So you want to start a brewery…

… well jolly good. Tally-ho to you and a pint of lager for the both of us. Now let me tell you about this brewery thing.

I’ve been approached by a number of new brewers looking for advice (or equipment). Some wanted to establish a brewery, some wanted to contract (that is a post another day). All of them have been home brewers for a good while. I’ve decided to share what I’ve been telling people here. This is the sort of stuff that I wish someone would have told me when I started to work on my brewery plans.

To preface: There’s some very different approaches to starting a brewery. I can speak to the shoestring approach – starting small with your own money or maybe a small loan, wits and endless hours of work. Starting a brewery with a number of people, with investors or bigger bank loans (and also endless hours of work) will be a little different. From what I hear a lot of the cornerstones are the same though. With more money doesn’t come more ease, just different-sized issues.

There’s a lot to talk about. Let’s unpack.

Why, oh why? 

So why does anyone want to start a brewery? The answer I hear is uniformly: Because I love to brew! And uniformly my advice is: Find a job as a brewer, do not start a brewery.

Brewer and a Brewery Owner are fundamentally different job descriptions. But people rarely say: I want to become a brewery owner. Brewery jobs for people without commercial experience or certificates are in very short supply. So starting your own brewery is the shortcut to making your craft dream come true – isn’t it? You’re your own boss and you get to make recipes, brew beer and talk to beer people all day long. Oh, and of course it’s a lot of cleaning *insert laughter*.

Also it’s kind of sexy, isn’t it? Imagine what it would be like to have my own brewery – free beer all the time. Amazing!

The people I’ve met are aware that the running of the business will be a part of the package too, but they seem to expect that it’ll be ‘some paperwork’ alongside the brewing. Yeah, right.

In my 3 years of building, and nearly 2 years of running a commercial brewery I spent about 10-15% of my time brewing. There’s sales, accounting, deliveries, pick-ups, manage supplies, keep your records and returns, cash flow projections, re-investment, endless emails, marketing, media and festivals, social media, people who want to chat with you and maintaining your venue. So there’s that.

Say goodbye to your old life

The weight of a business of your own shoulders is like nothing I experienced before. Being your own boss makes everything that happens to your business very personal and direct. While it gives you that great feeling of control and achievement, it also means that what happens to your business happens to you. Money worries, sales, growth, equipment not quite on point, chatter about saturation of the markets… and I don’t even have staff.

Over time you learn to distance yourself better from the stress and demands of your brewery, but make no mistake – owning a business will change everything, and might NOT make you a better person.

No matter what venture you start, you’ll likely find that reality is not quite what you expected, and that’s ok to some extend – learning curve and all. What’s almost impossible to anticipate is the massive toll on nerves, sleep, hobbies and relationships. To my experience, the people who are willing themselves into running a company in order to get the chance to brew end up seriously resenting the business side and everything that comes with it. And that in itself limits and risks the viability of the business. Because sales need to be done, more bills come in, relentlessly. More on that later.

In all likelihood, owning a brewery will create a Mr Hide alongside your Doctor Jekyll.

The strain shows. We all know stories of tantrums, aggression, frustration venting on the brewery floor, especially when numerous people are involved. The behaviour of some people in the industry would get you fired in any other job. And I think that’s not because aggressive, mean people become brewers – I think it’s because brewers are becoming business owners, unprepared to handle the personal fall-out.

What do you do as a home brewer is a batch goes wrong? In most cases I bet you’d just get a few mates over and drink the beer anyway. Owning a brewery, are you going to release a faulty batch? Are you prepared to pour out a few thousand dollars and days of your work because there’s a small fault to it? And will you manage to go home with a song on your lips, shrug it off and have a nice meal and a solid night’s sleep? Good on ya, if you do.

But the opportunity is so great, isn’t it?

Craft beer is such a growing industry, positively blowing through the roof ! According to the ANZ Craft Beer Insights craft beer sales have increased by 35% from 2015 to 2016.  You’d be a damn fool not to get on the craft beer wagon right now!

Like any industry, it looks very different from the inside. And while you should do your homework on stats, growth and market, there’s stories and experiences that won’t be reported in pie charts.

When this report came out, me and all the brewers I know looked at each other and went resoundingly: Nope. Nah ah.

The ANZ stats record craft beer and its growth in a very specific way, and most brewers I know disagree with almost all key points. For example, craft beer is defined simply by a higher ABV level – a questionable assumption. And the analysis includes breweries like Mac’s, Founders, Boundary Road, Stoke, etc.If you haven’t yet, read Dom’s analysis of the reported 35% growth. Insights like these are rare and very valuable.

Most important to understand is: Growth does not equal revenue! In fact, in order to grow and become well-known businesses like Garage Project have to invest and re-invest immense sums in design, sales, equipment, brand and staff. Investors with very deep pockets is a prerequisite for this kind of business model – alongside amazing talent, experience, outstanding staff, drive, motivation and a very clear vision. They sure are growing, but they’re not swimming in money. The money goes back into the machine.

This 35% report and the number of positive stories in the media are misleading people into believing there’s tons of money to be made in craft beer. Yes, we all have an interest in shining a positive light on our industry, and there’s certainly success that we all share. But simply put: The only ones making any money are the ones who invest tons of money – and they’re only expecting to make money over 20-50 years. 

That’s of course unless you’re selling your brewery on like Panhead or Emerson did. So perhaps that can be your game plan…

Starting a brewery vs running a brewery

When you do throw yourself and your money into the breech, you will embark on a massive learning curve. Over time you do pile up achievements when you learn to handle quotes, account forms, dealing with tradesman, designing your plant and sourcing all the bits and bobs you need for your business (woah, where did all the money go…?). After months you look at yourself and see how far you’ve come and how much stuff you handled – that must be worth something!

So you just got really good at the starting bit – but running your brewery requires a whole different set of skills. You have worked your ass off, and now you’re somewhat poorly prepared for what comes next.

I see it like this. A starting brewer spends a massive amount of time on sourcing and scaling equipment and plant, finding a location, etc. If you have some sense you start thinking about your brand and sales also (coming up next). Once you’re up an running, you spend about 10% of your time actually brewing, the rest of the time is sales, accounting, distribution, records and maintenance.

That is all unless you have a lot of money left up your sleeve to pay someone to sell for you, or if you magically landed a distribution deal – more on that later also.

starting-vs-running

By the way, this is an effect that’s not unique to the craft beer industry. There’s some people who are bloody excellent at navigating all the barriers and pitfalls of getting a business off the ground. But as soon as all the drama is over, they’re a complete fish out of water. Some then simply move on, leaving someone less fierce at the helm to steer the ship. But really, that’s when the real work just begins.

Brand and other animals

This is probably the field most ignored by new brewers, yet one of the most important factors to your brewery’s success. What is your brand? I’ve asked new brewers this question and most of the time I got: ‘Oh, I don’t know yet, I’ll figure that out.’ That’s a huge red flag.

You might think it’s the wallpaper that you put over the whole thing once you’ve figured out your perfect Pale Ale recipe, and something to put in beer that no-one else has ever out in beer ever before! Not so much.

Brand is a strange animal. The word itself reeks of jargon, and the deeper you get into it, it gets worse. I have a personal blacklist of brand-wank terms that make my toenails curl. All of them are likely to be thrown around when you talk about brands: unique, pop, edgy, new, challenger, with a twist… *vomit* It’s all the things you as a true brewing purist likely despise.

Answer the question: why should someone buy your beer? That’s when you enter the world of brand. And you don’t get to leave until you answered that question. Nasty.

Names matter, tap badges matter, bottle and can designs matter. The way to talk to bar managers and customers about your brewery and beer matters. Your stand at the beer event matters. Your posts and tweets and instagram matter.

People may buy your beer because it’s the new thing, but that’s one time. They’ll buy it again when they recognise your logo and name the next time you’re on tap or shelf. And that’s where you make the money to go on.

Garage Project are (again) the most prominent example of how it’s done. But by all means – you don’t need to ‘do it like’ Garage Project. You won’t, anyway. Someone said to me: “I have these designers and I really want them to make a great label design for my bottles. ‘You know, it really has to pop on the shelf.’

Look at a the craft beer isle at New World Thorndon:

29600689_displays7

In fact, go to at least 3 or 4 bottle stores that specialise in craft beer. Look at the shelves and imagine you’re just a punter with not much of an opinion on breweries or beer styles. Your brand will not ‘pop’, there’s no way.

There was a time when one could come up with a bottle design that was different from all the other beers and stand out – but that time is well and truly over. Craft beer packaging is now notorious for the flood of colours, fonts, images. Marketing and customer research are starting to describe ‘choice paralysis’, which leads to customers just grabbing the same thing they always buy.

Brand matters, but that doesn’t mean you have to find a way to be completely different from everyone else and try to out-pop the pop-iest on the shelf. And neither should you trust that you beer will fly off the shelves because you have found that one clever design or name that no one has thought of yet. Not gonna happen.

Good brand comes from vision, and you can’t fake your way to that. You can pay someone to have a vision for you, but you’ll need to keep paying them for a long time to come. And if all of this sounds like hogwash to you, you either have a vision that no-one can take away from you, or you’ll frankly never get there.

The real bottleneck

Consciously or not, new brewers expect that once the beer is finally kegged, bottled, canned and ready to ship, you open the roller door of your brewery and there’ll be a line of bar managers with dollys waiting to put your amazing brew on their taps and shelves. The calculation being: I make craft beer, craft beer is currently in demand, so my craft beer will sell. Unfortunately A leads to B, B leads to C, so A must lead to C does not work.

I know I made that assumption to some extend. I know I was busy designing my kit based on output, made projections based on how much beer I can possibly produce with the equipment. That’s by far the biggest mistake new brewers make – thinking that making  the beer and selling beer are more or less the same. 

I had real good starting conditions: When I released my first batch of beer I had been a part of the Wellington beer community for more than 2 years. I knew most of the bar managers and buyers around town, they knew me and my plans. I had worked very hard for more than a year, sacrificed a lot of time, nerves and cash. I had received an incorporated feedback on my beers. I thought I was as well prepared as one can be for a 1-person company, and now I deserved to usher in some shape of pay-out for all that work. Wrong.

As the new kid on the block you’ll probably land some taps and shelves here and there. The core of the craft beer world is always keen to try something new. Don’t celebrate yet – because without the re-orders your brewery will not make it that far.

Furthermore: The current situation in New Zealand is that the margin in all beer related industries is slim. Because a pint is not cheap you may think someone’s raking in the cash. But neither the bar, not the distributor, not the brewer, make a great margin. There’s not a lot of taps, there’s a few more shelves, and there’s plenty of good beer options to fill them. Craft beer bars live off variety, so even if you manage to establish relationships with bars around you, and even if your quality is a really high standard (that’s another blog post), they won’t have your beer on all the time.

But hey, there’s plenty of bars across NZ and more scenes are growing every day. True, but how are you getting your kegs there? And how do you return your empties? The kegs that you pay lease for every month, or own, and keep paying lease or can’t re-fill before you have them back, cleaned and sanitised? You need to ship your kegs (cost), keep track of where all kegs go, check in with the bar managers on when kegs are empty (that might take a while, bars don’t usually put kegs straight on), organise to get them back (cost). Did you say that you just really love to brew…?

This is where distribution comes in – another field with scarily low margins. For years it seems that the distributors who specialise in craft beer mainly make their money in importing beer, not with the local brewers. To find a distributor you need to give a discount on your beers, which will likely dwindle your small margin into oblivion.

The long and the short of it is: In the last year is certainly feels that New Zealand’s craft beer market is reaching a level of the dreaded ‘saturation’ that makes it difficult for existing breweries to get by – and more of less impossible for new breweries to establish remarkable brands that can safely make it through the next years.

That’s unless of course you have a few hundreds of thousands to invest in equipment, packaging, sales, staff, marketing and brand. And not only for your starting phase, but money to keep your brewery going on low sales for the first year or two.

Yes, more Kiwis are drinking craft beers – but the growth in the number of punters has not been in balance with the number of new brewers trying to get into the market. So getting your product out there and getting paid is a serious piece of work.

So why did I do it?

Here’s why I started Tiamana brewery: I have been working as a consultant for more than 10 years. I advise companies on how to make their websites and services attractive and easier to use. I advise – I don’t get to decide. And in the world of stakeholders, KPI’s and org charts, decisions are often made based on abstract procedures and policies, miles away from something like a real product and a real customer. I could talk for hours about the bizarre rules and bullet-proof logic of this parallel universe. I wanted to start my own business to put my own ideas about how a business should be run to the test. I wanted a relief from all the balled-up cynicism that I could see myself build up, and put my own money where my mouth is.

I actually wanted to start a business. And based on my own interest and heritage I wanted it to be a brewing business. Because yes, I do love to brew. But that was never my main motivation, I could have remained a happy home brewer and worked on something else. I did know though that I had some advantages in beer that I would not have in other industries: a real story.

I’m not saying that I’m so brilliant and found the ideal and only reasonable motivation to get into the brewing biz. There is no such thing. But I do feel that my track record in the office world has prepared me better for the life of a brewery owner.

So, where does that leave you?

So you’ve read my honest account of what it feels to be a small brewer owner at this day and age. Now what?

Consider this: If you love brewing, and you want to spend more time doing it in a more professional way – put your money into a real nice home brew fit-out. Keep it manageable and flexible to learn. Think of all the things you love about brewing and try to maximise them. Go and win the National Home Brew Competition. Become a beer judge. Form a home brew group with others, share beers and learn from each other. Be active in your local beer scene, organise events, make friends and talk beer smack all day. Learn to make your own labels at home. Build some of your own equipment, learn to weld. Set up a cellar of your beers and see how you improve your quality with every batch. Teach others to brew and to understand good beer. Spend you money travelling and try all your dream beers.

Seriously – it’s possible to have all the good stuff, without all the drama!

Owning a brewery is a lifestyle choice. Listed above are all the rewards that keep us going in our field. I’m really not trying to be pessimistic when I say that all of this comes with strain, risk and some really dark times. That’s the price for the ‘Pro Brewer’badge.

And yes, I do sometimes wonder whether I would do it all over again with what I know now…. I’m not completely sure.

If you’re still 100% set on this thing…

Here’s some final advice for you:

First of all: Don’t be an asshole! If you’re busting into the beer scene schooling others with your great knowledge, treating bar staff badly, proclaiming how your ‘extraordinary ideas’ will ‘reinvent beer’ (actual quotes from an online ad) – then you can pretty much wrap it up, you won’t go far. We’re a close community, and we talk. If you run around behaving like an arrogant bully it will back-fire.

Be clear on your business model: With all I learned about the industry, growth, margins, investment and revenue over the last 3 years I can say that there’s 2 somewhat viable models for beer right now:

  1. Start small for for the win: Manage your financial risk, form a very clear vision of what your specific beer brand is, and aim for the long-term sustainability. If your brewery is small enough that it can sustain itself with a few local sales – you may have a shot. Why not start with 50 liters? Seriously! Look at Craftwork.
  2. Go fucking nuts: This requires millions. If you have that sort of cash or have investors willing to engage with you, you may be able to compete on volume and price. I seriously doubt there’s lots of folks out there who can pull that off.

Anything in between those two may be doomed, or become a bottomless money pit.

Be prepared to lose every single cent you’re putting in. Make yourself comfortable with that thought and with the possibility of serious changes in your relationships and mental health. How would that impact your life and any future plans you have?

Do your friggin homework. You cannot do too much research or too many calculations. Test out lots of different scenarios, different scales, different locations. And by the hammer of Thor – be extremely careful calculating your income projections. Draw up some scenarios where you may only sell a few kegs a month – how long could you do that for without running into serious debt or other trouble? What would be your way to mitigate that? And what’s your exit strategy? ALWAYS have at least one exit strategy.

What’s your long term plan? Seriously ‘brewing good beer and having fun’ is not a good enough answer. Are you planning to give up your job and do this full time? Then you have to sell enough beer to pay for your bills. I emphasise: You need to sell the beer, not make it (see above). How much can you safely say you will be able to sell at all times?

For comparison: My sales have not been bad over the last year at all. The overhead of my business is very low, I share a lot of cost with another brewery, but I still can’t quite pay myself a salary. I work a 30h office job to keep myself afloat. And if I was to go full-time brewing I would make about half of what I make in my office job now. Can you manage that in the long run? Common brewer salaries range between 40-60k before tax. For trained and qualified brewers in big business it can go a decent amount higher – but if you were that, you would not need to read this post…

Don’t be a stranger. Get out in the beer scene, get to know people, make yourself be know. A lot of managers are instantly suspicious when they receive an un-requested beer sample from someone they’ve never heard before. Go to the bars that you expect might sell your beer, observe how they work, try to understand what matters to them and what sells well. Yes, you have to find your own way to your beer, but there’s nothing wrong with understanding your sales people and your customers also.

And lastly, consider your timing: What I’m describing in this post is what the industry feels like from a nano-brewery’s view in 2016/2017. I don’t expect it to get much easier anytime soon and I will likely have to make more personal investment to ready my business for the next years.

Beer won’t get out of fashion by tomorrow. We expect more punters to spring for a craft beer now and then. But DB and Lion are working on owning those beers. So nothing feels safe at the moment when it comes to sustainability even on the smaller scale.

Consider to wait out this moment of saturation that we’re experiencing. If you want to start a brewery you’ll have a shit ton of paperwork and research to do anyway. Do that, keep the ball rolling, and keep your ear on the tracks to check for any changes and opportunities for you to pounce on.

I hope that my very honest and open account is helping a few of you out there. Now, brewer, go and prove that you’re worth your yeast!

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11 Comments

  1. A very good article! Having built a successful brewery business in the US I understand everything you’ve outlined and the challenges you identify are still understated! Building a production brewery is very challenging! That said there is a world of opportunity still available in the brewing world. We moved to Nelson to open Eddyline and feel strongly that our business model has tons of potential across New Zealand: not a production brewery but rather a brewpub. Build a great location with atmosphere, comfort, and accessibility, come up with a menu that can stand on its own, and build a brewery that can make great beer and is capable of having enough variety on at any given time. No distributor, no accounts, just you and your customers. The challenge is that you will be running a restaurant, brewery, and bar which adds additional challenges. You still need to do good marketing, need to have great not just good beer, and you will have to have a couple dozen employees. At the end of the day, if successful, you will build a loyal following that might be able to be transformed into local accounts and eventually distribution. One of the great things about the brewpub model is that you get immediate customer feedback and it is a lot of fun serving the public. Cheers!

    Liked by 1 person

    1. Hi Mic, thanks for your comment. I heard about you guys, didn’t make it over last time I was in Nelson but am really keen to meet you next chance. I heard great things about your beer. With your pro background from the US your perspective is really unique. You know, looking back I sometimes wonder why a few years ago thinking about a brew pub just didn’t seem to be ‘a thing’. Perhaps it was connected with the impression of ‘craft drought’ back then, looking to get beer out asap. And as you say, while there’s lots of advantages with a brew pub, there’s also tons more to take care of and set up. Really interesting stuff! If I did it over again, I reckon I would start differently…

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  2. in my State of Victoria, Australia, when we started 11 years ago there were about 8 micro breweries. now about 140.. so that is an increase of 175%. and I agree that it is possible 35% growth in the market as we started sharing around 1.5% of the beer market and it’s now at least 2%, maybe 2.5% but what? !!! competition is still growing fast… the market slowly. tempered by overall decreasing alcohol consumption.. all those new breweries.. sharing a very small pie.

    Liked by 1 person

    1. Cheers Scott, so interesting to hear from you. Gosh, I’m just blown away how universal this seems to be. Honestly, I wrote this thing as a portrait of our little scene in Aotearoa, but I’m amazed (and a bit shocked) that craft brewers seem to make a very similar experience around the world. Kia kaha, bro! 🙂

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  3. Hi Annika,
    I guess I really lucked into the whole brewpub thing when I stumbled upon my location at Port Mapua. Advice from Doug Donelan about becoming a ‘venue’ rather than a ‘label’ didn’t hurt either. It served to nudge me in a good direction. Even more serendipitous, a chance meeting with Chris Little when I first moved here left me with a business partner
    who knows heaps about brewing equipment.
    I don’t know how or why all this stuff lined up?!.
    I just know that I’m glad to be positioned where I am in the marketplace. It’s been eight years now, and we are still growing. I still do all the local distribution myself, same with keg filling and keg washing. We don’t bottle beer. I still mash in every brew, but the demands of running the operation often draw me away mid-brew. Fortunately staff brewer John Stephens maintains the focus to carry each brew to completion.
    The whole deal is a lot about relationships. It’s also about applying love to each and every brew. That stuff takes time. Getting really big takes time away.
    We’ll strive to stay a small, well loved local place for people to come and have a good time.
    Life is short. It’s for a good time, not a long time.
    Jim

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