So you want to start a beer store

“So You Want to Start a…” is a series sponsored by Upsourced Accounting as a way to highlight the business side of the local alcohol industry. Making the right business decisions can be the difference between success and failure. While beer, wine, and spirits are fun, a lot of work occurs behind the scenes in order to provide you with that early morning hangover.

For the last several years I’ve been privy to the good time that is Delaware, Ohio. It’s one of the few places I can hit a greasy spoon, a vinyl shop, an antique store, a cigar shop, and a beer store within one block. Amazing, right? So when it was time for me to select a beer (and home brew supply) store for the next business in the series, the choice was easy, Barley Hopsters.

Over the weekend I drove up to Delaware (about a 20-25 min drive up 315 North) to visit Brian Harpster, owner of Barley Hopsters. While he chatted with customers I picked up a Racer 5. Once Brian was finished we sat down and started chatting.

Can you give me a background on yourself and Barley Hopsters?
My mom owned a bar in Waldorf, Maryland so I’d go in there quite a bit. I had a little bit of knowledge of how that ran. Eventually I started working for my family’s company in Westerville. I was the marketing manager, sales manager, and quality assurance manager. With all those jobs that I had, I just started burning out over time. It was really fun at first because I’d go on the road a lot when I was just a sales guy. As I moved up, the travels became less and I was sitting in an ugly cubicle. Which was just horrible. I was doing that for about 10 years and was looking for something to do, something where I could interact with people. That’s what I really liked about sales.

As for the store, we just celebrated our two-anniversary on the 18th of February. I originally looked at doing a couple different things, but decided on craft beer. Even when the economy took a bad turn, craft beer was growing double digits. So I started looking at the demographics. I saw that it would be work in Delaware. Completely underserved, population is a little bit lower in other places, but there’s really no competition.

Were you always into beer? Did you make your own beer?
One day I went to this bar in Westerville and had a Sierra Nevada and that was THE beer that changed me. I couldn’t go back to Budweiser, Sierra Nevada was my light drinking beer and everything else was above that. My friends and I would go out and try to find mixed six packs with single bottles. The headache was always trying to find that one store. I thought it would be great if someone had a shop with hundreds of beers where you could buy them individually.

As far as home brewing goes, Bill (who also works at the store) and I made beer in high school. When I was in the Navy we made mead, beer, wine. Up until I opened the store I was home brewing one or two times a month.

How did you finance your operations?
Loans from family, I did a very in-depth business plan and decided to go to family first because I thought the interest rates would be better, and they were willing to help out. I should say friends as well. Bill quit his job and I wasn’t able to pay him for a year. We’re just now paying ourselves recently.

[At this point of the interview I opened up a Dragon’s Milk. Just thought you should know.]

Did you have any difficulties getting permits?
Permits were easier than I thought they would be, although we did not get an on-premise permit until the last year. We got a lawyer, so that was a big part. While we had to pay that money upfront, he took care of everything for us. I do that with just about everything we do. I have an MBA, but I’m not an accountant, I’m not a tax expert, so I find people to take care of those things. These things cost a little bit more, but in the long run I think it costs a lot less.

How have you gotten the Barley Hopsters name out there?
We have a group called MainStreet Delaware, and they try to get people downtown. I think they do a good job of it. They have First Friday events, they’re starting a cash mob event. Other than that, we’ve just been doing social media. Word of mouth is always better than anything else, and with how far social media reaches out it made sense. So it’s a matter of what to use and how to use it, be it Facebook, Twitter, or Yelp!.

There are other advertising opportunities, but it’s hard to choose which one is right. I’ve had several radio stations come in and pitch me, but if you’re listening to 60’s and 70’s rock n roll, are you drinking craft beer? Probably not, you’re probably drinking Budweiser or something similar.

What would people not realize about your business from the outside?
Probably that it took us so long to be able to pay ourselves. I still work for my parents company as a quality assurance person. The days when I’m not here, I’m there, and vice versa. My wife, who’s a nurse at Riverside, takes care of everything else, although she is in the shop several days a week as well.

How do you manage payment on this entire inventory?
A lot of cash flow management. All alcohol sales are paid on delivery. The home brew stuff is 30 day, and I order every two weeks. When the order is fulfilled the guy at Carlson calls me up, I make the payment.

With the variety of beer, how many suppliers do you have to go to get this beer?
Heidelberg and Glazer’s were willing to provide pricing information up front so I made sure they were in. Cavalier, I met them at a beer show. We use DelMar (same ownership as Columbus Distributing), and Hill. Buckeye Distributing, mostly wine but they have a few beers. We use Bowling Green for eastern block type beers.

Every distributor handles a beer on a per county basis. So they go to the state and say they want to carry a beer in that particular county. There is an agreement between the distributor and the brewer, which then goes to the state. It’s a little bit confusing. Lowenbrau is an example of a beer that I’ve been trying to get from one of my distributors for a while but they’re always out. Yet while another distributor carries Lowenbrau up north, I can’t go through them because they’re not allowed to sell that beer in my county.

What’s your split on beer sales vs. home brew supply sales? Which one has better margins?
Over half our sales is beer, about 60% volume. Our other volume numbers are 20% wine, 20% homebrew stuff. Yet the homebrew supplies make up about 45% of our margin.

What’s the quality of your beer supply ingredients?
The quality is very good. We get it from a supply house in Kent, Ohio called LD Carlson. They have 95% of what people are looking for. There are a few specialty ingredients that people are looking for that we work with other suppliers to get that in. But Carlson has the majority of what people really need. Really good grains, and they work with Hop Union. The manufacturer we deal with is Wyeast, for yeast smack packs. At first we were having a hard time ordering the right amount, but our volume is so much higher now that I haven’t had a problem recently.

From the beer side, there’s such a large selection, how do you manage that?
We have a POS system. Our big thing is we try to keep the beer as fresh as possible, so we don’t keep large quantities of beer if we don’t know it’s going to sell well. I’ve been to places where I see Christmas Ale sitting on a shelf next to a window from two years ago. It’s like, “what’s going on with that beer?” Plus I don’t want to have a lot of money tied up in inventory, especially if the beer isn’t moving.

Do you feel like you’ve found your sweet spot with pricing?
I do. We’ve had a couple complaints. Some people thought Budweiser costs too much. But we explain to them we’re not the local convenience store. We pay for talented people to be here, we are an experience.

Do you ever have second thoughts about your pricing?
All the time, every time I write a check, and look at the balance in the checking account I think, “Oh man, I should be charging so much more.” Once we got the on-premise license we decided to do a $.50 tap (or corkage) fee. I struggled with it at first, and we asked a lot of our regulars, but we decided it was the right thing to do. If you grab a Great Divide Orabelle, we charge $2.13 a bottle. At a bar it’s probably $4 or $5. So I don’t think it’s a big deal.

I priced out the home brew stuff online. You can get so much online, and a lot of people do. But if you come here, you can get it now, not pay for shipping (although a lot of them have free shipping). We’re a bit more than online but not a lot. Plus, you can have a conversation with someone here about how to use the supplies. We’re probably 15-20% cheaper than any other brick and mortar place.

What are your best sellers?
We have a weekly top ten list, but our largest seller our first year was Kentucky Bourbon Barrel. Budweiser was 2012, followed by Kentucky Bourbon Barrel. But the guy who drinks Budweiser moved a block a way so he goes to another store that’s closer. So it’s not even in the top 30 now.

[I would just like to point out… holy shit, how much Budweiser was that guy drinking?]

And Kentucky Bourbon Barrel is back at #1 so far in 2013. Uinta Hop Notch has been big and in the top 10 list this year too. Typically we’ll have 2-3 IPAs, a stout, a porter, couple lagers, (Session is another big seller) in our top ten list.

What on-going challenges do you have?
The big thing is just keeping things stocked. We’re really running on tight margins. Our employees were getting paid before we were. But keeping things in stock, and running stuff day-to-day is a lot of work.

Being prepared for events, and scheduling employees and product for those events. Last St. Patrick’s day we sold a ton of Irish beer. So I stock piled Mexican beer for Cinco de Mayo, and then didn’t sell any. We had a huge stockpile of Mexican beer we were trying to get rid of. I was drinking Modelo for almost a year.

If I live in Columbus, why should I drive to Delaware for Barley Hopsters?
We’re an experience you’re not going to get anywhere else. There are not very many bottle shops where you’re going to be able to go in and grab a bottle and enjoy it there. Not to mention you can pick up all your home brew supplies as well. There are not many venues that have the couches and chairs, and the windows to watch life walk by you. Our knowledge, we’ll come to you and talk to you and engage customers and find out what they’re looking for and hand sell them every single beer. We have customers who come in and ask for a certain worker and say, “Pick me out a 6 pick, you know what I like.”

A lot of people in Columbus say, “Oh my god, Delaware is like a 30 min drive.” But if you go down the wrong end of 270 at the wrong time, it’s at least 30 minutes.

What are your plans for the future?
There are still some things we want to do here in this building. But there are some other locations we’re looking to go to. Opening up a second would be great. The big thing would be finding the talent to run or work at the store.

Up here Delaware is great because it had a good mix of craft beer drinkers and beer brewers. Seeing how well its working here we could transfer this just about anywhere.

What are your favorite beers / breweries?
It’s all over the place. I’m getting an appreciation for Belgium’s, the sours, I still love the IPAs, and I love the bitterness. Sierra Nevada would still be the beer I’d choose if I was stuck on an island. I’m not that into the lagers, I appreciate them, and I like the Session, but I’d rather have something else. I like Ales better, Skull Splitter is one of my favorite beers.

I’m really big on the Ohio breweries. CBC, Thirsty Dog, and I love Elevator, those guys are so cool, and do a lot of stuff with us. They’re really great people and they have great beers. We do a lot of private parties, and one we did when we first opened up was Ohio vs. Michigan beer. The couple that threw the party was from Michigan and they wanted to show people how great Michigan beers are. It was double blind taste test. Ohio beers won 5 out of 6. So now Michigan can’t even claim better beer either.

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After the interview was complete Brian suggested I try the Leipziger Gose, which turned out to be fantastic. Over the next hour we shared beers, chatted about our favorites, and talk about future plans for Barley Hopsters. It was then I appreciated the coffee shop feel that Brian had created with the store. Yet similar to my favorite vinyl shops, I could have conversations about a topic for an hour, and walk away with something new and wonderful. If you’re a liquids nerd, or a home brewer, I would highly suggest making your way to Delaware to visit Barley Hopsters.

This is a guest post by Craig Baldwin. Craig is a former public accountant who’s currently 1/3 of Upsourced Accounting. He’s also a freelance writer, BBQ enthusiast, and gives golf lessons on the weekends.