The micro-pico-nano brewing systems

Been lookin for small brew systems on the web and saw this, its a good writeup.
http://www.soundbrew.com/small.html
What do you nano brewers think about this, should we all forget about buying a brewing systems smaller then 7 barrels?

In short..Yes, If you want to make your hobby a real profit center. If you just want to make beer for people to enjoy and be able to sell it to them, then no. There are a boatload of Nano breweries that are not only "making it" but profitable. Can they support a family of 5 on their 1 bbl. system? Probably not. Are they working 14-16 hours a day brewing, transferring, bottling, kegging, paperwork, ordering, maintenance, marketing and then trying to enjoy a little fun time in the brewery.....yhhh yeah. If they are trying to grow.

The man that wrote that article was in the business for a very very very long time. He has seen it all, so to speak, when it came to startup ventures. I, myself trust his knowledge in the industry.

But just because most (not all) small start ups don’t make it. That’s not to say you can’t!

I have read that article many of times from posts here on HBT. Its always a good read every time I think of going smaller just to be able to afford to get started.
That said I am installing a 4-5 BBL system at my store. But I already have a profit center that works. I am not trying to rely on the brewery to support the business, only add to it.

Cheers
Jay

Icebrewer said:

Been lookin for small brew systems on the web and saw this, its a good writeup.
http://www.soundbrew.com/small.html
What do you nano brewers think about this, should we all forget about buying a brewing systems smaller then 7 barrels?

Click to expand...

That article scared me for a while until I started putting together a business plan. I quickly realized that he was way off base and that he forgot the plural of anecdote is not evidence.

Not only are there scores of successful breweries that started off at 2 or 3 bbl, but the economics of it make perfect sense. The way I'm going forward means I'll need to sell 129 bbl/year to break even the first year. That's not a lot of beer.

There are several brewers in the area that started with 1 barrel systems and made it work. There are also cases of people with piles of money installing 7, 15, or even larger systems and failing. There was one of each case nearby in the last five years. The bigger brewer was turning out beers that all tasted the same and not in a good way. Heater Allen was one of the first all-lager craft brewers around and he's doing just fine. He's running 30-42 barrels a month. I think he really wants a bigger system, but his limiting factor is space for lagering tanks.

SBS wants to deal with people who have $300,000 to spend. If you have that kind of capital, you aren't looking at a 1bbl system.

They probably don't have the time to deal with all the tire kickers looking into nanos because they are successful dealing with larger clients.

Nanos can be profitable, but they make it sound like it's nearly impossible. Most of what they say makes quite a bit of sense, though.

Absolutely nano's can be profitable...the problem is that in the "nano" world that means you made 5-10k for the year. Profitable...but not sustainable in the long run unless you are retired or have another means of income. It also seems that the most successful nano's have a small tasting room....that is where they make their money.

There's good arguments on both sides. We all know nanos going as small as 1bbl can be profitable. Hell, Hess is moving up to a 30bbl system from 1.5bbls, but that's mostly on investor money and loans, not from profits from the brewery.

That said, the anti-nano folks tend to totally ignore the extreme low cost of entry for businesses like this. A determined DIYer can get into this business very cheap, the trick is making your operation not LOOK cheap so that people respect you as a business.

The other thing people fail to note is that the Tasting Room model makes a very small brewery much much MUCH more feasible. If you're a packaging brewery and selling kegs to local bars, you can sell those kegs for ~$150 depending on your market. If you're selling all that beer directly to your customers, you can sell the ~110 pints in that keg for $4-$5 dollars apiece, which means at least $440 per keg. Selling smaller tasters and half pints increases this profit.

Large breweries can't work exclusively on tasting room sales, they have to distribute to get rid of all their beer. Most people aren't going to drive to a tasting room to get beer, so packaging breweries take advantage of a much larger market, but small breweries can sell more of their stock at much higher margins.

One last thing is that large systems (even as small as 3bbl) take a pretty big time and money investment just to LEARN how to use/clean/maintain/troubleshoot and come with a whole host of new equipment and problems. Think glycol systems, steam lines for heat, automation, CIP systems, and the whole range of dangerous chemicals and OSHA requirements that go with them. Same goes for a large brewery needing to have lots of employees- think employment law, workers comp, OSHA again, payroll, tax, and all sorts of other nuisances a sole proprietorship doesn't bother with.

In short: We know the nanobrewery is a workable model because there are already tons of profitable nanos in existence. These guys don't want to deal with them because of the high percentage of tire-kickers (as mentioned earlier, thanks to the nano boom) and small profits to be had. That said, I agree with the skeptics who say that you all are going to be able to pick up 1-3bbl systems for very very cheap in a couple of years. You can't have mine, though.

I've got a 1bbl home brew system and a 7bbl commercial system with all of the hardware. I already have a building with 3000 sq ft of space but the location is controlled by the developer and they will not allow any retail sales or restaurant type settings.

This put a major crimp in my brewery plans because it is tough to make a profit without retail sales. If I could acquire a bottling line it might help but I really need a tasting room which helps with outside sales also. I've been going back and forth with the city over this and they have no control over the developer so I'm stuck.

I could go ahead and open and hope for the best but at the moment I'm not sure that is the best plan of action.....

Monster Mash
This sounds like you need to ditch the building man and move on. Get that thing running in another location, OR.....Build it and just have the tasting room off site and do brewery tours, Jack Daniels did it.....



Don't get me wrong guys. When I talk profit myself, I am talking about making a living (input your own $$ amount here as to what that means to you). Heck $1 is profit.

Cheers
Jay

MisterTipsy said:

SBS wants to deal with people who have $300,000 to spend. If you have that kind of capital, you aren't looking at a 1bbl system.

They probably don't have the time to deal with all the tire kickers looking into nanos because they are successful dealing with larger clients.

Nanos can be profitable, but they make it sound like it's nearly impossible. Most of what they say makes quite a bit of sense, though.

Click to expand...

I completely agree! I am in the process of building my brewery. I am only looking at 3 -3.5 bbl systems and about 500 bbls annually. The reason SBS thinks that they aren't profitable is because they are in a mindset that everyone is pushing kegs out the door. I, for one, will not be doing keg sales or bottling for retail. All my beer will be sold in our Tap Room by the pint and in growler fills. Based on that model, we plan on being profitable in about a year, give or take 6 months (actually the Business Plan has it repaying all loans in 18 months, but I can take the hit in the wallet to get them paid off faster).

:rockin:

CA_Mouse said:

I completely agree! I am in the process of building my brewery. I am only looking at 3 -3.5 bbl systems and about 500 bbls annually. The reason SBS thinks that they aren't profitable is because they are in a mindset that everyone is pushing kegs out the door. I, for one, will not be doing keg sales or bottling for retail. All my beer will be sold in our Tap Room by the pint and in growler fills. Based on that model, we plan on being profitable in about a year, give or take 6 months (actually the Business Plan has it repaying all loans in 18 months, but I can take the hit in the wallet to get them paid off faster).

:rockin:

Click to expand...

good luck and congrats I will be there when it opens

Will let you know! Right now I'm looking at May 2014 depending on TTB & ABC licenses.

daksin said:

The other thing people fail to note is that the Tasting Room model makes a very small brewery much much MUCH more feasible. If you're a packaging brewery and selling kegs to local bars, you can sell those kegs for ~$150 depending on your market. If you're selling all that beer directly to your customers, you can sell the ~110 pints in that keg for $4-$5 dollars apiece, which means at least $440 per keg. Selling smaller tasters and half pints increases this profit.

Click to expand...

That's the big thing. Most of the "conventional" wisdom on nanos comes from the assumption of making profit on selling kegs. If you can sell the majority of your beer over your own bar you can definitely be profitable.