In our Autumn Issue, Luke Robertson from Ale of a Time, gives us the first of his three part series, which examines how to open a brewery. Here’s an excerpt from that feature…
No doubt many of you out there have had that infamous discussion that happens every weekend in Australian pubs. The one that comes after a few too many beers, and ends in phrases like, “We should give it a shot”, and “how hard could it be?” It is, of course, all about opening up your own brewery.
Greg Mace, brewer and technical sales for brewery equipment provider FB*Propak, told me it’s not uncommon for him to get phone calls after the weekend, with this exact story.
“Pretty much on a Monday you’ll get someone inquire, after drinking with their mates, about starting up a brewery,” he said with a chuckle. Adding, “I see a lot of people that start big, then price comes into it and they start pedalling backwards”.
The story of any successful brewery isn’t the romance of a couple of mates having a go in an old warehouse. It’s a story of wastewater, local councils, electricity, gas, business plans, floors, and dissolved oxygen. And more often than not, a lot of pain.
3 Rivers Brewing Co have been operating in Mandurah, Western Australia, for just over a year. Co-founder Trina Youchak looks after sales, admin and anything else; while her partner, Mark Rivers, brews. When I spoke to Youchak, she was out picking up grain, before stopping in to try to sell beer to a local pub. She was busy.
“If people are looking at this with dollar signs in their eyes I would say, ‘no that’s silly’. Do not enter this industry with that in mind… You forget that you can’t just take some time off work, like you did in your old job,” she said.
Everyone I spoke to for this story shared similar perspectives. The main themes were; unexpected problems, and money. You need to spend money, and no matter what, you will have unexpected problems. Which of course, cost you more money.
So what is the first class in Brewery Start Up 101?
WRITING A BUSINESS PLAN
Mace at FB*Propak says the number one step, prior to even looking at stainless, sites, or talking to your local government; a business plan needs to be done.
“You want to know that your brand will go somewhere in the future – and before you even look at buying equipment you should go through the stage of getting approval through your council,” he said.
This is echoed by Simon Haylock from Grain and Grape in Melbourne. A former brewer at Matilda Bay, Red Hill Brewery, and now equipment consultant for Grain and Grape’s Braumeister systems; he specialises in advising the smallest end of the commercial scale. They offer 50, 200 and 500 litre brewhouses. He asks simple questions of those who come wanting equipment.
“The first question I ask them is how much beer do you think you’re going to sell and how do you think you’re going to sell it.”
If they can’t answer that, he sends them off to go find out. He also regularly gets inquiries from people who have never brewed before. His advice for them is to stop talking and start brewing. Getting hands on experience in an established brewery will go a long way to improving your business plan.
“Get used to how much time each task takes and when you do your business plan you can work out how much time you can put into labour versus how much you put into equipment.”
Julian Sanders, founder of Spark Engineering, who supply 300 litre up to 50 hectolitre systems (5000 litres), agrees. Sanders told me sensible clients will look for value rather than total cost of the system. He also shares the opinion that home brewing is a “huge advantage”, saying between that, and other beer education, you will develop your palate. This gives brewers the ability to understand flavours and how to control them in the brewery.
“After that I recommend people go and get some time brewing professionally on a professional system,” he adds.
And on the extreme end of the scale is beverage equipment provider GEA, whose smallest brewhouse is 20hl. Kim Henriksen, head of beverage applications for Asia Pacific, says not planning far enough ahead can cause problems during growth.
“That’s unfortunately where people come unstuck. What was a group of friends and a nice hobby… suddenly it gets out of hand. And it’s a shame because it was a lot more fun when it was just a three mates in a brewhouse,” Henriksen said.
When Cornel Ianculovici, co-founder of Shambles Brewery in North Hobart, decided he wanted to leave his career as a teacher and open a brewery, he immediately began a business plan. While still working full time, it took him a year to complete.
After reviewing other brewery’s plans, with eyes to borrow heavily, he soon realised that he had to create his from scratch, specifically to apply to his situation.
“Start from the ground up, in your city, in your situation in your demographic. Be realistic with how many craft beer pubs are around,” he said.
INVESTMENT
Breweries are not cheap. No one I spoke to for this article wished they had less money and almost everyone went over budget somewhere. At the smaller end of the scale, Haylock at Grain and Grape says it’s getting easier to find debt funding and they, or other equipment suppliers, will be able to assist you through that process.
“There’s an increasing number of financing options with all the banks and there’s a lot of third party providers out there now offering what’s called a Chattel Mortgage.
“The security is on the equipment itself so you don’t necessarily have to put up your house or first born,” he said.
A popular path is to start as a contract or gypsy brewer. It’s a way to get your name and brand established, which has flow-on effects for planning and attracting potential investors. Endeavour Beer Co have recently opened their own brewpub, which gives them their own stainless steel for the first time, after six years of gypsy brewing.
Co-founder, Ben Kooyman, said it gave them working capital and confidence that people had tasted their beer – or at least had heard of their brand.
“Having some runs on the board gave our joint venture partners more confidence; even our architects, our interior designers and even our brewery manufacturers more confidence.”
Endeavour also used some debt funding for their project, and used Spark Engineering to help design and plan the brewhouse. Spark, like Grain and Grape, also provide advice on debt structure and finance.
Melbourne’s Stomping Ground had years of market experience before opening their brewpub in Collingwood. Co-founded by Steve Jeffares, Justin Joyner, and Guy Greenstone, from the Local Taphouse and the Great Australian Beer Spectapular, they used a combination of their own equity, debt funding, and private equity. Greenstone says dealing with banks wasn’t easy, despite their history in the industry.
“Banks are absolutely so terrible. You give them deadlines, they give you deadlines and then they consistently miss their own deadlines,” he said.
“Any sophisticated investor is going to wait until the bank funding is in place before they shell out their dollars.”
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