Get a leg up on the competition by following these steps to success.
There are more than 5,000 breweries in operation in the US.
The decision to transition from brewing beer as a hobbyist to running a commercial brewery is a big one. The craft brewing market is booming, with more people than ever before getting into the business. According to the Brewer’s Association, there were more than five thousand breweries operating in the United States at the end of 2016.
If you are looking to join the ranks of this competitive, ever-growing industry, it is important to understand the intricacies that come along with setting up and owning a brewery, as well as running a healthy business from the get-go. Get a leg up on the competition by following these steps to success in your first year as a brewer:
1. Arm Yourself with a Solid Business Plan
There are many considerations that should be taken into account to ensure the financial and commercial success of any new business venture. How will you market your brewery? What differentiates your brew from competitors’ products? How long can the business survive before turning a profit? The size of your operation should also be taken into consideration, as this affects utility costs, amount of product, distribution logistics, and sourcing of ingredients and equipment.
Be sure to have the following in your plan:
- A responsible budget: Know where to spend your money and where to save it. When it comes to purchasing product, ingredients and other overhead, ensure you have a good grasp on where your money should be going.
- Realistic goals: Keep your goals attainable. It’s easy to have high hopes and dreams for your brand-new craft brewing business, but setting realistic goals can help you organize your time and focus on actions that have the biggest impact. As you strive for specific goals, you’ll have short-term direction and long-term vision to help get your business succeed.
- A contingency plan: Be sure to have back-up plans and a security budget in place to account for the inevitable hiccups that come with opening a new business. Whether a piece of equipment breaks, an injury leaves you at home away from work or a customer changes a large order, you’ll be relieved that you were prepared.
It’s easy to dive head first into a new business venture, especially if you have a good formula for a fantastic craft brew. With your budget and goals in mind, come up with a strong strategy to move them forward.
Pro tip: Do your homework. By talking to peers within the industry and vetting vendors for all of your necessary supplies and ingredients, you’ll get a strong sense of what works for most, what doesn’t work for many, and what will work best for you and your business plan.
2. Find Strong Partners
The quality and uniqueness of a brewer’s product is first and foremost about the ingredients and the brewing process. However, new brewers tend to pay so much attention to sourcing the right ingredients that they often overlook the critical component of beverage gas.
Why is high quality beverage gas a necessity to your business and brews? For foam, flavor, and safety purposes, you’re going to want to have a strong supply of food- and beverage-grade gases for your brewery to hit the ground running.
As a new brewer, selecting a supplier for all of your beverage gas needs is a critical decision. A good supplier should encourage a schedule for your brewery that will maximize your productivity while reducing unplanned downtime. They should offer advice, provide structure, and propose schedules that have worked for other successful breweries of similar size and operations. The right gas supplier can mean the difference between success and failure.
Matt Swihart, owner of Double Mountain Brewery in Hood River, Ore. has been in business for approximately 10 years and has worked with the same beverage gas supplier for the entirety of this time. Swihart recalled that, when starting his brewery, he benefited from the experience of his gas supplier: “Having a vendor that already had structures in place was important and helpful. They also had a rental program for some of the equipment we needed to get started.”
Once you find a supplier that can offer guaranteed quality in food- and beverage-grade gases, as well as gas delivery systems, consider making them your single supplier for these products to ensure a consistent and reliable schedule.
Pro tip: Streamlining supplier relationships can also give you an advantage when it comes to pricing and contract negotiations, and can cut down on time spent managing multiple vendors.
Many brewers find it convenient to work with one supplier that can provide them with a wide range of products and services, including:
- Food- and beverage-grade CO2, nitrogen, argon and more
- Gas equipment, such as CO2 monitors
- Dispensing systems from maintenance to monitoring
- Safety services and products
- Welding equipment and gases
If your supplier is well-versed within the brewing industry, they’ll be able to guide you on the path to success with both your gas and equipment needs.
While Swihart acknowledges that his brewery has hit a few snags over the years, he says that having a consistent supplier that he was able to build a relationship with, and that “performed without a hitch,” made those glitches as painless as possible. “Our supplier had one goal, and that was to help Double Mountain Brewery succeed,” says Swihart.
3. Do the Math
While working on your budget, it’s wise to give yourself a buffer when it comes to ordering product during the first year as a business. A good example of this is to conservatively estimate how much of each beverage gas will you need to meet your production demands.
Pro tip: It’s generally a good choice to order slightly more gas than you might think you need in your first year. How many barrels are you going to produce in your first year? What is your estimate for your second year? Build and buy for that second year projection to ensure you have a stable supply.
When you have a well-stocked supply of gas, your business growth will not be impeded by the quantity of gas you have on hand if you’re selling more quickly than you anticipated, and you’ll give yourself the cushion to gauge how many tanks you will need in the future to keep up with the demand of your brews.
Swihart emphasizes that having a reliable supply chain has been critical to the success of his brewery. “Our supplier brings us the raw materials for what we manufacture [as a brewery],” said Swihart. “Without CO2 and head pressure for tanks, we literally would not have what we need to make our product.”
4. Know the Rules – and Follow Them!
It is important to become familiar with local and national permits and regulations early in your planning process. For example, many new brewers don't think about wastewater regulations before getting into the business, however every community has different regulations regarding what can and cannot be poured down the drain. A new brewer should contact local officials to inquire about local wastewater laws and affiliated expenses when planning their brewery.
When it comes to obtaining certain permits, Swihart emphasizes that there is a need for a federal and also a state license to operate a brewery. Much like wastewater regulations, laws can vary so it’s important to check with your state to see what is required. Also, inquire about laws regarding crossing state lines with your product or exporting it to another state. All of these things need to be handled legally.
The Ultimate Key to Craft Brewing Success
The marketplace for craft breweries is more competitive than ever before. From 2015 to 2016 alone, there was a 16.2 percent increase in the number of U.S. breweries according to the Brewer’s Association, and the new breweries along with those already in business aided in making the craft beer market a $23.5 billion business.
Did you know? The majority of the growth within the craft beer category is being brought about by smaller, local peers rather than larger craft beer companies that now have local recognition, according to Fortune. How can this be avoided? Fortune suggests that mergers between peer breweries may take a main stage in future craft brewery business growth.
Of course, no matter how prepared you are as a new business owner, you can expect to run into some obstacles in the early stages of opening your brewery. The brewing world is a vast and interesting one to navigate when starting a new business from the ground up. By arming yourself with a solid business plan and seeking out vendors that can provide you with reliable service, high-quality products, and important industry advice, these obstacles can easily be navigated around on the road to success.
If you liked this article, you may enjoy: Managing Your Craft Beer Supply Chain.