Craft Beer – The Next Big Investment Option?

The shaky national economy has quite a few investors looking for a safe place for their investment capital. While stocks and bonds (and even precious metals) can be used, some surprising options are cropping up. In fact, one private equity firm has actually acquired a craft brewery through an all-equity investment. The brewery in question is Iron City Brewing Company, located in Pittsburgh, Pennsylvania. 

Is Investing in Breweries a “Sure Thing”?

Now, private equity firms are not known for taking untoward risks, but they do deal with companies that are not publicly traded. However, should you put your money with a private equity firm or approach a company about becoming an investor? 

The first thing to realize is that no investment is a surefire hit – especially not in today’s economy. With that being said, there are certainly some pros for working with a private equity firm if investing in a small brewery is what you want to do. 

The primary advantage here is that the research is done for you. These firms don’t leap in without testing the water first and they will only invest in a company if there is significant potential for growth and profitability, something that can be hard to determine on your own.

Going it alone here is certainly an option as many microbreweries (and nano breweries especially) are constantly seeking investors to help them increase the scope of their operation. If you decide that you’d like to keep control of your money and invest on your own, there are some things that you need to look for in a worthwhile brewery.

Aligned Goals

Investing in a small brewery is very different from any other type of investment. Kicking back and letting your stock investment earn money is one thing, but when you invest with a brewery, you need to make sure that your goals align with those of the brewery owner. It’s not necessary that your perceived means of reaching those goals is the same, though – you need to be flexible as well.

Sharing the Passion

Brewers are passionate about their craft. As an investor in a brewery, you need to be just as passionate and about more than just the beer brewed. You need to be passionate about the craft beer community around you and the larger one across the nation as well. However, founding a partnership with a brewery owner might just require that you be the one to keep your feet on the ground and guide the financial aspect of the relationship. 

Posted on April 28, 2011 and filed under The Business of Beer.