One million dollars. That’s the average price to start a brewery according to Chris Farmand, founder of Small Batch Standard, a CPA firm helping craft breweries across North America. Farmand suggests tacking on an additional 30 percent of the $1 million as working capital just to get you through the starting months. That makes the closing tab of starting a brewery and keeping it alive during the first few challenging months $1.3 million dollars on average.
The president of Central Waters Brewing Company, Paul Graham, argues a small brewery can be started with a mere $30,000 of capital. The ease of starting a brewery has concerned Graham about the current and future competition. “There are more breweries in the U.S. than there has ever been,” Graham said. “The number of breweries has doubled in the last two years.”
According to Steve Hindy, author of “The Craft Beer Revolution” and co-founder of the Brooklyn Brewery, a thousand new brands of beer launched in 2013, supporting Graham’s assessment that the industry is “a little crazy competitive.”
The problem for Graham is partially the competition. Graham and Central Waters were lucky to be part of the first generation of breweries before “this uptick started.” Graham’s major concern is with the beer quality these small brewers are brewing.
“The bigger you are, the better the equipment you can afford. A lot of the brewers shouldn’t be brewing beer in it [the cheap equipment], but it allows you to start a brewery for $30,000,” Graham said.
Paul Gatza, director of the Brewers Association, spoke about the brewing industry’s beer quality at the recent Craft Brewers Conference in Colorado. Gatza spoke about one particular beer festival he attended. He reported “seven or eight of the 10 breweries needed improvement,” while also noting the people who were making the beer didn’t recognize how poor quality the beer was. [Gatza did not, however, say specifically what was wrong with the beer.]
Veteran brewer John Harris, who recently opened Ecliptic Brewing in Portland, offered a solution to the poor quality beer of new startup breweries. “If you are having problems with beer, ask others for help,” Harris said during an interview. “Don’t be too proud. We can help each other make our beer better.” Many new brewers have taken his advice to heart.
Henry Schwartz, co-founder of MobCraft Beer, a recent 2012 startup in Madison, has tackled the issue of poor quality by partnering with House of Brews a community supported brewery, to brew MobCraft beer. MobCraft receives assistance from other professional brewers in the community from being partnered with House of Brews.
Additionally, MobCraft Beer focuses on brewing a new flavored beer each month. Schwartz and his team experiment with different flavors of beer to gain continuous experience.
As a contributor to the craft beer craze, Schwartz has a positive outlook on the increasing number of new craft breweries. “Right now I see the addition of small breweries as a great thing,” said Schwartz.
However, the increased competition is prompting the larger, established breweries, like Central Waters, Potosi, New Glarus and many others to expand to stay ahead of the competition.
After remodeling its tap-room and barrel-aging warehouse, Central Waters still has a lot to do. “Our project list on installations of equipment and making things more efficient is backlogged a year right now,” said Graham.
Potosi Brewery is building a new brew house, packing line and storage facilities with hopes of restoring its former glory days as one of Wisconsin’s largest breweries.
While larger established breweries work to retain and extend their current markets, there’s still plenty of room in the U.S. for smaller breweries to open. The Chief Economist for the Brewers Association, Bart Watson, writes “long gone are the days where San Diego and Portland are hogging all the local breweries.”
America still has plenty of room for new breweries to grow, and the chances of drinking beer produced by local brewers is ever more likely. For now, the tap handle is pulled down and the number of breweries and beers is foaming over. Fortunately for all these new brewers, the adventurous beer drinkers don’t mind the foam at all.
Stay Positive & Craft Remarkable Beer
Sources:
http://www.craftbrewingbusiness.com/business-marketing/five-business-issues-to-consider-before-starting-a-brewery/
Phone interview with Paul Graham, president of Central Waters.
http://www.brewersassociation.org/insights/where-craft-breweries-are-located/
Contact with Henry Schwartz, co-founder of MobCraft Beer
In person conversation with Frank Fiorenza of Potosi Brewery.
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