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Risk Concerns for Craft Breweries

For craft breweries, bigger often seems like it’s better. Bigger production facilities mean more beer to sell; bigger tasting rooms can mean more local sales; and greater distribution can lead to more sales and brand recognition.

In the craft beer industry, growth is a constant. The number of craft breweries in the United States continues to rise (there are now more than 2500 operational craft breweries, according to the Brewers Association)—and more established breweries continue to strive for larger market share.

A recent Brewbound story spotlighted new distribution deals for more than half a dozen craft breweries, and renowned San Diego craft brewery Ballast Point announced that it has begun construction on its fourth location, a $12 million facility that will house a 150-barrel brewhouse.

Business growth is always exciting—but with greater size can come greater risk, and insurance coverages will most likely need to be modified. Craft brewers planning to expand their business need to meet with their insurance professional and review these important coverage issues:

  1. Business Personal Property limits may need to be adjusted to reflect new replacement values. Areas such as inventory, equipment, raw materials, equipment breakdown, and spoilage and contamination all need to be reviewed. Failure to do so could leave the brewery exposed to unnecessary financial risk.
  2. Business Interruption coverage limits should be reviewed to accommodate increased sales and operating expenses.  
  3. Liability limits may need to be adjusted. Liability limits should be reviewed in order to make sure the brewery is adequately protected. A good insurance professional knows how to look at a brewery's business structure, assets, and legal and business requirements to assist a brewery with determining adequate limits.
  4. Premium basis should be reviewed to eliminate any surprise increases. Growth brings additional revenue and payroll, and that could mean additional premiums will be due.

Recently Beall Financial and Insurance Services was a sponsor of Brewing A Beer Buzz: The Secrets of Successful Beer Branding, a craft beer branding seminar held at Chapman University. We saw firsthand the excitement that the craft beer industry is experiencing, given its great growth. If you are a craft brewer, deal with an insurance professional who has craft brewery insurance experience and knowledge, and that growth won't come at the cost of inadequate insurance coverage.