Financial Modeling

Starting a beverage company requires these steps:

1. Concept validation: Evaluate your beverage idea against the market to understand how to differentiate your product.
2. Commercial formulation: Partner with a beverage formulation expert to develop your formula and review ingredient specifications.
3. Precise financial modeling: Determine the costs of your beverage at each stage to calculate a competitive, profitable price.
4. Sourcing: Source beverage ingredients to optimize the flavor profile and packaging that helps promote your brand to customers.
5. Mass production: Partner with a co-packer that can make your product to spec, within budget and scalable for distribution.

Many variables affect the timeline — financial planning, ingredient sourcing and co-packer availability all dictate your speed to market. Since there are many steps involved in getting your beverage shelf-ready, launching a new beverage can take as long as 9 - 18 months from initial concept to full market launch. Working with an expert development partner like BevSource can help accelerate the timeline, help lower your costs and make the most of your funding.

Starting a beverage company entails formulation, development and production costs, usually ranging from $100,000-$300,000, which largely depend on the nature of the beverage and the scale of the business. This cost does not include marketing, staff, business premises and other related running expenses.

Beverage formulation costs range from $20,000-$45,000 to develop a beverage formula you can take to a co-packer for production. The total cost depends on the type of beverage and the number of SKUs being formulated. Investing in a small-scale pilot production run will also impact your costs. A pilot run costs between $15,000-$25,000 for a single day’s pilot production, depending on the number of SKUs, volume, complexity of the blend and testing requirements. Full-scale production of 10,000 cases will cost around $200,000.

These values are estimated costs, since factors like the number of SKUs will influence the final costs.

Some certifications and licenses you'll need to launch your beverage brand include:

• Alcohol and Tobacco Tax and Trade Bureau Basic Permit for alcoholic beverages
• FDA Food Facility Registration for food safety compliance if you own or operate a covered facility
• Sales tax permit for legal sales
• Health department approval for compliance with food safety standards

The exact certification you need depends on your business activity and state law.

The price point for your beverage will depend on the costs involved in optimizing your product, including:

• Ingredient costs: The number of ingredients, the ingredient cost per unit and the size of the beverage container will influence the cost of ingredients.
• Packaging costs: Aluminum cans, plastic bottles and other containers have different costs per unit, and adding a design influences packaging costs as well.
• Manufacturing costs: Beverage companies partner with a co-packer to produce the finished beverages. These costs also include specific processing that some beverages require, such as pasteurization.

All of these factors go into your cost of goods sold. Determine your cost of goods percentage by adding the costs of the used product, then dividing that value by the cost of the sold product. The ideal percentage varies based on the type of beverage. BevSource can review your cost of goods sold and help you calculate a profitable price point for your beverage.