The beer industry in the United States represents a massive $114.2 billion market, with craft breweries accounting for 24% of that market. Obviously, the demand for craft beer is strong, but so is the competition.
Craft breweries are booming. There are over 7,500 craft breweries in the U.S. alone. Furthermore, over 1,000 of them opened in the last year.
Domestically produced beer is favored by consumers. In 2018, 82% of all beer sold in the U.S. was domestically produced, while only 18% was imported from other countries.
Colorado and California are leading the way. Colorado has the most breweries per capita in the country (8.4), but California has the most breweries with 764 in the state.
How to Start a Brewery:
Breweries have a lot of moving parts (literally and figuratively). However, with the right preparation, your dream of owning a brewery can become a reality. Read through our 9-step guide to find out how.
Choose a name and trademark it.
Think about what makes your brewery unique.
Many breweries choose to adopt a name that relates to their location, such as Great Lakes Brewing. This can be a great way to create regional appeal, particularly in an industry that prides itself on "local" products.
According to beergraphs.com, breweries with the word "Liquid" in their name tend to have the highest rating when compared to breweries that use more traditional nouns like "beer company," "brewery," "brewing," and "beerworks." A unique name creates a stronger and more memorable first impression.
Perform a name availability search.
Search to make sure no one else has taken your name. You can cross-check your idea by Googling the name and variations of it to find out if there is already a brewery in existence that bears the name you want to use. If there is, simply choose a different one. If you can't find anything with a Google search, you can double-check by searching the United States Trademark and Patent database.
Trademark your name.
File a trademark by filling out an application with the USPTO (United States Patent and Trademark Office). Attorneys at the USPTO will review your application to make sure that it complies with legal standards and does not conflict with existing trademarks.
Write a business plan.
Start with an outline.
A business plan for a brewery should include the following items:
- Executive summary.
- Business description.
- Operations and management structure.
- Marketing plan.
- Competition analysis.
- Financial data.
- Future goals.
There are 7,000 craft breweries in the U.S., so the competition analysis portion of your business plan is very important. You don't need to compete with all 7,000 of them, but you do need to realize that this is a busy market. There are likely already several craft breweries in your region, so you will need to understand what they are doing and how your plan is distinct. To simplify things, start by asking yourself, "Why would customers buy my beer instead of the beer from brewery XYZ down the road?"
You can get a head start by using our free brewery business plan template at the top of this page.
Create a detailed financial plan.
As with most things in life, the financial portion of the plan is very important. If you are looking for people to invest in your brewery, you will need to provide as much financial information as possible. This includes how much money you need to open, what your overhead costs will be, how many people you will employ, how much revenue you anticipate making, and so on.
Check out our pro forma profit and loss template below if you need a hand creating financial projections.
Find a location.
Choose between leasing and purchasing a property.
Some new breweries are built from scratch so that they can be fully customized, while others are created by renovating an existing building. It's difficult to say which option is easier, but construction is sometimes better because breweries require a unique setup and retrofitting an old space can be complex and costly.
Determine your required square footage.
According to Specific Mechanical, you can determine your square footage needs based on the volume of your production. They recommend the following guidelines:
- 300 to 500 square feet for a 3 -5 barrel system.
- 550 to 1200 square feet for a 7, 10, or 15 barrel system.
Brewing facilities also need practical features like loading docks, ventilation from the brew kettle to the outside of the building, adequate ceiling height to accommodate brewing tanks, etc.
Form a legal entity.
Choose a legal structure.
You can create a corporation, partnership, or LLC for your business. Setting a brewery up as a sole proprietorship wouldn't make sense, because you will likely need employees and have a tax burden that is too large for one person to carry on their own. Most local breweries start as an LLC limited liability company.
In an LLC, ownership is usually limited to just a few people. This could also be said of a partnership, except partners must each bear some responsibility for taxes on their individual tax returns. In an LLC, you are only taxed on income that comes out of the company. Thus, when you're opening a brewery and reinvesting most of your initial profits, the tax consequences will be very minimal.
A further benefit of setting up your new brewery as an LLC is that it gives you greater control over how the company operates. In a business that is very hands-on, this control is important if you want to be able to grow and adapt.
Legal fees should be budgeted into your business plan, so find a law firm that you trust to manage your legal affairs. Some specialized law firms, such as The Craft Beer Attorney actually specialize in working with clients in the craft beer industry. At the very least, you should have a lawyer with experience in corporate law so that your business is compliant with local, state and federal laws.
List what positions need to be filled.
Operating a brewery is very labor intensive, so you will need at least a couple of employees, if not more.
Positions at a brewery typically include:
- Master Brewer.
- Taproom Server.
- Sales/Marketing Manager.
- Packaging Worker.
- Assistant Brewer.
The Master Brewer is the person who is responsible for creating recipes, starting new batches of beer, monitoring progress, testing batches, and so on. Every brewery needs an experienced Master Brewer who understands the process from start to finish and knows how to control quality along the way so that you end up with a delicious finished product.
Advertise job opportunities.
List your job vacancies with complete descriptions on popular sites like Indeed and Monster. This will help you to get more exposure and attract the best workers in your region.
Train new employees.
You can train employees with no previous experience working in a brewery, but since there will be many other challenges when you are opening a brewery for the first time, it is advisable to hire people who already have some experience in the field. You can use hiring software and job posting software to help streamline your hiring process.
Get a license from the TTB.
Visit the TTB website.
The TTB is the Alcohol and Tobacco Tax and Trade Bureau, a department of the United States Treasury. Every brewery must obtain a Brewer's Notice from the TTB in order to operate legally in the United States. You can access brewing industry resources on the TTB website.
Navigate to the "beer resources" section.
On the beer resources page, you'll find a variety of helpful links for prospective brewers who want to know the ins and outs of brewing regulations.
Click "Brewer's Notice," then "Apply Online."
The link to the Brewer's Notice permit page will direct you to a set of instructions. From there, you can either start your online application (if you already have a TTB online account), or register for an account first.
When you are filling out the Brewer's Notice application form, it's best to include as much information as possible about your brewery. This will increase the chances of your application being accepted. Include details about your legal structure, your business location, and so on.
The TTB handles thousands of applications, so it may take over four months for yours to be processed. Keep in mind that you need to sign a lease before submitting the application, but your brewery cannot legally open until your application is approved. This delay can put a strain on your financial plan, so be flexible and try to make the most of the waiting period.
Get state licenses.
Find out what licenses are applicable in your state.
To find out what licenses and permits you need, visit your state's small business website or contact the office of the small business development director. On the website, you should be able to find out what the essential requirements are for opening a brewery.
Build relationships in the industry.
If you want to get an early start on distribution by selling through retailers or restaurants, you will need to form partnerships and agreements that allow you to get your product from your brewery into customers' hands via a middle man.
Talk to local restaurant owners and ask them if they would be willing to use one of their bar taps for your beer. Restaurant patrons usually want local beer options, and it can be a great way to earn customers by giving them easy access to your beer in a place where they already like to go.
Talk to retailers.
You can meet with retail store owners and ask them if they would be interested in carrying your product. Starting on a trial basis will allow store owners to see how well the product sells, and strong sales could lead to increased orders.
Create a brewing production schedule.
Analyze sales data.
With a schedule, you can keep up with the demand for each of the various beer flavors that you offer. As your sales increase, you will start to notice trends and you can adjust the schedule according to demand. For example, if one beer is more popular among patrons than the others, you could add an extra brewing cycle so that you have more of it on hand.
A brewing schedule can be created using a spreadsheet, or other scheduling software. Use whatever is most convenient for you and make sure it can be accessed and modified by your Master Brewer. Check out our free brewing production schedule template at the bottom of the page.
You should be careful not to over-extend yourself. When you start a new brewery, it can be tempting to ramp up production in order to pay for all of the equipment that you've just purchased. On the other hand, it can be equally tempting to experiment with recipes and start with a small production volume. You need to strike a balance that addresses your cash flow needs and maintains the quality of the beer.
Veteran brewers recommend working in another brewery to familiarize yourself with the brewing cycle before going out on your own. This knowledge will help you - as an owner - to understand the dynamics of the brewing process.
Brewery Metrics: Revenue Per Barrel
One of the most important brewing production metrics is Revenue Per Barrel. Essentially, revenue per barrel tells you what your gross earnings per barrel are. To find this number, all you need to do is divide your total sales revenue by the total number of barrels sold. For example, if your gross sales are $500,000 and you've sold 1,000 barrels, your revenue per barrel is $500.00.
$500,000 / 1,000 BBLs = $500/BBL
You can build on this metric to find out what your per-barrel profits are. Determine how much it cost you to brew all of the beer that earned you $500,000 in sales and subtract the total cost from the total revenue. Then all you need to do is divide the result by the number of barrels sold to find your profit per barrel. If your total costs were $150,000, it would look like this:
Step 1. $500,000 - $150,000 = $350,000
Step 2. $350,000 / 1,000 BBLs = $350/BBL
As you can see, the final result ($350/BBL) is your profit per barrel, or Margin per barrel, as it is sometimes called.
Brewery Equipment Costs:
$4,000.00–$30,000.00 per tank
$2,500.00–$30,000.00 per tank
1/2 Barrel Kegs
Keg Washing System
What does it cost to start a brewery?
Brewery start-up costs depend on the initial size of the brewery. Microbrewery startup costs can range from $100,000.00 to over $1 million, according to our research. If you are wondering how to start a brewery with no money, it is virtually impossible since you need so much equipment.
How do I start a brewery legally?
- Choose a name.
- Create a business plan.
- Find a location.
- Form a legal entity.
- Hire staff.
- Get a Brewer's Notice from the TTB.
- Obtain State licenses/permits.
- Find distributors.
- Create a brewing production schedule.
How do you get a brewery license?
Every state has unique regulations and necessary permits for the sale of alcohol. To find out what licenses and permits you need, visit your state's small business website or contact the office of the small business development director.
What basic equipment do you need to start a brewery?
- A brewhouse.
- Fermentation tanks.
- Brite tanks.
- 1/2 barrel kegs.
- A keg washing system.
How much does brewery equipment cost?
Brewery equipment costs anywhere from $100.00 to $98,500.00 per piece, depending on what it is and what it does.
How much does a brewery make?
Brewery owners earn between $30,000.00 and $60,000.00 per year, according to our research. However, owners' earnings tend to increase with the size and scale of the brewery.
How long does it take to brew beer in a microbrewery?
If you're starting a microbrew batch, you can expect it to take a minimum of two weeks to ferment, but quite possibly longer if you want to age the beer for maximum flavor.
How much does it cost a brewery to make beer?
The costs of making beer differ brewery to brewery. You can calculate these costs by keeping track of the direct labor involved in making the beer, the direct material, and the overhead in an operating budget. Add these three rates together to find the costs your brewery will put into making the beer.
What is contract brewing?
Contract brewing takes place when a company hires a brewery to make a package beer for their brand. Contract brewing is becoming increasingly popular and it is sometimes beneficial for breweries that need to secure more revenue to pay for their equipment.
What are the essential things to look for in a brewery location?
- Ceilings with a minimum of 12" clearance.
- State-of-the-art plumbing and electrical systems to hook your equipment into.
- Proper floor drainage for spills and washing equipment.
- Sealed and acid-resistant floors that don't break down from contact with chemicals.
- Good ventilation to remove steam from the building when your brew kettle is boiling.
What is the difference between microbrewery and craft brewery?
In brewing terms, "micro" refers to size while "craft" refers to style. A microbrewery is a small brewery that produces less than 15,000 barrels per year. A craft brewery is independently owned, produces less than 2 million gallons of beer per year, and uses at least 50% traditional malt.
What are the top 5 books to read before starting a brewery?
- "The Brewers Association’s Guide to Starting Your Own Brewery" by Dick Cantwell
- "Brewing Up a Business: Adventures in Beer from the Founder of Dogfish Head Craft Brewery" by Sam Calagione
- "Brewery Operations Manual" by Tom Hennessy
- "So You Want to Start a Brewery?: The Lagunitas Story" by Tony Magee
- "Beer Law: What Brewers Need to Know" by John Szymankiewicz
How do I start a microbrewery?
- Choose a name and trademark it.
- Write a business plan.
- Find a location.
- Form a legal entity.
- Hire employees.
- Get a license from the TTB.
- Get State licenses/permits.
- Choose distributors.
- Create a brewing production schedule.
Do most breweries start small?
Some breweries begin as very small operations and then expand as money comes in, while others start on a large scale right away thanks to major outside investment. You can use the steps in our detailed guide to starting a brewery either way, but our advice is geared toward someone who wants to know how to start a small brewery.