacker with a stolen credit card can no longer be our strategy. The yet-to-be-named new financial strategy currently means the new pub project will be put on hold for at least 6 months, ensuring we don’t compromise our financial stability by taking on a large capital project.
If you like details, read on.
Since you are likely not a brewery owner I will fill in a little background information. In 2007, when I began my work life as a brewer, there were 1,500 breweries in the U.S. and of those 982 were brewpubs, 422 microbreweries and 55 regional brewers. As of 2017, there are 6,372 breweries, 2,252 of which are brewpubs, 3,812 microbreweries and 202 regional brewers. In 2007, Iron Horse was considered a microbrewery and over the course of the last 11 years we have had the good fortune to grow to the size of a regional brewer. Iron Horse was at the early end of a substantial wave of cultural shift toward more flavorful beers. In 2007, the craft beer industry was 3.8% of total U.S. beer volume and amidst a near decade long run of double-digit volume growth. In 2017 craft beer had grown to a volume share of 12.7% but the growth rate has slowed to 5% and overall beer volume was down 1.2%. If you aren’t already grasping the picture I’m painting, here is a final attempt: the pie of Beer sales is marginally smaller than in 2007 and the players looking for pie has increased 425%.
While this certainly isn’t a grim picture it has changed the market in ways that force me to reconsider our plans and expenditures. Our average rate of growth has slowed as the market matures and that forces us to take a more measured approach to all of our endeavors.
We are currently in the process of refining our expenditures and cost structure as well as shifting from a cultural mindset of invest for growth as fast as we can to one of sustain what we have to ensure a happy and healthy company for years to come. I have no doubt we will accomplish the goal of happy and healthy company. While these shifts are particularly fun, it’s necessary, kind of like your new year’s budget after reviewing all the money spent over the Christmas holiday. Sobering might be one way of putting it.
The new pub space represents a large expenditure that must be carefully considered and approached with a clear view. The investment in the build-out won’t be cheap because nothing is cheap and even more so when cutting corners is something that I have a hard time tolerating.
So, in case you were wondering, here is my plan.
- Get brewery to a strong positive cash flow position
- Ensure adequate funding for pub improvements and adequate operating capital.
- Build out the pub.
Here is my guess on how long that takes,
- 6 months to see if first round of budget revisions instill a sense of budgetary certainty in future cash flows.
- If they don’t, more budget revisions will required.
- If they didn’t, wait and see.
- Repeat as necessary.
Pretty uncertain plan isn’t it?
That’s life in the fast lane baby!!!
Bring on the questions.