Monday, September 30, 2013

SO YOU WANT TO OPEN A BREWERY.......



First and foremost, I got in way over my head.

I bit off a lot more than I thought I would.

I will be the first to admit that.

I got it, okay? I'll own that.

Okay, so way back when (emphasis on "Way"!), prior to uninstalling the brewing system from The Tap House in Huntington Beach, California (loosing precious brain cells along the way). Way before taking that fateful trip across western Wyoming on that painfully beautiful May afternoon when the whole idea of this was plunked into my brain. Back when I was learning the nuts and bolts of commercial brewing and product management at the H.C. Berger Brewing Company in Fort Collins, Colorado.
Back when my hair was much thicker and my eyebrows weren't.

Way back then, I thought how cool it would be to open and run my own brewery (it's still pretty cool!).
To do things "my way".
To make only "my beers".
How adventurous!
How daring!
I knew a heck of a lot about brewing and running a brew house way back then. I knew a lot about making good beers way back then. I mean, how hard could it possibly be.......(ugh!)


Okay, fast forward eighteen years to the Glacier Brewing Company at 6, Tenth Avenue East, Polson, Montana, 59860 ("Tenth and Main!"). We have been in operation for awhile now (incorporated July 26, 2001). We have kept our doors open to the public for retail sales twelve months a year since 2002 all the while operating a combination wholesale/retail/manufacturing business! No simple task, I'm here to tell you! Anywho, along the way, there have been a multitude of lessons dished out to us.

If you're curious, here are but a few:

This little "dog-and-pony-show" is producing ten products (beers and sodas) in six-packs, 1/6 barrel kegs, and 1/2 barrel kegs all year round (one barrel equals 31 gallons so 1/6 barrel is around five gallons and 1/2 barrel is, well, 15.5 gallons). Always striving to keep the inventories of all ten (er, actually, all twenty seven products because we must keep seven product inventories full in bottles, 1/6 barrel and 1/2 barrel kegs AND an additional three products in 1/6 and 1/2 barrel kegs!)products available at any one time just in case our distributors or retail customers should want something.

One of the rules of thumb in this bizarre industry is to have AT LEAST five kegs of each beer available for each account at any one time: one on tap at that account, one in their cold storage, one stored at the distributor, and two stored at the brewery. Not too big of a deal unless you plan on having more than a couple of accounts. Or maybe ten or how about 50 or more?!? Get a couple of distributors, several bars and restaurants interested in your products, your own tasting room and pretty soon you are looking at needing several, SEVERAL hundreds of kegs! Okay, just a cost of doing business, you say. Sure, easy for you to say as you sit on your comfy, overstuffed couch, enjoying a Glacier Select in the late evening sunshine! Keep in mind that each of these empty, used kegs (1/2 or 1/6 barrel)costs around $90.00 without shipping!
Now multiply that by 100 or 350 or 675!

Okay, so now you have your cooperage (what we call the "keg herd"). It's kind of a painful move financially but very necessary.

Okay, moving on.

We now need to get the actual brewing system. We settled on a ten barrel system (310 gallons finished batch). We choose this size because we didn't want to start smaller (economies of scale and time can cripple you) and we couldn't find any system bigger (that we could afford.) so ten barrel is was and is. Our particular brew system was found in The Tap House in Huntington Beach, California. Don't bother planning a pilgrimage there though, it was shut down for nine months when I got there to uninstall the brew system and associated fermenters and brite tanks twelve years ago.
(One particularly nasty side note: when I had the brew house equipment fully uninstalled and removed from the building, it was time to focus on the fermentation vessels (FV) and the brite beer vessels (BBV). The FVs are used to allow the yeast to transform the sugar-rich liquid into beer via fermentation and the BBVs are used to carbonate and store the finished beer. This brewpub/nightclub was located in southern California and had been shut down for at least nine months, WITHOUT power and I got there in September. All the refrigeration to these tanks had been turned off. The FVs and BBVs were all still full! Of course, I could not move them full. At this point in my week-long, self-induced mental trauma of the "uninstall" (shudder!), I was not able to think terribly clearly about how I could empty these tanks in a "non-intrusive" manner. Well, after noticing a couple of floor drains and also noticing how hungry and tired I was, I opted to open all the valves, not look back, lock the door and go to dinner. So I did. When I returned an hour later, the stench of rotted beer was heavy in the humid, southern California air and almost physical but the tanks were empty!)

If you get lucky, and I mean REALLY lucky, you could find a used, 10 barrel brew system (with associated tanks) for under $100,000 back in 2000/2001. We were really, REALLY lucky.
Don't forget you need to ship it from where ever you found it to where ever you want to install it (ca-ching!).
Also, don't forget you need to pay someone to install at least a part of it unless you happen to be a Master Commercial Plumber, Master Commercial Electrician, and a Master Commercial Steam Pipe Fitter (ca-ca-ching!).

For those of you paying close attention, all of this is under the assumption that you have secured an actual building in which to place your new toys.

This building, by the way, must meet several, critical criteria including:
  • adequate space to house the brewhouse, cellar, cold room, beer storage, raw material storage, office/administration space, and any public space you should choose to have.
  • adequate utilities like hookups to a municipal sewer system and water system with the ability to have a large amount of water pumping into and flowing out of the building, single and triple-phase power to support a manufacturing/retail/wholesale business.
  • physical arrangements to facilitate receiving and shipping pallets of materials weighing several thousand pounds, never mind the weight of the forklift itself, if you are so fortunate to actually afford one.
  • actual foundation and footings of the building to accommodate the varying weights of the empty and full tanks (well up to and beyond 3300 pounds for ten barrels). Seriously, look into this factor before you sign the papers unless you want your "ex-brewery" to be on the front page!
  • you must, must, MUST have a sloped floor poured in the brewhouse and cellar, both with trench drains unless you have some really weird fetish with squeegees!
  • make sure you have adequate ceiling heights for your tanks. Be sure to include space to work on top of the tanks (it happens)!
  • oh yeah! Make sure the zoning allows you to commence in manufacturing or light manufacturing. This is kinda an important point. Your new neighbors WILL shut you down within months if you violate this!
  • Keep this all well away from churches and schools (at least in Montana)!
Alrighty,  so we have our brew system and tanks, we have our kegs, we have our all-important building, we have a general understanding of logistics.

What else........?

Well, now we need to start buying the raw materials:
Find a grain supplier. Buy grain-$2000 per pallet (plus shipping), should do about four brews,
Find a hops supplier. Buy hops-averaging around $450 per 44 pound box (you will need at least five to ten different types of hops),
Find a yeast supplier. Buy yeast-around $400 per shipment at least six times a year,
Find a CO2 supplier. Buy CO2-lease the bulk tanks but have them filled for around $300 every couple of months or so,
Find a, er, well, miscellaneous suppliers. Buy sugar, flavoring, miscellaneous- $500-$3000 every three months.

One of the biggest costs will be the labor. Paying the poor malt-monkey to drag the hoses and grain sacks across your beautifully-sloped, drained, epoxy-coated, brewhouse floor and actually make the beautifully, creative, wonderful ale or lager you will sell. This expenditure (the labor not the floor) will probably give you the most sleepless nights. If this is your operation you'll probably think (don't ever say it out loud!) "I won't pay myself until the business is making money". You are a fool, but you're in good company. You and your family, however, will end up on food stamps and, even then, eating Ramen noodles thinking they are very tasty!
These are but a few of the things we need. The things we need to actually make the beers and sodas!

By the way, the more beer you make and sell, the more beer you will have to make and the more you will have to buy. Further pushing that "break even" point even further down the road.
Cruel truth but true.

Okay, getting your beers and sodas "out there"; Marketing.
Acquiring and holding draft taps in bars and restaurants is one of the trickiest things in this biz. It is a true cut-throat, winner-takes-all campaign. You can discount your kegs to an account only to find the "macro beers" (ABInBev, MillerCoorsMolson) have discounted even further (they can dip deeper than you can) and your half-full keg is suddenly sitting in a back room, never mind where the actual tap handle went (-$40.00). If you don't make them yourself on a lathe in your garage in the middle of winter, you will need to buy them. The style we have will run you around $40.00 per handle. Speaking of which, get used to the fact that once a tap handle leaves the brewery, YOU WILL NEVER, EVER SEE IT AGAIN!EVER!

Alright, you can hold "Pint Nights" at bars and restaurants in an attempt to further you brand. Sometimes this can be a very fun and useful event. Pint Nights are when you give pint glasses away with you logo on them to patrons who order you beer at a bar or restaurant. You will usually be there (volunteer, of course, no pay) to meet the customers and talk up your brand. Unfortunately, often the account will not be paying for the glasses and the beer from the keg is discounted to that same account. Chalk it up to "marketing".

Alright, so the draft market is hard, really hard. Really, really hard for a small brewery. How about six-packs? Oh man YEAH! Just think about all the accounts out there that DO have space for a case or two of your beers! No more worrying about tap space! Brewery Nirvana!

Slow down there Buckaroo......
Now you need to find a commercial bottling machine and a labeling machine. If you are lucky enough to find these two used, write the check for around $40,000 to $50,000, but be ready to do some repair/maintenance work on these machines. You also need to find a supplier for empty bottles. And one for labels. Oh yeah, unless you are skilled with Illustrator and Photoshop, you will be hiring a graphic designer to design your labels for you. Now that you have your labels, you must submit them to the government. More specifically to the Alcohol Label Formulation Division of the Alcohol and Tobacco Tax and Trade Division of the Department of the Treasury, aka the ALFD of the TTB. These of the kind folks who will determine if your label design meets all of the Federal requirements of a beer label. No charge for this, just a whole lot of anxiety. If they approve it, YIPPIE! You move on to a label printer. If they reject it, redesign and resubmit.

Most label companies will have minimums (you will get SO used to thinking in minimums!). This is the smallest amount of items they will sell you.If you can find one that deals with under 15,000 then, YEEHAW! But, be ready to pay for that small amount. You will pay a premium to purchase the minimum. Economies of scale rule. The more of anything you order, the less you pay for it  Also, don' t forget to design and print six pack carriers (aka "baskets"). Yup, even more doh-ray-me!

Okay, you have your labels designed and approved and printed and the packaging machines are in place. Now get your beers out there and saturate the market! C'mon! Let's Go! SELL!!!
hmmmm......
No saturation yet.....
Oh yeah! You need to hire a full-time salesperson and/or delivery person. Expect to pay them a salary, mileage, and, perhaps, a commission (don't even get me started on payroll tax, paid vacation, etc.) This individual will be beating the bushes, trees, small shrubs, perennials, and every other living thing out there to get accounts! Not an easy endeavour by any stretch.

So, to briefly recap. If you would like to open a brewery of your own, your very own, make sure you have a building that can accommodate a brewing operation. Make sure you have the brewing equipment. Make sure you have a lead on affordable packaging machines. Make sure you have adequately deep pockets to fund designs for your packaging. Oh, also, make certain you have the talent to sell your beer, promote your beer, and package your beer. And make sure you have the talent and creativity to actually make the beer in the first place.


The bottom line is this: you are starting a manufacturing business with retail and wholesale outlets. You are competing against local companies who are much more entrenched than you, with much deeper pockets, and a larger customer base than you. You are also competing against some of the largest corporations in the entire frickin' world (aka, good luck)!

Digging up the courage and resources to start and operate a microbrewery in Montana (or any state for that matter!) is nothing short of amazing. This is an extremely difficult enterprise to undertake: the hours are very long, the pay is low or non-existent, the reward is pretty much in your head. But, having gone down this trail myself, I gotta tell ya, every now and again I catch myself looking around my brewhouse and I think about all that has happened to get my business to the point it is. I think about those brave individuals who took a chance on me and my dream. I think about how truly amazing it is that I was able to manifest a daydream during a trip across Wyoming into an actual brick-and-mortar brewing company in the wilds of northwest Montana! This definitely gives me reason to be awestruck!

Opening a brewery is well within your abilities.
You just need to "have courage to loose sight of the shore"!

Until next time,
Your Humble Brewer

p.s. if you need help, I am available to hire as a consultant!

1 comment:

Quality Transportation Services, Inc. said...

Great post. If/when I open a brewery in Billings, MT I will give you a call for some consulting. Cheers! Andy