Published in Food/Agribusiness
Stoney Ridge Winery features an airy timber-frame barn and tasting room. Stoney Ridge Winery features an airy timber-frame barn and tasting room. COURTESY PHOTO

Startup craft beverage companies face delays, financial strain amid pandemic

BY Sunday, April 26, 2020 03:05pm

Launching a new craft beverage business can prove challenging in even the best of economic times, let alone in the middle of a global pandemic.

Yet that’s the reality a handful of startups have faced across West Michigan over the last few weeks. 

Some of the companies were within weeks of holding their grand openings when the state’s stay-at-home order took effect. Others that were further behind in the process are being forced to deal with longer-than-anticipated delays, especially as they try to get the attention of state and local inspectors to grant permits or even to bring contractors back into their spaces to finish up their build-outs. 

MiBiz spoke with four startup craft beverage companies from around the region. Here are their stories. 

Stoney Ridge Winery LLC

Sparta Township

The last few weeks have been filled with both highs and lows for the owners of Stoney Ridge Winery LLC in northern Kent County. 

After about eight years in planning, Stoney Ridge Winery had just started in early March to hold some small soft opening events at its tasting room and working vineyard located off M-37 along what’s known as the region’s Fruit Ridge. The plan was to hold a soft opening every weekend leading up to the company’s ribbon cutting on April 25, said owner Mary Smearman. 

Those plans changed with the statewide stay-at-home order that also closed all non-essential businesses. 

“Basically, we had to hit the brakes and regroup,” Smearman said. “We were really ready to open. We were even thinking of opening earlier just to get some of the bugs worked out and then at the ribbon cutting having a big event, but that’s been postponed indefinitely right now until we have some idea of what’s going on. 

“It’s quite disappointing, but there isn’t a whole lot you can do about it, so you have to just look for the good.”

The company had already hired a couple of employees, which it had to temporarily lay off, and had planned to be staffing up for the spring and summer season, “but all that’s on hold right now,” Smearman said. 

Stoney Ridge features a large timber-frame barn and tasting room, as well as outdoor seating and a large lawn area. Situated between the popular winery districts in the southwestern corner of the state and in the Traverse City area, Stoney Ridge aimed to become a “middle of the road” option closer to home. 

“We wanted a place where people could come and relax and enjoy themselves instead of driving two hours either way to go to a vineyard and a winery,” Smearman said. 

The winery also wants to offer the tasting room and vineyard for weddings and corporate events, and plans to host live music, food trucks and sensory classes for patrons. 

“We really want to do wine dinners and do charity events,” Smearman said. “This year is probably not going to be as packed with events as hopefully next year or after that. We’re going to play it by ear. Everything is evolving.”

The company also made an on-the-fly decision to switch its business model to offer curbside pickup of wine, and began promoting the sales via its social media outlets. While the sales channel offers a way for the company to get its name out, Smearman acknowledges the difficulty in selling product that people have not yet had a chance to taste. 

“We’re hoping that’s going to be a positive thing, that people will come, buy some wine, try it and say, ‘This is great. We can’t wait to come out here when you’re open,’” she said. “Once they come out and see the venue, it’s very pretty. It’s in a beautiful area, very scenic.”

Adesanya Mead

Grandville

Very little work stands in the way of David Sawyer being able to open his new meadery. 

Given the recent stay-at-home order and restrictions on non-essential businesses, Sawyer has little clarity on when his business will be able to put the finishing touches on its new 28th Street tasting room. 

While the production area of the facility is ready to go, Adesanya Mead still needs to complete the build-out of its bar area, a needed step to get final Michigan Liquor Control Commission and local health department approvals that would allow the company to open. 

Without answers on when he will be able to bring contractors back into the facility, Sawyer is left in limbo. 

“Unfortunately, the crystal ball is quite foggy for us,” Sawyer said. “It’s going to be something we’re just going to have to muscle through. It’s going to be another month or two. 

“I’m in a very weird position. I’d like to have answers because I don’t do well without them, let alone proper information. I can behave even in the roughest of times if I have the information to behave on, but we’re just kind of stuck.”

Even before the company can open and start fermenting, Adesanya Mead also has adapted its business model for the new realities of to-go sales, according to Sawyer. That includes purchasing a can seamer from Grand Rapids-based Oktober Design LLC, which makes a machine that seals beverage cans one at a time, to allow the meadery to sell its draft meads in a convenient to-go package. 

“From the financial standpoint, if we can get some quick turnover on draft mead, which behaves similar to beer with regards to its path in fermentation, we should be OK out of the gates as far as being able to get some money coming in,” he said. “We chose the mead route because of the low overhead.”

Adesanya Mead also tapped into some additional capital sources as the current situation evolved. Sawyer described it as a proactive move so the company didn’t totally burn through its cash as it closes in on the build-out of its bar and some other trades work within its footprint. 

Sawyer also is in the process of working with the company’s landlord on a possible extension of its partial rent period for the space, and is looking into whether the company qualifies for various small business loans and grants.

“It puts us in a weird spot not having revenue yet, for sure,” he said. 

The company set aside the proceeds from an earlier membership club sale to eventually purchase raw materials and begin mead production, but needs regulatory approvals before it can start fermentation. Sawyer hopes to find a way to work within the regulatory framework to be able to start production as soon as possible so Adesanya can begin to bring in much-needed revenue, but he’s not ruling out finding gray areas or working the phones “to find someone to say yes.”

“If I can’t ferment, I’m really going to be up a creek without a paddle,” he said. 

Even with all of the current challenges to get to opening day for Adesanya, Sawyer acknowledges the company is lucky to have this closure occur at this point in its life cycle. 

“Thankfully, I didn’t have to lay off people because that would have crushed me,” he said. “Right now, it’s me and a business partner that are working at this. It’s really only hitting us hard, it’s not hitting anyone else hard. As weird as that sounds, it’s probably the best time this could happen.”

Lost Art Brewhouse

Walker

Just after Lost Art Brewhouse wrapped up efficiency testing on its brewing equipment and finished the last of its test batches of beer, the operating environment changed rapidly for the startup company. 

The Walker-based nanobrewery had been planning to open its taproom during the week of April 20. All that remains is finishing up a quick build-out on the bar and guest area so Lost Art can get its final inspections, secure its licenses, and move ahead with brewing. 

Co-owner Brad Lawrence estimates the company had a week’s worth of work left on its taproom when the stay-at-home order hit. 

 “Even once this lifts and we can do that extra week’s worth of work, we’re still probably going to have five weeks into getting ready to open the doors,” Lawrence said. “It is very frustrating to work on a project for three years and then get to three or four weeks ahead of time and like everyone else, it’s just not knowing (any answers) right now. Are we going to be able to open in a few weeks? A few months? Is it going to be a year at this point? There is no knowing.”

Now, Lost Art’s best-case scenario hinges on being able to open in late May or early June, according to Lawrence. Even if the restrictions on restaurants and bars get lifted, the company plans to start with curbside to-go orders of beer, as well as home delivery. 

Lawrence, who expected by now to be working as a full-time brewer, has been spending most of his time during the shutdown “building a new business model from scratch” to make sure the curbside model can be viable for the company. 

“We’re not in any rush for people to come in and sit down anywhere, even beyond any sort of government order. We don’t want to put anybody in our community in a bad situation and be part of a problem,” Lawrence said. “The only real frustrating part of that is the unknown. You just don’t know when it’s going to be over so you don’t know how to prepare.

“It’s kind of a logistical nightmare switching business models at the last second, but you just do what you have to do.”

In the meantime, Lost Art also finds itself in a “weird period” when it comes to being able to access any of the available small business relief because the company is in its pre-revenue phase, which disqualifies it from most of the programs. Lawrence said the company is benefitting from a six-month deferral of its SBA loan payments, but continues to seek out other options. 

“Every month as we come up to the beginning of the month now, it’s going to be a scary period for us because there’s all those bills that are coming due and we don’t have the cash flow that we were hoping to at this point,” he said. 

Throughout the turbulent startup environment, Lawrence said he’s been buoyed by how supportive the community has been. As well, he also admits the struggles of starting up a business are small in comparison to the public health crisis in which “people out there are sick and fighting for their lives right now in the hospital.”

“As long as we can get open in some form or another in the next few months here and be safe doing it, every day we’re just trying to stay positive,” he said. “Being negative and being angry about the situation doesn’t help solve any problems.”

Burzurk Brewing Co.

Grand Haven

Small business owners often come to the harsh realization that opening a company takes more time and money than they expected. 

For Burzurk Brewing Co. in Grand Haven, the coronavirus-related shutdown posed the latest in a series of delays the company has faced in the last year. 

“We were already behind the eight ball before this with just typical startup things,” said founder Tyler Forbes. “Everything fell really late in the overall scheme of our startup. We were already starting to run really low on startup funding.”

Other delays came in the local site planning process and build-out of Burzurk Brewing’s taproom. A neighbor’s dispute over parking in the neighborhood added about two months to the company’s timeline, while the need to install a two-hour fire-rated wall to separate the space from an adjacent unit added an additional $20,000 to the project. 

“We didn’t get our building permit until December, and that really pushed us behind, and now it’s just delay after delay because of the coronavirus,” Forbes said.

An added complication arose in mid March when Forbes lost his job of 17 years as part of a reduction in workforce at the company. 

“There goes our safety net — I was planning to keep my full time job while we were doing our startup,” he said. 

Forbes has turned his attention to trying to tie up loose ends at the site until contractors can get back to work. The company had been “moving right along” toward opening in May before the pandemic hit, but now expects that to get pushed back to mid to late June, “or maybe even later depending on when they can get us back on their schedule.”

In the meantime, Burzurk Brewing is taking advantage of a six-month deferral in paying back its existing SBA loan to help conserve cash. Forbes continues to seek gap financing from the city of Grand Haven “so we can finish up and keep us afloat for the next two months while we finish opening.” 

Burzurk Brewing has looked into state and federal small business relief programs, but found them to be “a complete and utter joke, especially for startups,” Forbes said. 

“Everyone seems to have missed the startup in all this,” he said, noting that his company is not yet generating cash flow or employing people, typical requirements for the relief programs.

“At the end of the day, on our part, people could say it was lack of planning: ‘You didn’t have enough to make sure you can get through your startup phase.’ But what startup does? Everyone starts on a shoestring, and you try to do your best job planning, tack on a percentage for safety, and that gets pissed away quickly,” he said. “Literally, next month’s lease payment for the building is coming out of my personal paycheck — we’re that low in our startup financing.”

Despite the financial challenges, Forbes said he and his wife, Karen Forbes, have no plans to bring on other investors.

“We just want to try to do this on our own, come hell or high water,” he said. “We are doing this on a shoestring to start with … but we’re getting there. We’re building tables from scratch now that we’ve got the time. We were going to buy them but now we’re making them, which is good. We’ve got time to do some things now that we weren’t planning on doing ourselves. We’re doing all we can to try to save money where we can — every nook and cranny.”

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