Startup Brewery Questions

[MVKTR2]

I'm investigating the feasibility of opening a small microbrewery in Mississippi. My motivation at this early research stage is simple. This state is fruit ripe for the picking! Craft brewed beer sales are at their highest growth rate in the southeast, and I'm sure most here know of the expansion of craft beer sales nationally. Well in the 2006-2007 years sales growth in the southeast was +23%. WOW! This is an industry with a future, especially in the southeast where beer laws have traditionally stymied craft beer production and sales. One by one though the southeastern states have been changing laws with good results for the craft brewing industry.

Specific positive thoughts on opening a brewery here:
1) There's already a successful model in place which could be loosely emulated to fit with my venture.
2) Market penetration/saturation is VERY VERY low here. This is my key thought, if a quality product is produced, Mississippians have proven they will purchase it. There is very little competition because so few quality beers are available in the state.
3) A push is afoot to change beer laws in the state with bills introduced in the last legislative session. Starting up a couple of years ahead of the laws being changed would provide a real foothold on branding, creating a following, ensuring a market share, etc.
4) This is a craft I believe I could really do well at. I'm very much a type A personality liking lots of control and being very scientific in my approach to solving problems. I'm also creative as I have a BFA in Graphic Design. Lastly I'm pretty useful at mechanical things, I understand it to be a pretty important thing in keeping a brewery running.

Some negative thoughts:
1) The population is not very beer savvy, but I see this as a relatively small hurdle as this is changing, and most places that would carry a craft beer already have educated drinkers or they wouldn't have the taps in the first place. Additionally this is conquered by providing less adventurous beers that are somewhat familiar such as browns, ambers, and blondes; obviously market research would dictate the final decision.
2) Of big importance will be marketing and beating the pavement to ensure there are taps for product placement, promotions at local events, and specific plans to market the beer.
3) Mississippi has a 6% abv cap in place and 3 tier distribution mandated by law. This means NO direct sales PERIOD! This will put a severe strain on the profit margin vs being able to do direct sales to the bar/pub scene, being able to brew contract beers (house ale etc). (Geez wish I were a state mandated "middle man", talk about a cash cow... heck that's what I should be looking into!)
4) Honestly I feel like I don't know what I'm doing (this is where the following questions come in)! I'm a homebrewer with an entrepreneurial spirit and limited experience.

Here's the big rub. Can someone please point me to a site, contacts, and information that show the COMPLETE setup and operation of a small microbrewery? I mean I have some pretty basic questions about filtering and carbonation. I'm not sure I even understand the full function of "bright" tanks vs conditioning tanks vs uni-tanks! Ideally I'd like to start with a 3.5 BBL system, and will if I can find a couple of partners/investors. What would be an estimate for the complete brewery cost including cold room, kegs, kegging equipment, total setup for a 3.5 BBL system done economically but efficiently minus the location and any work necessary to prep the site? I've seen the full set up minus conditioning tanks new at nabrewing.com for about 45K. My worst case scenario is to have to start out as a 1 BBL brewery, brewing part time etc. If I do this I do know I can build the brew sculpture myself with 40 gallon HLT and MLT with a 55 gal. boil pot. Of course I'd have to purchase the stainless fermenters, storage tanks, build the cold room (which I'll have to do no matter what), set up filtration, etc. If I do this I'm gonna start out on this very small scale alone as a micro brewery not a brew pub. As I want to be a brewery not a pub, you can't be both in Mississippi. I just don't want to be tied into the trappings of location, wait staff, menus, and in general the volatility that is the restaurant business.... though it is tempting.

I've had business ideas like this in the past and have kicked myself over not following my ideas/dreams while watching someone else rake in six figures a year in very good profits because they executed the same idea I had! I feel like this is another one of those times. If I don't do this, someone else is gonna do it and I'll be left with only remorse and a pint of their beer!

Obviously alot of my questions could be answered by spending some time at a small brewery. I hope this thread can provide me some directions to look, and some answers to the many questions I have.

Thank you,
Phillip

[lhall]

Phillip,

Good luck, man. I'm originally from Vicksburg, and MS needs more good beer. I think you are setting yourself up to fail, if you don't go and get a decent brewing education somewhere. You are going to have to be able to handle all aspects of the business, from brewing to dealing with distribution to sales. Working at another micro will help, as will going to brewing school at somewhere like Seibel or ABG. Don't set your sights too low - it takes about the same amount of capital to install a 7-10 bbls system as a 15-20 bbl one. Take it from me, I wish we had started with a bigger brew house.

[MVKTR2]

Linus

Thanks for the input. What I do know is there is no way on God's green earth that I could ever run a 7 BBL system (or a 3.5 BBL for that matter), period end of discussion. But what I do know is that I could hire someone to train me and/or a partner on it when they came to brew on it! Yes I totally get what you're saying about formal training and just knowing how the brewery works wouldn't be enough to make it successful! This is just an idea at this point, but you know what I've done in the past when I've seen an opportunity is to talk myself out of doing it because I saw all the ways it could fail. What I do know is I'm investigating all avenues right now and in the process am educating myself on exactly what starting a 3.5-7 BBL brewery would take in terms of making it run daily and startup cost. Initially I'm of the impression that if I can get rent low enough I can get a 3.5 BBL system up and running for tens of thousands of dollars vs hundreds of thousands for a bigger system. (my best cheapest estimate on a used 7 BBL system would be something in the range of 175,000?). I 'd have to be lucky to raise more than 100,000 in capital as I just don't have the contacts with the type of people that make those kinds of investments. What I am doing in that regard is to research right now, start putting together a package in the coming months, and have a total package showing concept, product, startup cost, marketing plan, etc. to prospective investors. This will either fly or it won't then I'll have to decide if I want to invest in going at this alone on what is essentially a pilot system and try to grow from there. It can happen my parents started with a hobby sized wood framed greenhouse. 17 years later when they sold the business it was in excess of 28,000 sq.ft of wholesale nursery.

Fact is I'm married with a mortgage and responsibilities beyond myself. That's sort of a driving factor in wanting to seize what I see as an opportunity, regrettably it's also a snag in that I can't sell everything I own, send myself to Seibel and start working in the far flung reaches of the country to gain experience!

I've seen you post on MSBrew, if you would please don't spreading this information around there as I'd really not like to have to discuss it with every person I run into from that blog! When is Yazoo beer gonna be available in MS?

Thank you,
Phillip

[beauxman]

Initially I'm of the impression that if I can get rent low enough I can get a 3.5 BBL system up and running for tens of thousands of dollars vs hundreds of thousands for a bigger system. (my best cheapest estimate on a used 7 BBL system would be something in the range of 175,000?). I 'd have to be lucky to raise more than 100,000 in capital ...

Also from Mississippi (Jackson, Hattiesburg), moved to Seattle in 2000 to work in the brewing industry. I second Linus with the 'work first' idea. Also, if you are only allowed to produce wholesale, 3.5 BBls will not be the way to go. The cost of installing a 3.5 BBL and a 15BBL system are not linear. You will still have to pay about the same amount for infastructure (plumbing, electrical, upgrades, meters, tenant improvements...the list goes on). You could maybe cobble something cheap together but I would bet that you will run out of money and sanity before approaching break even. You really need to do the business model math, I cannot see how 3.5 BBLs all wholesale will ever make money. If you had retail, you might stand a chance.

Equipment is only about 1/3rd the total operational capital needed. The improvements, permits, trades, licenses, starting inventories, lease pre-payments, ect will be larger than you expect. I can see your 100k all going for that stuff before even buying any equipment. I am in the process of building now and see it first hand (15BBL).

Not saying it can't be done, but that's a hard way to go and spending many hours on realistic business modeling will bring it to light. There is always an exception to the rule, but more often, not.

Best of luck, MS needs more good beer (although Lazy Magnolia does a nice job!)
-Beaux

[Brett0424]

You won't be able to have a production brewery on a 1 Bbl system. Pubs have pulled this off, spending a lot of time brewing. They're also bringing in money from food/other liquor sales. As previously stated, you'd have a hard time pulling this off with a 3.5 Bbl.

One of the most common things that causes breweries to fail is underestimating the cost of the brewery. You said you saw a 3.5 Bbl setup for 45k minus tanks. Well, tanks will double that (or more). Bottling/kegging equipment/cold storage/electrical/plumbing/flooring/glycol/everything else adds up. That was probably just for the brewhouse itself, which is just one part of a brewery.

Definitely open a brewery. Just make sure you don't set yourself up for failure. Probrewer is a great place to keep you on track. But, if you're actually considering opening a 1 Bbl wholesale brewery you have A LOT of research to do. Call the equipment companies, call ingredient suppliers, talk to brewers, talk to accountants, etc., etc.. There's no website that will tell you how to set up your business in your area and be successful. It's a lot of work. Good luck, cheers!

[MVKTR2]

Beauxman, this paragraph helps alot:

Equipment is only about 1/3rd the total operational capital needed. The improvements, permits, trades, licenses, starting inventories, lease pre-payments, ect will be larger than you expect. I can see your 100k all going for that stuff before even buying any equipment. I am in the process of building now and see it first hand (15BBL).

What this thread is about is pointing me to the right information so I have what I need in order to put together a good business plan. Believe me my first visit before coming here was to the SBA website! I'm sure the real point of information collecting will occur when I visit an operating brewery. Do enlighten me. I did figure that storage tanks, cold storage, and plumbing which I believe I'm of the impression is less than what it will actually be would essentially double the size of initial investment beyond the brewing equipment.

Brett0424

I was absolutely not correct in how I wrote what I wrote about a 1BBL system. What I was trying to say which tied into what was below it was that if I had too I'd look into going with a 1BBL setup as a brewpub, not a brewery, something I don't think I'd be willing to do. It'd be one thing to have a a little small quiet brewpub sort of family friendly British Pub themed place. Furthermore a small brewpub wouldn't really provide the income or more importantly growth potential of a brewery. I have no desire to run a "night spot" and get into all that involves.


I do think I'm seeing something already here that is changing my thinking. I was thinking that by starting small 3.5BBL I wouldn't have capacity outpacing demand. But if the business model is geared toward success/growth and not just survival, maybe looking at a 7-10BBL system makes more sense. My initial thinking was that the capacity to brew 10 times more beer than I was actually selling at startup would be something of a wasteful investment/expendature.

Thanks,
Phillip

[MVKTR2]

I spoke to the fact that a 3.5 BBL system cost 45K above. Fact is that's for all new equipment. The same website has a 3.5 BBL system used for 12K. Granted it doesn't include as much but by my thinking that would get the investment into the stainless, cold room, etc. in below 70K. Which is where I'm coming up with the 100K investment idea. Ideally on a shoestring budget I thought one could get off the ground with operational capital for a few months for a little under 110K, obviously more capital would be better. No I haven't ran the #'s yet, but that's where I was coming from initially.

Thanks for the help, and keep it coming,
Phillip

[Gregg]

Thanks for the help, and keep it coming,
Phillip

Good questions, but long answers. If you are not prepared to learn the hard way with experience and formal education, you should consider paying a consultant to help you with this stuff. Be careful of using, and abusing, free resources.

Regards,

Gregg

[lhall]

Phillip, the trick is not just to get open, it's to stay open. Starting out with just a 3.5 bbl brewery to sell at wholesale is just not going to work. If you have a solid business plan, and the knowledge and experience to put that plan to work, it won't be as hard to raise the money as you think. Don't worry about the money at this point. Do some research, talk to bars and restaurants, talk to distributors.