Do you want to start a beverage company? If YES, here is a complete guide to starting a beverage production business with NO money and no experience.
Beverages are always in high demand because they provide people with instant refreshment. The number of alcoholic and non-alcoholic beverages available in commercial cooler sections has risen greatly over the years. Many people know of the huge potential of this industry, but most of them cannot afford the cost of starting a beverage manufacturing business —and this is the major downside of the business.
For you to venture into this industry, you need to have enough experience in beverage production (probably after spending years working with a beverage production company) and you should be able to raise the required capital for the business.
If you have decided to venture into this industry, you will need a comprehensive and accurate business plan for your enterprise. Your business plan should include details such as your business goals and objectives, estimated start-up and operation costs, projected earnings, market analysis and competition, unique selling point, marketing strategy and exit strategy.
Steps to Starting a Beverage Production Company
1. Understand the Industry
Anyone who understands what a beverage is can attest to the fact that the Beverage Industry is a mature sector; it includes companies that market non-alcoholic and alcoholic items. Analysis has it that growth opportunities in the industry are few compared to other existing businesses, many members of the industry have succeeded in diversifying their offerings to better compete and gain market shares in the industry.
These huge players may also go after lucrative distribution arrangements and/or acquisitions to boost their operations, product portfolios and geographic reach. Also, most equities in this group are suitable for conservative investors. In the industry, the biggest players offer reliable dividends with regular increase and above-average Stock Price Stability.
In the industry, both the non-alcoholic and alcoholic sides are dominated by a few sizable players and competition among them is often intense and severe.
Also in the industry, pricing and margins frequently come under pressure. It is also believed that volatile commodity costs will challenge managements to protect profitability. It is also important to have good operating, efficiency and cost-control practices, mostly on an on-going basis.
Not understanding or misconception of trends of ingredient prices can have a measurable negative impact on earnings. From the facts before us, a lot of things have changed since the American Prohibition of the 1920s and 1930s.
Apart from few a counties and towns, the prohibition of alcohol has been repealed in all U.S. states, and it is good news to know that industry sales are considerable, and regulators on both the state and federal level see the taxes charged industry players as a good source of revenue.
Without mincing words, taxes are the most expensive component of the brewing process. It seems they are also considering a tax increase on soft drinks to curb citizens’ sugar (corn syrup) intake and boost revenue.
Almost every country in the world have also checked up similar tax increase to shore up their budgets. But it is important to note that incremental taxes have not hurt overall beverage demand, but to a degree, they have pressured sales of premium offerings.
Foreign governments from time to time come under pressure from religious/health leaders to limit or ban alcohol consumption and to restrict alcoholic/non-alcoholic beverage imports. All in all, this industry has a lengthy history of steady single-digit yearly sales and net-profit growth.
2. Conduct Market Research and Feasibility Studies
- Demographics and Psychographics
We all know that the demographic and psychographic analysis of people who require or patronize the beverage industry are those who sell or buy beverages. People who need non-alcoholic beverages can be said to be all humans of diverse age groups and culture, while alcoholic beverages are restricted to people above 18 or 21 in some countries.
The age restriction is very wise because drinking or taking alcoholic beverages is more harmful for children and young people under the age of 18 than for adults. It has been proven times without number that young people under 18 are physically and emotionally less able to cope with the effects of drinking alcohol.
They are also less mature and more likely to behave in a risky or unacceptable way after drinking alcohol. Drinking at an early age can cause serious health problems. Evidence shows that drinking too much alcohol can increase the risk of organ damage in a developing body.
3. Decide Which Niche to Concentrate On
There many ways to choose a niche in the beverage manufacturing industry but the most notable is choosing a specific kind of drink you wish to manufacture. You can start with your initial product idea but must also consider all the ins and outs of the beverage industry itself. The beverage industry offers many types of drinks including:
- energy drinks
- health drinks
- coffees and teas
- sparkling water
- alcoholic beverages
The Level of Competition in the Industry
It is advised that the first step to take when planning to start a beverage manufacturing business is to explore the beverage market. Indeed the beverage manufacturing business can prove to be competitive, and as such needs watchful planning.
It’s also advisable that you meet up with experienced workers or leaders of any beverage companies that you are acquainted with, and try to find out from them the initial costs, the essential equipment, and challenges related with this business.
In the industry, the demand for non-alcoholic beverages is moved by consumer taste and demographics. It has been noted that the profitability of individual companies rests on effective marketing. In the industry, big companies have economies of scale in production and distribution, while lesser companies can fight favourably by producing new products, catering to local tastes, or selling at lower prices.
4. Know Your Major Competitors in the Industry
There is no industry where you do not have well-known brands already existing in it. This is also the case of the beverage manufacturing industry. So, when we talk about well known players in this field, here they are;
- Adirondack Beverage
- Adolph Coors Company
- Alpenrose Dairy
- Boylan Bottling Company
- Castle Brands, Inc.
- Clicquot Club Company
- Coffee Holding Co., Inc.
- Constellation Brands
- Dr Pepper Snapple Bottling Group
- Fizzy Lizzy
- Hosmer Mountain Soda
- Izze Beverage Company
- Javo Beverage
- Jones Soda
- Monarch Beverage Company
- National Beverage
- Niagara Bottling
- Oberweis Dairy
- Organic Valley
Without doubt, the global beverage market looks enticing with opportunities for alcoholic and non-alcoholic beverages. Experts expect the global beverage industry to reach an estimated $1.9 trillion by 2022 and it is believed to grow at a CAGR of 3.0% from 2016 to 2022.
A lot of things are believed to act as drivers for the growth of this market, things urbanization and disposable income. Current trends which have a direct impact on the dynamics of the industry include the use of natural flavours and sweeteners to meet consumer health concerns, and increased interest in exotic drinks.
It’s very important to note that energy drinks are slowing a bit from previous years, but it seems to be more of a reflection of the general market.
Industry analysts expect that some of the economy realities are not going to be repeated this year, and they believe that energy drinks are going to be higher than the 5.5% from last year. It has also been stated that negative publicity was affecting the energy drink business due to its contents like high concentration of caffeine.
Whilst the beer sector has been on a bit of a roller coaster; the re-installment of the payroll tax had a huge impact on consumer purchasing decisions.
It is expected that the category overall is going to improve in 2017 and possibly even rise a little (maybe half percent), as mainstream beers continue to struggle and consumers continue to migrate to craft beers. Also big players in the beer sector are striving to “premiumize” their product by purchasing craft beer brands.
This will likely cause an increase in craft beers, as the market is not saturated and big brewers will play a significant factor in that growth.
Wine had a pretty good time year, with a 2% growth. It’s evident that there is more innovation moved by the adoption of wine by Millennials. Non-traditional packaging options like wine cans are starting to enter the market. Although it is a tiny percentage, but they seem to have venues and drinking locations that make it work.
5. Decide Whether to Buy a Franchise or Start from Scratch
Facts and experts in the industry have shown that buying a franchise is far better than starting from the scratch in the Beverage Manufacturing industry. It has been noted that new Beverage businesses typically suffer when it comes to brand recognition because unlike entrenched competitors, new brands lack visibility and history with their customers.
Franchising has been noted to be an easier way for the focused entrepreneur to enter a competitive industry. One of the techniques entrepreneurs use to build a formidable Beverage Manufacturing Business is to buy an existing Beverage Manufacturing business to get an established brand. Even in ideal circumstances, it can take years to create an effective brand presence.
Note that Beverage Manufacturing business acquisition can put you at the helm of a brand that is already highly trusted by your target market. But you shouldn’t see it to be an easy task. Franchising comes with its own challenges and barriers. Be careful and make sure to research the industry thoroughly.
6. Know the Possible Threats and Challenges You Will Face
Just like we have noted, starting a Beverage Manufacturing Business can be very hard if you don’t have prior experience in this line of business but if you are hardworking and willing to learn, you will surely find it a bit easier. It has been noted that the profit you stand to gain from this type of business is largely dependent on your marketing and sales strategies.
You need to bear in mind that another challenge you will face is the application for a federal license. Applying for a federal license entails undergoing a full background check, hence your record should be spotless.
You need to prove that you are an outstanding citizen with a clean family history. Questions asked can be about your top investors, loans, and even personal questions. The authorities are also concerned with your security plan for any potential hazards like theft and fire, among others.
7. Choose the Most Suitable Legal Entity (LLC, C Corp, S Corp)
Being a prospective entrepreneur in the industry, you should know that the best entity for your Beverage Manufacturing involves a number of considerations, including taxation, owner liability, governance, capital structure, and potential exit strategies, to name a few.
But for the sake of this article, the best legal entity for a Beverage Manufacturing Business is the LLC. A limited liability company (LLC) is an unincorporated entity in which one or more individuals called “members” have limited liability for the enterprise’s debts and claims even if they participate in management.
Members of an LLC have great flexibility in structuring the management of their venture through the LLC’s governing document, known as an “operating agreement.” You should know that the benefits of creating an LLC typically outweighs any perceived disadvantages therein and the advantages are unavailable to sole proprietorships and general partnerships.
Also it is advisable that you consult with an experienced attorney and accountant while preparing your business plan to make sure your facts and figures are accurate and legal to avoid creating loopholes. These are the important legal considerations to make before your product ever sees the market.
8. Choose a Catchy Business Name
- King Beverages
- Bacon X
- Dexter Beers
- Alfred Bottles
- Energy Seeker
9. Discuss with an Agent to Know the Best Insurance Policies for You
We all know how important having an insurance policy is in the business world and not just the beverage industry. Consult with a business insurance agent to help you understand the insurance policy requirements for the beverage industry as well as for the business in general. Some insurance policies you would require may include;
- General Liability Insurance
- Liquor liability insurance
- Property insurance
- Workers’ compensation insurance
- Commercial Auto insurance
- Umbrella liability insurance
10. Protect your Intellectual Property With Trademark, Copyrights, Patents
With new wineries and breweries launching every day, the competition for product names is fierce. Intellectual property rights are needed in the Beverage Manufacturing industry for trademark and patent protection.
Also, once you have developed your product, you must research the essentials of patenting and protecting it. For the sake of your business, this does not include just your drink product alone but also your tagline, logo, and other marketing designs.
You should know that without proper protection, your ideas may be developed by someone else which can jeopardize your business. It’s also very important that you learn more about trademarks, copyrights, and the other legalities of the beverage business by meeting with an expert in the industry.
Another way for you to protect your patents and trademarks in the beverage manufacturing industry is by having your key employees sign employment agreements. A written employment agreement is very important for those employees who know your beverage product formulas, and they could do the most damage to your business if they start working for the competition.
11. Get the Necessary Professional Certification
You should know that there are federal and state laws regulating the beverage industry. Be careful to research the laws pertaining to your product to make sure your business has the correct licensing and certifications. In the industry, without proper licensing, regulating agencies can shut your business down and you may face heavy fines for regulation violations.
Also, Certification programs are important as they indicate a level of knowledge and expertise shown by the person certified and they are a uniquely transportable baseline of industry knowledge. Professional certification needed for a Beverage Manufacturing Business may include;
- Good Manufacturing Practice (GMP) Certification
- Hazard Analysis and Critical Control Points – HACCP Certification
- HAZMAT Training
- SIx Sigma
- Occupational Safety and Health Administration (OSHA)
- Safe Quality Food (SQF) Certification
- Total Quality Management
- Certified Supply Chain Management
- Certified in Production and Inventory Management (CPIM)
- ISO 22000 Food Safety Management
- Better Process Control Schools
- Certified Food Scientist (CFS)
12. Get the Necessary Legal Documents You Need to Operate
The Beverage Manufacturing industry is a tight industry that requires adequate documents and hard work to flourish. List of some legal documents needed by a Beverage Manufacturing Business are;
- Business license
- Certificate of incorporation
- Employment agreements
- Federal license
- State license
- Local license
- Proof of Insurance
- Intellectual property protection right
- Federal tax identification number
13. Choose a Suitable Location for your Business
When choosing a good beverage manufacturing business location, there are many considerations, both business and legal, that must be discussed and analysed before making this decision.
The issues may include whether the premises has adequate space for both present and future operations; are the utility systems (electrical and plumbing) enough to handle operations and waste disposal; and is there enough office space and storage space, etc?
There are also many legal considerations that must be looked into, including land use and zoning requirements for parking; legality of the commercial venture on the premises; loading and unloading; and compatibility with local Waste Management systems.
You should also consider factors for acquiring the premises; if the space will be leased, the third party landlord must be amenable to the nature of the business operations.
Additionally, the landlord may require a long term lease. Will a long term lease be compatible with your vision and growth? Do you have the ability to exit the lease if your business needs change before the expiration of the lease term? Do you have the ability to extend your lease under favourable terms?
14. Hire Employees for your Technical and Manpower Needs
In this competitive industry, if you plan to manufacture your own product, your initial investment will require the purchase or lease of the proper equipment needed for the process. It’s advisable that you research opportunities to buy this equipment in new and used condition. Also you have to decide where the equipment will be housed during the manufacturing process.
Though you might choose to walk the path alone, you will no doubt need reliable staff to help with sales and manufacturing. It’s always advisable that the cost of employees is accounted for in your business plan.
You also need to decide if you will hire full or part-time staff only and with a reasonable rate of pay for them. It is advisable that you meet up with a human resource expert to make sure that you understand the protocol for hiring and maintaining staff, records, insurance, tax information, and payroll.
Also whether you plan to make all deliveries yourself during the beginning phase of your business or if you would seek larger distribution deals, it is advisable that you consider all of your options and the associated costs before making a concrete decision.
Delivering product on your own may be easier initially but it still costs a lot of money in gas, mileage, vehicle maintenance, staff and insurance.
The Service Delivery Process of the Business
For some beverage entrepreneurs in the industry, it is vital they include the freshest ingredients possible into their product. You must understand the process of sourcing the best ingredients and determine the cost effectiveness of all your options.
Will you only use local fruits to produce your fresh juice? How much of the ingredients will you need to produce large batches of your product? What is the cost of local ingredients versus shipping charges for nationally/internationally-sourced products for seasonal items?
15. Write a Marketing Plan Packed with ideas & Strategies
You should have it in mind that your marketing plan must cover a lot of territories, because it doesn’t just concern the process of getting your product out to consumers, it needs a lot of thought about the big picture. It is important that you identify several key components in your marketing plan which may include:
Demographics and Psychographics
While developing your marketing plan, you need to be concerned about what demographic you will be marketing to primarily based on the type of beverage you will be producing.
- Is it a kid-friendly juice?
- An adults-only alcohol beverage?
- A health juice for the fitness market?
Have it at the back of your mind that your marketing efforts will be largely based on who you are targeting, so you must be able to identify the right demographic. With this in mind, it can therefore be said that those who may be in need of the beverage manufacturing company cuts across all walks of life.
16. Develop Strategies to Boost Brand Awareness and Create a Corporate Identity
In the industry, having a brand concept can make or break your chance of success. Why don’t you think about all the brands in the market you know by heart simply based on the logo or tagline. It is important that you build your brand image early on to maintain consistency throughout the life of the product.
Be clever to remember that you can’t develop a logo and then change it later. It will make your costumers get confused and your brand identity will be a failure. Basics to be included in your brand design include:
Constructing an attractive Logo
It is important to note that your logo should represent the spirit and personality of your product. If you are not an expert or experienced in graphic designing, hire someone to design your logo and other graphics to ensure a professional look.
In the industry, you may can create one primary company logo along with individual logos for each product. Remember to make a concrete decision early on so you won’t have to make changes once the product is already on the shelves, to avoid killing your business vibe.
Unique bottle designs
Most beverage products in the industry are recognized by the design of their bottles. Be careful and open minded during the process of choosing the right bottle for your product as it could become part of your signature look in the industry.
Juice bottles, soda bottles and water bottles often have a similar style but this may be time to try something extraordinary. Try to choose a unique bottle design that will attract more attention to your product.
Leveraging Website/Social Media
Have it mind that whether you plan to showcase your products online or not, having a presence online is important these days due to the advent of technology. It is advisable that you have a website which is professionally designed and easy to navigate.
Make sure you inculcate your logo, products, company history and contact information. Also do the same for your social media pages and have a strategy in place to make sure these pages get updated frequently and are used for marketing and positive interaction with your target market.
Other areas include;
- Ensure that you introduce your beverage business formally to the corporate target market and other stakeholders by sending a brochure with the picture and description of what you do and their prices, with your contact information attached
- Ensure that your beverage business is listed in local directories (yellow pages) as well as online directories
- Ensure that your beverage business is advertised in local newspapers and food magazines as well as on radio and television stations. This is so that adequate word can be sent out to people.
- Empower your marketing and sales executives to engage in direct marketing and sales on behalf of your beverage business
- Use the internet and social media platforms – such as Facebook, Twitter, Instagram and YouTube – to market and grow your business
- Encourage your loyal customers to help spread word about your beverage products.