Our greatest risk, much like many of our other craft beer brothers is that we cannot obtain a strong enough presence in a heavily saturated craft beer market. Shelf space and tap handles in bars and restaurants are not unlimited and the larger breweries have an edge.
We attempted to mitigate that risk by starting off with a 10BBL brew house and 5 fermentation tanks, versus a much smaller "nano" brew house so we could have the volume required to participate in the market. With a strong marketing campaign to increase brand awareness of our award winning beer line up we can increase our distribution network and further mitigate that risk. We have increased production volume year over year since starting with the addition of 20 BBL fermentation tanks in years 2 and 3.
In January 2017, we opened a very large (6,600+ square foot) satellite tasting room in the "BeeraMar" area of San Diego right on Miramar Road across the street from the main gate to MCAS Miramar. Sales are softer than predicted. This second tasting room has been operating at a loss for the year, and without additional funds to keep it going, may have to be closed.
Spoiled or contaminated beer is a risk, as the materials and labor have been paid to brew it. The cause can be mechanical, or bacterial but the damage caused to the brand by trying to save a bad batch is far worse than the costs to dump it. We will not serve a beer that is not exactly what it is supposed to be.
Our location is not the easiest place to find in the Vista business park, coupled with the fact that we are one of over 17 craft breweries in the city of Vista where the competition for customers is fierce. High visibility spaces get the traffic. Our tasting room sales have seen a decline year over year as new breweries open in Vista. This drives the need to offset tasting room sales with higher distribution volumes.
The company has been operating at a loss and there is no guarantee that the company will become profitable in the future. Funds raised will not be used to pay owner, but instead will be used to fuel the growth needed to become profitable through a focused marketing campaign and the investment in a canning line to increase distribution capabilities.
A disruption in brewing activities could have a material adverse effect on the Company.
A prolonged disruption to brewing activities (e.g., due to fire, industrial action or any other cause) at its brewing site could have a material adverse effect on the Company’s ability to brew its products. This could have a material adverse effect on the Company’s financial results and on your investment.
The Company’s brew pubs could have licensing, legal or regulatory problems.
Some or all of the Brew Pubs could lose their licenses or be unable to acquire licenses to sell alcoholic beverages or have their hours of operation curtailed as a result of hearings of the licensing boards in jurisdictions where they are located or as a result of any changes in legislation governing licensed premises in the various jurisdictions in which Brew Pubs are located or may be located, with a material adverse effect on the Company’s financial results and on your investment.
Increased costs could affect the company.
An increase in the cost of raw materials or energy could affect the Company’s profitability. Commodity and other price changes may result in unexpected increases in the cost of raw materials, glass bottles and other packaging materials used by the Company. The Company may also be adversely affected by shortages of raw materials or packaging materials. In addition, energy cost increases could result in higher transportation, freight and other operating costs. The Company may not be able to increase its prices to offset these increased costs without suffering reduced volume, sales and operating profit, and this could have an adverse effect on your investment.
The Company may incur debt.
The Company may incur debt secured by the land and/or the assets of its brewery to open other locations, and it may incur debt (including secured debt) in connection with opening and/or operating Brew Pubs. Complying with obligations under such indebtedness may have a material adverse effect on the Company and on your investment
The Units offered hereby may be diluted by future issuances of Units of the Company with superior rights.
It is anticipated that the Company will need additional rounds of financing for future anticipated expansion. Additional funding would likely adversely affect the current equity owners by diluting their equity interests in the Company. The Company cannot guarantee that the necessary funds will be made available to the Company. Thus, there is no assurance that the Company will be able to continue to develop and fully implement its marketing plan nor continue to operate if the necessary funding is not available.