Something to think about for wannabe micro/nano brewers

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limulus

limulus

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I read an article about Sierra Nevada hitting the 1,000,000 barrel mark. The revenue from that is approx $200-million.

That got me thinking: $200m seems like a lot of money at first but that is just sales revenue from the beer. I have no clue what operating costs are or what the net is, but you can bet it is a fraction of $200m. There are hundreds of employees, taxes and all associated expenses that apply to a normal business and then those that apply to a brewery. Then there is that little brewery being built in North Carolina. No doubt Ken Grossman has made his fortune in beer but it has taken >30yrs.

For me, I would have to sell a lot of beer to live comfortably, not 1,000,000 BBL, but definitely thousands and I'm not looking to become a pro brewer. I recently toured Terrapin Brewing Company in Athens, GA with the GA Craft Brewers Guild. They were saying it takes approx 3000 BBL to start making a profit or maybe it was to break even or maybe...it was their estimate to make a comfortable living. I'm not sure what size brewery they were basing that on or what the related expenses are that go with that calculation. But doing some very simple math using the $200/bbl figure from the article, that comes to $600k in sales for 3,000 BBL. With expenses, I'm sure there ain't much left in the end. I personally enjoy my vacay time and my boat. On the other hand, I sure am glad there are people who take the risk and make us some delicious adult beverages.

Here is the article:
http://news.investors.com/managemen...ierra-nevada-leads-surge-in-craft-brewing.htm
 
Margins are tight on most businesses.

Looking at the books for most any business is a real eye opener.
 
Yes. I've thought about it and once you do the calc, you realize that... well... it's real work. And I would be afraid of loosing the joy of homebrewing.

In a related comment, I've also toured the Terrapin Brewery and it's a nice place. I like the way they have it set up with that outdoor area for music and socializing. :)
 
What if you're starting a nano in a state that allows sales directly to the consumer via a tap room? Instead of having to go through a wholesaler, you'd be able to make a whole hell of a lot more profit by selling a pint for say $4, depending on the style of course.

I'm not saying that it's going to be enough for one to quit their day job, but it could at least help to start paying for the overhead of starting the nano and allow the brewery to eventually expand.
 
It is daunting, but remember that even things like salary are reflected in all of the costs of doing business. So if you're making ANY profit, you're good. You just want more profit so you can expand. For instance, our company makes maybe $40 million in revenue and employs over 150 people (including international offices) comfortably. Or reasonably comfortably. My salary is decent, and there are for sure people that make quite a bit more than me.

All of that and we still come out with maybe $6.5 million in profit. We're not a brewery though.

What I'm trying to say is, $200 million in revenue is a lot. I'm willing to bet that everyone is getting paid a pretty good wage. Even if their profit is somewhere around $3-10 million, that's a lot that can be used to grow the company. Heck, $1.3 million is about what I figure you'd need to start a 20bbl brewery anyway.

So let's look at the $200/bbl estimate as well. Sure that's $600k for 3000bbl. I think their estimate is pretty spot on for breaking even or profiting. I would also add that some barrels will make you more money if you can them and distribute...but we'll keep the estimate of $200/bbl you gave.

If you're making $600,000 in revenue, even in your second or third year, that's really good. Annual loan payments (on my brewery estimate) would be about $83k. Operating costs? Couldn't be more than $100k. I wouldn't know, that even seems really high (Water alone might be $4000 of that? Not sure about energy). Ingredients, another $100k as a really quick guess. $180k in salary for 3 people to start with. You've just made about $137k in profit. Not a lot, but it's still profit and you're self sustaining. Now you can bank it, invest it in your company, whatever. Obviously I'm neglecting things like taxes on the profit, expenses for things like external accounting, etc.

Brew 2-3 batches a week. The rest of the time you're racking, inspecting, canning, etc etc. I would say that's pretty respectable for $60k/yr. Just have a wife with a job that has insurance :).

I don't know, just my thoughts on that. I'm not saying I want to start a brewery. ...but someday I want to start a brewery.
 
sidepart said:
It is daunting, but remember that even things like salary are reflected in all of the costs of doing business. So if you're making ANY profit, you're good. You just want more profit so you can expand. For instance, our company makes maybe $40 million in revenue and employs over 150 people (including international offices) comfortably. Or reasonably comfortably. My salary is decent, and there are for sure people that make quite a bit more than me.

All of that and we still come out with maybe $6.5 million in profit. We're not a brewery though.

What I'm trying to say is, $200 million in revenue is a lot. I'm willing to bet that everyone is getting paid a pretty good wage. Even if their profit is somewhere around $3-10 million, that's a lot that can be used to grow the company. Heck, $1.3 million is about what I figure you'd need to start a 20bbl brewery anyway.

So let's look at the $200/bbl estimate as well. Sure that's $600k for 3000bbl. I think their estimate is pretty spot on for breaking even or profiting. I would also add that some barrels will make you more money if you can them and distribute...but we'll keep the estimate of $200/bbl you gave.

If you're making $600,000 in revenue, even in your second or third year, that's really good. Annual loan payments (on my brewery estimate) would be about $83k. Operating costs? Couldn't be more than $100k. I wouldn't know, that even seems really high (Water alone might be $4000 of that? Not sure about energy). Ingredients, another $100k as a really quick guess. $180k in salary for 3 people to start with. You've just made about $137k in profit. Not a lot, but it's still profit and you're self sustaining. Now you can bank it, invest it in your company, whatever. Obviously I'm neglecting things like taxes on the profit, expenses for things like external accounting, etc.

Brew 2-3 batches a week. The rest of the time you're racking, inspecting, canning, etc etc. I would say that's pretty respectable for $60k/yr. Just have a wife with a job that has insurance :).

I don't know, just my thoughts on that. I'm not saying I want to start a brewery. ...but someday I want to start a brewery.
Click to expand...

Your 20 barrel estimate is right on. The folks at Terrapin said $1.2 million.
 
limulus said:
Your 20 barrel estimate is right on. The folks at Terrapin said $1.2 million.
Click to expand...

Nice. I have no idea where one would manage to get all of that money though. If you just had the location, that'd just about halve the cost right there.

Do you actually own a brewery?
 
Lots of costs that no one bothers to calculate. Equipment is expensive. 15 bbl will run a quarter of a million with a minimum of FV and Bright Tank + CIP / Glycol / walk in refrigeration. Water, electricity, Nat Gas, sewer, grain + other ingredients, glass ware, bottling / canning, sanitizers, kegs, insurance, SSN, local, state, federal taxes, gas.... it's crazy. If you are not self distributing and selling pints in the tasting room.... You are struggling... You need cost plus 1 year operating costs to even consider the move.
 
$200 per bbl seems high but considering wages, gas, water and supplies it makes sense.

I think a lot of that has to do with scale and type of packaging as well. A brewpub will have a lower recoup margin than a package brewery bottling their wares. So in reality you can make a comfortable and even profitable living far below the 3k bbl number.

Granted not everyone across the country will know your name, but your local market sure will.
 
If you can't hit over $200 a bbl as a nano you better not open a business! Nanos that think they can survive in the market in a three tier state without selling $3 or $4 pints are dreaming! If you can't sell you beer without a distributor you better be planning on opening a 15bbl or larger brewery and you better brew 4 days a week!
 
These things totally depend on how you go about setting up your business -

-how frugal you are with regards to acquiring equipment - you can save hundreds of thousands if you're patient enough

-finding the right location - again, patience - if you can find a place that doesn't require a huge build-out, again you can save hundreds of thousands

-your business model and where you're located - if you're taproom only in a city/area with high demand and you have low overhead, your margins are very good; if you're a 20 barrel production brewery in a 3-tier state that doesn't allow taproom-only and you're constantly fighting for shelf space, your margins aren't as good.

Plenty of micro- and nanobreweries are profitable very quickly. Many others aren't, but plenty are. Funkwerks was profitable within 6 months, and they operate a 15 barrel brewery. Crooked Stave did <400 or so barrels in their first year, but made great profits, and are stepping up to >3000 barrels next year in their third year. Much of this is frugality and being smart about their business models.

Results can vary dramatically, and regardless of your model, it will be hard work. But what job worth doing isn't hard work, if you're doing it right? Work hard, work smart, make gains, keep working hard some more, and try to ensure that you're enjoying it. If you're not enjoying it, do something else. Operating a brewery shouldn't be any different.
 
yeahfairly said:
If you can't hit over $200 a bbl as a nano you better not open a business! Nanos that think they can survive in the market in a three tier state without selling $3 or $4 pints are dreaming! If you can't sell you beer without a distributor you better be planning on opening a 15bbl or larger brewery and you better brew 4 days a week!
Click to expand...

You are very correct. Tap Room sales are the only way that a brewery under 7 barrels will make any money. Anything under 15 barrels needs to have commercial accounts and a Tap Room. If you want to bottle only, you really need at least a 15 barrel brewery with at least 8 fermenters and 12 bright tanks (each 30 barrel and double batching), plus a bottling line and a *VERY* good distributor.

I've seen and heard that it isn't about the size of the brew plant, so much as the amount of fermenting and clearing space you have. Locally, Hangar 24 brews 24 hours a day, 6 days a week and they have problems keeping up with their demand (oh that I could have that problem). :ban:
 
moti_mo said:
These things totally depend on how you go about setting up your business -

Results can vary dramatically, and regardless of your model, it will be hard work. But what job worth doing isn't hard work, if you're doing it right? Work hard, work smart, make gains, keep working hard some more, and try to ensure that you're enjoying it. If you're not enjoying it, do something else. Operating a brewery shouldn't be any different.
Click to expand...

Agreed. My BP has moderate growth over 3 years with any loans paid in less that 2 years (of course that is without paying myself (love a better half that makes good money)!).
 
We opened a 7 barrel with 4 FVs and it's profitable in under a year, production is estimated to be around 500 barrels in the first year. 75% of our production is sold directly to the consumer in the tasting room/pub or via growler fills and we opened up in our own hood. So just generalizing what you need to make to make a profit doesn't work. There are many business models that do not depend on economy of scale but of course that is the most common model. Of course, any profits have just been sunk right back in to better equipment etc. so nobody's getting any cheese. But I don't homebrew anymore, but I do enjoy brewing still, and it's rewarding to have your neighborhood stoked on your beer.
 
I read Tony Magee's book on the story of Lagunitas brewing and it was a real eye-opener, as well as being a very entertaining read. If you're at all interested in starting a brewery of any size, definitely to pick up a copy.

I bought mine at the brewery. I have no idea where else to get a copy. Amazon has it listed, but it's out of print.
 
This method never fails:

1. pay cash for building, build out and all brewing equipment
2. make beer
3. ???
4. profit!
 
enricocoron said:
We opened a 7 barrel with 4 FVs and it's profitable in under a year, production is estimated to be around 500 barrels in the first year. 75% of our production is sold directly to the consumer in the tasting room/pub or via growler fills and we opened up in our own hood.
Click to expand...

Nice, congrats. Are you guys keeping your day jobs currently, or did you go all in?
 
enricocoron said:
Day jobs still for sure, very tired at the moment.
Click to expand...

Yeah, that's what I figured. We have essentially the same business plan as you guys do. We have an 8-barrel system with 6 FVs and a 3-barrel pilot, and need to find a place. Have a good line on a place in our neighborhood as well, so hopefully it will work out. Keeping the day jobs initially, and plan on being very tired for quite a while.

I'd be interested in hearing more about your experiences in the first year if you don't mind sharing via PM.
 
Can I ask how old you guys are being that you have day jobs as well as running the brewery?

I'm hoping to do the same in the next year or so and just wanted to know what it was like for other folks.
 
LovesIPA said:
I read Tony Magee's book on the story of Lagunitas brewing and it was a real eye-opener, as well as being a very entertaining read. If you're at all interested in starting a brewery of any size, definitely to pick up a copy.

I bought mine at the brewery. I have no idea where else to get a copy. Amazon has it listed, but it's out of print.
Click to expand...

http://store.lagunitas.com/So-You-Want-to-Start-a-Brewery-Lagunitas-Story-by-Tony-Magee_p_176.html

They sell it on the Lagunitas website. Is it really that good? I haven't started delving into research yet. I have some rough (really rough) numbers I came up with so that I can at least tell myself it's feasible. Otherwise, my next steps are to make good beer, get my name out there, and volunteer at a couple of breweries. I want to make sure that the back breaking labor is really something I would find to be a "labor of love". If I piss and moan about anything, the idea goes into the trash.
 
I learned a LOT about what it takes to start and grow a brewery. I laughed out loud quite a few times while reading it. It was easily worth the $18 I paid for it.
 
The best way to start a brewery? Make your money somewhere else, "retire" early, and then start brewing. That is basically my plan since I don't want/need a career change. I have my "brand" started so that when I finally do pull the plug and open I will have a large following. It won't be like I am starting from scratch.
 

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