Propelled by Success in the U.S.
5 years of operation and partnership with Costco
As CEO of Schubros Brewery, I've been distributing our craft beers throughout the U.S. for the past five years with the help of Costco Wholesale. Schubros is spinning off its international sales infrastructure and Asian production arrangements via a new company, San Francisco East Bay Brewing (SFEBB). Everything in the U.S. will still be Schubros and everything in Asia will be SFEBB. Schubros will produce beer for export and sell it to SFEBB, but not get involved in selling, shipping, or receiving the product. That beer has won many awards in America, including the A+ Bay Area Brewpub of the Year in 2014, and we're confident it will be popular in Asia, too.
The Asian Markets Are Wide Open, But You Have to Know How to Serve Them
With few craft breweries in Asia but increasingly high demand, we're planning to launch in China, Japan, Vietnam, and India
According to FOX Business, China is now the world's largest beer market. In 2015, the country drank almost two times (about 25 billion liters) the amount of beer that Americans drank, and the market share for craft beer has grown about 23% from 2010-2015 over there. With fewer breweries than New Hampshire, our opportunity is immeasurable; only one market could potentially rival it.
India. India will overtake China as the most populous country in the world by 2022, and its per capita beer consumption (while low today) is rising at percentage rates faster than seen in almost any other country. The country’s increasing urbanization and per-capita level affluence means its growth likely won’t abate for decades. Similarly lacking in breweries, the sky's the limit in India.
The trick will be to leverage each country’s strengths and wrap our strategy around that. In an over-simplified nutshell:
- China has the best transportation infrastructure in the world, low real estate rental costs, and an abundance of skilled blue-collar labor. We enter China with centralized scale production and efficiency-focused distribution - not unlike the traditional US model actually, but with a bit more ‘street marketing’.
- India has 4 of the top 13 most population-dense cities in the world, and the urbanization is only accelerating. It is also an inherently entrepreneurial culture, and one where franchising concepts are widely embraced. We enter there with a specially honed nano-brewpub concept built to affordably penetrate the heart of urban areas, then cluster them and spread the brand through franchising.
India's days as a beer-drinking lightweight may soon be over. With more than 80 operating microbreweries versus just two in 2008, sales of craft beer are rising 20 percent on-year.
– Bloomberg. January 5, 2017
The Brewpub, or More Accurately, the "Pico-Pub, Micro-Brewery." Introducing SFEBB’s “Hole"
We are introducing a new retail concept that can quickly and inexpensively enter, secure, and expand within Asia’s most vibrant and densely trafficked metropolitan centers. We will prototype it in the San Francisco Bay area. It’s about fresh-beer, competitive pricing, urban-grit and Hi-Tech. We will call these Pico-pubs the “Hole”, and they will fit into a floor plan of only 400sqft (or 475sqft when an exceptionally basic Indo-Chinese street-food-only pico-kitchen is required).
Deliberately, in fact hyperbolically small, the experience shall be about the beer, the technology, great prices, human interaction, the fun & some sports and music. When required for permitting we shall build in a very compact kitchen that serves exclusively Indo-Chinese fusion street food. The name, format, and location selection are all a bit edgy, and will strongly carry forward to represent the beer-brand off-shelf as well.
The closest American parallel to our “Hole” would be the BJ’s Brewhouse Chain. This is America’s #2 Dollars-Per-Store restaurant Chain (next to Cheesecake Factory). But now: make its locations 10% the size; slash its buildout costs 95%+; stand one up in 10% the time; reduce staffing by 90%; automate the ordering process to increase turnover, and maximize revenue through dynamic pricing; put it right next to a train station, instead of in a suburban parking lot; and shift its sales mix from predominantly lower-profit food-sales, to 80%+ high-profit beer sales.
The second closest model would actually be a convenience store -- not the gasoline attached American models, but the Japanese, Korean, and Chinese urban-center models. They are numerous, compact, brilliantly located, and resonate with the same western cosmopolitan middle-consumer we are targeting. But add in: the “fresh” element of our beer; add in all the social and fun elements; keep the foot traffic, but increase the ticket/basket size; and now give us a head start on defining this new micro-industry.
We can pop up 2 or 3 “Holes” in a single university area, 15 or 20 of these is a single metropolitan area over a matter of just months, using a mix of company owned and franchised locations.
- Centralized in construction we quickly create and leverage economies of scale. Once we finish the prototype and work out rough edges we want to build 2-3 of these a month, every month for the next 5+ years.
- Centralized & Automated in IT infrastructure with dynamic menu, pricing, and ordering systems, we can not only ensure consistency and monitor effectiveness, but we’ll have great agility to be profitable and engaging in our marketing and promotions -- up and down pricing/advertising. For example, imagine Russian Imperial Stout prices spike when Russian expats get expelled.
- Centralized & Automated in brewing, we will use modern technology to roll out pico-brew systems at each Hole. Processes will be highly automated for efficiency and consistency.; actual brewing will take place with a push of a button, require little interaction, and take less than 4 hours to brew (not counting fermentation). When an area clusters with a large amount Holes within an appropriate radius, we shall invest in building a small brewery outside of the immediate metropolitan area to provide centralized production and realize those economies of scale.
- At a mature state for each operating region (i.e. Southern Bangalore, or Eastern Shanghai) we shall evolve into a Hub-and-Spoke brewery supply system. Simple in execution, and readily monitorable and centrally controlled we will pursue a franchise model to simplify operations, match cash-flow to expenditures, and enhance scalability.
The target for SFEBB is India of course, but the concept is universally cosmopolitan. It will work in America, so we will hone our prototype here first, where we can more easily hands-on steer the initial build-outs. Then, with its Americana brand and concept-origins we take it to Bangalore, Mumbai, Hyderabad, Shanghai, Beijing, Hanoi, Tokyo, Taipei, Singapore, Bangkok, KL, Vladivostok…
The concept could be summed up as “A Hi-Tech, Nano-Club, Micro-Brewery”. Technology now exists to brew beer quickly and consistently within a remarkably small footprint. Meanwhile the spread of smartphones and e-payment has enabled us to automate the time consuming and error/shrinkage-vulnerable ordering process. At the same time, we will build up an invaluable data-resource allowing us to directly communicate with customers and introduce a loyalty program that will readily support the concept of franchising and sharing customers across our outlets. Finally we shall use the new ‘silent disco’ technology to support airign or live-streaming events, like the FIFA and Cricket World-cup or concerts, without driving out other patrons or becoming a community nuisance in densely populated areas.
The drawings below represent three concepts SFEBB is exploring for "Hole" designs, depending on real estate, land availability, and location.
Say Hello to Our Beers
Quality Bay Area Beer | Locally Made | Crafted With Care
A classic mahogany IPA with an ivory head, this beer's caramel and toffee malt flavors are balanced by the refreshing scents of tropical fruits and lively citrus.
6% ABV / 65 IBU
Radiant black with a toffee-brown head, Diablo Dark is infused with chocolate, caramel, and coffee. A bit of each flavor sensation carries you through to a light, bittersweet finish.
5% ABV / 35 IBU
This crisp Pale Ale's malt flavors complement undertones of honey, roasted nuts and warm bread. Beneath a satin head, bright citrus and floral hop aromas create a pronounced bite.
5.3% ABV / 35 IBU
Rich gold in color, Nico has depth like no other wheat beer. Caramel and toasted nut aromas, a rocky white head, and light bitterness make this beer a favorite for all.
4.5% ABV / 15 IBU
SUNRISE & MOONLIGHT
Overseas we occasionally rebrand our product for large retailers, distributors, and other critical partners. In this example we clearly play up our California Origins in these rebranded Diablo Dark and Nico beers.
A line of limited-edition super-premium barrel aged beers. Brands such as Midnight Cove, Sameon, Kirov, and Riel boost both our image and margins.
SHIP TO SHORE SERIES
A line of rotating Pales and IPA brews. Hoppy and powerful, these beers embody the bold flavors that put California on top of the US craft-beer scene.
OUR JOURNEY SO FAR
We're fundraising to buy the equipment we need to amp up production, fulfill orders, and open up overseas.
Schubros completes Friends and Family Common Shares Round
Schubros launches 680 IPA, our #1 seller in the US
Schubros launches Diablo Dark Stout, our 3rd permanent beer
Max. Capacity Reached
Schubros expands capacity, adding new fermentation and finishing tanks; reaches maximum possible capacity at current location.
Open Hole #1
Open Hole #3
Open first Indian Brewpub – Hole #5
Let's Bring Craft Beer to Asia
Beer is Great.
Craft Beer is better.
But what will fund your and my future enjoyment of said product in the future is the financial opportunity craft beer offers in Asia. And San Francisco East Bay Brewing Inc. is the best means to tap that prospect.
Schubros Brewery is a five year old microbrewery based in the San Francisco East Bay, and we have created an entirely Asian-focused company -- San Francisco East Bay Brewing, Inc. -- in order to seize this opportunity.
The decision was made to found the company for five reasons:
1. Asia’s Economies: We will focus on four massive markets: China, Japan, India, and Vietnam. But more than their size, its their surging affluence, their growing disposable incomes, and the rapid growth that the full region promises that makes their prospects near limitless.
2. Craft beer, the category: Strongly branded, and socially-visibly consumed, craft beer is the perfect ‘visible upswitch’ product. Every bit a lifestyle as well as a consumable good, craft beer taps rising disposable incomes and visibly communicates its buyers’ cosmopolitan-savvy and personal success within a modern globalizing society.
3. Wide Open Markets: Amazingly, the biggest Asian markets are still wide open for an American craft beer player. Below are just two of the jaw-dropping statistics:
- There are more breweries in New Hampshire than there are in China.
- There are nearly as many breweries in San Diego (America’s #7 city by population) as there are in all Japan (the world’s 3rd largest economy by GDP).
- The US craft market, where brewery innovation and proliferation has been most active, has been consistently and rapidly growing for decades. Few American brewers have needed to look outside.
- Doing business in “Asia” is intimidating. It is a mix of different cultures and different regulations; it requires an entirely different skill-set and international sensitivity to do right.
Put those two reasons together and you can see how the US Craft “comfort zone” has provided sufficient growth and headroom to keep entrepreneurs content and “complacent” for the past 20 years. You can start to see why there are almost twice as many breweries serving 50 million Californians as there are serving 3 billion Asians.
4. Timing: An unbelievable window of opportunity is open right now, courtesy of the confluence of several market-changing great events. Beyond continued Asian economic, the past 10 months have seen:
- The opening of Indian trans-state alcohol distribution laws (July, 2017)
- Vietnam’s privatizing of the their two dominant government breweries (announced October, 2016),
- China’s trillion-dollar investment in infrastructure (ongoing)
- Japan’s long-waited deconstruction of its megabrewery-protective tax laws (March, 2017)
5. Familiarity: Our leadership team and Directors are all quite comfortable with the Asian markets. I have 8 years managing Philip Morris’ brand portfolio sales for Japan and Asia, and running Private Label marketing for Asia’s largest retailer, Aeon. Murty, Atul, Cuong, Gillian, Gillian, Darron, Mayumi, Carl -- most of us involved in the venture have more business outside the US and/or in our focus countries than we do here in the States. So on top of all the market, economic, and timing reasons to enter Asia, by doing so we’ll actually be going into our comfort zones.
We need to move now, and move decisively. And that is why Schubros is spinning off San Francisco East Bay Brewing, and hoping to partner up with you to power our company forward.
If you support us early, we want to give you ownership -- not reward-limited debt or a future expiring revenue share. If things go even half as well as planned, our company value will soar. And as we’ll be years ahead of the competition, with a robust Pan-Asian infrastructure built up, in several years when the big guys shift their take-over focus from the US to overseas, we’ll garner some acquisition interest. Things could happen even earlier.
So the time to act is now. But please do not fail to do your due-diligence, and please do not hesitate to reach out through the Wefunder chats section with any questions. This is not a simple business venture, so I expect you’ll have some questions and we are very open to fielding them.
Thank you, and I look forward to working with you, and for you, in the future.
Ian Schuster, CEO