According to the Brewer’s Association, there are over 9,500 breweries in the US, with 549 new ones opening and 319 closing in 2022. It costs between $250,000 and $2.5 million to start a brewery, and most brewers start turning regular profits after about three years. Here we cover starting a brewery in 10 primary steps, […]
According to the Brewer’s Association1, there are over 9,500 breweries in the US, with 549 new ones opening and 319 closing in 2022. It costs between $250,000 and $2.5 million to start a brewery, and most brewers start turning regular profits after about three years.
Here we cover starting a brewery in 10 primary steps, with a deep look at branding and the legal requirements of this highly regulated industry. Note that these steps may not be taken sequentially; you may start working on your licensing before you finalize a budget.
Key Takeaways:
The first step of brewery ownership is deciding which type of brewery you want to run. Niche down on your unique perspective and how you will stand apart from the competition. In a crowded brewery marketplace, picking a niche will define your company’s brand.
There are two major types of breweries: those that cater to walk-in customers, and those that distribute to bars, restaurants, and retailers. These two types can be broken down further into six major market segments based on their locations and how many barrels of beer they produce annually:
What is a beer barrel (bbl)? Breweries measure the size of their business in barrels, abbreviated as “bbl.” One bbl is the equivalent of 31 gallons of beer. Brewing equipment is also categorized by bbl.
There are several costs to consider when planning your budget. Your location alone can cost upwards of a million dollars in rent or mortgage and renovations. Manufacturing breweries have bigger expenses for location and equipment. Brewpubs have smaller brewing requirements but they also have to pay for restaurant equipment and supplies.
Below is an extensive (but, by no means, complete) list of estimated costs to consider.
Once your costs are estimated, finalize the budget by adding contingency funds. You should have enough money in savings to cover fixed costs (rent, utilities, and payroll) for three to six months. You may not see sales revenue for several weeks. Contingency funds ensure that you’ll keep running until sales roll in.
The average markup for beer is as much as 300%. One rule of thumb is to price at least four times the expected cost of production. After expenses, most breweries see a profit margin of 20% to 25%; much higher than the average of 5% of most restaurants.
Despite the high markup, it can take three to five years to turn a profit on your brewery with start-up fees and expenses. After that, the average annual salary of a brewery owner runs $50,000 to $88,000.
A business plan is an important component of your new business. It works as an outline to help you structure and grow your company. It shows how you plan to turn your knack for brewing into a profitable business. It should show each step and permit process broken down into actionable steps.
You will also use your business plan to convince potential investors why you are the right candidate for their investment.
Below are general guidelines for your brewery business plan.
You’ll want to be sure the area you’re considering is zoned for brewery and alcohol sales, then ensure the operational costs are in your budget. In most cases, breweries tend to be outside of densely populated areas. Breweries simply need a lot of space for equipment, an enormous amount of water, plenty of room to dispose of spent grains, and neighbors that are too nearby can complain about the smell.
It’s not that breweries smell bad, but not everyone appreciates the aroma of fermenting yeasts and sugars wafting into their apartment or office space. So you’re likely looking mostly at suburban and rural locations.
Expand the sections below for more details:
First, check that the area you’re considering is zoned for brewery and alcohol sales, and thoroughly read the zoning regulations of your town, city, or borough. If neglected this step could be a massive headache down the road potentially ruining your business before it starts.
Price out rent or sale fees, utilities, and refit costs for your desired location.
Look for spaces that have previously been used for manufacturing. Most retail and restaurant spaces don’t have enough water or electrical infrastructure to support a brewery, and upgrading these services is costly.
Size is important—too small and you hinder expansion; too large and you’ll pay for unused space. Brewery equipment provider ICC-NW recommends the following:
Your space must also be equipped to handle the weight of heavy brewing equipment; an empty brew tank can weigh more than 1,000 pounds. Warehouse districts in former industrial neighborhoods of large cities are rich with potential.
Look for a location with:
ICC-NW suggests these minimum utility requirements for your brewing equipment:
If this sounds like gibberish, call an electrician and a brewery equipment technician to assess your potential space. Brewery equipment providers are usually happy to send a technician to see if a location can support their equipment.
If you have a taproom or brewpub, add enough space for the bar, restaurant, and kitchen.
There are several options to secure capital for your brewery. Startup business loans, investors, business partners, lines of credit, and grants are all potential funders.
Your business plan will help to secure bank loans, grants, or partners. Find more information on what you need to secure a small business loan in Restaurant Financing: The Ultimate Guide.
Another popular alternative is crowdfunding, where people contribute in exchange for rewards or equity to your investors. A special crowdfunding site just for breweries is called CrowdBrewed. It also offers learning opportunities and a place to connect with other brewers and beer lovers.
Stay legal, and make sure to get all of the permits, licenses, and insurance. If you own a taproom or brewpub, you may need even more. Check with the Tax and Trade Bureau for Alcohol and Tobacco, your local Alcoholic Beverage Control (ABC) Board, and the Brewers Association State Laws for what’s required in your area.
Incorporation: Bars and businesses take on a lot of liability; incorporating the business will separate your business assets from your personal ones.
A business attorney can advise you on the best decision for your brewery, and ask which one is best for your business.
Below is a non-exhaustive list of potential permits, licenses, and insurance to get you started on paperwork:
Depending on your location and your plans, you may also need permits for:
See our full guide to restaurant permits and licenses for more details about individual licenses, their costs, and how to obtain them.
The amount of equipment you will need depends on the size of your brewery, available floor space, and how you intend to sell. However, the general guideline is to buy a little more than you expect to use. The Asian Beer network recommends at least a 10-hectoliter (HL) tank and a mix of 5HL and 10HL fermentation vessels.
Most breweries can get started with these minimum equipment and supplies:
When sourcing suppliers for your consumables, look for trustworthy businesses. Start with the Better Business Bureau and online reviews. When interviewing suppliers, ask about minimum order amounts, payment policies, quality assurance processes, and delivery days.
Some brewers have cut the costs of equipping their brewery by up to half by designing their own systems and sourcing used parts. Check message boards and networks for brewers selling used equipment. Be sure to vet your suppliers; ask for references and customer reviews.
A distribution plan is crucial to a brewery’s profitability; it’s how your beer travels from your brewery to the customer. As with most things alcoholic, distribution options vary widely according to state laws.
The Brewers Association also maintains a list of distributors. Find one in your area, read over their policies, ask for a list of references or key accounts, and see if they’re a good fit for your brand.
Branding is incredibly important to help your beer stand out on crowded shelves. Consider your logo, name, and label. Small batch breweries often have bold, colorful graphics and artistic designs with entertaining, silly names to help them sell.
States have varying laws regarding required information for beer labels. Check with the local liquor control board for your area’s requirements. If you work with a label printing service (which you should—they save time and money), they can provide you with the correct labeling information for your product.
The average United States brewery employs 11 people at any given time. Some of the common positions you need to fill are:
All staff should be given a comprehensive employee training manual with company practices, instructions on the brewing process, an explanation of the equipment, software, federal and state regulations for food safety, alcohol serving policies, and sexual harassment prevention.
You’ve done the work—now let’s have a party!
A soft opening is a precursor to the grand opening. It’s a fun, intimate party for the family and friends of the owner and staff. It’s a good way to thank everyone who has been involved in getting you off the ground while working out the kinks and giving the staff practice before the big day.
Now, call the press, blow up your social media, and contact all the local beer influencers. Book live music and break out the giant yard games. If you don’t sell food, bring in a food truck or two. Grand openings are an exciting way to introduce your new business to the world.
These are some of the most common questions we hear from prospective brewery owners.
Most breweries average a profit margin of about 20%, which is higher than the standard for restaurants (closer to 5%). Breweries are hot in the US. According to the Brewers Association, sales of craft beer in 2022 increased to $28.4 billion (5%), and make up 24.6% of the $115 billion US beer market. With luck and knowledge, you can expect to earn a profit in the first three years with an annual owner pay of $50,000 to $88,000 a year.
You need:
Nanobreweries do better as taprooms or brewpubs, if you want to be profitable as a microbrewery business, that’s the best route. If your plan is solely distribution-based, your path to profitability will be more difficult.
The best business structure depends on your brewery type. Small breweries may be able to incorporate as an LLC, while larger breweries may be better suited to a corporation. There is a lot of liability when producing alcohol. Consult a business attorney to ensure you’ve covered all your legal bases.
It takes hard work to clear the initial hurdles of starting a brewing business. Brewing has a learning curve and takes education and engineering to understand the processes. There’s a lot of paperwork and bureaucracy in the beginning, but once you’re over the initial hump it gets easier.
Opening up a brewery is about so much more than making beer and spending your evenings around friends. The process is complicated, arranging distribution plans, monitoring day-to-day cleaning and administrative tasks, and securing the correct permits and licenses may appear daunting. Follow our 10-step plan to get you going. It can be a long process with lots of start-up costs and gray hairs along the way, but when the moment comes that you serve friends at the bar or spot your own beer at the liquor store it’ll all be a proud moment worth the work.
Reference:
Jessica Hamilton is a writing professional with over 15 years of experience in the full service restaurant industry, from small mom-and-pop wineries to major national chains. For the past 10 years she has written on travel, hospitality, restaurants and marketing for publications like Hawaii Farm and Food magazine.
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