Nanobrewery..Road to failure

The whole concept of "**** the law, just do it!" is nonsense.

Why are you going to sell your beer to? What bars are going to buy from you? You obviously aren't getting a distributor. Who are you marketing to? You going to run a speakeasy in your basement? What happens the first time there's a fight and the cops get called?

Reading Cape's experience, if you ever decide to go legit and you've been caught... it ain't going to happen. You'll never go legit, that's the first thing they're checking is for those types of crimes.

What if you're successful and want to expand? Where are you getting your capital from? You sure aren't getting a bank loan or an SBA loan, you're looking to borrow money from Big Vinnie.

How are you going to market your illegal enterprise?

Incidentally, did you happen to notice the brother homebrewer in Alabama who's got $20k in legal bills for... HOMEbrewing? You think they aren't going to be even worse if you're selling without a license? Now, we're talking FEDERAL charges, I'm sure those are a blast! 'Cause, you know... pretty sure that not paying taxes is the kind of crime that people DO go to jail for.

Phunhog said:

Like I said I agree that it is a bad idea BUT where is the evidence that that you are "asking for trouble"? Why don't we just say that the boogeyman will get you while you are sleeping? I am fine with the fact that it is against the law and obey the law. it just makes me cringe when people say things like "you will go to jail" or "you're asking for trouble" when there is ZERO history of anything like that occuring. I also cringe when people are so supportive of homebrewers in Miss. and Alabama when technically speaking they are breaking the law. Seems like a double standard that we support one illegal homebrewing activity but do not approve of another...

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Seriously, man, selling beer is such a far cry from making it for yourself. It breaks local, state, and federal laws. And these laws are enforced. Not to mention that at every level of selling beer you will need to work with other companies, each of which will likely not work with an unregistered, non tax-paying beer seller. If you think otherwise, and you honestly think homebrewing and selling beer commercially are both the same risk factor, you are painfully ignorant.

libeerty said:

Seriously, man, selling beer is such a far cry from making it for yourself. It breaks local, state, and federal laws. And these laws are enforced. Not to mention that at every level of selling beer you will need to work with other companies, each of which will likely not work with an unregistered, non tax-paying beer seller. If you think otherwise, and you honestly think homebrewing and selling beer commercially are both the same risk factor, you are painfully ignorant.

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This I agree with but there is a double standard that has been going on in the homebrew world as well as hbt in regards to allowing people located in states like MS and AL where homebrewing is illegal (until just recently). So a certain level of f#$k the law is acceptable but another is not?

Seems a strange line to draw.

Phunhog said:

Like I said I agree that it is a bad idea BUT where is the evidence that that you are "asking for trouble"? Why don't we just say that the boogeyman will get you while you are sleeping? I am fine with the fact that it is against the law and obey the law. it just makes me cringe when people say things like "you will go to jail" or "you're asking for trouble" when there is ZERO history of anything like that occuring. I also cringe when people are so supportive of homebrewers in Miss. and Alabama when technically speaking they are breaking the law. Seems like a double standard that we support one illegal homebrewing activity but do not approve of another...

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I don't know if you noticed, but you're talking about HOMEbrewing. This thread is about commercial brewing.

libeerty said:

Seriously, man, selling beer is such a far cry from making it for yourself. It breaks local, state, and federal laws. And these laws are enforced. Not to mention that at every level of selling beer you will need to work with other companies, each of which will likely not work with an unregistered, non tax-paying beer seller. If you think otherwise, and you honestly think homebrewing and selling beer commercially are both the same risk factor, you are painfully ignorant.

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Homebrewing has been legal at the federal level for around 35 years. So for 35 years there has been laws regarding homebrewing....yet I still can't find a single case where someone has been prosecuted for for violation of these laws. One exception is the guy in AL and that was for just plain homebrewing and it was an individual state law. My point is that these laws are NOT enforced so telling someone they shouldn't do something because they will be fined/jailed is a scare tactic. There is no evidence of that occuring. But you still shouldn't do it because is against the law.

Big_Cat said:

I've been told so many times that even though my recipes are nice and my brew is a product that people would love to buy that if i go in as a nano brewery of less than 5bbl I will fail and if i don't have the backings to keep me and my bills covered for at least six months that again i will fail...i am so upset and no one to vent with so i decided to vent here... I love this country but its sad that our government (elected officials ) make it so hard for a.starting business to succeed .... I won't give in but today i am a little down..Tomorrow will be another day and i will start my day with a fresh head on my shoulders ...

Thanks for allowing me to vent.

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Have you visited with your local chamber of commerce. They can be a good source of information and help with funding.

Phunhog said:

Homebrewing has been legal at the federal level for around 35 years. So for 35 years there has been laws regarding homebrewing....yet I still can't find a single case where someone has been prosecuted for for violation of these laws. One exception is the guy in AL and that was for just plain homebrewing and it was an individual state law. My point is that these laws are NOT enforced so telling someone they shouldn't do something because they will be fined/jailed is a scare tactic. There is no evidence of that occuring. But you still shouldn't do it because is against the law.

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Are you saying that the laws about beer sales are unenforced?

Homebrewing laws are not often enforced because it's tough to do so, and nobody is hurt. Beer sales laws ARE enforced, because the government isn't getting their tax revenue; they take this VERY seriously.

Selling unlicensed beer is a terrible idea.

homebrewdad said:

Are you saying that the laws about beer sales are unenforced?

Homebrewing laws are not often enforced because it's tough to do so, and nobody is hurt. Beer sales laws ARE enforced, because the government isn't getting their tax revenue; they take this VERY seriously.

Selling unlicensed beer is a terrible idea.

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I agree it is a terrible idea......but where are all the cases of brewers doing exactly that? Enforcement of a law implies that someone was actually caught doing the illegal activity. You can't enforce a speed limit but never write a ticket. I can't believe in the 35 year old history of legal homebrewing someone somewhere hasn't been tempted to sell some "under the table" and been caught...yet I can't find a single case where that occurred. Please don't think for a moment that I approve of or condone this. I don't!! What I question is the government's enforcement or apparently lack of enforcement.

"Under the table" is very different than trying to conduct a legitimate business.

Denny said:

"Under the table" is very different than trying to conduct a legitimate business.

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This. I'm sure plenty of guys have taken $20 for a case of homebrew, and this would be very tough to prosecute.

Starting up a nano without licensing is a far different matter.

Phunhog said:

Homebrewing has been legal at the federal level for around 35 years. So for 35 years there has been laws regarding homebrewing....yet I still can't find a single case where someone has been prosecuted for for violation of these laws. One exception is the guy in AL and that was for just plain homebrewing and it was an individual state law. My point is that these laws are NOT enforced so telling someone they shouldn't do something because they will be fined/jailed is a scare tactic. There is no evidence of that occuring. But you still shouldn't do it because is against the law.

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Seriously, you need to learn how to read a thread before chiming in with completely off-the-point nonsense. This thread is about opening a brewery and selling beer. That is the exact opposite of homebrewing. You know what homebrewing is, right?

Denny said:

"Under the table" is very different than trying to conduct a legitimate business.

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Sorry but Denny is 100% correct on this.....under the table...is one thing with landscapers, and the like....with alcohol....it's akin to moonshining, and very very illegal

You are right this thread has gone astray from the OP's thread. Somebody a few pages back kind of changed the subject......you know talking about Rosa Parks... and we all jumped in with our opinions.

There are a few things I have found in researching this topic. People keep quoting Soundbrew, but two things need to be kept in mind. One, that advice is many years old, and the craft beer game is changing daily. Two, even they don't say you CAN'T succeed. What they say is that either you'll go broke (beer suck, bad location, etc.) OR you won't be able to keep up with demand and will have to upgrade. Sifting through the anecdotal evidence supports these two generalizations in many cases.

Moreover, if you talk to (or read about) the brewers who've succeeded by this route, they generally say it was backbreaking work and, if possible, you should start out no smaller than 10-15BBL. This is sound advice.

All that being said, I am left with two very real truths. I've never been afraid of working myself to death (and I'm lucky to have a supportive wife behind me!), and there's no way in hell I can borrow $750K-$1M to get my 15BBL brewhouse, fermenters, etc.

So I'm gonna have a run at starting small. (Yes, I'll keep my day job for the first 12 months at least...at which point I can better assess my chances for the long run.) I'm pretty sure I can raise the money for a 3BBL system, 6mos of rent, and reasonable marketing & merchandise. It'll likely be the hardest thing I've done, but it's what I'm passionate about...and if I don't take a shot at what I care about, what's the point of being alive?

I'm just gonna leave this right here....

http://www.oregonbusiness.com/guest-blogs/4075-the-economics-of-nanobrewing-

Denny said:

I'm just gonna leave this right here....

http://www.oregonbusiness.com/guest-blogs/4075-the-economics-of-nanobrewing-

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PDX has so many breweries it is easy to get lost in the shuffle of mediocrity that plagues its brewhouses lately, so that article does not surprise me in the least. There are many markets where a 3-7bbl system is more than enough for many years...unless you are looking for distribution, then I will easily concede that anything less than a 15bbl is gonna drive you mad.

Denny said:

I'm just gonna leave this right here....

http://www.oregonbusiness.com/guest-blogs/4075-the-economics-of-nanobrewing-

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"So where does that leave nanobrewing? Basically as a foot in the door. If there is intense enough local demand for craft beer and enough beer nuts out there who will go off in search of nanobrews, some local bottle shops and pubs that will serve nanobrews, and a robust enough demand to be able to charge premium prices, then I suppose it can be a way to try and build up some funds to pay for future expansion. If any place does, Portland certainly meets the above criterion. I mean a city that can support Alan Sprints' passion for 17 years could certainly support a nanobrewery or three. But I agree with Jeff, nanobreweries are just a stepping stone — even those who think they will remain small, will soon find the tide of economic forces carrying them along.

But the good news is that very little has to be ventured so that even if it is lost, not much damage will be done."

I think this is pretty much what I just said, Denny. Thank you. I hadn't seen that particular iteration.

Two things further, for me: my area is still pretty much a desert when it comes to craft beer, and I can sell most of my beer at retail (no distributor early on). Then I have "proof of concept" and can take solid numbers and records to the bank for a loan (debt = tax write off, equity does not)--or else I lose, but as the article said, "not much damage will be done."

I believe Jamil reached the conclusion that a nanobrewery could work if you had a tap room and sold all of your beer out of it. No distribution means a lot less headaches i.e. finding and keeping accounts, keg management, getting paid, more employees, etc. I bet all/most 15 bbl breweries would love to sell all their beer in their own tasting room at 5 bucks a pop vs. selling a 1/6 keg to a bar at the equivalent cost of 1.25- 1.50 a beer. Talking to a part owner of a 15 bbl brewery and he said it was the tasting room where they make the money. They do ok distributing but it a highly competitive market in SoCal and you are constantly fighting for tap/shelf space.

It seems that there is a great demand for regional craft beer. I think there is a lot of potential for nanobrews. Push the regional aspect, get your locals to love you, and you will succeed.

Craft beer is huge, but there is no room for distribution. There are too many. But if you don't mind staying local, there's lots of room at the trough.

The nature of craft beer is to buy locally. It's a dream for the small guy. A dream. Look for untapped markets. They are out there.

Try and do an assessment of all your likely costs and regular expenses for each potential system size. From that you can try to work out how much each pint/litre/gallon/keg of beer will cost you to brew, package and sell. Make sure you then leave a healthy margin on top for unexpected problems and things you have forgotten about.

Some market research - checking beer prices in the area, even just giving people some of your homebrew and asking them how much they'd be willing to pay for it, will give you an idea of what kind of prices you can expect to charge. Perhaps even take some (free) samples of your best homebrew round to some local bars and ask the owners/managers if they'd be willing to consider stocking your beer if you went pro. Wholesale prices will be significantly less than retail so you need to take that into consideration - but the advantage with selling to bars is that the location of your brewery is somewhat less crucial. That way you might be able to save a lot in rent.

Once you know how much your beer will cost you and how much you can charge for it - then you can work out how much you will need to brew in order to make a decent income. If you can brew that amount on a tiny system - then I say go for it!

I am in the planning stages for a micro/nanobrewery here in the Philippines. I have several advantages over the OP in that craft brewing has barely started yet in this country while interest in craft beer is taking off; labour costs are very low; land is cheap; and the amount of money I consider a good income will be much less than what most people in the US need (my current salary is only about $700 a month.) There are disadvantages too - high utility costs; cheap competition (though only mass-produced yellow lager; ) no local malt, yeast or hops so everything has to be imported; a lack of 2nd hand equipment that could be fashioned into something useable.

Looking at all my probable expenses and potential revenues I reckon I can just about make enough to live on with a 200Litre/batch system, (sorry I don't do gallons/barrels) brewing 3 times a week - if I sell my beer in bottles to local bars, resorts and restaurants.

But I am hoping to raise enough cash to afford a 500-700L system instead - even if I can only afford enough tanks to brew once a week initially. That way I can keep my day job, brew once a week and if my calculations are correct I'll make nearly double the money from my beer compared to my job! Then in a year or 2 - if my beer is popular enough - I can simply buy a few more fermenters and move to full-time brewing.

I have no interest whatsoever in running a bar or restaurant (though my wife might one day,) plus I can't afford the rents on decent commercial lots with high traffic, so this will be purely a distribution brewery.

Sorry this has turned into such a long post but at least its somewhat on topic

Blah blah blah! So many frikin experts on here, just because they read an article, or an out of date book that may not even apply to the region you're in. You can "what if" any business to death. It's all about risk. If it were easy everyone would be doing it! The only thing you can do is try to know your market the best you can, have a solid business plan, and hope for the best. But in reality you have no idea what will happen until you take that leap. So to the OP I would throw out all the advice from anyone who has never started anything, let alone a brewery in their life. Opinions are like ********, everyone has one; and most of them stink. Follow your dream.

morticus said:

Blah blah blah! So many frikin experts on here, just because they read an article, or an out of date book that may not even apply to the region you're in. You can "what if" any business to death. It's all about risk. If it were easy everyone would be doing it! The only thing you can do is try to know your market the best you can, have a solid business plan, and hope for the best. But in reality you have no idea what will happen until you take that leap. So to the OP I would throw out all the advice from anyone who has never started anything, let alone a brewery in their life. Opinions are like ********, everyone has one; and most of them stink. Follow your dream.

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Not to down play anyone but I'm pushing on...Ive owned several businesses since the age of 16 some successful and some not so.I'm not afraid of the risks and due to not being afraid is that I'm moving forward but i never thought so many wall would need me to climb it not every when i owned a pawn shop was it this crazy and everyone wanting a fee ...wow.

Big_Cat said:

Not to down play anyone but I'm pushing on...Ive owned several businesses since the age of 16 some successful and some not so.I'm not afraid of the risks and due to not being afraid is that I'm moving forward but i never thought so many wall would need me to climb it not every when i owned a pawn shop was it this crazy and everyone wanting a fee ...wow.

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I think there is some validity in many of the responses I've read. Anybody telling you to take a blind leap and wait to see where you land is not counting on you to pay their bills or help raise their family. I'm sure you have thought this through and good luck to you. After all, I would rather regret something I have done than to regret something I have not done.

Hey big cat. I'll admit I couldn't read through all the posts here with the tangents and all. As an entrepreneur I would like to commend you as this is most of our brewing dream. I would also like to make a couple reasonable recommendations. Someone mentioned CofCommerce, not bad also check with your Secretary of State for a "new biz packet", there should also be a small biz admin close to you for free consulting ( not great consulting but good) , for reading check out Michael Gerbers, " the E myth revisited" it really helped me grasp my vision and role as CEO, employee, and technician.

Like some have said, there is risk. It is risk v reward that drives entrepreneurs. otherwise we would would for someone else. also, there is a free course coming up on Coursera, Smart Growth for business 2. I took the first one but already learned that in the SofHK's. I'll admit, I just about lost a decade worth of savings in the 08 crash. Would I do it again, he'll I already started.

good luck Rollin this around your head. PM me if you want some PDF's, case studies, how to's etc... I have amassed a little arsenal. Edit.... The patriot act states I must call this a library.

I read a great, no nosense book that I think you will like: "A Brewer's Guide to Opening a Nano Brewery: Your $10,000 Brewery Consultant for $15, Vol. 1" by Dan Woodske. He's direct but leaves much room for dreaming. Again, his recommendation, tap room will produce most of your profits to start. You can do growler sales as well but you need to sell in the tap room. Overhead is nearly non-existent (couple hundred pint glasses) and there's no commute!

Like any home business, with the right money, product and overall sheer will, determination and some luck of course you can make it happen. But it sure as heck ain't easy. Just like opening a restaurant, so many fail.

55chevydude said:

I read a great, no nosense book that I think you will like: "A Brewer's Guide to Opening a Nano Brewery: Your $10,000 Brewery Consultant for $15, Vol. 1" by Dan Woodske. He's direct but leaves much room for dreaming. Again, his recommendation, tap room will produce most of your profits to start. You can do growler sales as well but you need to sell in the tap room. Overhead is nearly non-existent (couple hundred pint glasses) and there's no commute!

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That's about the only way a nano can stay a nano and still be really profitable

55chevydude said:

I read a great, no nosense book that I think you will like: "A Brewer's Guide to Opening a Nano Brewery: Your $10,000 Brewery Consultant for $15, Vol. 1" by Dan Woodske. He's direct but leaves much room for dreaming. Again, his recommendation, tap room will produce most of your profits to start. You can do growler sales as well but you need to sell in the tap room. Overhead is nearly non-existent (couple hundred pint glasses) and there's no commute!

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I agree with the tap room. Part of my analysis has been going to breweries and talking to owners and brewers...one thing I've consistently seen is their tap rooms full and all buying pints. Correct that the overhead is low.

As far as a system size...you can start with a smaller system...but you will face the eventuality of having o upgrade your system. I'd rather finance more up front and have the capacity for later on down the road. Originally I was thinking a 5 bbl system...but now I'm leaning more towards a 7 or 10.

Another thing with Nano's is a lot of people (in any small business) think they are making money, but don't factor in a lot of other things (like gas, electricity costs, water, wear and tear on your vehicle, and regular maintenance). One big expense can sink a small business, many hidden expenses. I knew a lady who would spend $250 to complete a $150 job and thought she was making money when she got paid. I get the feeling Nanobrewing is similar. If you drive to and from your Nano brew at $100 a week in gas...that is a $400 a month expense on a personal vehicle. If you eat out, same thing.

Nanobrewing is a great experiment to figure out how to run a real brewery, or to have one heck of a hobby on the side. It is more of a social thing if you have a taproom than a money maker. The low overhead thing is in comparison to a full restaurant, you still need a bar, seating, tables, napkins, coasters, mops, etc....this all adds up and all needs replacing!

Don't expect to really make money doing it, but I bet it sure can be a heck of a lot of fun and a great way to decide if it is for you. Be realistic about the goals of the nano and you will have a better chance of succeeding.

Part of any business startup should be a sound business plan with proforma financials. These should be inclusive of estimates of all costs associated with running that business. Your business plan should be a living document and be ready to change it as time passes.

tdhickey said:

Don't expect to really make money doing it, but I bet it sure can be a heck of a lot of fun and a great way to decide if it is for you. Be realistic about the goals of the nano and you will have a better chance of succeeding.

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I've read this whole thread but it's been a month or two. Do you run a nano? Or is this analysis built on theory?

To the OP, have you considered contract brewing? That sort of gets you to the point where you have a product to sell and need to find a distributor.

Piratwolf said:

I've read this whole thread but it's been a month or two. Do you run a nano? Or is this analysis built on theory?

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Nope, but talked to a lot of people who run breweries and/or work in them at tasting events, read some good stories about places that make award winning beer that shut down because it's not really a money maker. Even people who operate successful brew pubs tend to say the same thing.

Ok sorry I haven't answered much lately but I have been knee deep in red tape.... I will say this that if you can't take rejection well then starting a nano brewery isn't for you. I still haven't gotten the TTB to approve me and the building permits are awaiting the TTB. also during this time i have been paying for a warehouse that I haven't made a penny on yet. But I won't give up..

Ok sorry I haven't answered much lately but I have been knee deep in red tape.... I will say this that if you can't take rejection well then starting a nano brewery isn't for you. I still haven't gotten the TTB to approve me and the building permits are awaiting the TTB. also during this time i have been paying for a warehouse that I haven't made a penny on yet. But I won't give up..

Big_Cat said:

Ok sorry I haven't answered much lately but I have been knee deep in red tape.... I will say this that if you can't take rejection well then starting a nano brewery isn't for you. I still haven't gotten the TTB to approve me and the building permits are awaiting the TTB. also during this time i have been paying for a warehouse that I haven't made a penny on yet. But I won't give up..

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I've heard that from multiple places. The recommendation I received was to have at least 1.5 years worth of operation cash prior to signing anything. If you can get open in 6 to 7 months then happy days...but at least you're prepared.

ghosthef said:

I've heard that from multiple places. The recommendation I received was to have at least 1.5 years worth of operation cash prior to signing anything. If you can get open in 6 to 7 months then happy days...but at least you're prepared.

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The catch 22 is that if you don't have a place for business already (not thinking of a place but already signed contract ) the TTB won't even look at you.. You must have a place leased or owned and in the companies name for a minimum of 45 days

Big_Cat said:

The catch 22 is that if you don't have a place for business already (not thinking of a place but already signed contract ) the TTB won't even look at you.. You must have a place leased or owned and in the companies name for a minimum of 45 days

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Yup...and financing already set up. Pretty brutal. We have the LLC and trademark work already in the works. By the time those clear we will be ready to secure financing...then comes the TTB, then the state, then the health and building departments...just keeps going on and on. Not to mention the 4 month build time on the equipment.

ghosthef said:

Yup...and financing already set up. Pretty brutal. We have the LLC and trademark work already in the works. By the time those clear we will be ready to secure financing...then comes the TTB, then the state, then the health and building departments...just keeps going on and on. Not to mention the 4 month build time on the equipment.

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Our LLC EIC are complete also we've had to rent a smaller space due to the high rent in south florida so hopefully soon we can get the TTB to at least give an opinion so that the drainage and electrical can begin ... As a brew bud told me when he saw me upset " Get used to paying for signatures " I will confesse I've learned to be very patient and drink slower