Why Financial and Operational Planning is Essential for Small Breweries
As we mentioned in our previous article on the top FP&A strategies for breweries. The craft brewing industry is currently grappling with a shifting business terrain. For the first time in decades, the industry is in contraction and consolidation. Additionally, macro headwinds are mounting, costs are rising, and consumer preferences are shifting. Smaller breweries and brewpubs, typically those producing under 5,000 barrels annually, feel this pressure most acutely. It can be very overwhelming for small brewery owners who already have their plate full with managing an inherently multi-faceted business.
However, this article is not all doom and gloom. Business and economic cycles come and go, the businesses who weather the storm are those who have rock solid fundamentals. At Plato Brewing and Consulting, we see proactive Financial and Operational Planning (FOP) as a vital tool to transform these obstacles into pathways for survival and growth. In this article we will explore how you can begin implementing some basic Financial and Operational Planning practices in your small brewery.
The FOP Gap in Small Breweries
Small breweries often rely on only the latest top line sales data from their POS system, intuition, and anecdotes of their taproom/brewpub regulars rather than structured planning and empirical data. This may be due to limited resources and time to monitor finances or operations or just simply not knowing how to dig deeper to get the fully story the data is telling. This leaves them vulnerable to unnoticed cost increases, such as increases in input/ shipping costs, that can result in margins getting tighter with negative consequences that compound over time and result in profitability and/or cash flow issues.
Without proper tracking of key metrics, inventories, and unit costs, things can spiral out of hand quickly. This is where Financial and Operational Planning is invaluable to your brewery and business. It starts with basic tools and practices like inventory and cost tracking, budgeting and forecasting, and variance analysis. When implemented early and repeated regularly, it can provide crucial insight into the business, financial, and operational health so that management can make decisions proactively rather than when it is too late.
Why Financial and Operational Planning in your Brewery is Essential for All Breweries (and businesses!)
Financial and Operational Planning addresses four critical areas to protect small breweries from compounding problems:
Cost Control: Rising input costs can erode margins. Regular BOM reviews and process monitoring help identify savings before they become unmanageable.
Cash Flow Stability: Seasonal dips or unexpected expenses can halt operations. Rolling forecasts provide a buffer to maintain liquidity during lean periods.
Budgeting and Forecasting: Monthly budgets ensure spending aligns with revenue, preventing cost creeps from going unnoticed.
Variance Analysis: Comparing budgeted vs. actual results proactively spots issues like sales drops or cost spikes, allowing adjustments before they worsen.
Getting your Brewery Started with Financial and Operational Planning
You don’t need a large team or even software to begin implementing some basic processes to help you better track and plan your brewery business. Here’s a practical roadmap:
Track Key Metrics Monthly: Monitor your COGS (all ingredient and consumable inputs), sales per barrel, and labor costs using a spreadsheet to maintain visibility in your operations. Additionally, ensure you are tracking your margin health from the top level down to the product level – Gross Margin, Net Margin, and Margins for every single product you sell. Establish parameters for what is acceptable both relative to average industry benchmarks and internal margin health/improvement goals.
Build a Basic Forecast: Create a 3-month rolling forecast for sales, production, and associated expenses, adjusting for seasonal trends or cost hikes to stay ahead. Build this forecast based on known current and seasonal sales trends. Plan your production schedule fully each quarter, cost every ingredient and consumable, and schedule orders strategically to meet production needs without holding excess inventory and smooth out purchases for cash flow.
Meet and Review Regularly with your Team Leaders (Head Brewer, Tasting Room Manager, Marketing, Sales): Set a weekly 30-60-minute check-in to review internal and external sales, production schedule, most recent input price changes, promotional effectiveness, analyzing variances, catching potential issues early, and keep your business on track. These team check ins are meant to keep everyone up to date on the health of the highest-level metrics and determine if coordination between departments is needed to advance company goals. These are not detailed strategy meetings.
Putting together some high level KPI’s for each department will help distill the most important information and keep you focused on what matters most.
Schedule separate meetings directly with managers if more detailed, department specific strategy discussion or improvement is needed.
These may seem like basic items, and they are. But far too many breweries, cideries, and brewpubs operate without some or all of these most basic FOP strategies. Without FOP, small breweries risk missing out on significant cost savings and efficiency gains.
Plato Brewing and Consulting offers a full audit of your brewery or beverage business financial and operational health as well as ongoing fractional FP&A services to help you set the foundation, track your numbers, and proactively maintain profitability for your brewery or beverage business.
What’s the toughest financial or operational challenge your brewery faces? Let’s address it together! Reach out to us at info@plato.beer