Recently, a lot of people have been in the brewery business. It’s because there is a massive surge in this industry, especially after the pandemic (2020).
Many brewery owners are making big in this business. For example, big names in this industry, like Anheuser-Busch InBev SA/NV, Heineken International, Carlsberg Group, etc., are making huge profits.
So, if you are someone looking forward to investing in this industry, you’ll need a hefty amount to start your brewery, but with a bit of understanding, the entire budget is much more straightforward.
This way, you can have an idea of where to reduce your expenses. So, give a complete read to this article, where we’ll break down all the expenses required for a brewery startup. You’ll be able to make a clear budgeting plan for your future business. So, let’s start!
Average Start-up Cost to Start a Brewery vs. a Restaurant
On average, opening a restaurant costs over $275,000, depending on the location, its size, and the type of food being served there. The cost of setting up a brewery also depends on several factors like location, business model, etc. but it also includes the cost of brewing equipment used for malting, mashing, boiling, and packaging. So that’s a major difference.
The brewing equipment is pretty expensive compared to typical kitchen equipment. Even if you are going to set up a microbrewery, it will cost you around $250,000, and for larger breweries, it’s double. So, on average, start-up cost for a brewery can range from $500,000 to $1.5 million.
In the end, a balanced conclusion would be that the more you invest both in the sense of money and effort, the more profit you’re gonna make, be it from a restaurant, a bar, or a brewery.
Cost Depends on the Type of Brewery
There are four major types of breweries, and the start-up cost can depend on the type of brewery you choose for your start-up. Let’s see what the types are:
1. Nano-Brewery
This type of brewery operates on a very small scale and produces almost 1,000 barrels annually. Therefore, they don’t require much space, and they can operate with minimal equipment. The set-up costs for this type of brewery are way less than the larger breweries because their production capacity is limited. So, if you want to start with low investment costs, go for setting up these kinds of breweries.
2. Microbrewery
These operate at a slightly larger scale as compared to Nano-breweries and produce between 1,000 to 15,000 barrels annually. These breweries have a wider range of production than Nano ones, but still, they are considered small in this industry. So, these breweries have relatively high set-up costs, but still, you can manage if you are an independent brewer.
3. Regional Brewery
These breweries operate on a larger/regional scale and produce approximately 15,000 to 6 million barrels of beer in a year. You need a heavy investment amount for this one as the production is on the regional level.
4. Large-Scale Brewery
As the name suggests, these breweries produce beer at the largest scale, with almost 6 million barrels of beer production per year. They are often affiliated with major brewing corporations and are recognized globally. Thus, if you are thinking of setting up something on a large scale, you’ll need an equally large amount for that.
The Initial Costs for Starting a Brewery
Now, let’s break down the expenses for starting up a brewery.
1. Construction and Building
So, first of all, to start your brewery, you’ll need a place where you can set up all your brewing equipment and related stuff. That place can be called a “brew house.” You either have to construct the building from scratch, or you can rent it. So firstly, you have to select a precise location that the government allows to set up businesses like breweries, as in you can’t just decide to start a brewery anywhere you like. You gotta pay for that, too.
Once you are done finalizing the location, you need a full-fledged building there. Now, there are two options here, too. If you have a good amount in your pocket, you can construct a building from scratch, but that’s an expensive option. For a cheaper option, you can go for renting an existing building, but rents also vary from place to place.
2. Equipment Costs
Now, that’s where most of your investment will go: the brewing equipment. Now, the amount for which you purchase your brewing depends on what scale you are producing beer, either small or large. You can also purchase second-hand machinery. It just depends on your budget. If you can pay up to $1 million or more, then go for a brand new 30-barrel system. But if you have a bit lower budget, you can buy small-capacity equipment for $100,000 and second-hand for an even lower price.
3. Licensing and Permit Costs
Now, for your brewery to function properly, you need to get all those necessary licenses and permits from the concerned departments. In the US, three very important permits that brewery owners commonly need are a Brewer’s Notice from the Alcohol and Tobacco Tax and Trade Bureau (It’s a Federal Permit), a State Liquor License, and a Zoning Permit. These permits and license costs vary across countries, ranging from $ 1,000 to $ 3,000.
4. Operational Costs
Now that you have a building and all the equipment for your brewery still, it is NOT enough for it to operate on its own. You still need an amount to pay your employees, to cover insurance costs, and to purchase relevant inventory.
You can also set aside a portion of your initial funding to cover labor expenses. Apart from that, you need appropriate ingredients like water, hops, malt, and yeast to make beer. Set aside funds to purchase these items from reliable suppliers.
To have a clear estimate of what your beer is costing you in general, use the following criteria:
Total Beer Cost = Aggregate Ingredient Costs + Labor Cost + Utilities + Excise Taxes
Another way to keep a check on the costs is the revenue per barrel. Revenue per barrel should be somewhere around $800/barrel (assuming 8% to 10% for loss/waste).
Now, even after making your brewery fully functional, you need to save money for things like making advancements in your technology, advertising your brewery, and stuff.
Conclusion
Setting up a brewery is pretty costly. You have to invest big in this business. You should have at least $500,000 to $2,000,000 in your pocket to start your brewery, and this cost depends on various factors like the location of the brewery, its construction or renovation, brewing equipment, and many legal & permit costs. So, think accordingly. Hope this will give you a rough idea about the whole thing.
I am a passionate beer connoisseur with a deep appreciation for the art and science of brewing. With years of experience tasting and evaluating various beers, I love to share my opinions and insights with others and I am always eager to engage in lively discussions about my favorite beverage.
