10k USD to start a home brewing business. Possible?

integra93ls said:

Yes but that's why I said sell for $5 a bottle. There is still $2-5 more profit they can make on each bottle.

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I encourage you to go talk to folks on probrewer.com. I think you will find that your expected profit margins on bottles are wildly excessive.

BrewKnurd said:

I encourage you to go talk to folks on probrewer.com. I think you will find that your expected profit margins on bottles are wildly excessive.

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Still a profit at $3 a bottle just not as much.

integra93ls said:

Still a profit at $3 a bottle just not as much.

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I think you will find 3 a bottle a wildly excessive estimate as well. The consistent message from successful brewers is that it is very hard to make money in retail.

Knock off the name calling and bickering. First and only warning. Next offense will lead to a 3 day ban plus thread closure. Enough!

Here's a link from Oregonlive which interviews several nano breweries: http://www.oregonlive.com/mix/index.ssf/beer/nano-breweries-put-great-care-into-little-batches.html

There are links to others at the bottom of the page. They might be helpful if you contact them.

I've done a lot of research on this subject, and it seems to me that the people who think it costs 200k+ are assuming that you are opening up a brewpub. Serving beer on tap, food, with a brick and mortar building. They usually quote construction costs in that 200k budget they mention. If that's the case, then yes, 10k won't even pay rent for a year.

If you are looking to brew beer in your garage, and distribute it yourself (btw, OR and WA allow you to self distribute) than 10k is feasible. You will have to keep your day job, and you'll likely brew everyday. The Internet is full of stories about breweries who started with 1bbl and upgraded to 3, then 7 then 15, etc etc. It can be done. It's a lot of hard work though.

If you plan to sell bottles, don't forget about all the extra work that goes into that. You'll be filling and labeling bottles by hand, unless you want to spend 20k on a used automated bottler.

I once looked into going the keg route. My Pale Ale recipe would cost around $50 a keg. Micro brewery kegs sell for around 130-150 (see: http://www.maletis.com/beer-dock-sales.php) So let's say a keg cost me 75, I could still sell it for 130 and make some decent $$.

Run the numbers. Shop around. Look for used equipment. Think of EVERYTHING and EVERY possible scenario. Write up a business plan. If it still looks good. Go for it!

--cheers

BrewKnurd said:

I think you will find 3 a bottle a wildly excessive estimate as well. The consistent message from successful brewers is that it is very hard to make money in retail.

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Agreed 100%. To the OP, check out probrewer. They have a lot of online resources, guides, and a forum that is a ridiculous resource for professional and want to be professional brewers.

There are business plans for breweries floating around the internet. I'd take a look at a couple if I were you and see what you find. You may find a lot of information and costs that you hadn't expected. I hope you do it and are successful!

Funny I stumbled upon this post. I live in Portland, OR and am in the process of all this now. I am into it for a while and I can tell you that $10,000.00 is not enough money. Not even for a small 1/2 bbl brewmagic system which is what I have. Feel free to PM me if you want to talk more. There is also an article in next Friday's Living section of the Oregonian that I am interviewed in that explains alot of the pains involved with it. If you are a member of the OBC, find me at the next meeting.

Very nice Pono. I noticed your PM before I viewed the forum and saw your post. I'm not a member of the Oregon Brew Crew, but would be interested in checking out. Like I said I'm in the very early stages of this, mainly just asking questions and building a network of people I can talk to. Who knows, maybe I can find a few passionate people with money and the know how and we can all work together. Anything is possible with the right strategy. I just thought this forum was/is a great place ask questions.

SweetAmmonia, the OBC hold monthly meetings at FH Steinbart's and will have a booth at the Oregon Brewer's Festival if you want to learn more about them.

I think OR is fairly well set up for smaller breweries and I am also doing some research on nanos. I really believe you could launch one for 20k in the right area with the right equipment and a few hook ups. Up by Mt Hood the area is classified as open zoning so things are a little more lax. We also have 13 bars/restaurants, 2 gas stations, and 1 grocery store with a massive beer selection(especially 22s). The bars also sell 22s. So if you found a cheap garage or shed to rent, skipped buying kegs and only bottled 22s, got a small labeler for around $200, and self distributed you could probably start small and fairly cheap. Plus it's a tourist area where local things can be pushed harder. This would however be more like a proof of concept instead of a full blown end game. But if you planned to only stay in the local area and exploit everything available you might see a decent profit. I believe this is why so many nanos are able to do well in so many small towns in OR.

Hook ups and cheap would be little things like making your on stand and system with a friend who welds or can get cheap metal. Building a cold room like John Beere. Find a good house yeast that will work with all of your beers at the same temp so the cold room can do the work of expensive glycol systems. Making inductor tank fermenters like Hess. Having Major malt/hop distributors within driving distance. And as always, Craigslist.

Granted a lot of this is still INCREDIBLY inefficient as far as labor. But it's a labor of love. It's a lot easier to recover from failing small than blowing 250K.

Forgot one last item but remembered after reading about Gordie. Background job. I work 40 hours in three days doing over nights. Gives me 4 days off to brew and numerous hours over night on the internet to do research and work on recipes. The 9-5 is probably not ideal to trying to brew on the side and start a brand.

Honestly I think that without a taproom the nano idea has very limited viability. I follow Healdsburg pretty closely on FB and it looks like he is only in two bars on a regular basis. I am guessing that with a 1 bbl system that is about what you could support. A tap room is where the money is being made. Once I realized that I have backed down from starting a nano in the immediate future. It just doesn't make financial sense to spend the time/money making beer but let someone else make the "big" money selling pints to the consumer.
In the meantime though I would suggest just getting your name and beer out there. I give away a lot of beer for other people's functions. It gets me a lot of positive exposure!! People just love to hear about some guy brewing really good beer out of his garage. I also have t-shirts that I sell to help cover the costs of the beer. I tell people that I can't legally sell beer but if you do like the beer to please consider buying a t-shirt. It's a win/win/win!! People get free beer, I sell some shirts that pay for at least some of my costs, and I get the exposure when people wear their shirts around town.

I would 100% agree with the last comment on needing a tap room/tasting room. You will find it may be your only business until your name gets out there and are established as well as a tasting room will actually pay for your rent/lease on the building usually if done right. the profit margin on selling your own beer by the pint is much greater than selling it by the keg too. Just to give you a heads up, a bottom level keg washing system starts around 8 to 10 thousand so take that into consideration.

In maryland a brewery license costs 4k alone, and has to be renued yearly. Look into a business plan, price things out, see if you can do it. In my opinion "nano brewing" is a waste of time and money, you will never be able to produce enough volume to become profitable. 10k might be close to starting a homebrew store though.

So I probably shouldn't share this but after a few IIPA's, what the hell. In Oregon, here is a break down of the costs. Insurance will run between $1,500 to $3000 a year approx., bonding is only about $200. For Workers comp, you will need to pay $3.60 per $100.00 payroll on a brewer, $.80 per $100.00 for outside sales guy (self distribution), $1.70 per $100 for tap room. No application fee for TTB, OLCC is $250.00/year for license code BP or $500/year for license code BRW & BRWNC plus and additional $2.60 per server. Oregon State Business license will run at different costs depending on how you register your business (ie: LLC, corporation, etc.) Keep on mind, on top of this you will need to pay your rent/lease on the building, renovation costs, costs to meet health code regulations, etc. Now once you are up and running you need to pay the man which means federal and state. State taxes are approximately $2.60 per barrel. I have lost the information on federal but it is easily found if you research it. So just to give you an idea, your start up costs not including equipment is easily going to surpass the 10K range. I will repeat what alot of guys have said already. If you want to be successful, get your business plan done and go from there. I am probably on the 20th revision to mine already just to get financials in order. The preparation work will take just as long and be just as hard as it will once you get things physically going. I guess if I was to give any advice it is to make dang sure this is something you really want to do for a living (meaning eat, sleep, breathe beer) before you do it. If you don't want the headaches, just make great beer at home and share with friends.

Thought I would post a little write up from Andrew.
Enjoy the read.....

Cheers
Jay

I've operated Parish Brewing Co. for over 2 years now, furiously brewing a nano-amount of beer. I get several emails every week from aspiring nano-brewers from all over the country and they all have the same questions about my experiences, my custom equipment, and other general info about starting a tiny commercial brewery. If the probrewer community would humor me, I'd like to use this as a place to get some FAQs documented since I cannot answer all of the emails I get with the full respect and well thought-out answers they deserve. Hopefully this can help some of you daydreaming out there get some answers. Some of these answers may not be what you want to hear, but they are based in fact and my actual experience. I know I would have appreciated some of this info before I embarked upon the nanobrewery path.

1.) Nanobreweries are not profitable. Well, at least if you have to sell at wholesale. The only way a nano can be in the black is if you can sell most or all of your production at full retail price. Even then the return will not justify spending the capital required to get it going. A nano will never, ever make enough profit to pay for organic growth of the brewery. Period.
1)(b) On the other hand, a nano is a great vehicle to get the investment needed to finance a viable craft brewery. In my opinion, that is the only rational reason to go through all of the trouble to build and operate a nano. If you do not have a plan to finance a viable larger operation, don't build a nano. The nano can be used to show real revenue and cost structure in your market, and can be extrapolated to any project size from there.

2.) You can use cheap equipment, like plastic fermenters, and make great beer. They will not last very long, and you have to be seriously anal-retentive about taking care of them and sanitization, but they work. I used some stainless drums found on craigslist for the brewhouse, etc. There are some creative ways to make brewing equipment in the 50 to 150 gal size range and don't be afraid to try something new. I mean, some of the finest brews in the world are fermented in a wood container. Think about that the next time you drool over that cherry, stainless jacketed conical fermenter that probably costs more than my entire brewhouse and cellar combined. Also, most of the money you will spend getting the nano going will not be on brewing equipment. The cost of kegs, walk-in cooler, operating capital, etc will all be likely more than 50% of your total startup cost.

3.) Save your money for another year or two and buy something bigger. Seriously, this is the best advice I can give. If your beer is halfway decent, you will sell way more than you can ever produce on a nano system. You will bust ass like you've never busted ass before and it will still not be anywhere close to being enough beer. Trust me. If your beer is good you will need more than a nano. If your beer isn't good, you probably wouldn't be reading this. Simply put a nano produces a painfully small amount of beer. Save your money for another year or two, get something at least bigger than 7 bbl brew length, and then send me a case of your finest when you realize I was right.

4.) Permitting is a *****. There are lots of government agencies, and they all want a piece. Get used to it. You get no special treatment because you are a tiny, low cost operation. If they want you to put covers on your fluorescent lights, you better be ready to shell out for that manlift rental. Start talking to your respective agencies as early as possible. There is no best way to start, there is no road map. Every professional brewer on this forum has had to figure it out on their own, unfortunately. Go forth. Be brave. Approach your various govt agencies, be polite, and you will eventually get all of your permits and licenses in hand.

5.) Operating a nano every day isn't very fun. It makes a really fun hobby a painful job - a 2nd job that you work on the evenings and weekends. I know it seems like fun now. You need to have some serious stamina to keep up the pace required to work a day job and also the nanobrewery. I have a huge amount of respect for any of the other nano owners out there who have made it work. They will never get the credit they deserve from most of the craft brewing community for the pain and sacrifice it takes. Just because its a small brewery doesn't mean its any less work than a larger version. I only recently quit my day job to focus on our new large brewery, but until then I worked every weekend for over 2 years. Think about that for a minute. No more fishing. No Saints games. Countless hours of time lost with my toddler daughter and wonderful wife. Whatever you love to do beside brewing and drinking great craft beer, it will probably have to go on the back burner.

6.) It is incredibly rewarding to brew for a living and to hear someone say they love your beer - and that's totally worth all of the bull**** noted above.

Cheers!

__________________
Andrew Godley
Parish Brewing Co.
Broussard, Louisiana


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That's a great writeup. Thanks for sharing, Jay.

ktblunden said:

That's a great writeup. Thanks for sharing, Jay.

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Guess you didn't click the link I posted....

Denny said:

Guess you didn't click the link I posted....

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You're correct. I generally don't click on links unless I'm actively looking for information, which I wasn't in this case. But thanks for posting the link, it's great information, regardless of who posted it first.

ReverseApacheMaster said:

I hear that there are some breweries that produce beer entirely by contract and have no physical location, so it is a feasible model.

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We went to a place up in the Finger Lakes a couple weeks back that did that. The beer happened to be atrocious, which is probably not going to be the case with every contract brewery but if you don't have the ability to quality control, that might prove to be an issue.

But, something like that is probably the only way to possibly get off the ground for those kinds of dollars, given the lawyers that you'll have to pay and the equipment that you'll have to buy and rent to be paid up-front and ingredients to be bought and everything else - and no cash coming back through the door for months.

So, I would probably look into contract brewers, but then it's a question of trying to get your beer sold!

One question for anyone who wants to do this -- What's your differentiation strategy?

So you're a good brewer. You've got some tested recipes that taste good. You know what? So does everyone else. You have an awesome IPA? So does everyone else. The American craft beer market right now is *INCREDIBLY* crowded. Brewing great beer with great execution *should* be enough to succeed, especially if you're working at the brewpub level and can generate some volume and sell your own. But as a nano? Unless you can develop a cult following for your beer, you're likely to be in trouble, and unless your beer is unique, you're not going to do that.

As an example, look at The Bruery. Patrick [& Tyler] had been a member of my homebrew club prior to starting professionally. They absolutely blew up from nothing in 2007, when they were still building the place, to today. How did they do this? By offering unique beers that you can't find anywhere else. And it was perfectly timed for the craft beer market, because it was just at the point where the "extreme beer" craze had hit. They make excellent beer, to be sure, but I firmly believe that their commercial success is due as much to the uniqueness as to the quality.

Like a lot of homebrewers, I have that thought in the back of my mind of "hey, maybe I could do that too!" But their style of brewing isn't my style of brewing. I mostly brew classic styles of beer. I think the quality of my beers is high, but I don't think there's much differentiation there, with the exception of the fact that I brew Gose and milk stout, which are two harder-to-find styles. But a good hefeweizen and an above-average IPA isn't going to be enough to get you noticed and to grow in size as a brewery in the crowded market we've got, you need differentiation.

You bring up a lot of great points but I don't know if differentation is necessarily a good thing. Some guys in my HBC want to start a nano that only brews barrel aged sour beers. I would venture to say that the vast majority of beer drinkers (BMC and craft) don't enjoy sour beers. So as a business I would think it would be incredibly hard to sell something that the majority of beer drinkers don't enjoy. Even you make really, really great sours the market is so small that to make any money you are going to have to really set your price point really high.

Prove us all wrong and do it...Remember Kurt and Rob sold cloudy beer that was said to be bad because of haze...now look where they are.

Phunhog said:

You bring up a lot of great points but I don't know if differentation is necessarily a good thing. Some guys in my HBC want to start a nano that only brews barrel aged sour beers. I would venture to say that the vast majority of beer drinkers (BMC and craft) don't enjoy sour beers. So as a business I would think it would be incredibly hard to sell something that the majority of beer drinkers don't enjoy. Even you make really, really great sours the market is so small that to make any money you are going to have to really set your price point really high.

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Jolly Pumpkin does okay I think.. I agree though.:fro:

onthekeg said:

Jolly Pumpkin does okay I think.. I agree though.:fro:

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Yeah, with 15 dollar bombers... That would be the really high price point that was referenced. if you can make a beer good enough to charge 15/bomber, then yes you can have success marketing to a niche market.

bwarbiany said:

One question for anyone who wants to do this -- What's your differentiation strategy?

So you're a good brewer. You've got some tested recipes that taste good. You know what? So does everyone else. You have an awesome IPA? So does everyone else. The American craft beer market right now is *INCREDIBLY* crowded. Brewing great beer with great execution *should* be enough to succeed, especially if you're working at the brewpub level and can generate some volume and sell your own. But as a nano? Unless you can develop a cult following for your beer, you're likely to be in trouble, and unless your beer is unique, you're not going to do that.

As an example, look at The Bruery. Patrick [& Tyler] had been a member of my homebrew club prior to starting professionally. They absolutely blew up from nothing in 2007, when they were still building the place, to today. How did they do this? By offering unique beers that you can't find anywhere else. And it was perfectly timed for the craft beer market, because it was just at the point where the "extreme beer" craze had hit. They make excellent beer, to be sure, but I firmly believe that their commercial success is due as much to the uniqueness as to the quality.

Like a lot of homebrewers, I have that thought in the back of my mind of "hey, maybe I could do that too!" But their style of brewing isn't my style of brewing. I mostly brew classic styles of beer. I think the quality of my beers is high, but I don't think there's much differentiation there, with the exception of the fact that I brew Gose and milk stout, which are two harder-to-find styles. But a good hefeweizen and an above-average IPA isn't going to be enough to get you noticed and to grow in size as a brewery in the crowded market we've got, you need differentiation.

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^^ what this guy said. There are more breweries operating in this country then ever before at any point in history according to the BA. According to the BA there are also thousands of breweries planning to open in the next calendar year. You have to create a niche for your product. Nano brewing (brewing on a scale less then 3bbls) for production is highly inefficient. Most breweries that produce beer sell a half bbl keg from 80-100 bucks to a distributor. Unless you have world class beer that can compete and best the perennial winners at GABF and WBC, you cant sell beer much higher then that regardless of the quality. This is why such a small production model is tough to run, you physically cannot brew enough beer to make it profitable, and you quickly realize you need to upgrade your system to a real 10, 15, or 20 bbl brewhouse. This requires substantial investment and defeats the purpose of a nano brewery to begin with.

You would most likely have the most success with a system that small being able to sell on premises where your margins are well over 400% But to do this you most often have to be classified as a "brewpub" and have food, unless you are in a state that allows you not to do so, food means running a restaurant as well which is a whole other bag of worms. Even then if you experience any success you'll still be looking to upgrade your brew system. DFH started brewing on a half bbl sabco system, brewing many times in one day 7 days a week. There is a reason they no longer use that system.

The brewing industry is about growth, grow or die. It is smarter to start with a larger system and grow into it then buy small and have to rebuy a year or two into the business just to stay afloat. If you look into a small brewpub, you have to draw a crowd by creating a niche through beer style, atmosphere, or other factors.

I have been inside a nano brewery where the guy was doing 10 gallon batches. I marvelled at his largely empty brewing room and asked what kind of yeast he used. He said "mostly dry" and held up a couple packets of what looked like us-05. He definitely started for less than 10k but who knows how long he will stay open. Just because it can be done doesn't mean it is the best idea. The beer was ok but not special and the price point was a bit high. 3 New brewers starting up within 15 miles of him, if he survives the winter I will have to give him another try.

There is an amazing brewery near my house that has a 1BBL system. They have to brew almost everyday of the week to meet demand. It's damn good beer too.

red96jeep said:

You would most likely have the most success with a system that small being able to sell on premises where your margins are well over 400% But to do this you most often have to be classified as a "brewpub" and have food, unless you are in a state that allows you not to do so, food means running a restaurant as well which is a whole other bag of worms. Even then if you experience any success you'll still be looking to upgrade your brew system. DFH started brewing on a half bbl sabco system, brewing many times in one day 7 days a week. There is a reason they no longer use that system.

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I agree that a sell on premises facility is pretty necessary, but I don't think it has to be a brewpub. A new brewery just opened with a taproom a couple miles away from me and they have a nice setup and excellent beers. They've teamed up with some local food trucks to have food available most days they're open, plus there are a number of fast food places right around the corner that you can grab a to-go order and bring to the taproom to eat. Their margins are pretty low given that they're renting an industrial space and not dealing with food preparation at all.

EDIT: Though their system was surprisingly small, so I'm sure they'll be upgrading pretty soon.

DonMagee said:

There is an amazing brewery near my house that has a 1BBL system. They have to brew almost everyday of the week to meet demand. It's damn good beer too.

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To me, that would be taking a fun hobby and turning it into wage slavery.

ktblunden said:

I agree that a sell on premises facility is pretty necessary, but I don't think it has to be a brewpub. A new brewery just opened with a taproom a couple miles away from me and they have a nice setup and excellent beers. They've teamed up with some local food trucks to have food available most days they're open, plus there are a number of fast food places right around the corner that you can grab a to-go order and bring to the taproom to eat. Their margins are pretty low given that they're renting an industrial space and not dealing with food preparation at all.

EDIT: Though their system was surprisingly small, so I'm sure they'll be upgrading pretty soon.

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Your right, I only said brewpub because in my state you have to be classified as a "brewpub" to sell pints of beer. In Maryland liqueur laws are county by county so in some counties a brewpub does not need a kitchen, in others you have to have a food requirement to sell pints of beer.

red96jeep said:

Your right, I only said brewpub because in my state you have to be classified as a "brewpub" to sell pints of beer. In Maryland liqueur laws are county by county so in some counties a brewpub does not need a kitchen, in others you have to have a food requirement to sell pints of beer.

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Ah, got it. One of the (very few) things California gets right is laws generally very friendly to small breweries.

We have a local startup nano that acquired a building last Fall, and they are still not done satisfying all the bureaucratic requirements. There are three guys, each with a piece: a brewer, a marketer, and a lawyer. They've put together a startup / pilot rig of 2 bbl., and plan to make a quantum leap from there once there is a demonstrated market in this area. They are self-distributing under the new law in IL, and have a tasting room in the same building as the brewery. This strikes me as well planned, well thought out, and I think it has a good chance of success. But they raised several times the amount mentioned in the OP, just doing a Kickstarter- quite apart from whatever other capitalization they may have. I realize that there are some states that may let you brew in your basement, but this isn't the 1990s when outfits like New Belgium and DFH started up. And, yeah, Jim Koch of Sam Adams fame was successful, but his rich father invested in Boston Brewing to make it happen.

I endorse the posts that say to do a business plan. Also see a lawyer.

Denny said:

To me, that would be taking a fun hobby and turning it into wage slavery.

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I think I am already there.... I brew a lot and give a lot of beer away to friends. Which means it pretty much takes up the majority of my free time. Every day off I have some brewing related stuff too do. Today I stepped up a yeast starter, cleaned up a jockey box, cleaned fermenters. Tomorrow I brew. The next day off I bottle a bunch of beer and fill out comp entries. I am operating on the 10 thousand hours principle...which essentially says that to master something it takes 10 thousand hours. At this rate I should be a master in another 20 years or so