Do you have a passion for craft beer? Maybe you’ve even tried your hand at some home brewing. If you’re creative, know your beers, and are looking for a business opportunity, then starting your own brewery might be a great fit for your interests. While starting a brewery requires a significant investment of both time and money, a brewery can be a rewarding and successful business venture.
Breweries specialize in developing and brewing their own beers, alcoholic, and even non-alcoholic beverages. These facilities are equipped with the significant amount of equipment that’s necessary to the brewing process, but many also offer brewery tours and encourage visitors. Some breweries feature kitchens and dine-in options complete with bars and entertainment, while others take a more private route, acting more as wholesalers. Breweries can vary greatly in size, specialty, and overall business design.
According to IBIS World, the craft beer production industry experienced a 4.4% growth from 2015 to 2020. As of 2020, the industry was a $7.6 billion industry. That growth was spurred by an increased demand for a variety of beers as consumers grew to appreciate the attention to detail and craft that small-scale brewers offer. That interest is predicted to continue, though the industry is becoming saturated with craft brewers. Still, IBIS World expects that industry revenue will continue to rise from 2020 to 2025.
The Brewers Association reports that in 2019, overall beer volume sales in the United States were down by 2%, though craft beer sales grew by 4%, evidence of the growing preference for craft beers. In 2019, craft beers made up 13.6% of the United States beer production by volume. That same year, retail sales of craft beers reached $29.3 billion. As of 2019, 8,386 breweries were in operation, and 8,275 of those breweries were craft breweries. A total of 302 breweries opened in 2019.
Craft Brewing Business predicts that the brewery industry will see several trends in 2020 and beyond. One of those trends is the result of the increased competition in the industry because of the many new breweries that have opened in the past few years. With over 8,000 breweries in existence, competition on retail shelves is steep. It’s likely that many breweries will focus heavily on branding and rebranding to stay relevant and competitive.
There’s a growing market for non-alcoholic beer, creating an opportunity that breweries can explore. The popularity of Dry January and the interest in dry seltzer may indicate that more adults are looking for lighter or non-alcoholic alternatives that they can enjoy. That focus on health is also reflected in the growing popularity of low calorie and lite beers. Breweries are embracing this trend and are delivering quality products that deliver better taste than some of the lite options offered by big-name breweries.
Customers are increasingly seeking out breweries for the experience, rather than specifically to drink beer, and breweries need to focus on improving the experience that they deliver. Everything from design to furniture to music and menus affects the customer experience. When done well, breweries can create a great experience and use that to build customer relationships and customer loyalty.
Broadly put, breweries market to beer enthusiasts. A brewery’s target market may be beer enthusiasts who are looking for the entertainment and education that a trip to a brewery provides. Breweries may also market to beer enthusiasts who don’t ever actually visit the brewery, but who can still become loyal fans of the brand and product.
Breweries also market to retailers who will stock their products. The specific target retail market will depend on many factors, including the brewery’s products, price point, and ideal end customer.
Skills, experience, and education useful in running a brewery
You won’t necessarily need a business degree to start a brewery, but certain skills and experiences are helpful.
Previous brewing experience. Firsthand experience with brewing is really a must for anyone planning to start a brewery. Knowledge of the brewing process, its challenges, and the equipment and time required will help to prepare a business owner to build a successful business.
Intricate knowledge of beer. A brewery owner needs to be invested in and enthusiastic about the work. Comprehensive knowledge of beer and the beer industry will be an advantage for any brewery owner.
Familiarity with beer trends. Trends can change quickly, so brewery owners need to stay aware of the current and evolving trends in the beer industry. With this knowledge, a brewery owner can make wise product development choices.
Attention to detail. Details are so important when brewing beer. From choosing the right equipment and ingredients to accurately describing the notes in each beer, a brewery owner needs to have a focused, attentive nature.
Customer service skills. A business owner with great customer service skills can help ensure that brewery visitors have a great experience, encouraging return visits and customer loyalty.
Management experience. Breweries require multiple staff, so a business owner who’s previously hired, trained, and managed staff will be at an advantage.
Finance knowledge and skills. Because breweries can be expensive to start, it may be necessary to secure investors or loans. Finance knowledge and an understanding of investment and loan practices may help a brewery owner to secure funding.
Startup costs for breweries can be substantial. 2nd Kitchen reports that many breweries cost between $500,000 and $1 million to start. Much of that cost is due to construction costs and equipment purchases. When starting a large brewery, it may be necessary to secure a large business loan or to seek out multiple investors who can assist with these startup costs.
Microbreweries or craft breweries are smaller, so while their startup costs are still substantial, they’re more affordable than a traditional brewery.
Common startup costs for a brewery include:
- Building construction or renovation costs
- Equipment purchases
- Supplies, like bottles or cans, mugs and glasses
- Inventory, including ingredients
- Furniture including chairs and counters
Steps to Starting a Brewery
Step 1. Write your Business plan
After coming up with the idea, the next step in starting your business should be to write a brewery business plan. Not only will a bank require you to have a business plan, but multiple studies have shown that a business plan helps increase the odds of starting a successful business.
Step 2. Form a Business Entity
A business entity refers to how a business is legally organized to operate. There are four primary business entities to choose from which include the sole proprietorship, partnership, corporation and LLC. Each type of entity has its own pros and cons such as liability exposure, costs and administrative requirements.
Related: Comparison of Business Entities
Step 3. Select your Location
While most breweries don’t necessarily require a prime, high-traffic location, it is usually important to be located close to densely populated areas. Finding a space can be challenging as finding a facility with tall ceilings are a must to get large tanks in the building.
Related: Choosing a business location
Step 4. Apply for Business Licenses and Permits
A brewery business owner will need to obtain certain business licenses and permits. These permits and licenses can vary based on the state and town where the brewery is located.
In addition to these standard business licenses and permits, brewery owners are required to hold additional industry-specific licenses. According to Craft Brewing Business, a business owner must:
- Obtain a federal brewer’s bond or brewer’s collateral bond, which guarantees a brewery will pay tax on the products that you sell. A federal brewer’s bond is required when applying for a Brewery Notice, and some states also require that a brewery have a local brewer’s bond to apply for licensure.
- Apply for Alcohol & Tobacco Tax and Trade Bureau Brewery’s Notice. This can take between six months and a year to obtain. To apply for the Brewery’s Notice, business owners must submit proof of their brewer’s bond , as well as information about the brewery’s packaging, labeling, and environmental impact.
- Apply for an alcoholic beverage permit from the brewery’s state. Licenses are available for supplier, importer, wholesaler, and retailer brewery businesses. Each state has its own application requirements which may require floor plans, statements of funding, a brewer’s bond, and more.
Because there are so many licenses required within this industry, it’s best to start planning well in advance of the brewery’s opening day so that you have plenty of time to obtain all of the necessary licenses.
In addition to brewery specific licensing there will also be local, state and federal registrations such as a sales tax permit, Employer Identification Number, Occupancy Permit among others.
Step 5. Find Financing
Coming up with a good business idea and having the skills to run it are one thing, but getting the funding to start a brewery is another due to the high costs to start. Funding to start a brewery business can be difficult. In order to get a loan, the borrower(s) will need to have good credit and be able invest 15-25% of their money towards the total start-up costs.
Step 6. Get your Marketing Plan in Place
Good marketing is essential to a brewery’s success, especially when developing a brand of beer that beer enthusiasts will recognize, connect with, and remember. Developing a website, logo, and initial branding can cost $5,000 or more, and that branding will need to also be applied to every new beer developed.
Marketing costs will depend on the type of activity performed, as well as its volume. Common marketing techniques for breweries include print advertising, online advertising, and social media marketing. Connecting with local tour guides and event managers is another valuable strategy that can help to build brand awareness and secure valuable partnerships. Breweries may also choose to compete in local food and beer competitions to promote their beers.
Step 7. Get Insurance
A brewery needs several types of insurance for full coverage:
- General liability insurance protects the brewery if customers are ever hurt while on the business’ premises or as a result of the business’ products. This type of policy helps to cover expenses like legal fees or medical bills.
- Commercial property insurance can help to cover the cost of the business’ equipment and building if they are ever damaged or destroyed by an event like a fire.
- Commercial auto insurance covers any company-owned vehicles and helps to protect the business against expenses if those vehicles are ever in an accident.
- Worker’s compensation insurance helps to cover expenses like legal and medical bills that can occur if an employee is ever injured while on the job.
Insurance policy cost can vary greatly depending on the value of a business’ equipment and building, the number of employees on staff, and the types and numbers of vehicles owned by the business. To get the most accurate idea of insurance policy costs, request quotes from multiple providers. When comparing the quotes, pay attention not only to differences in premiums, but also to how the coverage limits, exclusions, and deductibles compare.
Step 8. Hiring Employees
Most breweries will need to employ multiple staff. According to PayScale, the average salaries for these brewery positions are:
- Head brewer: $41,000
- Brewer: $35,000
- Regional sales manager: $60,000
- Marketing manager: $51,000
- Maintenance technician: $50,000
Depending on a brewery’s size, some or all of these staff may be necessary. In addition to budgeting for salaries, a brewery will also need to account for related expenses like paid time off, health insurance contributions, and workmans comp insurance.
Related: Hiring your first employee
Additionally, Amazon has several good books for starting a brewery such as:
- Small Brewery Finance: Accounting Principles and Planning for the Craft Brewery
- How to Start a Microbrewery: Be Your Own Boss, Make Good Money, and Craft Beer That You and Others Love (free on Amazon Kindle Unlimited)
- How To Brew: Everything You Need to Know to Brew Great Beer Every Time
- So You Want to Start a Brewery?: The Lagunitas Story
How much can you potentially make owning a brewery?
Brewery income can vary dramatically depending on factors like the brewery’s size, location, years in business, target audience, profit margins, and more. Whether a brewery sells mostly through its own taproom or if it wholesales its beer to other retailers can also play a role in profits. To ensure that your brewery has the best chance of becoming profitable, it’s important to do thorough market research and to try to identify a niche in the industry that your brewery can specialize in.
Things to consider before starting a brewery
The brewery industry is highly competitive, and in recent years many more new breweries have opened, adding to the competition. That doesn’t mean there isn’t room in the industry for your business, but it does highlight the importance of great branding, a focus on a niche, and identifying local and national demand. A detailed business plan and thorough market research can help you to develop your concept and position your brewery for success.
As you plan your brewery, think about the model that you want to follow. Breweries can act as wholesalers, but they can also be retail businesses, themselves. Craft Brewing Business highlights that for breweries, selling through their own taprooms provides higher profits than wholesaling beer to other retailers. Structuring your brewery to include a heavy focus on direct sales with qualities that encourage consumers to visit could potentially increase revenue, but only if that decision is right based on your location and the local market.