5/17/2014 7:00 AM
By Deborah Jeanne Sergeant New York Correspondent
WATERLOO, N.Y. — Starting an on-site brewery or cidery can generate another revenue stream for the farm, but it takes some know-how. About 80 people gathered last weekend to learn about the subject from experts tapped by Cornell Cooperative Extension of Seneca County.
Sponsored by Waterloo Container Co., the workshop also featured around 20 industry vendors.
“We want to educate aspiring breweries and cideries, and get everyone in a room that they’d need to talk to,” said Derek Simmonds, agricultural economic development specialist with Cornell Cooperative Extension of Seneca County.
Simmonds said that Seneca County currently has one cidery and may have as many as five by the end of the year. At present, the county has two breweries and could double that number by year’s end.
By a show of hands in one workshop, only two attendees currently operate a cidery or brewery, which means most of the attendees are exploring the idea.
Jim Fravil, a former bank chairman in Seneca County, now owns Just Serendipity Farm, a 350 to 500-head beef operation in Lodi, Seneca County. He addressed attendees on tax implications of starting a brewery or cidery.
“There’s no better tax shelter in the world than a farm,” Fravil said.
He told attendees to seek financing from a farm lender, not a commercial lender, because farm lenders tend to view farmland and equipment as assets, whereas commercial lenders look more at cash flow, which can vary greatly for ag operators.
Fravil said that commercial lenders can be stingy with funds because most small businesses lose money their first five years — half fail during the next five years and another 30 percent fail after 10 years.
To help obtain start-up funds, Fravil encourages entrepreneurs to get organized.
“Have the records they’ll need,” he said. “They’ll benchmark you against the best business in your industry that they know of, the ones you’re competing against.”
Dave Mansfield, co-owner of Three Brothers Wineries & Estates in Geneva, shared insights from his experience in starting businesses in nearby Ontario County. Mansfield and his partners now run War Horse Brewery, Stony Lonesome Estates, Bagg Dare Wine Co., Four Degrees Winery and Passion Feet Vineyards & Wine Barn, all under the umbrella of Three Brothers Wineries & Estates.
Obtaining a commercial loan was difficult, especially since Mansfield had no background in making wine or beer, or in farming. Lenders could hardly believe he would make a go of the business. Although he had purchased the former Nagy’s Newland Winery, its existing 18-by-18-foot tasting room was little more than a shell; it had no heating or air conditioning, for example. Though starting humbly, he still needed money to build the kind of business he wanted.
He paid a writer to help him develop a business plan and marketing plan.
“Banks want to know what you’re doing and thinking,” he said. “You should know this and your goals.”
Though passionate about making fermented beverages, he had to prove he knew what it would take to make the business profitable.
Local economic development organizations were of little help since he couldn’t anticipate adding many jobs to the area soon.
Instead of obtaining a bank loan, he sought funding from family members who got the ball rolling.
“If you have family members helping, they’ll probably have less rigorous standards than the bank,” Mansfield said. “I shamelessly did that to family and friends.”
Fravil added that the U.S. Small Business Administration allows bankers to lend much more money since the organization underwrites the loan.
An attendee asked if money he had spent on product development and research would count as equity. Fravil said that only tangible objects qualify. Another attendee asked why she received such an unfavorable loan rate despite her good personal credit and willingness to put down her personal assets as collateral. Fravil said that business loans typically receive a higher rate since so many businesses fail. A home equity loan would likely result in a better rate.
“Or ask around,” Fravil said. “Sometimes shopping around at different banks helps.”
Crowdfunding through websites such as www.kickstarter.com can help business start-ups, but Fravil warned that the money is counted as income by the IRS since it doesn’t have to be repaid.
“Maybe you can offset some of that by machinery purchases if you’re starting out,” Fravil said.
Product development and marketing has been crucial to Mansfield’s success.
“Doing what you love and owning your own business is only a small part of it,” he said. “Start with a good product that will create a buzz.”
For example, he said that “Bob’s Brewery” with a nice view overlooking the lake is likely to attract little attention since it’s already been done. His War Horse Brewery uses World War II memorabilia on the walls and its themes on the labels to create a sense of unique brand unity.
“Start with decor and a name,” Mansfield said. “People will come to your place and remember it.”
Some wine trail visitors said that Mansfield’s business was the only stop on the trail that they remembered and subsequently talked about to their friends.
“Give it ambiance,” he said. “Get great labels. It’s not that you don’t make great products. I’m assuming you do. It’s that no one tastes it because they don’t notice it out there since it’s like everyone else’s.”
With only 80 employees, Mansfield’s business saw 187,000 visitors last year and has grown case sales from 1,500 cases to 33,000 cases without using a distributor. He said the reason he shuns distributors is simple math. Instead of selling a bottle of wine for $5 to a distributor, he sells directly to the public for $14.
Mansfield is also not shy about hawking merchandise, such as T-shirts. He sold 4,000 of them last year. He also charges $3 for cider tastings and sold 11,000 cider samples alone last year, spurring him to build a cidery this year.
He interacts with each visitor to the business to pump them for information: where they came from, what they bought, what they liked, why they bought it. He uses that information to decide where to take the business next. For example, his root beer sales have eclipsed sales of beer and wine combined. Visitors explained that they weren’t big drinkers and they also bought bottles to take home to their children.
Rather than worry about what’s “wrong” with his beer and wine, Mansfield simply ramped up root beer production.
“It is my goal to have every single person who comes in to buy something to spend everything they’ve got until they hit my ATM and then tell their friends to come and spend all they have,” Mansfield said.
As one means of keeping interest in his business, Mansfield uses social media extensively. His email list includes 30,000 subscribers and he keeps up with Facebook and Twitter.
He also hires “all-star” staff and pays them well.
“Paying $40 extra per person at the end of the week won’t break me,” he said.
Fravil said that operating a start-up as a business as Mansfield does — not just a full-time hobby — is the key to success.
He urged owners to keep impeccable records, including cash books — the business check book; accrual books — income and expenses; enterprise books — tracking what makes the business money; and liability books — safety records, documented procedures and logs for activities that impact safety, such as pesticide spraying. He said that using accounting software, not spreadsheets, can help reduce errors, too.
In addition to Fravil and Mansfield, speakers included Tina Lemley, representing Niagara Label; Victor Pultinas, Lake Drum Brewing; Dave Schlosser, New York State Brewing Association and Naked Dove Brewery; Randy Lacey, Hopshire Farm & Brewery; Eric Shatt, Redbyrd Orchard Cider; Bill Barton, Bellwether Hard Cider; Dre Carter, Empire State Development; Whitney Russell, New York State Office of Building Standards and Codes; Zachary Benjamin, attorney at Scolaro, Fetter, Grizanti, McGough & King; Bill Verbeten, Cornell Northwest New York Field Crops Team; Steve Miller, Cornell Extension Madison County and New York state hops specialist; and Ian Merwin, Black Diamond Orchard and Cornell Department of Horticulture.
The second day of the event culminated in a field trip to Climbing Bines Hop Farm in Penn Yan and Bellwether Hard Cider and Black Diamond Orchards in Trumansburg.