Brewery For Sale.......
It’s been a pretty hectic couple of months over here. From the shock and horror of the first few weeks of this pandemic, to gradually working to finding a sense of normality within our new world. After writing down how we had initially reacted, I thought it was time to give an update and let you folks how things have progressed since then, and currently what our plans for the future are.
We’ve managed to maintain a great team of people around us who are happy and excited to still be at work in the current conditions. We’ve got a fairly big facility at St Philips, with our brewery and our warehouse completely separate. This has allowed us to fairly easily create 2 separate groups who don’t cross over. We’ve limited the team sizes to 3 in most cases. We have a 4th person join the team on packaging days, when we have 3 on the canning line and 1 completely separated working on cellaring. On our warehouse side we generally have 3 people within the warehouse working on packing boxes and building the occasional pallet, getting beer out via our courier partners. Our office team has been reduced down to only Jack and myself (Bruce) being actually in the office and Callum (Finance Controller) working from home. Our sales manager Hannah only came on board the week before the lockdown and is based in Manchester. She’s had a more challenging start in our company than we expected, but is doing an epic job working remotely. All remaining team members are on Furlough, giving us a total of 35 people being supported by the government scheme across our bars and brewery. We are currently generating around 50% of our normal turnover via our direct routes to market (most of that via our straight to customer online shop). We are working hard to ensure that we are feeding some cases out to our loyal bottle shop customers who are still trading. Keg sales are almost non-existent, though some bottle shops and bars are taking them so they can offer growler/takeaway for their customers. We are currently using our mini-kegs to get through the kegs we have in stock that would otherwise have gone to bars and through our own taps. As it stands we don’t expect that we’ll have to dispose of any stock, which is great news and a far cry from the position I expected when bars were first ordered to close. As we move towards a position in the country where we hope that bars and restaurants can re-open we are beginning to view increasing our production to hopefully cater for that. We expect that we’ll bring some more of our brew-team back off furlough sometime in June and begin again to produce beer from our Finzels brewery.
While in the short term we are not posting profits, we have managed to create a business model quickly that is allowing us to minimise losses. As long as government support exists in the form of Furlough until we are able to reopen our bars we will be able to get through without long lasting damage to our business. We do have a great deal of anxiety over the government's proposed change to the furlough system at the end of July. Asking the hospitality industry to contribute to employee payments if they have not yet been able to re-open would be catastrophic. Even if they are able to open to a degree (reduced capacity for instance) the cost of operating will be higher to manage in that scenario, with our turnover down. Adding in paying staff who are not working would push many businesses under. I hope there is some sense, and when they change the furlough system there is recognition that industries are being affected in different manners and that an across the board approach would be inappropriate. We can only wait and see.
With regards to our landlords at Small Bar and St Philips warehouses, both have taken a fairly blunt approach. Basically, the global pandemic and impending/current recession is our problem, not theirs. The government brought in legislation stopping landlords evicting tenants for non-payment of rent. Our landlords have offered to not collect rent in the short term, but load our future payments to make up for it. So basically they’ve done the absolute bare minimum they are required to do, and will try and put pressure on us when we are back trading (under reduced capacity). To suggest we’re all in this together is simply not true. The wealthy landowners want their rent, regardless of the pressure and hurt that will apply on their tenants. The mortgage holiday period has just been extended to 6 months. I find it unfathomable that there is a recognition that freehold owners will need a break from payments, but tenants will just have to get on with it.
With both premises we really at this stage don’t know what the future holds. Certainly the Brewpub has more ability to re-open and maintain social distance, though the impact to trade that would bring will be fairly catastrophic. We have been working hard behind the scenes to get a temporary increase of outside seating areas on King Street. This would massively help Small Bar reopen with some trade, and begin the kind of change that King St has been crying out for for years regardless of the current crisis. Even with outside seating the level of trade that will be possible will be impacted, and the thought of the bar being what it was is just not in our immediate future. With both premises we can only view them from a minimising loses perspective. They need the level of trade they had before to be sustainable and profitable. Rents, rates, utility bills, staffing costs. These are all set to push money out of the businesses based on their previous trade. No owner of a singular bar or small brewery business is rich. There’s a reason for that. Overheads are high, and generally we do it for the passion and human rewards rather than the financial ones. To re-open with trade massively diminished and overheads remaining the same will be difficult. We can only try and take a deep breath and last as long as we can, and hope that’s long enough for the world to return to some normality. We are obviously lucky in that we have our feet in 2 camps. Production and bars. We are able to cover losses to a degree with income from production. But we can only do that for so long. I feel for those out there operating only bars, restaurants and cafes. They will be horribly exposed, with no trade and no clear idea of when they will be able to generate a penny in income. They will simply have a steadily decreasing bank account (or more accurately/likely, steadily increasing debt). At least we have been able in the short term to diversify our business and our team to online sales and cans.
The future…..part of this is selling our St Philips brewery. Anyone interested should give us a shout ;-) ….. Does this mean the end of LHG? Course not! We took on a larger unit within Wadehurst Industrial Estate back in June last year when out storage requirements increased due to Finzels. The plan has always been to build a new brewery into this unit (Unit 3), and hand back the smaller units (Unit 8 and 9) with the existing brewery in it to our landlords. Currently we are spread over almost 15000 sq ft, paying rent and rates on every part of it. In reality we only need in the region of 10000 sq ft (the size of the new unit, Unit 3). It’s imperative at this stage we decrease our overheads as much as possible to give us the best chance of having a profitable business in the future. We are in a position however of having spent a lot of money in the smaller units on fixed assets. Our drained floor, water system, electrics, mezzanine, glycol (cooling) pipework are all stuck there and can’t be moved. Further to that, if we hand the units back to our landlord, they’ll ask us to remove it all at our cost to return the units to a base condition. So not only will we lose the value of the works, we’ll also have to pay to get them out. A bit painful all round. However, if we can find a smaller brewery who is looking to upscale, or a new brewery looking for premises, we can pass the works, our brewhouse and some tanks onto them and give them a great base to build from. The building has a license and a tap room, and is next door to our bigger unit, new brewery and new tap room. So if you want to be a part of Bristol’s great brewing scene, be our next door neighbours and be right in the heart of the East Bristol Brewery Trail, then get in touch!
Plans for Unit 3.
We’re putting in a very similar sized system to the one we currently have, and sticking with an Elite Stainless brewery. It’s served us well, and subject to some improvements on layout/ design and the addition of a whirlpool vessel it’ll be almost identical. We’re moving most of our tanks, but adding in 3 new vessels from Malrex, the same supplier of our other St Philips tanks. These will be 1 x 30HL tank (same as the ones we have currently) and 2 x 60HL tanks (which we’ll brew twice to fill), allowing us to produce more volume of beers like Sky Above, Hazy Pale and German Pils, our high volume session beers. We’re putting in a new mezzanine, creating storage space and an amazing seating/viewing deck overlooking the brewhouse for our tap room. The drained floor from Kemtile (the same flooring we have in the brewery at our Brewpub) will extend throughout the brewery and packaging area, but also right to the back of the building covering our barrel store. We’ve got 2 new tanks arriving which will be fruiting/blending vessels allowing us to begin to actually package some volume of beer from our barrels, and also increase and improve our barrel stock and store. At the same time we’re extending our staff kitchen to give our team a far more comfortable, light and usable space, and turning the existing kitchen into a shower and changing room, something that in our current work environment is sorely missed.
Ultimately the investment and new equipment (we hope) will allow us to make slightly more beer with no additional effort/cost, make better beer with more flexibility with how we make it, create an epic tap room space (with loads of room to be socially distanced!) in full view of the new brewery and barrel store, and provide a comfortable, usable, light and airy work environment for our amazing team. It will also reduce our overheads, via rent and rates, and if we are lucky we’ll find someone to take on Unit 8 and 9. This will give us a return on the equipment/ fit out down there, and brand new neighbours with a tap room giving you all the more reason to come visit us down in St Philips! Wins all round!
So that’s it for now...uncertainty, fear and anxiety...but also optimism. And while you are here, remember, drink good beer, support small, independent businesses, and be kind to each other.