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When Grantham’s Brewsters Brewing opened in 1998 in the north of England, things were different. In those pre-crowdfunding, early internet days, there were no shortcuts in terms of funding. “We had savings, and I had a job elsewhere for the first three years,” says co-owner Sean McCardle. “Sara [Barton, wife and co-owner] did everything. We took nothing out of the brewery, we bought a second-hand kit from the Wye Valley Brewery, we spent nothing on marketing. Away we went!”

Much has changed, but one thing remains an iron law, in brewing as in so much else: cash flow is fundamental. Even more so, arguably, at a time when inflation is high, and a string of external factors – from COVID-19 to the Ukraine conflict – has made the financial side of brewing so much more complicated.

There are things, though, that any brewer can do to ensure they remain on top of cash flow as much as possible. It’s crucial:-

  • to do what you can to ensure money comes in as quickly as it leaves
  • to be clear about how much you actually need in reserves
  • to seek out direct routes to market
  • to be prepared for ups and downs
  • not to neglect capital expenditure, even if it seems a good idea in the short term

We spoke to three English craft breweries with divergent paths and experiences in the industry – Brewsters Brewing, Gipsy Hill Brewing in South London, and Bristol’s Lost & Grounded – to find out what advice they’d offer on this crucial topic.

1. Get paid as quickly as possible

For Gipsy Hill’s Sam McMeekin, it can be worth sacrificing a little cash in return for getting it sooner. “We had one large customer to whom we gave a small discount in return for shorter payment times,” he says. “If you can negotiate, let’s say, a one percent discount to move from 90- to 30-day terms, you should do it. And actively review your customer base to see who’s up for that.”

Other debtors, though, might not be so able to pay. A little understanding goes a long way for Lost & Grounded’s Alex Troncoso. “We try to be supportive,” he says. “We might put together a payment plan and split the payment over 12 weeks or whatever. Most customers really appreciate that. Handling it the wrong way is a really good way to destroy that relationship.”

According to Sara Barton, see what other brewers have to say if all else fails. “You might hear that you need to watch out for so-and-so, stuff like that,” she says. “Brewers do tend to keep each other warned.”

2. Ensure you have enough cash in reserve

For Troncoso, the financial buffer needed depends on what stage the brewery is at. “In a perfect world, I’d want to have a month’s sales in the bank,” he says. “When it’s unpredictable, it’s really easy to get caught out if you don’t have enough in there – and when you’re a young business, it’s that much more unpredictable, so you need a bigger buffer. As you mature, you can operate with a smaller amount.”

McCardle says cash liquidity is just as important when things are going well as when you’re struggling. “You need to have enough cash to cover those periods when sales are increasing – because it’s then that you need to buy materials in and then wait for your customers to pay you,” he says.

3. Seek direct access to market

There’s one very good reason why taprooms have become such a crucial part of modern British beer: they provide access to immediate payment. Some breweries, particularly well-established ones, benefit from an estate of pubs.

It’s a huge advantage to have this sort of direct access to market, says McCardle, but – as Barton adds – it’s no guarantee. “Businesses like Batham’s brewery in the West Midlands, who have ten pubs, they can sell all their beer into those,” he says. “We have to be a bit more on our toes because we’re mostly in the free trade.”

They do own one pub, though – but it’s rarely been a guaranteed money-spinner. “We’ve supported our pub, The Marquis of Granby, a lot of times through the brewery,” adds Barton. “We allowed it to build up a load of debt with us to keep it going. It’s a rural pub, so not huge in terms of turnover, but now it’s doing alright.”

4. Be prepared for slower times of the year

According to McMeekin, there are typically two key moments of the year for breweries like his. “April until June is by far the biggest period of the year, and then there’s four weeks at the end of November and the start of December that is a sort of purple patch,” he says. “Then it’s pretty hectic.” This is when breweries need to cash in to tide them over during less busy times, such as January. Planning is essential.

However, things haven’t been so predictable in recent years, according to Barton. “It normally picks up in September, but this year it hasn’t really because everyone’s feeling the pinch,” she says. “You just have to hope that economic factors will improve.”


5. Stopping Cap-Ex is a mistake

When cash flow in the brewery is a worry, it can seem sensible to cut back on investment in brewing equipment – but that’s short-term thinking. “You should always have a CapEx program going on; that’s part of being in this business,” McMeekin says. “Even if it’s just about repairs and renewals. Not maintaining your equipment is just the start of a steady decline.”

And finally…

Words of wisdom from Crisp Malt’s finance guru James Newstead, who is group financial controller at Anglia Maltings, of which Crisp Malt is part, adds, “It’s pleasing to see the importance that small businesses are placing on liquidity. After all, ‘Cash is King’.

“This is an area that can be easily overlooked when prioritizing other operations within a business. However, it is one that should be placed firmly at the top of the list.

“A good understanding of your cashflow profile allows you the financial flexibility to be confident in your decision making – and the ability to deliver your business activities on time and on budget.

“I would always recommend detailed brewery cashflow forecasting. It’s key to ensuring that you have sufficient liquidity for current operations and future plans – but also that you can factor in some contingency for any future inflationary and cost pressures that may materialize unexpectedly. And let’s be honest: things have been quite volatile of late.

“Another recommendation to support liquidity management is the development of strong partnerships and relationships with lenders, suppliers and customers alike. For smaller brewing businesses, these relationships can prove invaluable, especially if you are experiencing a temporary squeeze on liquidity and need some short-term support.”

Article written by Will Hawkes

Fortnum and Mason Awards Drink Writer of the Year 2021 & 2023

Find out more about Will Hawkes here

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