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Small Business | LEARNING CURVE: PROPHET BREWING CO.

Ale and Hearty : Fraternity Pals Market Fruit Microbrew

May 28, 1996

Scott Yara and Greg Shapiro were backpacking in Europe when they discovered Belgian fruit ales called lambics. When Americans started to show significant interest in microbrewed beers, the UCLA fraternity brothers created a lighter version of the lambics and have so far sold more than 3,000 cases of their fruit-flavored California Prophet Ales. Yara was interviewed by Karen Kaplan.

Greg got the idea for fruit-flavored beers while on a backpacking trip in Belgium in the spring of 1993. About a year and a half later, we decided the time was right to bring this to the American market, where specialty microbrewed beers were taking off. Fruit-flavored beers started popping up at local brew pubs and people were drinking it. That motivated us to be the first ones in the marketplace.

At first we spent a lot of time learning about the industry. We started sneaking into home brew clubs, then worked our way up the chain to some local brewers around town.

Then we hired professionals to design a recipe. We did at least 30 to 40 test brews over a nine-month period, and we developed recipes for seven or eight different flavors. But we only had enough money to bring one flavor to market. We started with raspberry.

Between the two of us, we emptied out our piggy banks and pooled together about $40,000 in seed capital. After we started brewing our first batch last summer, we applied for a line of credit and got $15,000 from a bank.

We went into stores and bars late last summer. If we had had more money sooner, we'd be in more stores by now. We could be selling 10 times as much beer based on demand, but we didn't have the money to invest in inventory. We could also have had more advertising and more employees promoting the product.

So I befriended a professor at the business school at UCLA, and he helped me develop a business plan. Then I did a lot of cold calling and delivered a lot of business plans to groups that could invest half a million dollars in our company.

We got two verbal commitments to finance our business, but the deals fell through because the investors couldn't come up with all the capital. That was disheartening. Now we're on our third investment group and we feel confident about them.

We've learned that until the money is deposited in the bank, you've always got to keep your ears open for other investors. If we had known then what we know now, we would have kept more irons in the fire. We were wasting time, and time is the most valuable thing you have when you're a small business trying to grow.

Right now we're brewing 5,000 cases--that's 120,000 bottles--of beer in raspberry, peach, apricot and passion fruit. That batch will hit stores in June.

When we decided to go forward with this product, I was 20 and Greg was 21. We understand the industry really well, and that makes our age kind of a nonissue. Besides, people see this as a Generation X product, so it helps that we are in our 20s.

On getting in at the beginning of a trend . . .

"Fruit-flavored beers started popping up at local brew pubs, and people were drinking it. That motivated us to be the first ones in the marketplace."

On what they sacrificed to enter the market fast . . .

"We'd be in more stores by now. . . . We didn't have the money to invest in inventory. We could also have had more advertising and more employees promoting the product."

On raising money from outside investors. . . .

"Until the money is deposited in the bank, you've always got to keep your ears open for other investors."

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

AT A GLANCE

Company: Prophet Brewing Co.

Owners: Scott Yara and Greg Shapiro

Nature of Business: Brewers and sellers of fruit-flavored beers

Location: Santa Monica

Year Founded: 1994

Number of Employees: 6

Annual Sales: $650,000

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