How to Start a Brewery

The U.S. craft beer industry is expected to grow by an average of over 10% per year, meaning that, despite the fact that there are nearly 10,000 breweries in America, there is still a clear market need.

If you’re thinking of starting a brewery, creating a business plan and having a road map for permits, financing and marketing can help set you up for success.

8 steps to start a brewery

If you want to start a brewery, knowing how to brew beer is not a prerequisite. Although the operation revolves around beer, there are plenty of other pieces of the business to focus on as well. You’ll need to:

1. Research and write a brewery business plan.

A well-researched business plan is often the backbone of any type of small business, breweries included. Your brewery business plan would likely include these standard components:

• Executive summary: Explain the business objectives of your brewery. Include a mission statement and a brief summary of your location, employees and leadership team.
• Company description: Describe details related to your brewery’s concept or brand. Include a description of your local market and target customers.
• Market analysis: Share your market research and how you plan to stand out against nearby breweries. Conduct a separate competitive analysis to investigate your competitors and determine how to provide a different and better product, as well as an improved customer experience.
• Organization and management: Identify your main team members and others you plan to hire. Include a list of suppliers and describe the products they’ll provide. You’ll also identify your brewery’s business entity, or legal structure, in this section. You may choose from entities such as a sole proprietorship, limited liability company or corporation, for example.
• Services and products: In this section, describe your beer and any food items in detail. You may want to include a sample of your brewery menu here as well. Be sure to highlight other products you expect to sell, such as retail merchandise.
• Marketing and sales: Discuss your strategy for building up a customer base. You could also lay out your pricing plan and how your product costs influence your price structure.
• Financials: Create a financial forecast for the brewery, including balance sheets, cash flow statements and income statements for your first five years in business. If you plan to seek financing, outline how much you need and how you’d use the money. To stay on the safe side, you may want to underestimate revenue and overestimate expenses.
• Appendix: Include any relevant documents or forms you didn’t include in previous sections.

2. Hire a consultant.

If it’s in your budget, hiring a brewery consultant could help you iron out certain details when opening a brewery, such as finding a space and hiring a head brewer.

A consultant could supplement your in-house resources on a one-time or ongoing basis. They can help with large projects or specialty training for your staff.

When choosing a brewery consultant, look for someone who has extensive experience in the industry — ideally as a brewmaster — as well as formal education, such as a degree in brewing science or fermentation science.

3. Figure out your financing.

Though you may not need outside financing right away, you should have a plan to address increasing or unexpected costs.

You may draw from your personal funds, investor capital or commercial financing to cover the costs of starting a brewery. Loans from the U.S. Small Business Administration (SBA) may also be an option.

The SBA guarantees loans made through banks and other financial institutions, and these SBA-backed loans typically have favorable rates and terms.

4. Apply for permits.

The Alcohol and Tobacco Tax and Trade Bureau (TTB), within the U.S. Department of the Treasury, regulates the beer industry. All TTB-regulated businesses need a permit to legally operate. You can submit permit applications online — it’s free to apply.

Brewery owners may also have to apply for a permit or license, including a liquor license, from their state and city. Cities often restrict where alcohol can be made and sold, so do your homework before committing to any location.

Depending on how you plan to sell your beer, you may need additional local licenses.

FDA registration

Prepare for a visit from the Food and Drug Administration. All breweries must register with the FDA – no fee required – and pass an impromptu inspection. The FDA requires breweries to have Good Manufacturing Practices for Craft Brewers (GMPCB) in place, which are federally mandated standards including sanitation and employee hygiene. The FDA could visit at any time, so this should be a priority from the start.

5. Buy commercial brewing equipment.

Although expensive, brewing equipment is a worthwhile investment. And you may be able to easily sell pieces if you outgrow them or if the business folds.

Here are a few of the basic pieces of equipment you’ll need:

• Mash/lauter tun: A tank that infuses grains and water, creating wort, which is a bittersweet liquid that becomes beer after fermentation.
• Brew kettle: A pot that boils wort.
• Heat exchangers: A device that quickly cools wort.
• Fermentation tank: Holds wort as it ferments into beer.
• Brite tank: Clarifies and carbonates beer.
• Kegs, cans or bottles: Containers in which you store and distribute your beer.

Large brewing equipment can be made to order but it could take a few weeks or months before it’s delivered. Used equipment would be available right away — and could save you money — but specific pieces may be hard to come by.

Regardless, this may be one of the biggest upfront expenses for your brewery. If you don’t have enough capital to purchase equipment outright, you may want to consider equipment financing.

6. Set up an insurance policy.

You should have a business insurance policy in place before you start brewing. Brewery owners generally need liability insurance to cover any damage or injury related to workers or intoxicated customers, as well as business interruption coverage to supplement loss of business income and commercial property insurance to protect the physical space.

You may want to consider extending your coverage to protect you in the event of beer contamination, equipment breakdown or beer leakage. If you plan to transport your beer outside of the brewery, look into policies that would protect your beer in transit, as well as commercial auto policies.

7. Build a taproom.

Buying or building a taproom will be a major expense, regardless of whether you buy a space that needs minimal renovation or renovate a cheaper building.

Usage is a major consideration. If you’re planning to sell food, you’ll need to find a location with a kitchen — or room for one — and an area where customers can comfortably dine. Meanwhile, if you plan on offering tours and hosting events, you’ll need to consider that when laying out the space. Since the industry is so competitive, you’ll need to invest in a design that really lets your brewery stand out.

Choosing the location is perhaps even more important. On the one hand, you’ll want to set up in an area customers can easily get to — either by foot or in a short drive, or because it’s nearby other popular businesses. However, you’ll need to balance these benefits with the costs or renting or buying in a popular area. Building in a major commercial area will be more expensive, as will choosing a major metropolitan area versus a smaller city.

8. Open your brewery.

When it’s time to open, you’ll want to focus a great deal of effort on advertising. Start building a presence on social media as early as possible to connect with your community. And if you can afford it, consider classic methods like digital ads, print signs and billboards or even TV and radio spots. Solid market analysis research from your business plan can help you craft a message that highlights why your brewery stands out.

Some breweries opt for a “soft opening,” with a smaller group of friends and family, before opening their doors for real. This offers a lot of benefits, including a chance for your staff to practice in a real-world environment.

However you launch, though, be sure to enjoy the day. It’s a culmination of months, or more likely years, of hard work, and while there’s lots of work to be done after the fact, it’s a good time to pause and reflect.

Costs to start a brewery

Starting a brewery could cost from $250,000 to several million dollars depending on details such as your brewery’s size and product offerings, among others. Costs to consider include:

• Equipment: Everything from brewing equipment and bottling supplies to kitchen appliances and payment systems.
• Commercial space: At the outset, a down payment (if you’re purchasing your space) plus construction and remodeling costs. From there, you’ll need cash set aside for monthly payments, repairs and renovations.
• Licenses: Brewery licenses can vary widely between states and often cost several thousand dollars. It’s good to have money set aside for this, plus any other licenses required by state or local laws.
• Decor: Furniture, decorations and entertainment for guests.
• Branding: Money spent on both merchandise and advertising.
• Staffing: Payroll for leadership, employees and any outside consultants you work with during the planning phase.

Ongoing tax costs

The taxes associated with running a brewery would depend on the state you’re operating in and the business entity you’ve chosen, but all brewery owners could expect to pay federal excise tax on beer that has been sold.

The Craft Beverage Modernization and Tax Reform Act (CBMA), which went into effect in 2018, reduced the federal excise tax from $7 per barrel to $3.50 per barrel on the first 60,000 barrels for brewers producing less than two million barrels annually. All other brewers owe $16 per barrel on the first six million barrels, and $18 a barrel if they surpass six million.

Other taxes for brewery owners could include:

• State excise tax
• Sales tax
• Property tax
• Federal, state and local income taxes
• Payroll taxes

For all small business owners, it’s worth putting together a tax preparation checklist to make sure you have everything in order ahead of time.

How to finance a new brewery

New brewery owners may start with personal savings and funds from private investors, such as friends or family, and then secure outside financing like a business line of credit if more capital is needed.

If you need money to open or expand, there are several financing options available.

• Short-term business loans: These are often used for immediate business needs or emergencies, and have a short term length, typically ranging between three and 24 months.
• Equipment loans: These are largely traditional loans that can provide significant financing for general equipment needs.
• Business lines of credit: This is a revolving business credit account that lets you borrow up to a set limit, repay the borrowed amount and then make additional withdrawals. It works similarly to a credit card, but often has lower interest and can be used for things you can’t put on a card, like payroll expenses.
• Crowdfunding: Popular with startups and on platforms like Kickstarter and GoFundMe, this practice lets you source money from a large number of individuals at once.
• Business credit cards: A credit card issued specifically to a business owner, allowing them to borrow up to a certain amount.

Alcohol distribution laws: What to know

To get your beer into the hands of more people, you’ll need to start distributing. Alcohol distribution is regulated at the state level within a three-tier system. All beer must pass through these three levels before reaching consumers:

• The producer: Breweries that brew and package beer, from large national brands to neighborhood microbreweries.
• The distributor: Distribution companies ranging from those with a small fleet of trucks or those running a multi-state operation.
• The retailer: Off-premise alcohol retailers, such as liquor stores, supermarkets and convenience stores, and on-premise retailers, like bars and restaurants.

The producer makes beer then sells it to distributors, which deliver the beer to retailers where consumers purchase it.

Most states also allow self-distribution, permitting brewers to deliver to retailers on their own. Self-distribution is a good option for brewers first entering their local market, but it could be hard to scale the business and expand to new areas without outside help.

Look out for state franchise laws

Some states enforce beer franchise laws, which require brewers to strike an agreement with a distributor that would mandate a brewer to legally prove “good cause” before terminating the relationship. Though the laws aim to protect small distributors from large, powerful breweries, brewers risk getting trapped in a bad relationship. Proving “good cause” could require an extensive legal process to provide evidence.

In 17 states, the government maintains control over the sale of distilled spirits, sometimes including wine and beer. In these states, government-operated stores are the only entities allowed to sell liquor, and sometimes that rule extends to beer and wine. Check the National Alcohol Beverage Control Association (NABCA) website for a list of applicable states and information about their laws.

5 tips for growing your brewery

Once you’ve gotten through the initial growing pains, it’s time to focus on the next challenge — growing your brewery into something even bigger: