How to Start a Brewery

How to Start a Brewery

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How to Start a Brewery

If you’re looking to start a brewery, you’ve come to the right place. Since we’re going to show you exactly how to do it.

We’ll start with key brewery industry fundamentals like how big the market is, what the key segments are, and how revenues and profits are generated.

Then we’ll discuss keys to not only starting a brewery, but succeeding in it!

How Big is the Brewery Industry?

According to IbisWorld, there are 3,025 breweries in the U.S, that generated $37.8 billion in revenue last year. This represents an annual growth rate of 0.4% over the past 5 years.

What are the Key Segments of the Brewery Industry?

The key segments of the brewery industry are as follows:

  • Premium beer: 42.1%
  • Sub-premium beer: 16.9%
  • Craft beer: 15%
  • Super-premium beer: 14%
  • Progressive adult beverages: 6.4%
  • Malt liquor: 5.6%


What External Factors Affect the Brewery Industry?

A number of factors affect the performance of the brewery industry. These drivers include:

Excise tax on beer: The excise tax on beer represents federal and median state taxes levied on beer, which is charged per gallon of beer produced. The excise tax on beer is expected to decline slightly in the recent years.

Per capita disposable income: The level of disposable income affects spending on industry products, which range from affordable sub-premium brands to more expensive limited-edition and ultra-premium brands. Per capita disposable income is expected to increase in the recent years.

Per capita expenditure on alcohol: Trends in alcohol consumption can either positively or negatively affect beer sales. Consumers’ incomes, cultural preferences or personal tastes can influence demand for beer.

Price of coarse grains: The price of coarse grains tracks the prices of barley, oats and sorghum. Malted barley is a major ingredient for beer production, so the price of grains is a strong indicator of the overall level of costs for the industry.

The price of coarse grains is expected to decline, representing a potential opportunity for the industry.

Demand from beer wholesaling: Wholesalers are a crucial link in the supply chain. Therefore, breweries need to carefully plan distribution to influence the level of product promotion within beer wholesaling outlets in order to maximize market share.

Demand from beer wholesaling is expected to increase only marginally, representing a potential threat to the industry.

Trade-weighted index: The trade-weighted index (TWI) measures the strength of the US dollar relative to the currencies of its trading partners. An increase in the value of the TWI will make the industry’s products relatively more expensive on the global market.

Consumer Insights


What are the Key Customer Segments in the Brewery Industry?

At just over 23%, Consumers aged 35 to 44 are the largest market for the brewery industry. This is followed closely by consumers 25 to 34 (22.8%) and consumers aged 45 to 54 (21.8%).

The Rise of Craft Beer



What are the Key Costs in the Brewery Industry?

The key financial metrics in the brewery industry are as follows:

Profit: Industry profit margins declined slightly over the five years to present to 6.9% of revenue.

Purchases: The largest costs to breweries are purchases of raw materials, which IBISWorld estimates will account for 40.0% of industry revenue in the recent years.

Wages: Labor has declined as a share of industry revenue over the past five years, accounting for 5.0% of industry revenue.

Depreciation, rent and utilities: Presently, depreciation is estimated to account for 4.5% of revenue. Rent makes up 4.6% of the Breweries industry’s revenue, a figure that has steadily increased as a result of the industry’s largest breweries expanding the square footage of their facilities in recent years. Utility costs make up 1.9% of industry revenue.

Other costs: Marketing is estimated to represent 4.5% of industry revenue.

What are the Keys to Launching a New Brewery?

  1. Have A Business Plan
    – A business plan is an important key to determine if you will be able to thrive. Proper planning is a key factor as this business entails great risks and huge money. Potential projection of profit and losses are revealed when you have a business plan.A good plan will also attract potential investors or banks for financing.
  2. Ensure You Have Sufficient Start Up Capital
    – A large investment is needed with an approximated cost of not less than, but could be more than $1 Million as this industry is one of the most heavily taxed and thoroughly regulated businesses in most countries especially in the United States.
  3. Selecting a Location
    – In searching for a location, consider a high traffic area as there will be more potential customers, and also a strategic location where in case you want to expand you don’t need to move out and look for a bigger place.
  4. Obtain the right Equipment
    – Purchase the right equipment and make sure that your locationhas good ventilation, proper drainage systems and high quality flooring as your floor will suffer a lot from traffic and spilled beer, which is prone to damage because of acidity.
  5. Choose a Name and Patent It
    – In choosing your brewery name you have to make sure that it is unique. Then, have it patented in that way you will get the exclusivity and rights for your chosen name. This will be beneficial for expansion and/or franchising in the future.
  6. Legal
    – Hire a lawyer to draft contracts and agreements. One of these key documents is an entity form. This serves as protectionfor all your personal assets from liabilities of the new venture. This will also define the rights and ownership in cases of multiple proprietorship to help downplay future disputes.
  7. Execute a Strategic Marketing Plan
    – As a starter of this industry you will need to have a robust sales and marketing plan to draw in customers, as there will be a lot of competitors. The goal of a marketing plan is to ensure long-term success. Employ an integrated strategy that will reach your target market segments. Utilize marketing, public relations, advertising and sales efforts to gain brand recognition and ultimately drive revenue.


10 Keys to Craft Beer Success


What are the Typical Startup costs for a New Brewery?

The typical startup costs for a brewery are $100,000+ and include:

  • Equipment
  • Building expenses
  • Licensing

Brewery is a very capital intensive business and the cost to start varies tremendously based on the type and size of the company.

How much do Brewery Operators Make?

Brewery operators and executives receive varied pay amounts based on the success of their company. According to Bloomberg, the annual salary of the CEO of Molson Coors Brewing Company is more than $2M.

The average craft brewery in American makes $5.2 million, according to the Brewer’s Association

HOW INDIE BREWERS ARE OUTPACING BEER INDUSTRY GROWTH



Helpful Videos

Saugatuck Brewing Co. – How Brewery Marketing Works

Fat Bottom Brewing Company – Careful Branding and Creative Distribution

Managing and Growing Your Beer Brand: Specialist Brands Against The Global Breweries

Additional resources in the Brewery Industry

For additional information on the brewery industry, consider these industry resources:

 

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