Kombucha – what some might call a fad drink or superfood – is a carbonated tea drink made with yeast and sugar. While its roots are old, the modern popularity of this beverage may entice hopeful business owners to consider the market product.
Grand View Research has studied the kombucha industry and reported an expected industry “compound annual growth rate of 19.7% from 2020 to 2027,” reaching “USD 7.05 billion by 2027”.
Considering the likelihood of kombucha becoming a billions-of-dollars industry in the near future, prospective kombucha business owners will want to start creating a solid business plan. In this article, we’ll outline the most essential steps in starting a kombucha business, including budgeting, franchising, securing funds, insurance, and much more.
How to Start a Kombucha Business
1.Write a Business Plan
Writing a solid business plan entails a couple of things. First, figure out who your target audience is, then make sure you know who you are in direct competition with.
You’ll also want to craft at least a basic timeline of how long it will take you to start your business. These steps will help you to be as prepared as possible as you step into this journey.
For a kombucha business, your target audience is going to be special beverage drinkers, which includes women between the ages of 28 and 45, according to a 2019 study drawn by Food Dive.
Additionally, individuals in the Millennial and Generation X demographics make up a large portion of kombucha drinkers. These are individuals aged 25-56. Considering these factors, you can determine who to target your ad campaigns towards, as well as what mediums to use.
Before you consider your competition, first decide whether you will produce solely hard kombucha (alcoholic), non-alcoholic kombucha, or both.
Both types of producers exist in today’s market, and this can key you into who your competition is, as well as what demographics will even be able to legally buy your product. And of course, restaurants and bars will become big opportunities for business, as these are going to be the people who will want to sell your product to their customers.
To understand your competition, look out for kombucha brands that are being sold at major retailers, such as Target, Walmart, etc. Some big names in the kombucha industry at the moment include Brew Dr., Health-Ade, and June Shine.
Create a timetable of roughly how long it will take you to start turning profit. It may be wise to get the assistance of a financial advisor for this task, but either way, knowing how much money you’ll have to spend before you can get a return is essential. A timetable can also help you plan for how much you need in terms of resources, hired labor, and more.
2.Get Business Insurance and Licenses
It’s wise for any business to purchase insurance. The liability you undertake when starting a business is high, and especially so if you intend to sell food or beverages. First, consider getting a comprehensive small business insurance plan.
Small business insurance or general liability policies protect you and your business from unexpected claims and lawsuits that could be filed against you. You never know when a worker is going to get injured on the job and want to file a lawsuit against your business or you.
Further, operating a brewery puts your business at risk of accidents happening due to the equipment being used. This is why it’s essential to insure all aspects of your business.
Kombucha Brewers advise to secure a general liability policy of minimum $1 million for a small business, obtain business licenses from your state and municipality of operation, and meet tax regulations such as OSHA, workers compensation insurance, and HR and payroll.
You also have to be on top of regular health and safety inspections, food and beverage regulations, alcohol testing regulations (if you sell hard beverages), and labeling codes.
3.Decide Whether You Will Franchise Your Business
Franchising is a business decision that may launch your company into great success, but you should be careful to consider whether you have the stamina to sustain such an endeavor. Franchising requires going into business for the long haul. It’s not for the faint of heart and will require a long-term commitment to the business and its continual expansion, which means it requires lots of funding.
It’s also important to note that a product like kombucha is really about the brand name, which means that you may find more success supplying your product(s) to multiple distributors, as opposed to making chain locations of your store that only sells a few different products.
Since kombucha would do well being sold by multiple distributors, you might have more financial success by opting out of the franchise route and instead partnering with other brands who can get you more business by sharing their customers.
4.Decide Which Software You Need
You may need several types of software to help your business run. Accounting software is important, as well as payroll software and something to keep track of inventory. Below, we’ll discuss some useful features to look out for in payroll software, but for now, let’s explore the accounting software you’ll need.
Keeping books is an important part of running any business. You will have complicated taxes to file each year, so making sure that you are monitoring and keeping track of all your expenses and earnings will help you in the long run. You never know when something you buy for your business could be recorded as an itemized deduction that could save you money.
Good accounting softwares for businesses will include customizations, the ability to add on employees, time tracking features, inventory management, budgeting tools, and in some cases even payroll tools.
According to Investopedia, most small business accountants use QuickBooks Online. However, there is a range of other providers to choose from, including Xero, Wave, FreshBooks, SlickPie, and more.
5.Secure Your Financing
This part of the process is very important. No sane person starts a business believing it will be easy or affordable. The market is competitive, so you will need to be willing to put down a lot of funds to get a good result.
In order to secure your business funds, there are several routes you can take. One thing you can do is to get angel investors. Angel investors offer to front you money (invest) in your business, with the agreement that they will get a stake in the profits or success that come later on.
Another method of financing that is more common is credit. You can achieve a loan for your business, and there are actually small business loans you can apply for that are specifically made for people starting up a business.
If you want approval for a loan, or any type of credit for that matter, you need to be able to show you are creditworthy. Creditworthiness is typically determined based on your credit history, debt history, financial assets (savings), what type of deposit you can provide, and can be affected by things like collateral (what is the value of things you own that you’re willing to give up if you can’t pay your loan?)
Make sure that you are willing to go into debt before you decide you’re ready to start a business. Most people don’t have the cash or savings to pay for their business outright, so obtaining credit or investments will take you far.
6.Purchase the Necessary Equipment
Equipment is going to comprise a large portion of your starting funds, since it takes expensive and high quality equipment to produce a product in bulk.
Your necessary equipment will depend on whether you intend to brew alcoholic or non-alcoholic kombucha (or both). Consider the costs of the following necessary equipment for any kombucha business:
- Carbonation equipment (Pro Brew sells a ProCarb Mini for around $20,000 and a ProCarb Plus for slightly more)
- Can fillers
- Liquid blending systems
- Shipping and packaging equipment
- Tea product and other ingredients (decide whether you want to supply local or international ingredients, solely organic ingredients, vegan supply, etc.)
- Furniture like tables and chairs (if you plan to open a store that directly sells the product to customers)
- Dish ware and silverware (again, only if you plan to open a store that directly sells the product to customers)
7.Decide How to Advertise Your Business
You can use your target audience to determine the best forms of advertising. Advertisements for businesses in the food and beverage industries do well when focused on a recognizable and enticing brand image.
Figuring out your kombucha business branding style will go a long way in getting customers to recognize and want to try your product. Additionally, factors like online marketing, social media, and partnerships with other brands may help you reach your audience more easily.
Having a well-oiled company website that displays your brand and targets the demographics most likely to buy will make your company appear forward-thinking, modern, and convenient. And if you can get a good social media presence going, you are more likely to get brand partnerships, as well as influencers who can advertise your product for a modest fee.
This kind of online exposure is exactly what a new business needs to thrive in these times. According to 2021 stats by Fundera’s 2021 Small Business Marketing Statistics and Trends report, 74% of consumers rely on social media networks to influence their purchasing.
Even more important to note is that your online presence won’t thrive if you or your website designer doesn’t understand SEO (search engine optimization). According to the same Fundera report, “60% of consumers begin their product research with a search engine before heading to a particular website.”
8.Build a Solid Website
Once you’ve landed on a good advertising plan, you can focus on how you will optimize your website and even tailor it to your consumer’s needs. Enabling restaurants and consumers to find you online, see your prices, and have a way to even order your product from home is essential in this modern age.
Getting started building your website is as simple as choosing a plan and buying a domain from one of the many website building platforms available to the public online.
Sites like Wix (free with paid domains and plans starting at $14/month), Squarespace (free trial offered with paid domains and plans starting at $12/month), and others provide intuitive website building features that don’t often require you to know coding in order to get started.
You can save a portion of money by doing this yourself, and then if you want to optimize your website and tailor it more to your audience, you could hire a website designer, coder, or marketing or SEO expert to take your website to the next level.
It could make a significant difference in how consumers perceive your business and its ability to relate to the customer.
9.Decide Which Payment Methods You Will Accept
If you are in the business of selling beverages, then consider that you may want to accept more than just credit. For a smaller purchase like a beverage, a lot of individuals expect to be able to use cash, since using credit for such small purchases may cause them to get fees from their credit account.
On the other hand, if you value the customer experience, you could anticipate this need and choose a credit processing company that doesn’t force customers to pay a minimum in order to avoid credit payment fees.
Lastly, consider that if you have one form of payment you accept at all, you should include a credit processing system. Mostly everyone these days pays with debit or credit cards, so find a credit processing system that offers you good benefits and possibly one that accepts alternative methods of payment.
A lot of people are trending towards contactless payments, chip readers, and Apple Pay, so having a system that caters to those methods will be a plus for your younger demographic. Additionally, accepting credit will be essential for online orders.
Some quality credit processing systems include Clover, MerchantOne, and Square.
10.Hire Employees for Your Business
In any food or beverage business, you need to hire employees to meet your specific needs. Firstly, you can determine what types of employees you need to hire by looking at the methods you’ll use to sell your kombucha products.
The Types of Employees You’ll Need
If you intend to sell your product mainly online or by distributing to retailers, then it’s advisable to hire a skilled customer service team and tech-oriented individuals who can run your online sales processes.
On the other hand, if you intend to sell your product directly to consumers via your own store or cafe, then you should consider hiring a talented wait staff, as well as individuals who can tend cash registers, cleaners and maintenance workers, and front of house workers.
When it comes to the actual process of brewing your kombucha, you’ll need to hire workers skilled in the brewing process, as well as people who can work the equipment. And finally, a good team of employees makes room for someone who can help you keep books, such as an accountant or financial advisor to guide you as you get started.
Interview Questions to Consider
Most interview questions are pretty straightforward. However, you may consider choosing interview questions based on your business and/or personal values. For example, do you want a team of employees who value honesty and hard work? If so, you may consider interview questions that go a bit beyond the ordinary, such as:
- When was the last time you made a decision that negatively affected your coworkers, and what did you do to rectify it?
- Why is hard work important to you, and how will you prove that if you work for me?
Or perhaps you value efficiency and turnover in your business goals. If that’s the case, some interview questions you could use are:
- What is your most valuable quality as a worker?
- How do you prioritize tasks when put under immense pressure?
- Are you good at tackling goals within a competitive work environment?
11.Decide on a Good Payroll Service
Lastly, you’ll want to have a payroll system in place for when your business hits the ground running.
You have to meet the needs of both you and your staff. This means choosing a payroll service that keeps track of not only paychecks, but also the other funds you might not first think about. These include things like employee benefits, among others.
Other aspects that a good payroll service can manage for you include HR, business analytics, talent management, employee on-boarding processes, as well as extraneous forms of capital.
Popular payroll services include QuickBooks Payroll (plans start around $22.50/month and include automatic payroll, benefits, 401(k) plans, workers comp, and more) and Zenefits Software (direct deposits, tips reporting, contractor payments, ledger reporting, payroll integration, mobile paystubs, and more).
Ruben has been doing online marketing for the last 4 years. Prior to that, he spent 15 years managing different brick-and-mortar businesses, in the home improvement and logistics industries. Overall, he has 20 years of business experience under his belt. Recently, he added SEO, affiliate marketing, and link building to his business skills.