By: Ben Engler
As part of your benevolent life, you have decided to satisfy the thirsty masses and provide them with a tasty brew. Few things in the world are as wonderful as a well-made beer, so we understand the attraction. Of course, owning a brewery not only makes you everyone’s best friend, but hopefully financially secure as well. Plus, you’ll never need to make another halftime beer run again. Before you get started, though, there are few things you’ll want to consider. Let us walk you through some of the key, early planning decisions.
Brewery vs Brewpub:
The first question you’ll want to ask yourself is how will you be selling beer, retail or wholesale? In a production brewery, large amounts of the beverage are crafted at a time and then kegged, canned or bottled and shipped to bars, grocery stores, etc, which is obviously a wholesale method. At a brewpub, beer is still made on premise, but is sold from the tap to the establishment’s patrons and consumed on-site. Either way, you’ll be making bigger batches than your in bathtub, but the two models will require different business plans.
If you go the production brewery route, you’ll have to know the local distribution laws well. Very likely, an you will have to sell your goods to an independent distributor, who will, in-turn, spread your drink around town. Cost control is very important, since wholesale margins are much lower than retail. Thus, you should choose to locate your brewery where rent is cheap. Ideally, you would like fans to be able to visit, but you do not want to pay for a building downtown. Because you are distributing, you may need a bottling or canning line, though it is not uncommon for breweries to only keg when they first start. Until you bottle or can, you will be limited in the customers you can sell to, ie bars and restaurants. If your product sells, though, distributors will be clamoring for you to expand.
Owning a brewpub, you may not bother with distribution at all, meaning you must attract the customer to you. The good news is your beer gross margins will be around 300%, compared to 100% at a production facility. You have different set of concerns, though, than a production brewery, like running a restaurant. If the food is bad, people won’t come back for the beer. Although won’t have equipment like a bottling line, you will have a kitchen, tables, chairs, etc. Your location will need to be in a high-traffic area, visible to plenty of potential customers, as you are dependent on patrons passing through your door consistently. Either way you are making and selling beer, but you see how different the businesses must operate.
For any commercial brewing, you need a lot of stainless steel. A variety of different systems exist, with different capabilities, coming in different sizes, and you want to acquire one that works well for your business (don’t just choose the shiniest). A system’s batch size, coupled with the number of fermentors on hand will dictate your annual output. A brewpub will usually have a system ranging in size from 7 bbl (beer barrels) to 15 bbls ( 1 bbl equals 31 gallons or 2 kegs). Experienced brewers will recommend purchasing the largest size you can afford, and makes sense for your business because it is easier to brew less frequently than it is to buy and install a bigger system. Also, if you are running a pub, you won’t have time to brew everyday, as other activities will require your attention.
Whatever your business model, ProBrewer.com recommends doing a bit research before purchasing any system. This includes going to current breweries and pubs that have setups similar to what yours will be and observing. Talk to the brewers and taste their beer. Get an idea if more sophisticated and advanced setups work as they claim and if they are worth the trouble (expense). This is the best way to decide the ideal system for your business.
Geography plays a big role in business planning and quality of the beer as well. If you plan to open in Seattle, Portland or Denver, you better be prepared for competition. What will make you stand apart from the many other breweries down the street? Consider opening in an area of town lacking craft brewers. After all, man will naturally seek out the closest brew. You may also want to offer a different menu or styles of beer. A brewpub owner new to Portland, says it has, “behooved him to stray,” from the norm of other pubs.
There are reasons, though, that breweries congregate in certain locales, despite established competition. Water is key to beer and some areas naturally have better water, such as the cities we just mentioned. If you are breaking ground in a Bud and Coors town, make sure the local H2O is chemically correct for tasty beer production. Also, such cities may lack knowledge about good beer, and thus it will be your job to educate them. Do not assume the masses will drop their dad’s favorite drink just because you are the new guy in town. This is an advantage to brewing a beer packed city; you know there is a market for your products.
Finally, research the availability of raw materials at your intended location. Consumers are becoming more appreciative of food and beverage manufactures that source their ingredients nearby. It can also save you money and help ensure freshness. For example, you might be surprised to learn that over 75% of US hops are grown in Yakima, WA. This begs the question, what came first, the hop farmer or the brewpub? Additionally, should their be a shortage of any given product, having a the grower close by could help make sure you get your needed share.
Whatever route you choose, you’ll notice none of our steps include not starting a brewery. Get your plan straight and please, bring more bubbly brew into our world.