06 Jan 2010 @ 8:01 AM 
 

Startup: Starting small – the nanobrewery concept.

 

I keep running across references to nanobreweries, but up  until now I never gave them much thought. My mind kept going back to this old article on MSN last year, “Something’s Brewing Close to Home” in which they note (or quote actually):

The nanobrewer isn’t going to quit his day job. They are brewing because they love the process and want to share the results with the people in their neighborhoods…

That sounds crazy to me, so I wrote it off. But I keep seeing the concept pop up, so I started doing a little research, and I think I just didn’t get the correct characterization off of said MSN article (an MSN article being unclear? Shocking!). It just kinda ends after introducing the concept. From what it looks like, you homebrew, and then you drop the thousands upon thousands of dollars you need for the necessary permits and licenses to sell your product, and then for some bizarre reason you keep your day job.

See? It is crazy. Totally batshit insane.

But! There are other operating nanobreweries around. The Hess Brewing Odyssey, a nanobrewery in San Diego, recently compiled a list of operating nanobreweries in the U.S., some of which are making the step up to being small craft breweries, though in reality a small craft brewery is all a nanobrewery really is. Sorta.

Curve Street Brewing

There’s no good definition, but what seems to be settled upon is that you’re making an amount of beer, per batch, that is considerably less than one would expect from a production brewery: half-barrel or one-barrel systems are common and sometimes even less. If you think about it, in that respect, Dogfish Head can be said to have started as a nanobrewery.

There are only a handful in the country, but it’s been enough for the TTB to put together some guidelines. They are basically a reminder of what constitutes the amount of beer that you can legally make in your home every year and that if you sell it, you need a license.

Michael, the person behind the Hess Brewing Odyssey, has compiled an absolute wealth of good documentation about how to open a brewery, nano or not. He covers all of the forms and hoops you have to jump through quite well (in fact, I’ve already bookmarked it to use as a reference), but the associated cost is still there.

So, I ask: If you don’t have a sizable bankroll at your disposal (Hi, I’m looking for investors, interested? Let’s talk!), is starting a nanobrewery financially feasible as a startup option? In other words, if this isn’t going to be a hobby – you’re not going to keep your day job – is that type of investment worth making 1 – 2 kegs at a time? A 7bbl brewday isn’t going to be much different in time vs. a 1bbl brewday, but at the end of it all you have 14 kegs to sell instead of 2 in return for your 8 hours of janitorial work. Will a 7bbl brewery cost more? Certainly. At least the brew system. Any sort of packaging and packaging system will cost exactly the same, and you’re going to use it a lot more frequently. If you’re making a go at starting a business,and you start that small, I feel like you’re going to be spending all of your time making your product, rather than selling it, and the latter is really important if you want to make a profit.

On the other hand, I’m a proponent of slow growth in the craft beer industry. Every single book I read about startup businesses in craft beer, every single time I hear an industry veteran talk about their startup experience, the number one thing I hear (though mostly in subtext) is, “We grew too fast, and had a hard time keeping up with production demands, so we went into a ton of debt.” I mean, I hear about companies that are now successful quote things like 7 – 10 years to cash-flow positive. I’m not convinced it has to be like that. Maybe starting super small and selling deep into a market is a way to avoid that. The path to cash-flow-positive growth is to not grow until/unless you can afford it and bust your ass in the meantime. It’s a theory.

I just can’t get by the fact that you have to brew 5 days a week to sell a half-barrel keg to 10 accounts. That’s a lot of time – and it’s a lot of fermentation space! I have a hard time imagining it.

Maybe the purveyor of a fine nanobrewery will stop by here and set me straight. They’ll let me know that, actually, they put together their operation with $5,000 and a box of coat hangers and they only brew on weekends, but I’m going to guess that’s not the case. I’m going to guess that they all meet at least one of the following conditions:

– they are rich
– they are in an enormous amount of debt
– they are making a go and hoping against odds that this venture doesn’t make them bankrupt
– they are still employed at a full-time job elsewhere
– they have an anonymous benefactor
– they are homeless and sleep under their lauter tun
– they have a really-well-employed spouse or partner
– they employ magical elves to make beer while we sleep
– they are, in fact, wizards

What do you think? Starting that small is an undeniably cool (and even romantic) concept, but I wonder at how sustainable the businesses are. It’s great to see that some of the ones listed in the link above are making a step up in growth, but how many will successfully make that step, and how many will make that step at all? Are these merely extended hobbyists or is this a viable entrance strategy to the craft beer industry?

I’d love to hear from others.

Tags Tags: , , ,
Categories: industry, startup
Posted By: erik
Last Edit: 06 Jan 2010 @ 09 02 AM

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Responses to this post » (115 Total)

 
  1. LTS says:

    Well, to be honest it is insane. However it is also a passion and the desire to make your brewing a little more fun.

    Here’s the problem, at the end of the day I can brew 10 gallon batches of a lot of beer. The problem is that I have to drink all that beer or give it away which costs money… now I love doing that, I really do. However, not every one of my friends wants to drink my beer all the time. So what’s the next option?

    You begin upsizing your equipment to a 1bbl size. You license yourself (it’s not THAT expensive) and you sell it. You aren’t looking to make a profit per se but more at reducing your costs. In addition you are brewing more often and on a system that more closely aligns with the larger scale craft brewers.

    You spend a bit of time doing that, you gain a following and then perhaps you have the roots for the next stage. It’s easier to get investors when you can prove that your beer sells.

    I am looking at doing this for this very reason. I had thought about going straight to a 7bbl system but I lack the overall experience in crafting beer and that would work against me. I have a full time job so spending a ton of time at the local craft brewer as an apprentice isn’t going to cut it either (although I am going to spend SOME time there).

    It’s insane.. but it’s what makes the hobby fun.

  2. erik says:

    LTS – you’re looking at doing this?

    What kind of packaging are you looking at? Just keg distribution? Bottles?

    Are you looking at still doing 10-gallon batches (some do! 10 gallons? That’s a LOT of brewing.) or are you thinking of starting off from a 1bbl perspective?

    It is insane.

  3. LTS says:

    I am looking at a minimum 1bbl. I don’t think 10 gallons is feasible, although it is possible. If I am going to brew I might as well go larger. I think initially I would be looking at 1/6 kegs over 1/2 kegs. The trick is selling it. There are a lot of options and even i have not sat down and charted out all of them.

    At the moment the biggest issue for me is location of brewing. My house is not designed in such a way that it would pass approval for small scale brewing (garage is not just attached but UNDER the house). So I may need to look at an additional building for brewing purposes. The federal government (TTB) is actually easy to understand, I think it’s the local codes that are the hardest to find and overcome. From the people I have spoken to it really depends on WHO is in your town approving these things. If you get someone who understands they are far more lenient than someone who does not.

    I’ve had to get a few things straight in life and I am finishing up my MBA over the next 5 months so that takes some of my time but I need to start now so I can hit the ground running potentially this summer or fall.

  4. Tim Weber says:

    I don’t think it is insane if you take it from the standpoint that what you are really trying to do is get rid of beer and not make a profit. Brewing is fun, brewing a lot is even more fun. Drinking ton and tons of beer so that you can keep brewing is not as fun. I would brew even more if I could unload some of my beer and not have to pay for ingredients.

    Also starting small may give some people the confidence they need to go pro, or it might disuade them, preventing them from making a $200K mistake.

  5. erik says:

    @LTS: Where do you get your supply of magical elves? (I kid.)

    So, this is only a feasible strategy in states where you can self-distribute, and then you still need the time to be able to go out and sell your beer.

    I’m really interested to hear how this works out for you (and others!), I think it’s fascinating. I mean, it’s like the soul of small business: start something in your garage, then grow as you can.

    At the same time, when your major local competitor makes more beer in a day than you make in a month that’s intimidating, especially when that local competitor is minuscule in comparison with the big players in the industry – like Sam Adams.

    Just think of the tiers:

    Sam Adams: 2 million bbl/year
    Local Microbrewery A: 15,000 bbl/year
    Local Nanobrewery B: 100 bbl/year

    The scale difference is terrifying.

  6. erik says:

    @Tim – fair point (especially the latter).

    If your motive is to move beer out of your house/recover cost then, sure. At the same time, you’re still going to operate at a relative net loss for a good long time. If you’re really looking at cutting costs then the answer is to make less beer. 😉

  7. Nate says:

    Great article, Erik.

    I tend to think that “nano brewing” maybe be semantic invention. We humans do like creating words at every opportunity. It seems that many brewers start of “nano-brewing” but they just called themselves a microbrewery at the time.

    Regardless of the case, even the “nano-brewer” will require capital and thus have to be more well off or seek even small investors or benefactors, like you mentioned.

    I have seen a few “nano-breweries” who made some impressive equipment (75 gallon boilers/fermentors) for only a few thousand dollars.

  8. LTS says:

    The innovation some people have regarding their brewing systems never ceases to amaze me. I don’t have it. I wish I did.

    There is the thought that if you are operating as a business then there a certain other perks that come along with that (writing off research, cost of equipment, etc.)

    Erik – you speak of the competition but larger brewers are widely available, so they can’t offer the one thing a small brewer can, exclusivity and a story. Over the past year or so the locavore movement has really helped as well. Communities love a small brewer with a story, beer lovers do. I’ve had people telling me they want to buy my beer and with a few connections I might be able to get into a few small accounts. Some people hook up with caterers as a differentiation technique. There are all kinds of avenues to tackle that it will blow your mind the more you read what people are doing.

  9. christopher says:

    I’ll start off with what the hell do I know but here’s my $0.02. Speaking from startup experience I think the idea is appealing because so many of us are used to sucking on the corporate teat and stepping out from that umbrella is scary. I tried a number of unsuccessful tech startups, failing mainly because we tried to do it while keeping fulltime jobs.

    Going nano, pico, or fempto one feels more in control like there is less risk of disastrous failure (always got that fulltime job to fall back on). Likewise I think its hard for overwhelming success since growing means buying new (expensive) equipment but due to the organic growth model you have no money for the business. Not impossible but probably less likely.

    Its a model I’ve tossed around but I’m no closer to an answer than you are.

  10. erik says:

    LTS – you’re singing my song, brother. In fact, you might have just quoted my business plan. But the larger brewers do have a story, and much of their success is based in exclusivity.

    The thing is, in this case “the larger brewers” isn’t just Sam Adams or Dogfish Head or something. It can be a 5bbl system at a brewpub down the street. There’s considerable advantage in being able to have the time to market your product. But! As has been noted, if this isn’t your full time job, it’s a lot easier to make the beer…. but if it’s not your full time job, then you have even less time to make/market your beer.

    Important: I’m not knocking this idea. I’m fascinated by it. I want it to work, which is why I’m banging against it. I’m still skeptical at it being an viable entry into a larger business model unless it is, from the get-go, your full time job.

  11. Big Tex says:

    I’ve heard a little about the nano-brewery concept. I believe it was in an article of BYO last year where they highlighted several home brewers that have gone pro, or at least semi-pro. A couple of those spotlighted were of the nano-brew sort. I think I recall one guy brewing on a Sabco system. I’d have to check my back issues that I have at home to be certain.

    Nevertheless, this concept strikes me as a feasible alternative to begin the quest of going pro.

  12. LTS says:

    The best marketing is the marketing you don’t have to do at all. When people love your product they will market it for you. You are small, so you don’t need big marketing campaigns. Time to brew is what you need and a few accounts to service. In most cases your beer is popular enough that you need to expand, either time brewing or increase batch size. In short order if you ever get overrun there is always the option of contracting a batch of beer. Indeed there are a few “brewers” out there who have never made a batch of beer in their life, they just contract others to make their recipe and then they sell it to accounts. Not for me, but in a pinch spending $1800-$2500 for a 10bbl contract batch might be enough push to get you going.

    The brewpub is really the avenue I want to go but there is a LOT more there than just brewing at that point. Now you are a restaurant manager, you need a chef, a menu, you have major health inspections and code to adhere to. It’s a huge step that takes a lot of time and money just to get into unless you have an investor or partner with experience.

    The other option is to go the route of Blackstar Coop in Austin. http://www.blackstar.coop – of course a Coop brings certain organizational intricacies into the mix.

  13. erik says:

    Brewpubs scare the crap out of me. I just don’t want to worry about napkins and silverware and crap like that. Totally outside of the realm of stuff I care about.

    You’re right. Word-of-mouth will do a lot for you, but if you’re not bottling, word-of-mouth isn’t necessarily going to get you a tap-handle at the local bar. That’s up to you going into the bar and sell your own beer. That’s what I mean in terms of marketing. You, the person who is the company, needs the time to actually go out and make sure people can drink your beer somewhere and create word-of-mouth exposure.

    re: Blackstar. A Coop is basically their only option, I think. I’m pretty sure you cannot self-distribute in Texas, which means that even a nanobrewery would have to have an account with a distributor to sell their beer off-premise. Seems unlikely that a distributor would want to pick something up with that low volume when they can just as easily move Bud Light Golden Wheat.

    • Joshua says:

      Section 3 chapter 12 of the TX brewers code states that if you brew less than 75000BBLs per year than you are entitled to the same rights as a class B permit holder (Distributor). Meaning…you can self distribute if you are a nano…

  14. LTS says:

    Selling a tap was the one thing I questioned other brewers about. They said that I would be surprised how easy it is to find someone who is willing to go for it. There is no doubt it takes time to expand your accounts and that does take a lot of work. Over the past year I have been trying to widen my network of contacts in order to make it easier. There are some locations that you simply cannot get into without a large size.

    In some cases it could be as easy as selling growlers to the local beer store (less time filling those). One of our beverage centers does growler fills for customers and they are a possibility as well to sell a straight keg to. I’ve discussed the idea with a few bar owners who are very interested in a local brewing option (even outside the larger brewers in our area).

    It’s never going to be easy, but I do think it’s possible and from what people have said in many cases the beer can almost sell itself if the quality is there and the story is good.

  15. darknova306 says:

    I’d say, in my mind, the best way to go into the brewpub angle is to either a) get a business partner that would control the restaurant side of things, or b) get to know a restaurant/bar/pub owner that is interested in growing their business into a brewpub.

    The nanobrewing concept has fascinated me for a while now, and this thread is some really good discussion. 🙂

  16. I feel like a Jackelope. I produce approximately 30 bbl a year of cask ale and have a day job. My brewery is almost two years old and all my beer is pretty much allocated prior to release or sold pretty much at release and I don’t carry any inventory. I’m running a 1 bbl brewhouse and self distribute draft only with 1/6 bbl kegs (in CA). It can work, but you have to be clear about what you want out of it and how you’re going to go about it. There’s no one-size-fits all. What works for me may not work for others and vice versa. In the meantime, I’ve talked to a bunch of folks who are working on startups and I think there may be more nanos out there than people realize…

    Kevin McGee, Healdsburg Beer Co.

  17. LTS says:

    Kevin you are the inspiration for me looking into it in the first place.

    Oh.. and I’m going to a Sabres game tonight, vs. Lightning!

    I gotta get back to the pics of your setup again too. 🙂

    You are natural carb’ing in the kegs? I must have missed that somewhere.

  18. erik says:

    @Kevin – thanks for stopping in!

    So what’s your plan? Do you want to grow, or is this it?

    What’s your fermentation capacity? How many kegs do you have to rotate stock?

    You must work your ass off. 🙂

  19. Hey LTS! Go Sabres! I’ve actually got a crew going to Sabres-Sharks in San Jose on the 23rd. And I’m cask conditioning everything. a while ago I split a number of batches between force carb and natural and just decided the natural tasted better to me. Since then, I’ve realized I get benefits in terms of avoiding oxidation, flavor development and a few other things, including being able to go to a bar and order my own beer and watch it get pulled from an engine (which is pretty darn cool…).

    Hey Erik! I’m actually planning on running it at this capacity for at least 2010. My day job is pretty busy and I’ve got my process and workflow pretty well dialed at this point. I also have a 2 yo daughter. In the meantime, taking more time doesn’t hurt in improving street cred and proof of concept. Next year I’ll start putting some serious thought behind next steps, but for now I’m happy being a small production artisan type. The brewery actually turns a small profit and I’m having fun, so what the hell. The process has me brewing about every 2 weeks and when my pipeline is full I release 6 5g kegs every two weeks.

    Fermentation wise, my primaries are 1:1 with the brewhouse (not ideal but about what I have time for) and I’m actually splitting a 1 bbl batch into two fermenters, actually 15.5 g sanke kegs (which work really well, dirt cheap, easy to sanitize and I can move everything with CO2 and a modified coupler and yeast harvesting is actually really easy). I let primary go about a week and then split it all down into 5 g kegs for dry hopping or conditioning for another week or two depending on the beer. Then prime and let cask condition for at least 3 weeks. I’ve got 3 modified chest freezers with dual stage temp control so I can dial in three different fermentation environments for what I’ve got in process. I sample at each stage and sample each and every keg before it goes out the door. Makes for moving a lot of vessels but gives me the flexibility and opportunity to experiment with multiple split batches, which has sent my learning curve almost vertical. (Painters tape and a sharpie make everything real easy to keep track of.) I bought about 30 5g kegs from Sierra Nevada some time ago and have to keep an eye on making sure I clean them soon after getting them back since I turn them pretty quick. That’s the basics… but the beer is the easy part. Its all the other crap that derails most people. The most important thing to keep in mind for people wanting to do this kind of stuff is that you’ll spend way less than half your time actually making beer and the rest of it doing bookeeping, marketing, distribution, sales, TTB and tax reporting, etc… That said, its been really fun for me and I don’t mind the work – its worth it.

    There’s a lot of cool folks out there looking at going this road which I think is awesome. Sort of a grass-roots “take back the beer” thing. And the beer community is remarkably cool. I’ve yet to meet a pro brewer who wouldn’t answer a question, take time to hear some ideas or offer to help with anything they could do. Vinnie from Russian River told me “we’ve all been there.” So likewise, anything I can do to help or give my perspective or whatnot, I’m happy to do.

    Kevin

  20. Billy Broas says:

    Kevin, GREAT information. I was drooling over the description of your brewery : )

    Erik I had the same initial reaction as you when I heard this. INSANE. But theory often isn’t the same as reality, and people like Kevin show us it is possible. This is every homebrewers dream isn’t it? To sell their beer? The problem is leaving our jobs to start a micobrewery is a scary thought. So why not ease into it, build a fan base, and most importantly, minimize the risk.

    As Kevin said, what worked for him might not work for everyone. I’d like to look more into the cooperative idea. That could be a good way to get the economies of scale that nanobrewers are missing out on. A CSA-type model might work too. Customers pay upfront to help finance the operations, then receive their own case when the beer is ready. You could get pretty creative with the business models…

    Funny you posted this today. I just met someone who is starting a nanobrewery. We’re doing an interview in the next couple months for the blog I’m launching next week. Stay tuned!

  21. Hey,

    I made a little post on my old blogger site about your article. Check it out if you want the inside scoop on how we intend to work this whole nanobrewing project.

    Also, I dig the comments! It’s a scary business to be jumping head first into like we are, so the more I think about all the angles the better.

    Mr. McGee is correct, there is not a one size fits all answer to starting a brewery. It’s a very individualized project depending on the amount of time/capital/friends you have to help the venture be realized.

    Michael Skubic, Hess Brewing Co.

  22. erik says:

    Thanks Michael!

    Everyone else, here’s a direct link to the article.

    This has been really fantastic and enlightening discussion, and I really appreciate everybody contributing so thoughtfully.

  23. erik says:

    Thanks for posting that – someone mentioned that to me this weekend, but I hadn’t seen the article.

  24. Mike says:

    I’m in the process of starting a nanobrewery in Portland, Oregon-in my garage. I’m working through the licensing process right now, which sort of feels like running full speed with a blindfold on. I haven’t hit a brick wall yet though.

    I think it’s exciting (and selfishly reassuring) to see breweries like Healdsburg Brewing Co., Blind Bat, Hess Brewing, Vertigo Brewing, and Mt. Tabor Brewing that have already paved the way (the latter two in Portland).

    I have a day job that I do not intend to quit, and I do not have plans to grow. I am purposely limiting my financial input and keeping it simple. Will I succeed? I don’t know, but I figure I am going to have a good time trying.

  25. JP says:

    The concept of nanobrewing reminds me of the old stories about Bamberg Germany. In 1898, Bamberg, a city of 250,000 people, had over 300 registered breweries. About one brewery for every neighborhood. Most of those breweries sold thier lagers within a block or so of the brewery itself. Of course, Bamberg had quite a few larger breweries. I remember reading an interview from an elderly German from the 1980s. He recounted the tales of his childhood of him and other German children going to the neighborhood brewery, knocking on a side door, and having the brewer fill thier father’s beer buckets with lager. This was before WWI. Most of these tiny breweries went under after 1920, as the economic and social conditions changed for the worse. The same thing is now occuring all across Franconia, where the local farmhouse breweries are shutting thier doors due to market and demographic conditions.

    The US led the way in the micro-brewery movement, And the Nano concept is just a normal extension of this. Like the tiny Bavarian brewers of yesterday (many brewed only 2-3 times month for perhaps a few dozen families and a small tavern), the nano-brewers are filling a bother personal and social need.

  26. erik says:

    So, let me ask this – as a sort of devil’s advocate:

    Looking at your Bamberg example paired with the local farmhouse example in Franconia:

    If all of these small independent breweries are closing down, and they have in the past, why should anybody deem them sustainable in the U.S.?

  27. JP says:

    To answer your question: demographics. I lived in Germany at the tail end of one era, and the beginning of another. German beer production peaked in 1989-90, and has been going down every year since then. The older generation of beer drinkers who were loyal to thier village or neighborhood brewery started dieing off. The younger generation of Germans are fewer in number, and they don’t drink nearly as much beer as thier parents and grand parents. In the rual areas, in many cases there were no children to carrying on the brewing. All of this has led to over capacity throughout Germany. Many regional breweries were bought -most of the smaller one simply closed up shop. France and its wine consumption is going through the same pain.

    As for the US, a nano brewer’s goals may be simply to supply beer to one account (a tavern or restuarant) and sell the rest on premises. His goal is really no different than the few remaining communal Kellerbier breweries in Franconia. In this case, the nanobrewer could brew as little as a half barrel a week. His goal isn’t necessairily to expand. This at least seems to be the case in the few nanobreweries I’ve read about. How this will all pan out is another story. It’s alot of work and time and very little financial rewards; but, I know of people who do similiar things in other fields. There’s a 48 year old neighbor of mine whose hobby is blacksmithing. He has a considerable talent and investment in his hobby. He makes and sells knives, iron fences, etc… and makes only a small profit. He has no plans on stopping. I also know a woman who loves baking bread. She sells her bread at a local grocer. She might clear $50 a week if she’s lucky. But she loves baking and her customers love her bread. I can’t see why a person who brews beer is any different.

  28. erik says:

    I can’t see why a person who brews beer is any different.

    Good! I can’t see a reason why either.

  29. Chris says:

    Has anyone looked into the legalities of operating a normal “homebrewing” brew stand with propane burners as part of a nanobrewery? It looks like some of the more established ones are using something similar to a MoreBeer or Brew-Magic, but everything I’ve seen says that getting the county to buy off on the indoor use of those set ups is nearly impossible. I have an existing 10 gallon set up, that I can expand, but since I built it, and the burners are rated for outdoor use, I have doubts as to whether the health department woudl approve its use.

    • Mark G says:

      I have plans brewing in my mind and on paper about starting a small garage brewery of my own. Have you found out the answer to your question about the homebrew set up being up to the states standards for distribution? I have the same question.

      • Problem is the TTB will never let you work out of your garage. I had this same issue when I started my paperwork. I ended up leasing a warehouse and everything was fine. They won’t let you brew in what they deem a domicile. I would strongly recommend checking out the TTB website, http://www.ttb.gov. Unlike most government websites, the TTB is actually quite easy to navigate, the downside is, the processing of the paperwork is notoriously slow, be prepared to be paying rent while you wait 90 days for your paperwork to be approved or denied. Distribution can be hard or it can be easy. In my case it was easy, I had done my networking early on and met a distributor who ended up liking my beer. So network the hell out of people, talk to local homebrew clubs, get noticed early.

  30. LTS says:

    Chris,

    I’ve actually had an initial go round with my town and NYS. The town requires me to be in a zoned commercial space and NYS requires that it adhere to health codes as well as be in an separate structure that is not attached in any way to a residential structure.

    That might give you a clue. I am sure it’s purely safety.

  31. Sean says:

    Hey erik,
    I’m fascinated with your fascination and enjoyed reading your post. We started our ‘nano’ in Vermont over two years ago, and it was big success right from the get-go. I think you’ve got it now, and had most of it in the first place. The people behind nano or really small breweries start out because they have the passion and desire to follow their dreams, with a mix of many of the reasons you listed. You’ve got to have some money to start, many of us keep some income stream on the side (part-time for me), we have spouses/partners/friends that help pull off the work or support the household, lots of us have little kids and brewing small close to home means more family time. We’re a little (or a lot) mad like crazy, we probably sleep less than your average person, and we work some wizardy AKA magic everytime we put together a mere collection of barely, hops, water and seasonings with that crafty little critter Saccharomyces cerevisiae, the yeast cell, and turn it into this beautiful beverage we call beer. OK, so I’m romanticizing here. But, for me, it really is an act of creation, and people in small (and big) communities are very attracted to food/beverage/goods that are crafted locally by people they know.

    Yes, there are the logistics and they are what will make or break your business. Like licensing, debt, cost of goods, sales price, volume of production and all that necessary but essential business work like marketing, sales, distribution, taxes, and so on. But I digress. The point is that if you make a quality beer it will sell itself. Nano or community-based breweries have a very engaging and local story that connects them to their customers and to retail and draft accounts. Our experience has been that people are willing to pay a lot more for a quality ‘local’ beer, one you have to come here to central Vermont to try or buy, and that they are willing to travel from all over to find us!

    I brew two 1bbl batches each week and bottle about 1/3 and the rest goes into 5 gallon kegs for our draft accounts. We have five draft locations, one retail store (where 8+ cases sells out every week), plus I crank out a bit more into bottles for special events and farmers markets (where in VT you can sample and sell wine and beer directly as a manufacturer). In VT, you can self-distribute through a seperate, licensed wholesaler (read: costs more but well worth it). Its just enough that I can manage the brewing and distribution all myself, with support (especially on the family front) from my wife. We’re having a blast along with way, have garned a really great following, and are poised to grow with a long list of accounts waiting to order the beer once we do. The lesson for me is to follow your dreams with a well thought-out, researched (and slightly crazy) plan AND make sure you put your quality of life measures first (how do you want to spend your time?). As my great friend Jeff “Sparks” Bercuvitz puts it – create yourself a “good life index” where you list, categorize, and prioritize all the “INGS” of your life (being with family, brewing, sleeping, etc.). If you can plan your life around those priorities AND open a nano brewery at the same time…..man, you’ve made it to beer nirvana!

    Cheers! – Sean Lawson, Lawson’s Finest Liquids, Vermont

    PS – thanks for letting me ramble on your blog; this is perfect musing for a talk I have to give tonight about how we started and where we are now.

  32. erik says:

    As an aside, go check out an interview with Kevin McGee of Healdsburg Beer Company, who commented earlier in this thread, for another good look at nanobreweries.

  33. Great discussion by all. I am putting together a group to do just what you all are doing or talking about, right here in Norcal. I really like the model set forth by Kevin in his post, I too have a day job I am not about to quit, and yes, also a passion for brewing and creating something that others have a passion for drinking. I also have kids running around, and dozens of other things that would limit me from going bigger (7, 10, 15 Bbl). I think starting small, having local support in restaurants, and bars. . . and building a local base (like the guy from vermont) can help to create a job/hobby (jobby?) that is sustainable.

    Prost

    DH

  34. […] differently than I had originally thought I would. I started off the year thinking about going the nanobrewery route, having been sufficiently convinced after the long conversation on that post that it was a feasible […]

  35. Scott says:

    I think this is a great concept, and I think more people will be inclined to try it considering the reduced risks. Also, as more people work out successful systems and share their experiences (as Hess Brewing Co is doing above) I think its something that more people will want to try!

  36. […] in fairly progressive locations like the PacNW) have opened that fix production at a self-described “nano” (or sometimes “pico”) level- anywhere from 10 gallons to 5bbl brewhouses.  For […]

  37. Kurt says:

    I’m going to beat that same drum… great discussion, very informative. Like most homebrewers, I’m curious as to what it would take to jump in to the nano scene. Correct me if i’m wrong, to expand it wouldn’t take much more than adding more fermenters. Not saying that its cheap, but if there is interest, than the extra investmet isn’t that hard to turn around. I would also approach this by maintaining a full time job… using word of mouth and giving it a couple years to develop before going overboard. Wonder who I could find locally for the equipment?

  38. Michael says:

    I love this discussion! I’ve been contemplating going the nano route and have the bones of a business plan and an expenses worksheet. My plan is to brew in some unused space in my father’s business’s warehouse and renovate that area into a small store. I would brew 1/2bbl at a time on a Blichmann brew sculpture, ideally brewing one day a month (2 batches on that day) and selling directly to customers from the brewery using growlers. I figure I can probably sell 60 growlers a month, but probably not more so I would cap retail sales there. I’d like to sell to distributors for local bars, but that would be year 2 at the earliest (by brewing twice a month and selling 2 half-bbl at the brewery and 2 half-bbl to the distributor). Custom printed growlers will actually make me money by selling them for $5 each and I would charge $10 for a fill. So far I’m looking at about $10,000 start up costs including licenses, equipment, and all that. If I sold all 744 half gallons of beer the first year I’d break even. This is still just an idea for me but I set up a website at http://www.hibbletonbrewing.com and if anyone would like to discuss this (I love talking about it) hit me up at Michael [at] hibbletonbrewing.com

  39. Larry says:

    I can sympathize with the thousands of homebrewers out there that dream of the day of opening a brewery or working for one. The “nano” idea definitely has no short of romance, but I can tell you from experience with certainty that it takes every tumbler perfectly falling in place and the ultimate golden horseshoe to even come close to making it as a business.

    Issues:

    While you can brew in very small batches, beer quality and stability are constantly at risk. Commercial equipment doesn’t exist below the 5 bbl range for a reason, and even at 5 bbls its rare. Brewing endless times just to come up with a few bars worth of kegs is not only insane, its wasteful on energy, extract %,labor, exposes the beer to spoilage and is woefully inefficient, all the while your not putting food on the table.

    Many brewers spend the better parts of their lives learning and understanding the art and more importantly the science of beer. Lets get a grip here, just because you’ve brewed for a while and your friends and family “love” your beer, that doesn’t mean you and everyones brother suddenly hasthe skills to reinvent the beer business from the ground up with a new “less is more” approach. I will guarantee with these small mildly crude setups that from a technical prospective your beers will easily have a 25% differential from batch to batch, not a good scenario. Craft drinkers are savvy, the romance will wear off quickly when you can’t consistently produce the same beer. You also have to understand when you buy raw materials (particularly in the spot market) at this low volume your not getting preferred stock.

    Also you must understand that even with the best of beers you will have to compete with extremely well marketed and funded brands and more importantly limited tap and shelf space. Do you have the budget to have you brand developed visually/conceptually. Don’t think for a second that your artwork designed by your buddy will stand the test against the likes of even the smaller well branded craft breweries. Granted Craft coinsides with the word “Discovery” but amateur branding can sink a ship quick.

    Will you have the cash to shell out 50+ tap handles for your local area and afford to loose them at the discretion of the bar that has a friend who collect handles. Can you afford to give away cases and cases of glassware, t-shirts, etc. Bottom line is that breweries are enormously expensive in every aspect, from legal work to zoning (not everyone will get licensed in their garage and will have to have commercial space), equipment to packaging, your not doing it for under $150K and expect to come out alive much less grow to be a sustainable company.

    Look at the hard numbers, your gonna slave to wits end to sell 180 bbls only to have to expand to sty alive and a bank still wont lend to you because you haven’t generated 1/10th of the revenue your asking for to do even a small expansion. I have seen numerous operations that failed because they never produced solid revenue due to equipment issues.

    The bottom line this nano craze is simply a fad, its simply not a functional or sustainable plan. Ask your self this, would you start a power company with a generator strapped to a bike. NO, its just not realistic. I wish any who has this dream the best, and I hate sound cynical but it far harder that BYO or some random article on the net makes it sound. Do the beer world a favor, get the right brewing experience, raise the money and start a real brewery, the industry and the dedicated beer drinkers will be better of for it.

    • Jeremy says:

      These are great reasons to move forward, because it has not been done before. When did we become afraid of doing the impossible?

      I’m not sure where the 150K number comes from. There’s lots of bootstrapping that can happen in ANY business. Besides, didn’t Dogfish start with a Brew Magic?

      Let me paint a picture…you raise a bunch of money, start a “real” brewery and play it safe with a bunch of me too beers that everyone shrugs at. You are on the hot seat with your investors (banks won’t touch you with out collateral) and are sweating bullets on how to get to break even in 7-10 years.

      This industry has thrived on people with crazy ideas. Larry, you need to read up on some beer history and reflect on how safe you are playing things.

      • Larry says:

        Jeremy, it has been done before for years, since the 80’s, many times, very few if any made it to the other side. The ones that did have the make up of a true entrepreneur. I can guarantee that 75% of the folks out there taking a stab at nano don’t have it. With such a small investment impact why not right? Like I said go for it. On another note perhaps you should learn your brewing history. Dogfish (Sam) started a *restaurant* with a brewery in the back. This restaurant carried the “brewery idea” for Sam for several years even when he had a separate packing facility. His start-up cost came in about $255K. So before we continue to falsely romance about dogfish you should read up, talk to some brewers maybe. The 150K number and higher comes from every successful brewery out there dominating their markets right now. 5% percent of the beer market can only drink so much beer, granted we have light years to go, but with everything, there will be shake out and ten years from now the same thing will happen. Opening a business is never safe, no matter how much money you do or don’t spend. But hopeless optimism doesn’t pay the bills. Like I said before, I encourage anyone to shoot for the stars. I just feel that there are a lot of ignorant people (lacking knowledge) getting in over there heads.

  40. LTS says:

    Larry,

    I agree with every point if you are trying to make nano brewing the sole source of income. I disagree completely with the idea of being able to do this as a part time gig.

    Yes, competing for shelf space and tap space is damn near impossible. However, there are accounts out there that will dedicate some space to a local option.

    I agree that being able to produce consistent results can be tough but it’s not impossible but I disagree that most people can pick out those differences. Even our local large scale brewers have had batch consistency issues and most people don’t know the difference. Ive tried to explain at length about what changed and most people just stare at you.

    That said, all your points are valid. I don’t think anyone should approach a nanobrew operation with the idea of making a lot of money. If you can get a few accounts. You wont need 150 tap handles. You can grow, if possible, but at some point you will need to make that big jump, if you have a brand you can always find a brewer who will contract a large batch an you can try your hand at the marketing aspects without dropping a ton of money on space, equipment, etc.

    I would imagine the successful nano brewer percentage will be less than the successful restaurant percentage and that’s pretty low.

    Still, for a minimal amount of money, if you can do it why not try?

    • Larry says:

      LTS,

      All valid arguments. Anyone is welcome to go for it and I encourage everyone to do something positive in their lives and for the industry. One could argue as well that the more breweries we have the better off Craft beer is as a whole. I would be a hypocrite if I didn’t give that notion credit, but there are quite a few “nanos” popping up and literally thousands of homebrewers in the wings thinking about.

      The harsh reality is that the market space for it just isn’t there yet, consider the number of larger (15-30 bbls) craft startups out there as well. Its one thing to do a nano in an area where there is little to no craft presence and you can develop a niche. But there are people (would-be nanos) that are trying to set up shop in areas that are wildly over saturated with craft selections. One example is the Philly suburbs and surrounding areas, these folks must be dense. Every other week I read of a new start-up in the highest density brewery states in the US. Its like the gold rush of old. These guys have not gone at this from a practical or realistic angle. They simply figure where there is smoke there is fire. Not realizing when the market for craft tightens, and it will, it will ring out the fat.

      As far as production differences in flavor, yes larger breweries do have it from time to time but I’ve found it to be rare. If you are trying a beer on tap and feel that the flavor is off, its the bar not the beer. I’ve worked on quite a few tap systems in the past and many are pretty nasty. But when your taking a 30 gallon batch and splitting it down to two kegs for ferment, you’ll have differential and QC issues.

      As far as contracting, I personally despise that cop-out. Grow a pair, borrow or raise the money and brew the beer yourself. Contracting completely contradicts the point of what Craft beer and the small brewer are. Your ability to brew the beer in all conditions is what makes your brand. Not because you can pay another talented brewer to produce your beer.

      So if someone has 20 grand to blow and doesn’t fear loosing it go for it.

      • erik says:

        I disagree about the market space.

        Market space seems limited because for the past hundred years the beer market has been dominated by 2 – 3 players that currently take up 75% or more of the shelf/tap space.

        My local discount supermarket carries more brands of wine than there are breweries on the east coast – there is absolutely no reason that craft beer can’t inhabit the same kind of market space. It’s just a matter of retailer education and breaking the stranglehold that the Big 3 have on distribution and the market.

        I also think that the need for consistency is a myth given to us by Bud. Beer is never going to be the same length to length – and forcing it to be the same via blending and chemical analysis is taking the art and craft out of beer and reducing it to a soulless manufacturing process. Wine changes year to year because climate changes, growing conditions change, etc. The same thing happens with beer through barley, hops, and even individual brewing conditions, but we’ve been taught to abhor the natural changes in beer because the Big 3 are all about consistency.

        It’d be nice to see craft get away from that and actually educate their consumers about what to expect in changes instead of trying to deny that they exist.

        Besides all that, I agree with LTS: Most drinkers – even craft drinkers – don’t have a delicate enough palate to be able to pick out batch-level differences. I’ve seen brewpubs change hops and yeast from one IPA batch to the next and not have most drinkers even notice a change.

        But! That’s all a different discussion.

        I do think that there’s room in the market for nanos, very much in the same way that there’s room in the market for local artists to make jewelery but not run a jewelery store at the mall.

        I still think it’s batshit insane, though.

      • LTS says:

        Larry,

        I’m not talking about pulling the Schmaltz route. I am talking about people who develop recipes on their own and then work with a contract place to brew that recipe on a larger system.

        I agree that paying someone else to develop a recipe makes you anything BUT a craft brewer. We don’t criticize larger brewers for contracting their operations out to another site, why criticize a nanobrewer for contracting a larger batch from someone who has surplus capacity?

        I’m not even talking about batch to batch inconsistencies. I’ve seen brewers change the malt, the hops, the yeast and the beer become something completely different and a lot of people you ask don’t even realize it. They are simply too ignorant of beer to know. They drink craft beer because they like the flavor but if you asked them the difference between Citra and Cascade they won’t have a damn clue.

        You’ll find startups because it’s the natural order of business. Like I said, most will fail, some will succeed. Just like in the restaurant business (or opening a bar) many will do so just because they think it’s cool. They won’t have the practical business sense to get themselves off the ground and last past 2 years.

        There’s a brewpub operating in Ithaca, NY that is running on a SAbco BrewMagic. They run about 25-30 10gallon batches per week. They are making money right now (we’ll see if they last). Do I like the beer? One was good, one was pretty bad and yet people are talking about it because it’s local and clearly Ithaca is not a town where people have no craft options.

        People go to chain restaurants for consistency. I go to smaller mom and pop shops because I want inconsistency, but I want it to be good. A small brewers inconsistent batch doesn’t necessarily mean it’s bad, just different.

  41. I officially opened my Nano two weeks ago. I do this full time and figured that to be able to make a profit I have to sell 20 cases per week. I am currently brewing 2 barrels per week which yields about 30 cases. Money can be made especially if you make a little noise. I officially opened at a small beer festival, the media happened to be there, and now I seem to be answering my phone a lot. So it is actually possible to make money off of this and quit your day job. I currently use 2 42 gallon Blichmann fermentors. They are a considerable expense but well worth it. You can also get plastic conicals meant for biodiesel, they run about $200 for a 60 gallon. I’m thinking of getting one of these. I have to deal with the ABC in my county but I am also expanding into the Washington DC market.

  42. jjakes says:

    I’m opening a nano in the near future which will be out in the country. A destination or “boutique” brewery as it were. The numbers jive, the demand is there. People want a place to go on weekend road trips, we have a couple of “destination” style businesses here that have done quite well for years now. Most of the visitors come off the interstate highway and from larger metro areas.
    I believe that nanos have a big future, who makes the best cookies? Keebler or your grandma? I’ll take grandma’s anytime!
    I hereby dub the preference of nanos over macros “The Keebler Effect”

  43. Kevin says:

    I am starting a nano with friends (me brewing, them owning) in hopefully six months. Starting with a Brew Magic. Also out in the country as a “destination” style like you, adjacent to a winery. Should have distro to a few local restaraunts as well. I am figuring brewing 3 kegs a week to start.

  44. Dr. Fic says:

    Having traveled to San Antonio in April and happening upon a beer reveal of a distributor, he noted to me that shipping costs were skyrocketing: $22/$4 per keg/case respectively. One of the beers to sample came from Magic Hat Brewery, which is now part of a conglomerate: http://www.nabreweries.com/

    Therefore, craft breweries seem to be realizing that being closer to customers is cost effective, but again, might compromise brewing quality to those with trained tastes. Hipper communities, like those in Vermont, Austin, TX, or maybe New Orleans, LA, might ready for a keep it local approach to beer of high quality. The green aspect can be used to market one’s beer–i.e. our carbon footprint from the brewery to your pint glass is far less than even a regional brewery.

  45. Felix says:

    There’s alot of talk about planning and expenses which is great! What about profits? Can anyone weigh in on how much beer would someone have to sell to make say $100,000/Year? I understand there are alot of factors, but if we deal with just ingredients, how many bbl’s of beer would one have to sell in order to profit $100,000/year.

    Feel free to break down your numbers. I think this would help alot of people with this angle of the business.

  46. Proof that the nano concept works, I’ve expanded 3 times equipment wise since I started. Its all about the distributor and networking. I’m brewing 3-4 times a week to keep up with demand. I’m already looking at a 7 bbl brewhouse, up from 2 bbl.

  47. Byron Bame says:

    Paul, I’m in the process of starting a nano brewery. Currently, I’m trying to decide on what size of a system I should start out with. I’m having a hard time arriving at a happy medium when using a conservative approach. As you mentioned, I don’t want to brew 3-4 times a week as this will take time away from filling orders, networking, distributing, etc. However, I don’t want to have my cash flow decimated by financing operations required to purchase a larger brewing system. Is a 2bbl system efficient enough to allow a one man operation time to network and acquire contracts? Is it profitable or are you just scraping by? My goal is to commit to this full-time; to develop a following to my product which will allow me to grow into a micro-brewery. Do you have any pointers or potential pitfalls that I can avoid to make the first step as painless as possible?

  48. dan allen says:

    There are about as many posts here as there are nanobreweries in operation, and about as many enlightening tales.. I’ve been a homebrewer for almost 20 years, and consider myself professional because of two great stints, one as a would-be apprentice, shoveling grist and skimming trub for free on a 7bbl system at a local pub, for whom the head brewer went on to open his own craft brewery and won a world beer cup award, and another which my cousin and I bought out a failing brewpub only to invest our blood, sweat, tears, t-bonds, and busted piggy banks and have it burn to the ground.. my dreams, and night terrors come in the 22 oz form.. I have loved beer and brewing more than life itself in some instances.. and what I admire and aspire to, comes from the patriots who founded our country and paved the beery way.. one keg, or cask, or stubby at a time. Alive and well in Portland, Oregon is the biggest renaissance in beer since prohibition..and the naysayers even here, now, who lumber behind the counter, filling tubs of malt extract for the 20-something hippies in S.E., they attempt to answer the age old question..”is it feasible to have another revival? From the proverbial frying pan into the fermenter? Can even beervana support another batch of Charlie Papazian students and have them leasing a space cranking out a few more taps for the purported 7 macro, 35 micros, and 17 nano brewers in the city limits?” YES!, HELL YES.. WHY??? Because that’s what has worked, and what continues to fuel our hard earned boutique, unique, spirited triumph of being able to do it ourselves.. its recognized as pioneering something great, something viable, and something ours! The beverage business has been booming for centuries, and without recognizing or calculating risk, it thrives,, almost everywhere, in every segment.. and I pay attention to it, make money from direct sales and more indirect investments.. its MY day job, and I’m keeping it.
    A friend and I have introduced the Autobrewer, my inspiration and advice, and his ingenuity and development brought this to the market…one of the worlds best nanobrewing units that can be customized to your specifications.. seriously it plugs in the wall ! No gas, No steam.. its revolutionary in many ways and brews perfect, all grain batches of beer. Autobrewer.coa

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