I have mentioned this before, but the impetus for writing this post comes from a very detailed Business Insider article about the craft beer market. It’s not necessarily doom and gloom for the industry, but the article takes the blinders off for many who might consider that being a brewer means getting to hang out and enjoy a lot of your product. It details everything from the double-edged sword of success to the market saturation that is reaching the breaking point, and how a once collaborative industry with a clear-cut Us v. Them mentality has matured into a much more variegated business with a lot of backbiting as new breweries struggle to eke out a niche. Being a small brewery isn’t as simple as dodging the lumbering footsteps of the old, corporate behemoths whose product became a choice between whose font looked cooler or which one was on special for the night.
My own sobering moment came when I decided to shadow a local craft brewer for the day to get a little more insight into the business for which I was constructing my plan. Jon Northup of St. Boniface Brewing Company was fine with letting me tag along, but he wasn’t about to pull any punches. One of the first things he asked was how big I wanted to be if and when I opened. I had chose his brewery, which was very small at around 2 BBL (Beer Barrel), as a starting point that I was comfortable with and told him as much. “Don’t do it, don’t do what I did” was his response. Thus became one of many lessons into the economies of scale and how a small brewery may mean small initial capital and risk, but will mean lots of long brewing hours and almost immediate maxed out capacity all for the privileged of breaking even, if you’re lucky. I had found in my research that the ideal starting point, if you hope to make a profit, is 7 BBL, but there was much more to opening a brewery that John clued me in on. For one, most small brewers try to minimize their footprint so as to keep overhead costs such as rent low, but don’t realize that without storage space for kegs that they will have to spend money on cooperage fees to house them off site. You also have to worry about the raw material costs, which like most in demand items are going up. Those high costs have already led to many small breweries closing this year, according to the Business Insider article. Then there is the realities of being a small time player. “Want to brew with Citra hops? So does everyone else. There’s a two-year waiting period.” I was told.
And while John and Jen Kimmich of The Alchemist in Vermont were able to turn their fortunes around after Hurricane Irene destroyed their brewpub in 2011, they have had to deal with the fervent desire for their beer that is now rated number one on BeerAdvocate. This has ultimately led them to shut down the retail shop, as the throngs of people lining up to buy cases of Heady Topper have spilled over to adjoining stores and caused gridlock in Waterbury, VT. This is a rarity in the new craft beer world, as people getting into the business hope that their local watering hole will have space to offer even one of their beers, while simultaneously dealing with a culture that wants the latest and greatest thing on tap and may find that beer to be “old hat” after even a week on the draft schedule.
Ultimately opening up a brewery is as challenging as starting any small business, and it may be that we have already seen the amount of craft breweries shoot past equilibrium. The craft beer market is still increasing by small gains every year compared to the macro market, but the amount of newly opened or opening breweries may begin to contract as the market begins to find its carrying capacity. If you still feel the desire to start your own brewery, consider your expertise, market, and creating a solid business plan and remember to recognize the talent around you by supporting your local brewery.