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Nick Kozak for the Toronto Star
Case Studies
Posted: June 18, 2013
by Roger Pierce

Toronto’s MB Bottle Brew simplifies brewing craft beer, but demand outstrips production capacity

Vital Stats
Name:
MB Bottle Brew
Contact:
Steven Best, stevenb@mbbottlebrew.com
Founder and Brewmaster:
Stefan Riedelsheimer
Address:
2210 Drew Road Mississauga, ON L2S1B1
Phone:
1-855-806-3711
Field:
Consumer beer brewing
Employees:
20
Years active:
4

Steven Best believes consumers are thirsty for a new take on an old beverage — beer. He wants to hook people on making their own suds with MB Bottle Brew, his company’s craft beer-quality homebrewing kit.

 

But making it easy to create good beer at home is tricky, expensive and time-consuming. Despite opening a new brewing facility just last year, MB Bottle Brew has grown so quickly that it’s already pushing past current production capacity, and is struggling to fill rapidly growing sales orders.

 

Still, the company has a number of advantages over well-established competition. According to Best — a former sports marketing industry executive and the company’s marketing manager —  the guesswork involved in existing brew-it-yourself processes can lead to frustratingly unpredictable results. Standard kits have many steps, a myriad of working parts that each need to be perfectly sterilized, and they require customers to accurately mix supplied packages of concentrated malt and powdered barley.

 

His company decided to provide a simpler way, and created a method that gets product to customers in near-complete form while still giving them the experience of brewing at home. Unlike beer kits, which have the thirsty starting nearly from scratch, MB Bottle Brew does most of the brewing itself. The company processes beer in much the same way as other craft microbreweries, with one distinguishing difference: it withholds the yeast.

 

The non-carbonated and alcohol-free beer is then placed into two-litre plastic bottles, which customers buy from a growing list of retailers across Canada. They take the bottles home, open them up, and pour in a supplied vial of yeast. The mixture then ferments, adding alcohol and naturally carbonating the beer. Best says the drink is ready for consumption in about two weeks.

 

MB Bottle Brew currently offers two lagers for sale. Mexican Cerveza is light tasting, while Bohemian Blonde Ale offers a more robust flavour. The products, which brew the equivalent of 24 standard 341 mL bottles, carry a suggested retail price of $24.

 

Best claims the final at-home product is shockingly close to the type of beer you’d find on tap at your local pub.

 

“They say there are 10 steps to making a great microbrew beer, and we’ve done nine of them,” Best says.

 

That mix of DIY attitude and craft beer expertise seems to resonate with consumers — the company’s 2012 sales exceeded $1 million.

 

And their product has another distinct advantage — it dodges strict liquor industry regulations because it’s shipped to retailers as a non-alcoholic beverage. The beer remains alcohol-free until the consumer adds yeast, so it can be sold almost anywhere. Currently, MB Bottle Brew boasts distribution in over 250 retail outlets, including corner markets and mid-sized chains such as TSC Stores, a Canadian retailer with 45 locations in Ontario and Manitoba. The company aims to triple the number of retail outlets carrying its products within the next year.

 

But first, it will need to overcome production issues.

 

“We’re trying to find that balance between how much to brew and what we ship out,” says Best.

 

Rose Reis, a marketer who works extensively with the Ontario Craft Brewers Association, believes this is a common issue for all small brewers.

 

“The LCBO understands the capacity limitations that some brewers have, and they will work together to determine what is achievable,” Reis says.

 

But MB Bottle Brew has no plans to work with the LCBO, and the company’s current retailers — most of who have never worked with a brewery before — don’t have the same support systems. The solution, says Reis, most likely lies in careful planning and managing retailer expectations so they recognize the company’s production limits.

 

“Given their small production capacity, a huge order may not be achievable,” she says.

 

But signing new retailers means production will have to increase, and the company has little room to grow capacity —  which is currently near its limit at about 10,000 litres a day, or approximately 30,000 standard 341 mL bottles.

 

The company formerly brewed at a small industrial unit in Vaughan before scaling up operations and opening their new Mississauga headquarters in 2012. This made meeting demand easier, for a time, but it was also extremely expensive. Every piece of production equipment had to undergo an expensive retrofit because the product is shipped in those two-litre plastic bottles instead of standard 341 mL glass longnecks.

 

“In the end, over and above our traditional brewing equipment, we had equipment customization expenses in the neighbourhood of $300,000 to $350,000,” Best says.

 

Between these costs and the price of construction, the company has spent more than $1 million on their new headquarters. With expense amounts so close to revenues, there’s little cash for new expansion.

 

Potential growing pains don’t stop there. Hiring staff is time-consuming because new employees require extensive training. Even those with previous brewery experience need time to adjust to MB Bottle Brew’s unique production line.

 

For now, the company is still meeting demand increases by working extra shifts, even though overtime is costly and production is still bottlenecked. Still, Best is worried about his ability to fill orders in the future — especially if the company signs on with a major national retailer.

 

“If we get a large order and have no inventory, we need to inform our customer it will take time to fill,” he says. “We need to add a 24-hour shift, and add new equipment in the future. Looking even further ahead, we see ourselves opening new plants across Canada to help with distribution issues.”

 

Despite production issues, Best says consumer response is simply too positive for the product to fail.

EXPERT VIEWS

As Interviewed by: Tom Henheffer

The number one issue here is price. If they’re so successful, why not increase it? Just five cents a bottle would give the company much more breathing room, and considering the price of craft beer at the LCBO I don’t think the market will have a problem bearing that increase. The next question is how Best wants to scale. I wouldn’t be doing any more marketing if he’s already starting to push past his capacity. First he needs to build another brewing facility so he can meet an increase in orders. But the company will need to be very careful, because it’s easy to bankrupt yourself by expanding too quickly. And this move will be very expensive—they won’t be able to build with cash flow alone. So I’d be looking for investors, preferably ones who bring management capacity and industry knowledge on top of cash. With such strong demand and so much potential this company is probably an attractive investment, and if they raise prices and improve their cash flow, it will be an even easier sell.

by Theo Peredis (York U)

MB Bottle Brew seems to have a nice problem: demand for their product is higher than they can currently supply. While desirable, this won’t last if the company spreads itself too thin or targets the wrong consumers. MB Bottle Brew is fairly small currently for such a production-heavy business. The company has just moved and incurred expense and significant overhead. Accordingly, batch sizes and production quantity will likely be held at the existing maximum for a while. Given this constraint, sales efforts toward landing larger accounts are probably in vain, for now. Instead, now might be a good time to focus on supply for a specific target market, one that will be loyal and consistent. MB Bottle Brew can focus on marketing to early-adopting, DIY-oriented, micro-brewery fanatics who love beer and want to try craft brewing. Making sure to have a presence in some connoisseur boutiques, at specialized trade-shows, and on social media sites dedicated to beer fanatics will be key to capturing opinion leaders in this consumer population. That, in turn, will be crucial to guarantee sustainable demand for MB Bottle Brew’s products over a longer term.

by Brynn Winegard - Ryerson

The solution is simple — MB Bottle brew needs cash. Best has to get a three year, month-by-month cash flow forecast going that includes his dreams of expansion and all the included production, infrastructure, and personnel costs. He needs to monitor it daily, make it into a presentable format and bring it to banks or investors. He’s got the demand, he’s got a proven product, he’s got fantastic recommendations and reviews from customers and he has repeat, growing demand. In other words, there’s a potential for exponential growth here, and the only missing ingredient is cash. That means MB Bottle Brew is ripe for investment. But people are wary of handing over money, and Best will need that sparkling business plan and cash flow forecast if he wants wallets to start opening. And he’d better get them opening quickly. This is a simple idea, which makes it easy to rip off. If he starts getting big but fails to saturate the market quickly, the company will start finding chunks ripped out of their profits by hungry imitators.

by Deirdre Fitzpatrick - GBC