Expert Topic Opening on a Two-Barrel System – Will it Work?

Posted by Tom McCormick

The pace of new brewery openings is still roaring with at least 1,049 new brewery openings in 2018, according to the Brewers Association. Many of these new openings are small. Very small. Like two barrel system small. This allows people who want to dive into the industry to do so with very little capital investment. A two barrel system requires little square footage, can be purchased for under $100,000 and can get a brewer-wannabie open quickly, easily and cheaply.

But will it work? The answer is probably not.

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Doing the math without the reality of owning a business or knowing the pitfalls and difficulties of operating a commercial brewery and selling direct to the consumer might “work on paper.” But as this interesting discussion on the ProBrewer Discussion forum points out, reality paints a different picture. Waste in the brewing process, waste at the taps, costs of employees, legal costs of owning a business, buying brewing ingredients in small quantities and so on all add up. Not to mention the cost of conforming to state, federal and local health department regulations, fire department codes as well as regulations from the state alcohol beverage control and other regulatory agencies. Best plan? Do your research. Carefully!

Opening on a Two-Barrel System – Will it Work? posted in:
Tom McCormick
Tom McCormick

6 Comments on “Opening on a Two-Barrel System – Will it Work?”

  • Kevin

    says:

    I’ve seen it done on even smaller systems several times! Thankfully, it meant that the breweries had to expand quickly. I wouldn’t go with less than a 3 barrel, but as you say, the numbers have to work and that’s the only way to really tell. I’ve seen breweries go broke with a 10 barrel as well, you know?

  • DK

    says:

    I depends if it’s a standalone brewery and what your long term goals are. There are nanobreweries around where I live that are doing well and thriving. I’ve talked to one owner as part of some MBA research project and their primary focus is a restaurant/café and their own brews. What a smaller system does provide that larger systems don’t when first starting out is variety. If you start out with a 7 or 10 BBL system, you may have the tap space for it but if demand isn’t there initially, you’ll be throwing beer down the drain unless you are also distributing it out but then you’re dealing with bar tap space and that’s not easy to come by with new breweries popping up all the time. It used to be that small systems – 4 BBL and below couldn’t work but I’m seeing otherwise and like I said, it depends on your goals and your business model. There is NO one size fits all. Where I live, there are 4 different business models that I see with our local breweries. One model is a brewpub (10 BBL) where only that beer is sold on the premises but there are multiple sites. There is another model where the system is a 2 BBL at a café style place but they provide 5-8 different styles but sold on the premises only. Then there is brewery that sells on the premises but only finger food and a very limited menu. Lastly there is a brewery (in the top 50 in the country in terms of production) that has food, lots of space to sit drink and eat but 90% of it’s sales are via distribution. It’s primarily a production brewery. Each has a niche of the market but I will say that some are doing better than others but I think it’s more of the IPA craze and the breweries are not giving in to that craze, which is fine by me because there aren’t a lot of breweries out there producing non-hopped clean lagers anymore. It’s sad to see that style being ditched for hoppy beer.

  • wayne norris

    says:

    depends on your location…15bbl+ is a lot of beer to get rid of and you need help (distributor) small systems allow for quik change ups and fresh beer. people like new stuff…our 2bbl works for us in a small town..we’re not rolling in millions but making a living…you have to know where you stand in life. there is only so much tap space and beer drinking dollars out there…everyone thinks they will be the next Sam Adams …good luck. but if you want to have fun and make some money while making a variety of beers..small is the way to go.

  • Kevin

    says:

    We started out at 1BBL and then quickly upgraded to 2BBL. This opened up these opportunities/advantages

    The great flexibility to make a great variety of beers,
    Nail down our core offerings where we weren’t wasting a lot of product trying to get it right
    The ability to leverage large home-brewing equipment, which is much more reasonably priced and much easier and quicker to obtain and get up an running.
    Not go broke (used our own capital) or have investors breathing down our necks looking for payouts
    Establish a business which leads to obtaining capital and credit since you have been around for a while
    Smaller space to rent/lease – leads to less worry at end of month.

    Challenges have been:
    Keeping costs down with ingredients – you have to be cognizant on what you absolutely need to order – resist the temptations to buy “cool” ingredients and merch. Some things just don’t sell and you have to be able to move on and drop it or try again when conditions are more in your favor
    More work keeping your core offerings on tap as you can only make so much
    Collecting wholesale sales.
    Cashflow. cashflow, cashflow

    Solutions we found that work:
    Upgraded to 5BBL system that we can brew 2bbl and 5bbl batches on. Kept our 2bbl vessels and obtained a bunch of 5BBL unitanks. We can brew big sellers and specials/seasonals on same system.
    Listen to your customers and what they want. Don’t be afraid to try something that everyone is asking for.
    Expanded next door – more room, more tasting room space = $money
    multiple revenue streams are absolutely necessary.
    CUSTOMER SERVICE – Talk to your customers!

    We will be starting our 6th year later this summer. It has been a struggle and an incredible learning experience but it can be done. Plus, we are in a self-distributing state which cuts out the middle man locally.

  • David Morse

    says:

    Owned a 2bbl brewery which I designed, built, and was the brewer for 15 months. I was 1 of 4 unpaid owners. I was unpaid as the brewer. We broke even without having to pay the brewer. My wife and i evaluated an upgrade to 10 bbl and decided the risk was too much, too much competition. We sold to our other partners. They still own the 2 bbl brewery and are ‘losing a bit’ but they roll it into their very successful fruit farm and barely care that it does not pay. I find it VERY hard to believe that anyone is paying the bills and paying the employees at less then 5 bbl. My wife is a finance person and me an engineer and we could not make the money work.

    • Kevin

      says:

      It can work and it really depends on keeping your bills at a minimum. I agree, payroll is a bear but you have to keep it to a minimum at this level. Like I said we are going into our 6th year later this Summer.

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