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Cape Brewing

DOH!!! Stupid brewing...
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There are always threads floating around by folks who are thinking about the same dream 98% of us have... starting a brewery. I have been responding here and there and figured I would just start a thread.

I am super lazy so I lifted (and slightly edited) a response I gave on another thread below.

I don't remotely consider myself some sort of "expert". I am not remotely saying you will need to 1) do it how we did it or 2) run into the same issues we did. I am simply trying to show what it took for us so folks can go into the situation with as much knowledge as possible.

Two partners and I just opened a nano and are holding our initial release parties in about two weeks at two different bars... so... I just went through this.

You're going to need to file for and obtain a Brewer's Notice through the TTB. Part of that application process includes documenting the commercial space you've OBTAINED (not "are looking at"... they want a copy of either the deed to the property or the executed lease agreement with the landlord.) They'll also want proof of insurance (the landlord will want that too), six months of financial records, evidence of where the funding for the brewery is coming from... among other things. We were able to get all of that paperwork filled out and submitted in about two weeks. We got approval in about 45 days after that (which was lightning fast from what other breweries have told us).

There is a lot of talk about the TTB allowing a brewery to operate on privite propery (or a residential property). MY understanding (which could be 100% incorrect) is that it is very rare that the TTB will allow a commercial brewery to operate on a residential property and when they do allow it, the brewery needs to operate in a completely separate building from the residence.

Once you have your Brewer's Notice, then you have to get your state license... the state is typically dependant on getting the TTB license first. State licenses vary dramatically from state to state in terms of rights to self-distribute, tasting rooms, ABV limits, fees, etc. I can't really help you there other than to say that I can't fathom the state not having a detailed (and painful) process for all of that. That process here in Mass took us another 75 days or so.

(all the while paying rent on the commercial space we had to take)

While you are going through the licensing process, you get the pleasure of dealing with local/town building/fire/electrical/plumbing inspectors as well as the Board of Health.

They're going to want to take a look at every single nut and bolt of the brewing operation. We were originally going to use banjo burners.... NOPE... "not UL or any other industry safety commission certified. Sorry". (trust me, I know how ridiculous that sentence is). We had to replace our stand, our burners, everything but the pots. "oh...well... the natural gas line in this building isn't rated for the volume of gas you need so you need to run new gas line"... $2,600 to run black pipe across an entire building.

And it just keeps on coming. ADA-compliant bathrooms... "sorry, you need a new toilet, sink and this door isn't wide enough". CO monitors and automatic gas shutoffs. Water backflow preventers so you don't backflow into the town water supple (again... ridiculous but we had to do it). Make sure the septic tank is rated appropriately. If it is sewer, make sure the town is Ok with "brewing chemicals" being dumped into the sewer. Occupancy permits, business permits, LLC registration... don't forget you ge the pleasure of now filing corp. taxes too as well as your state and federal excise tax pre-payments!!

My experience in talking with other nanos in Massachusetts is that local building codes or what an inspector will accept will vary dramatically from town to town.

We're on a 1.5 bbl system and while we ABSOLUTELY knew this going in, at that scale, it is impossible to make any money. We can work around the clock if we want and sell every drop and at the end of the year, each one of us would make a couple grand. If you are brewing on a 15 gallon rig, take that tiny profit and erase it completely.

Distribution: This varies from state to state as well. We're lucky that here in Massachusetts, under our Farmer-Brewer License, we're allowed to self-distribute. We needed to "officially" license each of our individual vehicles (down to the VIN numbers) and pay a fee, so that each of our trucks could legally carry the beer from the brewery directly to our customers. Again, what you can and can't do will vary from state to state and you need to know what you're facing.

Once up and running, you need to file all sorts of regular reports with the TTB and supporting agencies... excise taxes, operations reports, label approvals (not just for bottles but for kegs as well), recipe and process documentation and approvals, etc.

Start to finish... it took us about 14-15 months to get from "let's find some space and do this" to "Our beers are going on tap in two weeks!"

Like I was saying at the beginning... I'm not an "expert" and if someone thinks any of this is wrong, great... that's one of the reasons I wanted to post this. It is something my two partners and I are taking very seriously (although having a ton of fun) but if we can learn something here as well... awesome... I'm all for that!

If you have any interest... there is a blog on our breweries website (below) that talk about some more of the specifics of what we went through.
 

mcbaumannerb

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Thanks for sharing - interesting information. Where in this process were you actually able to start brewing beer for sale? I'm guessing after you got your health dept. food service certification? Before that could you at least brew for personal consumption - so you could get the process down with the changes you had to make and feel like you were getting some use out of that space?
 
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Cape Brewing

Cape Brewing

DOH!!! Stupid brewing...
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Thanks for sharing - interesting information. Where in this process were you actually able to start brewing beer for sale? I'm guessing after you got your health dept. food service certification? Before that could you at least brew for personal consumption - so you could get the process down with the changes you had to make and feel like you were getting some use out of that space?

You're pretty much correct. We couldn't start brewing for sale until every approval from everyone had been obtained. TTB and state licenses are a given... but the real BTCH was the local Occupancy Permit which is your "approval" to operate in your space. For that, each and every inspector (building, Board of Health, electrical, plumbing, zoning board, conservancy board, fire Dept)... all have to sign the permit. Once you have that, you can open for business.

We spent that down time scaling and testing recipes but were leary about doing too much IN the brewery so a lot of that was done on our home rigs which aren't much smaller than the rig at the brewery.
 

hoppyhoppyhippo

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Awesome writeup. My brother and I are considering in 5-10 years starting up a nano, by then we should have a strong enough business plan and personal backing to start it up.

In NJ as I understand it it's much harder getting your municipality to sign off than to get the state. But the states limits made it harder for start ups to distribute as I understand but now you can sell more beer on premise than you used to. In theory with the right beer and a dedicated base you can build a functioning nano.

Right now the operation we're gonna try to keep the founders as brewers. I don't want someone there just for money but who knows we may need that. What I'd like is 2 more partners in the end but we've got plenty of time to look. That way everyone can keep their regular jobs, and just alternate when we brew and bottle so we can run it 7 days a week.
 

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We're on a 1.5 bbl system and while we ABSOLUTELY knew this going in, at that scale, it is impossible to make any money.

So do you think at some near point you will be turning a profit? Guessing you may already know this, but if you don't make a profit, in 3 of the next 5 years, then the IRS will consider the brewery as a hobby, so any deductions you make for equipment, etc will be disallowed.

I've seen some people run into this issue before (well they actually expected to make a profit) then get blindsided with a big tax bill when they don't make it. Not trying to be a downer, but just giving you a heads up.
 

broadbill

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To add to what JeepDiver asked:

What is your plan for making a profit? By your own admission or system isn't big enough to brew profitably, therefore there isn't a way for you to boot-strap yourselves to a larger system in the future?

Will the idea for the partners to keep infusing capital to keep the operation afloat and moving towards profitability, venture capital, bank loans to upgrade? Just wondering.
 

WissahickonBrew

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Thank you for sharing the joy and pain of following your dream. I understand the logic of starting with a 1.5 bbl nano to test the market, even though your "test" includes almost 2 years of battling the federal, state and local governments. Investing in larger production equipment from the beginning is an unnecessary risk!

I'll visit your website in a minute, thanks for sharing the address. I notice you did not mention much your marketing plan. I've found that small brewers are guys who just love brewing, and assume the great taste will make the brewery successful. Mega brewers of beer like Bud, Coors and Miller have proven financial success in brewing has nothing to do with taste, rather it's effective marketing.

Good luck and thanks again!
 
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Cape Brewing

Cape Brewing

DOH!!! Stupid brewing...
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Apologies... the whole "how are you going to make money" peice is a big hole I left out unintentionally.

We will be profitable very shortly... and when I say "profitable" I mean our monthly revenue will outpace our monthly expenses pretty quickly. Where we WON'T be profitable any time soon is covering our initial start up costs. That'll be a few years given our scale. Also, when I say "profitable" I mean that we will MAKE money... but, again, we're talking about $400 a month between three guys for a lot of work.

Like I was saying before, we absolutely knew this going in and the thinking behind it was....

1) are we going to like commercial brewing?? Who knows. It isn't the same as homebrewing. We can't experiment with every batch. Every batch has to be exactly like the last one and we can't just "get around" to racking, etc.... things have to be done 100% correct 100% of the time.

2) Are we going to be able to actually sell beer? Who knows again.

3) Are we going to be able to build a decent reputation?

4) What is the craft beer market going to look like in 12-18 months.

We have theories on what all of those answers on but we don't know for sure and we weren't willing to bet either our lives savings or the mortgages on our homes to build a to-scale brewery.

We wanted to first start with a "test brewery" if you want to call it that, brew for a year or so, and then see if we have any clearer answers to the questions above. If the answers to all of the above are all positive, THEN we will very seriously think about scaling up. Also... if we are successful in building a reputation and account base with actual cash flow, getting investments and favorable rates on debt (which we REALLY want to avoid) will be dramatically easier than trying to pitch an idea of "but we've been homebrewers for a long time!" argument with investors.

And Jeepdiver... I'm not really worried for two reasons. 1) we WILL be profitable... just not on any scale and 2) we won't be operating this tiny brewery for that period of time. We will either scale up dramatically or just scratch the whole idea well within that time frame.
 

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Thanks for the write up, and good luck with everything! I hope this question isn't inappropriate, but would you mind sharing a rough estimate on capital it took to get you where you were today, and what percentage was personal funds vs loans? If you don't want to share no worries. I've always been interested in starting something like this, but really have no idea on the potential costs associated with startup at this point...
 

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Out of curiousity how big is your setup (1bbl, 3bbl etc.)?
Are you brewing strictly for distribution, brewpub, taproom, all of the above?
Do you have a pilot system for smaller test batches to dial in new recipes with a dedicated test tap?
 

FastAndy

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Nightshade said:
Out of curiousity how big is your setup (1bbl, 3bbl etc.)?
Are you brewing strictly for distribution, brewpub, taproom, all of the above?
Do you have a pilot system for smaller test batches to dial in new recipes with a dedicated test tap?

Most of this is answered in the original post.
 

Nightshade

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Most of this is answered in the original post.

Wow I totally missed it:cross:

There is a guy here who just jumped to a 7bbl system and had been running on a 1.5bbl (White Bluffs Brewing) and did very well with it and profited enough to purchase his new equipment in cash as well as each expansion he has made (two expansions in two years).

So it can be done but he was constantly brewing as well as holding a full time day job. He was getting burnt out a bit over the last year but it is starting to pay off well and has a few employees at the taps as well as himself on brew detail.

He is a good guy and so is his staff, and they make some of the best beer in town by far.
 
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Cape Brewing

Cape Brewing

DOH!!! Stupid brewing...
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So you are selling the beer directly to bars with no middle man?

Yes. Under our Massachusetts Farmer-Brewer license, we're allowed to self-distribute, which simply means that we are not required by law to use a distributor and we are allowed to sell directly to bars, restaurants, liquor stores, etc.

Some states don't allow for that, although I think they are in the minority at this point.
 

BBL_Brewer

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Damn, now you've got me thinking about this again. What do you ferment in? What is your weekly brew capicity?
 
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Cape Brewing

Cape Brewing

DOH!!! Stupid brewing...
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There is a guy here who just jumped to a 7bbl system and had been running on a 1.5bbl (White Bluffs Brewing) and did very well with it and profited enough to purchase his new equipment in cash as well as each expansion he has made (two expansions in two years).

So it can be done but he was constantly brewing as well as holding a full time day job.

I'm sure it can be done but I can't imagine how difficult that road has been. He must be brewing several times a week with a massive fermenter space capacity.

Our hope is that we basically took our start up costs, dumped it in as a total loss and will make subsequent investments... hopefully... offset to some significant extent by whatever money we can make on the little 1.5 bbl system in the mean time.

We'll see.

The nice thing about our little adventure is that we went into this situation thinking, "if we lose every penny, will it be THAT big of a deal"... and the answer has always been "no". Don't get me wrong... we don't have cash to just light on fire and we sure as hell aren't looking to LOSE money... but if this thing goes south, we'll just divide up the equipment amongst ourselves, brew with it out of our houses, and chalk it up as a fun experiment.
 

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The profitability thing is just like he mentioned. It takes a few years to recover you investment in most cases no matter how big you start. The balance sheet will be positive within a couple months most likely.

The thing I like about this is that he has 2 guys to share the load. Managing that is a task, but it means they don't get as burnt out. My guess is, if the beer is any good, they will be brewing on a 8 - 15 bbl system within 2 years.

Cheers!
 
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Cape Brewing

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DOH!!! Stupid brewing...
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Thanks for the write up, and good luck with everything! I hope this question isn't inappropriate, but would you mind sharing a rough estimate on capital it took to get you where you were today, and what percentage was personal funds vs loans? If you don't want to share no worries. I've always been interested in starting something like this, but really have no idea on the potential costs associated with startup at this point...

That's almost an impossible question to answer because there are SO many factors that come into play...

What will your space cost you? Our space is INSANELY cheap... about $450 a month utlities included...

BUT... we needed to replace a ton of our equipment... instead of the amazing stand my partner fabricated, we needed to buy new burners and stands that ran us over $2k all in.

so... again... it's going to vary dramatically by what your individual town's inspectors are going to let fly.

That said... I would be thinking tens of thousands instead of tens of hundreds.

You could probably swing it for $20k if you got really lucky.
 

Nightshade

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I'm sure it can be done but I can't imagine how difficult that road has been. He must be brewing several times a week with a massive fermenter space capacity.

Our hope is that we basically took our start up costs, dumped it in as a total loss and will make subsequent investments... hopefully... offset to some significant extent by whatever money we can make on the little 1.5 bbl system in the mean time.

We'll see.

The nice thing about our little adventure is that we went into this situation thinking, "if we lose every penny, will it be THAT big of a deal"... and the answer has always been "no". Don't get me wrong... we don't have cash to just light on fire and we sure as hell aren't looking to LOSE money... but if this thing goes south, we'll just divide up the equipment amongst ourselves, brew with it out of our houses, and chalk it up as a fun experiment.

If I remember right he was averaging 6 days a week brewing. He hit the point where demand exceeded production very quickly and had quite a few fermenters going and was using 1007 German yeast as his main yeast for eveerything so quick fermentation and then an average 6 week aging process from what I remember.
 
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Cape Brewing

Cape Brewing

DOH!!! Stupid brewing...
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Damn, now you've got me thinking about this again. What do you ferment in? What is your weekly brew capicity?

We only have four 55 gallon fermenters and that is really our largest capacity restraint. And it isn't the fermenters themselves but rather the space we are in... in that we can't FIT anymore fermenters.

As it is now though, we're brewing, pretty much once a week as well as all of the usual maintenance so our capacity is, back of the envelope, about 45 gallons per week.
 
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Cape Brewing

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DOH!!! Stupid brewing...
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If I remember right he was averaging 6 days a week brewing. He hit the point where demand exceeded production very quickly and had quite a few fermenters going and was using 1007 German yeast as his main yeast for eveerything so quick fermentation and then an average 6 week aging process from what I remember.

yeah, we're actually over capacity right now as well... we have standing orders already we can't fill but it is a matter of the situation very quickly becoming "business decisions" vs "brewing decisions"...

In order for us to increase capacity, we need more space in the very short term. We could simply take on more space and line up more fermenters but how long is that sustainable? Do we take on space and the expense of more fermenters or just hold off and move to a larger space and a larger system altogether in 6-8 months? How much is that going to cost? how are we going to pay for it?

We've only been "pros" for a few weeks so do we really want to expand before we've techically sold even our first drop?

there's a lot to it.

Hell... if we take on more space, do the three of us (all three are dads with two younger kids each)... do we want to be spending every waking free moment in the brewery?
 

Nightshade

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Haha... sure... if you would like to relocate from Washington and work for 25% of whatever profit we make... you're IN!!!!

:mug:

If I could afford to do the move I would definitley be down for that no doubt, but something tells me that living in Mass is a bit more spendy than I can afford to do right now.
 

BBL_Brewer

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We only have four 55 gallon fermenters and that is really our largest capacity restraint. And it isn't the fermenters themselves but rather the space we are in... in that we can't FIT anymore fermenters.

As it is now though, we're brewing, pretty much once a week as well as all of the usual maintenance so our capacity is, back of the envelope, about 45 gallons per week.

Man, that's gotta be tough. I've been going over some plans in my head for a couple years now. I wouldn't even consider pulling the trigger unless I could pump out a minimum of 3 bbls per week. But, like you said in your last couple posts, you need fermenters, space for same and yes, on a small system you will be spending way too much time brewing. I brew 1 bbl batches at home by myself (most of the time) and I really can't imagine doing that 3 times per week on top of everything else. My average brew day is 12-14 hours after clean up and that's with preparation the day before. Granted I could shave 3 hours off of that since I usually split my wort into two boils because I don't want to make 30 gallons of the same beer, but still. I wish you luck. Keep us posted on the progress. :mug:
 

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I don't know if you mentioned it or not but do you guys have a tasting/tap room? IMO that is where a nano can be profitable. You can sell your beer to a bar for 1.50 a pint(maybe) or sell it yourself for 5.00 a pint (easy). 1bbl of beer sold in a taproom comes out to 1600+ dollars income. The same amount sold in keg form to other bars only equals 420 dollars (maybe). Plus it eliminates a big expense...kegs/tap handles.
 

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Sounds like you need to hire someone with older kids that can act as a dedicated brewer...cough cough

Well he said they would be making about $400 a month to split between 3 guys. I bet if you move across country and work for $100 a month with no benifits they might hire you :)
 

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Cape Brewing said:
That's almost an impossible question to answer because there are SO many factors that come into play...

What will your space cost you? Our space is INSANELY cheap... about $450 a month utlities included...

BUT... we needed to replace a ton of our equipment... instead of the amazing stand my partner fabricated, we needed to buy new burners and stands that ran us over $2k all in.

so... again... it's going to vary dramatically by what your individual town's inspectors are going to let fly.

That said... I would be thinking tens of thousands instead of tens of hundreds.

You could probably swing it for $20k if you got really lucky.

Thanks, that's exactly the sort of answer I was hoping for. $20k sounds completely reasonable, and hopefully in a few years I'll be posting a similar thread about a nano brewery in NC!

Good luck and I'm looking forward to your future insight!
 

Nightshade

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Well he said they would be making about $400 a month to split between 3 guys. I bet if you move across country and work for $100 a month with no benifits they might hire you :)

Some things are worth the gamble. I have played this game before and made crazy money with high risks such as this, I have also seen the lows that come with high risks...which is where I am at right now due to economy and my last risk being a failed company :(
 
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Cape Brewing

Cape Brewing

DOH!!! Stupid brewing...
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On the tasting room... yes, we have spoken with our town's board of selectmen and they've "unofficially" approved us having a tasting room. We have to fill out another pile of forms and get an actual liquor license just like a regular bar. The nice thing is that in Massachusetts, because we have a Farmer-Brewer license, our liquor license doesn't count against the town quota so we are almost a rubber stamp approval, for about a $100 filing fee, instead of paying $10k for a liquor license off an existing bar owner.

And yeah... we are going to sell growlers out of the brewery..

but..

we all have full time jobs and families so it ain't like the brewery is going to be open every day from noon to 10PM. We'll sell them when we can and see what we can make.

We haven't filled out any of that paperwork yet only because we want to get up, running, get our release parties behind us, get our beers into normal rotations ar bars and then worry about growlers. That said, i have the paperwork on my counter at home and will likely get to a large chunk of this weekend (after brewing all day Saturday that is.). Luckily we can leverage a ton of our TTB paperwork for the Pourer's license.
 
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Cape Brewing

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DOH!!! Stupid brewing...
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Are you selling quarter bbl or 6ers for the most part?

ALL 1/6ths...

All of the bars we've spoken too really prefer the 1/6th kegs so they can rotate beers really often. We've been told that we have a dedicated tap at a pretty nice beer bar in Boston and doing 1/6th kegs will allow us, again, to rotate a couple of our beers on that line with some regularity.
 
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Cape Brewing

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DOH!!! Stupid brewing...
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And the market for used sankes is extremely tight so I wouldn't simply assume, "meh, I'll grab a pile used for cheap".

We went with 65 new 1/6th sankes... and the ones we bought have the entire spear simply unscrew so we can get in and "manually" clean and sanitize them without either having to have automated keg cleaning equipment or it being a massive PITA
 
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