Start Your Own Brewery

You have said it to yourself. Maybe your friends have said it to you, too. “Your beer is excellent. You should open your own brewery.”

Many have considered it. A few have even made it happen. But as the pros will tell you, there’s more to running a brewery than making good beer. Following is a glimpse of what it takes.

Bill Moore is founder, brewmaster, and a member of the board of directors of Independence Brewing in northeast Philadelphia. Moore was an avid homebrewer for 12 years before brewing professionally. He spent five years brewing at Stoudt Brewery in Adamstown, Pa., before opening his own place.

Moore understands the most important aspect of running a microbrewery: selling beer.

To Market, To Market

“Market pressure is what is driving the craft industry. The consumers, at least here on the East Coast, are getting more and more sophisticated and willing to try new things,” says Moore. “Our task is a balance of making products that are interesting enough to get attention but traditional enough to sell.

That’s the key difference between homebrewing and doing it professionally. It’s one thing to make a couple of cases in your basement and really like it. Some of your buddies might like it, too, so you are tempted to believe that the beer would sell in the open marketplace. In reality it might sell or it might not, depending on a million other factors.”

When choosing the beer to brew, Moore quickly learned that success in the beer business means giving the customer what he wants, not want you think he wants. “We made our debut in the Philly market with our Independence Ale, which was stronger, maltier, and hoppier than anything the beer-drinking public was used to. It was well balanced but very big. In fact, too big. We quickly learned that Philadelphia was one of the nation’s biggest Coors Lite markets. It did not take a lot of inspiration to realize that we overestimated the tastes of our customers and we had to tone it down a notch or two.

You have to weigh isolated requests from a few people with the kind of large-scale demand that ultimately affects your bottom line, Moore says.

One of the craftbrewer’s weekly challenges is sorting out the difference between real consumer demand and fads. “Sometimes it’s not so easy,” says Moore. “For example berry beers and fruit ales are popular now, as are honey beers. But if I am going to put a berry weizen on the market, I had better be pretty sure that it is going to sell before I start making it 40 barrels at a time.

“We have five beers on the street right now: our pale ale, a lager, our Gold, a porter, and the Franklinfest, which is an Oktoberfest style. Even with that much variety, the sales guys keep coming back, reporting that the distributors want something different. We are jumping through hoops just to keep our regular stuff going, and we really can’t afford to climb on every fad that comes down the pike.”

But then again, when you think you have tapped into real demand, you have to be flexible enough in your plant to be able to get the new style out there. Constant demand has caused Moore to make porter year-round instead of seasonally.

For this reason, you need a professional brewery, run by professionals, according to Moore.

Once you get the beer itself in good shape, you still have far to go. You will have your distribution market to deal with. That’s another reason you need people in the organization who not only know the business but know the business in your market. “For example the Pennsylvania market is drastically different than the market in, say, Maryland or Jersey. In Pennsylvania beer is sold by the case, through distributors. It takes a big commitment to buy beer here. The customer wants some beer, so he walks into a distributor and has to be willing to take a chance on 24 bottles of beer. He or she is unlikely to make that commitment for an unknown or unfamiliar beer,” says Moore.

“In Jersey or Maryland you can walk into a big liquor store and buy a six-pack. In many stores you can even buy a single bottle. It’s much easier to get someone to try your beer if it only involves a few dollars and a few bottles. We don’t have that luxury in Pennsylvania.”

Finding distributors who know your area is important, he adds.

The distributors, too, can make life challenging for the brewer. They have a lot of control over the small brewery’s success. They want a good price, and some will do anything to save 50 cents on a case. And they may not accommodate your every need.

Moore wanted to produce unpasteurized beer. When he realized that distributors were not going to refrigerate it, he changed his brewing procedure to increase the beer’s shelf life.

“It’s a very competitive market and it is getting more so. The micro pioneers had only the big boys to compete with. We still have them, but we are also competing with ourselves and with big brewers masquerading as craft brewers.

“Besides that, the big micros from out West are expanding their markets into the East. You have got to be the best you can be and flexible enough to respond to a rapidly changing marketplace. You won’t have what it takes if you try to do it on the cheap or build a brewery on a shoestring,” he says.

Moore puts a $2.5 million lowball price tag on building a 30- or 40-barrel brewery. That includes production, packaging, marketing, and transportation. Moore says the $1.5 million he started with was not enough, and he has been raising capital ever since by selling private shares. To stay financially healthy, Independence plans a public offering in the near future.

Moore’s firm learned the hard way that saving money up front often costs you much more later. The lesson came in the form of his bottling line. “The bottling line is a very important and, unfortunately, a very expensive part of the micro’s equipment list,” says Moore. “We made the mistake, like other micros, of buying a used line that did not live up to our expectations. We bought it through the back pages of one of the trade journals, and it did not come with any support or expertise. We got what we paid for — a bottling line, nothing more.”

Buying the bottling line was a bad move because the employees at Independence lack knowledge, and the dealer does not provide enough support, Moore says.

Independence is tearing out the used line and replacing it with new equipment that comes with customer service support. “I would advise anyone who is serious about this business to choose equipment and suppliers very carefully. You want some accountability to go with the equipment,” he says.

Also keep in mind the size and layout of your building. Independence served as a warehouse and steel fabrication plant before the brewers moved in. They have high ceilings and 35,000 square feet to grow into. “If you are successful, you are going to grow and you need to have space. If your building is just right or if it feels too small when you open, you are probably heading for trouble,” Moore says.

Moore’s approach is to build breweries bigger. “It’s not going to be worth it to you to build anything under a 10-barrel capacity, even in a brewpub. You won’t save much by building smaller, and the cost of production is significantly higher when you build small. Making 10 barrels instead of four or five will cost you literally pennies more. It always costs more to expand, rather than starting off with the capacity you need to go the distance.”

The bottom line is that if you are seriously considering the option, you have to be willing to admit that operating a brewery is a business. To keep a business successful, you have to be willing to raise enough money, buy the right gear, get the right building, hire the right people, and sell the right beer.  “If you have unlimited cash on hand and you do not have to work for a living, make anything you want, any way you want. But if you want to make money at it, you have got to be willing to do whatever it takes to keep the beer selling,” Moore says.

A Model Brewpub

If you have never visited the Heartland Brewery on Union Square in New York City’s Flatiron district, put it on your schedule. It is one of New York’s friendliest and most comfortable places to eat, drink, have a cigar, or just hang out.

And that’s no accident. Jon Bloostein has gone to great lengths to make his place as comfortable as it can be. He is detail oriented, and it shows.

Heartland is decorated with handsome murals depicting scenes of agricultural tranquillity on America’s plains. It’s heavy in brick, dark wood, and comfortable lighting.

Bloostein is proud of his creation and feels he has successfully created the space he intended when construction began in late 1994.

“I was in the acquisitions and mergers business, a career that promises years of white-collar frustration for those unlucky enough to pursue it. I spent a lot of time on the West Coast and seemed to always end up hanging out in a brewpub, no matter what town I was visiting,” says Bloostein.

“I realized that New York City did not have anything quite like the West Coast brewpub, and I decided to build one. We had a few brewpubs, but they were going belly up as rent escalated. I had some experience in retail and was dumb enough to think that selling beer would be no different from selling anything else.”

As it turned out, it was his financial expertise and his investigative ability that he relied on more than his retail experience when starting the project. “I know how to find out about businesses,” he says. “So I knew which vendors and suppliers to encourage and which to avoid. My biggest challenge was in construction details. I do not know anything about construction, so I could never be sure if I was getting what I needed or if I was being taken for a ride.”

Bloostein’s instincts and a little luck got him through the details of construction and his vision kept the crews focused on the task at hand.

“I think a lot of people think a brewpub is a brewery with a restaurant. Some see it as a restaurant with a brewery. In fact it is neither. A true brewpub is a hybrid, a unique place with a unique feel.

“You have to be different, unique. Especially in a competitive market like New York, where the consumer has hundreds — if not thousands — of choices,” he says.

Bloostein is quick to point out that good beer in a brewpub goes without saying. But you have to be as dedicated to quality in the kitchen, if not more so, according to Bloostein. “The nice thing about beer is that the first glass out of the serving tank, under normal circumstances, will taste pretty much like the last glass, no matter how many were drawn in between. The kitchen runs under a different set of rules. If you make 1,000 hamburgers, they represent 1,000 opportunities to screw up. If you overcook it or undercook it or put bad lettuce on it, the customer will be unhappy. That’s why you have to be really careful about who you put in the kitchen. The lion’s share of your payroll costs will be in the kitchen, anyway. So be sure to spend that money wisely,” he says.

Bloostein admits there is no way to know if the person you hire is right until you have worked with him or her for some time. “I thought I opened with a terrific staff. Of 85 employees, only five have been here since we opened. The brewer is one of them — I was very fortunate there. Plus you have to make sure you have enough of the right people, too. I never dreamt it would take 85 people to staff this place,” he says.

Bloostein says opening a brewpub is like every other business in one important way: You can’t do it without enough capital. “It’s hard to say what a brewpub will cost without looking at the individual situation. Every town and location will be different. The important thing to realize is that it will cost significantly more than just the price of the brewhouse. I mean, some folks think that because you can buy a brewhouse for $200,000 you should budget for $300,000 and be covered. It doesn’t work like that. Not if you are going to do it right. We spent $25,000 on our sound system alone. Our computer system cost thousands. This business is replete with hidden and soft costs that will haunt you if you don’t plan to deal with them up front.

“Probably the biggest surprise I’ve had to deal with and continue to deal with is spending an incredible amount of time on non-business activities: dealing with lawyers, architects, designers, trademarking, advertising, repairmen. The list goes on. But they don’t bother you at night, when you will have plenty of time to drink,” Bloostein says with a laugh.

Teaching Brewing Enterprise

As the former president of the American Brewers Guild, Bruce Winner had regular opportunities to commune with professional brewers who serve the guild as regular and guest instructors at craft-brewing industry seminars and courses. Winner, too, doid his share of instructing would-be brewery operators.

“I think the first piece of advice I give everyone is to either hire experts in the field or become an expert yourself. Everyone has his or her own special skills, but not everyone can run a brewery. And there are many fine homebrewers who have what it takes to become professionals, but most will need training and professional assistance to go pro,” Winner says.

Winner says everyone brings a unique set of skills and experience to the brewery operation, but they may not be the skills needed to ensure success. “The micro is a combination of two basic operations: making good beer and selling it. If you do not understand sales and marketing in today’s intensely competitive beer market, the best-made beer in the world will not move. Conversely, if you know how to market beer but the beer’s no good, you will also find success elusive.”

As you might expect, Winner is a big advocate of education as a means of preparation. “Education means more than just attending seminars. Read as much as you can on the subject, and interview operators of successful breweries to find out what makes their operations profitable,” he says.

And echoing the words of Moore and Bloostein, he warns against going in with insufficient capital. “Always get more money than you think you need. It’s a tough situation, because sometimes it’s hard to estimate how much you will need. But if you do enough homework and write a good business plan, you will be able to come close,” he says.

Like his colleagues inside the brewery, Winner agrees that successful brewery entrepreneurs understand and admit that selling beer — in a micro or in a brewpub — is a business and should be viewed as such.

Most agree the salad days of the craft-brewing business are over. Still, Winner firmly believes the industry is growing with new opportunity. “I think the brewpub industry has a good five or 10 years of strong growth left. Demand is increasing as people all over America are being exposed to a huge variety of unique and full-flavored beers. And some of America’s largest cities have no brewpubs, or only one or two.

“If I had to choose one (venue — microbrewery or brewpub) over the other, in today’s market I would look more closely at the brewpub option. It’s less risky, in general, because your initial outlay is less. Plus it’s a cash business. You serve the beer and the customer pays for it, unlike the micro end where you have to bill for product and wait 60 or 90 days for payment,” he says.

Of course, the brewpub is a restaurant and the restaurant business is notoriously risky. “If you do not know anything about the restaurant business, either don’t build a brewpub or get a partner who knows the restaurant business very well,” Winner says.

No one can guarantee success. But if you are realistic about the project, find enough capital, understand your market, educate yourself, and surround yourself with experts, you will give yourself the best chance of success in a relatively hostile business environment.

Issue: February 1997