According to the Brewer’s Association1, there are over 9,500 breweries in the US, with 549 new ones opening and 319 closing in 2022. It costs between $250,000 and $2.5 million to start a brewery, and most brewers start turning regular profits after about three years.
Here we cover starting a brewery in 10 primary steps, with a deep look at branding and the legal requirements of this highly regulated industry. Note that these steps may not be taken sequentially; you may start working on your licensing before you finalize a budget.
Key Takeaways:
- The more you know about brewing and business, the smoother your brewery will launch.
- Working in the industry, crafting your own beers, and shadowing a professional brewer are steps you should take before taking the plunge into ownership.
Step 1: Determine Your Niche
The first step of brewery ownership is deciding which type of brewery you want to run. Niche down on your unique perspective and how you will stand apart from the competition. In a crowded brewery marketplace, picking a niche will define your company’s brand.
Brewery Types
There are two major types of breweries: those that cater to walk-in customers, and those that distribute to bars, restaurants, and retailers. These two types can be broken down further into six major market segments based on their locations and how many barrels of beer they produce annually:
- Microbreweries: Sell more than 75% of their beer off-site and produce less than 15,000 beer barrels (bbl) per year. A nanobrewery is an even smaller microbrewery, one that produces less than 2,000 bbl annually.
- Brewpubs: A brewpub offers food and beer, and sells more than 25% of its beer on-site. Brewpubs are the fastest-growing segment for independent breweries.
- Taproom brewery: Taprooms do not serve food and sell more than 25% of their beers on site.
- Contract brewing company: These companies hire other small businesses to produce some or all of their beer.
- Regional craft brewery: These can have worldwide recognition but produce between 15,000 and 6 million bbl annually.
- Alternating proprietor brewery: This is where two or more brewers share brewing equipment. Usually, one is the host and rents the space and equipment to the tenant brewer. This could be a good way to make extra money while raising the demand for your product.
What is a beer barrel (bbl)? Breweries measure the size of their business in barrels, abbreviated as “bbl.” One bbl is the equivalent of 31 gallons of beer. Brewing equipment is also categorized by bbl.
Step 2: Understand your Budget & Expenses
There are several costs to consider when planning your budget. Your location alone can cost upwards of a million dollars in rent or mortgage and renovations. Manufacturing breweries have bigger expenses for location and equipment. Brewpubs have smaller brewing requirements but they also have to pay for restaurant equipment and supplies.
Below is an extensive (but, by no means, complete) list of estimated costs to consider.
Brewery Costs ($5,000 to $1+ million)
- Incorporation (filing legal documents with the state): $300 to $1,000
- Rent, lease, or mortgage: $10 to $30 per square foot
- Remodel: Dependent on the space and uses, taproom furnishing estimated at $15,000
- Business license: $25 to $7,000
- Liquor license: $3,000 to $400,000, depending on the location and size of the brewery
- Food license: $100 to $1,000
- Entertainment license (if applicable): $80 to $250+
- Branding (including trademark): $225 to $600
- Website design: $100 to $15,000+
- Permits and insurance: $77 to $100
- Marketing: 3% to 6% of sales
- Distribution and packaging: $1.50 a six-pack; 20 cents a glass bottle
- Soft opening and grand opening expenses: $100 to $10,000, depending on how large the party
- Equipment costs: $1,000 to $1 million
- Software costs (management software, point of sale, inventory): $30 to $300 monthly
- Recurring costs(electric, water, payroll, food costs, etc.): $3,500 to $15,000 monthly
Once your costs are estimated, finalize the budget by adding contingency funds. You should have enough money in savings to cover fixed costs (rent, utilities, and payroll) for three to six months. You may not see sales revenue for several weeks. Contingency funds ensure that you’ll keep running until sales roll in.
Expected Income
The average markup for beer is as much as 300%. One rule of thumb is to price at least four times the expected cost of production. After expenses, most breweries see a profit margin of 20% to 25%; much higher than the average of 5% of most restaurants.
Despite the high markup, it can take three to five years to turn a profit on your brewery with start-up fees and expenses. After that, the average annual salary of a brewery owner runs $50,000 to $88,000.
Step 3: Create a Business Plan
A business plan is an important component of your new business. It works as an outline to help you structure and grow your company. It shows how you plan to turn your knack for brewing into a profitable business. It should show each step and permit process broken down into actionable steps.
You will also use your business plan to convince potential investors why you are the right candidate for their investment.
Below are general guidelines for your brewery business plan.
- Executive summary: Explain what type of brewery you’d like to open, your mission statement and objectives, location, partners or management team, and how many staff you’d like to employ.
- Market analysis: Include how your brewery will serve the community and details of the local market.
- Competitive analysis: Who your competitors are, how you will compete, and your niche.
- Organization: Your equipment and supply lists. Will your business be a sole provider, LLC, or corporation?
- Location: Your prospective address; will you rent or buy? Also, include modifications and renovations to the building and their estimated costs and timeline.
- Products and services: Which products will you provide and how—retail beer sales, taproom pours, restaurant food service, and events? Provide a sample beer and food menu and any plans for retail merchandise.
- Marketing strategy: How will you market your new business? Plans of hiring a social media manager, radio or TV advertisements, and marketing budget.
- Sales forecasts: How long will it take to turn a profit? Include cash flow charts and income and expense forecasts for five years after launch. Estimate how much financing you’ll need and your budget. Always overestimate expenses and underestimate profits.
- Milestones: A checklist of permits, rental or purchase agreements, supply delivery company contracts, legal issues, and zoning regulations that must be met before opening
- Management and employee structure: Your comprehensive employee training and restaurant guideline manual.
Step 4: Find Your Location
You’ll want to be sure the area you’re considering is zoned for brewery and alcohol sales, then ensure the operational costs are in your budget. In most cases, breweries tend to be outside of densely populated areas. Breweries simply need a lot of space for equipment, an enormous amount of water, plenty of room to dispose of spent grains, and neighbors that are too nearby can complain about the smell.
It’s not that breweries smell bad, but not everyone appreciates the aroma of fermenting yeasts and sugars wafting into their apartment or office space. So you’re likely looking mostly at suburban and rural locations.
Expand the sections below for more details:
Step 5: Secure Funding
There are several options to secure capital for your brewery. Startup business loans, investors, business partners, lines of credit, and grants are all potential funders.
Your business plan will help to secure bank loans, grants, or partners. Find more information on what you need to secure a small business loan in Restaurant Financing: The Ultimate Guide.
Another popular alternative is crowdfunding, where people contribute in exchange for rewards or equity to your investors. A special crowdfunding site just for breweries is called CrowdBrewed. It also offers learning opportunities and a place to connect with other brewers and beer lovers.
Step 6: Get Permits, Licenses & Insurance
Stay legal, and make sure to get all of the permits, licenses, and insurance. If you own a taproom or brewpub, you may need even more. Check with the Tax and Trade Bureau for Alcohol and Tobacco, your local Alcoholic Beverage Control (ABC) Board, and the Brewers Association State Laws for what’s required in your area.
Incorporation: Bars and businesses take on a lot of liability; incorporating the business will separate your business assets from your personal ones.
A business attorney can advise you on the best decision for your brewery, and ask which one is best for your business.
- Limited Liability Company (LLC), the most common type of business structure
- Sole proprietorship
- General partnership
- S corporation (S-corp) or C corporation (C-corp)
Below is a non-exhaustive list of potential permits, licenses, and insurance to get you started on paperwork:
- Employer Identification Number (EIN)
- State tax ID
- A Federal Brewer’s Permit
- A Brewer’s bond
- Liquor license
- Food and beverage license
- Retailers license
- Sign permit
- Certificate of occupancy
- Registration with the Alcohol and Tobacco Tax and Trade Bureau
- Liquor liability insurance
- Business income insurance: optional, but it can protect you if you need to shut down temporarily.
- Register with the local health department for food safety inspections
- Register with the Food and Drug Administration to pass an impromptu inspection ensuring that you meet the Good Manufacturing Practices for Craft Brewers (GMPCB).
Depending on your location and your plans, you may also need permits for:
- Pool tables
- Live music
- Dumpsters
See our full guide to restaurant permits and licenses for more details about individual licenses, their costs, and how to obtain them.
Step 7: Purchase Equipment & Source Suppliers
The amount of equipment you will need depends on the size of your brewery, available floor space, and how you intend to sell. However, the general guideline is to buy a little more than you expect to use. The Asian Beer network recommends at least a 10-hectoliter (HL) tank and a mix of 5HL and 10HL fermentation vessels.
Most breweries can get started with these minimum equipment and supplies:
- Brewing equipment: Boilers, fermenters, kettles, thermometers, test strips, scales, etc.
- Bottling and boxing supplies: Glass bottles, boxes, labels, and bottle fillers
- Kegs and shelving: Hand trucks for moving kegs, shelves, and mobile taps
- Service equipment: Keg tapping and pouring dispensers, towers, taps and glassware
- Refrigeration: This could be a walk-in fridge for kegs and bottles, a beer case with sale bottles, or a freezer for cold pint glasses
- Ingredients: Malt, hops, yeast, wheat, honey and other ingredients your recipes call for
When sourcing suppliers for your consumables, look for trustworthy businesses. Start with the Better Business Bureau and online reviews. When interviewing suppliers, ask about minimum order amounts, payment policies, quality assurance processes, and delivery days.
Some brewers have cut the costs of equipping their brewery by up to half by designing their own systems and sourcing used parts. Check message boards and networks for brewers selling used equipment. Be sure to vet your suppliers; ask for references and customer reviews.
Step 8: Develop a Distribution Plan
A distribution plan is crucial to a brewery’s profitability; it’s how your beer travels from your brewery to the customer. As with most things alcoholic, distribution options vary widely according to state laws.
- Contact your local liquor control board—or an experienced lawyer—to learn what is permitted in your area.
- The Brewers Association maintains an online database of state laws that can give you a good idea of what to expect.
- Distributors take between 20% and 40% of your sales. In return, they are your sales team, shop around for a company you like.
The Brewers Association also maintains a list of distributors. Find one in your area, read over their policies, ask for a list of references or key accounts, and see if they’re a good fit for your brand.
Step 9: Market Your Brews
Branding is incredibly important to help your beer stand out on crowded shelves. Consider your logo, name, and label. Small batch breweries often have bold, colorful graphics and artistic designs with entertaining, silly names to help them sell.
- Don’t scrimp on this step, hire a graphic designer or an artist to make awesome branding for your labels and logo. A strong, recognizable aesthetic will make your beer memorable. Make sure your artist will be available for future products and seasonal brews.
- Your customers love a good dad joke. Some of the most popular labels playoff brewing terms, like “Hoppy Ending” or “Pathological Lager.” Make it clear, clean, and reflective of your story.
- Printing your city or town on the label is a great selling point. Microbrew customers love to see where their beer is made and enjoy buying local brews as town residents or while finding fun new brews on vacation. Once you’ve got it, protect it with a trademark.
- Breweries often have such great branding they’re able to sell merchandise with their private logos. This doubles as a money maker and free advertisement. Your logos and artwork walking around town on shirts, hats, and sweatshirts are great conversation starters and phenomenal word-of-mouth marketing.
- Create an Untappd Badge for your brewery. Untappd Badge is a game where nine million beer drinkers log the brews they’ve tried at different breweries. They compete with others to become the biggest beer drinkers. Becoming part of this community is fun and drives sales.
State Laws and Labeling
States have varying laws regarding required information for beer labels. Check with the local liquor control board for your area’s requirements. If you work with a label printing service (which you should—they save time and money), they can provide you with the correct labeling information for your product.
Step 10: Hire & Train Staff
The average United States brewery employs 11 people at any given time. Some of the common positions you need to fill are:
- Head brewer: Typically requires years of hands-on experience and training
- Assistant brewer: Can be an apprentice
- Engineer: Looks after the equipment
- Microbiologist or chemist: Analyzes the microbes
- General manager
- Salesperson/s
- Customer service
- Bookkeeper
- If you have a bar or restaurant, you’ll need waitstaff, host, barbacks, cooks, and dishwashers.
- Beertenders, also called beer sommeliers or cicerones, are a special breed of bartenders for breweries. They recommend beers and food pairings catered to the customers’ tastes.
Training Your Staff
All staff should be given a comprehensive employee training manual with company practices, instructions on the brewing process, an explanation of the equipment, software, federal and state regulations for food safety, alcohol serving policies, and sexual harassment prevention.
Grand Opening!
You’ve done the work—now let’s have a party!
A soft opening is a precursor to the grand opening. It’s a fun, intimate party for the family and friends of the owner and staff. It’s a good way to thank everyone who has been involved in getting you off the ground while working out the kinks and giving the staff practice before the big day.
Now, call the press, blow up your social media, and contact all the local beer influencers. Book live music and break out the giant yard games. If you don’t sell food, bring in a food truck or two. Grand openings are an exciting way to introduce your new business to the world.
FAQs
These are some of the most common questions we hear from prospective brewery owners.
Last Bite
Opening up a brewery is about so much more than making beer and spending your evenings around friends. The process is complicated, arranging distribution plans, monitoring day-to-day cleaning and administrative tasks, and securing the correct permits and licenses may appear daunting. Follow our 10-step plan to get you going. It can be a long process with lots of start-up costs and gray hairs along the way, but when the moment comes that you serve friends at the bar or spot your own beer at the liquor store it’ll all be a proud moment worth the work.
Reference:
- Brewers Association Releases Annual Craft Brewing Industry Production Report and Top 50 Producing Craft Brewing Companies for 2022 ↩︎
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