Some 20 years ago, it seemed like just about everyone who wanted to start a small business thought opening a microbrewery was a good idea. Microbreweries began popping up all over the country. Some made it; most failed. Truth be told, the biggest challenge to opening a microbrewery is cost. It is not cheap.
Every new business venture comes with upfront costs. Success requires having enough cash in reserve to keep things running until the business is profitable. That is often easier said than done. But you would think it should be fairly easy in the beer brewing business. It’s not.
Equipment Is Expensive
In addition to securing space, applying for a license, hiring staff, etc., brewing beer requires a significant investment in equipment. That is where the biggest expense lies. According to Houston-based Cedar Stone Industry, copper and stainless steel brewing equipment eats up the lion’s share of a new microbrewery’s startup budget.
Before you ever brew that first batch of beer, you need a fermentation tank and a bunch of tubing. That is just for starters. Commercial breweries also need brite tanks or unitanks, along with holding tanks, filtering equipment, and on and on. The bill just keeps getting higher.
Choosing Between Copper and Steel
Traditionally, brew masters prefer copper equipment because it is readily available and easily formed into the perfect shape for fermenting tanks. Yet copper does not hold up well to repeated cycles of heating and cooling. Copper equipment tends to wear out faster than stainless steel.
These days, the largest commercial breweries go with stainless steel from top to bottom. Stainless steel brewing equipment lasts a lot longer. It allows for more consistent temperatures across the entire process. Best of all, it is an excellent choice where hygiene and cleaning are concerned.
The downside to stainless steel is its expense. It is not cheap to make. Therefore, it is not cheap to buy either. But given its toughness and durability, commercial breweries tend to spend less over the long haul by going with stainless steel.
Buying Used Equipment
Cedar Stone Industry says that a new microbrewery can cut its initial expenses by purchasing used equipment. The used market is extensive enough to support a sufficient supply of:
fermentation tanks
storage tanks
kettles and boilers
stainless steel kegs.
It goes without saying that brew masters have to be careful about sourcing used equipment. It is as easy to buy bad equipment as it is to buy the good stuff. Brew masters should absolutely not buy used copper or stainless steel brewing equipment sight unseen.
It should also be noted that used equipment probably won’t give the new microbrewery as much life as new equipment. But that is to be expected. Used equipment is available because other breweries have already used it before upgrading.
Securing Initial Funding
Given how much it costs to start a new microbrewery, an entrepreneur really needs to consider funding sources before even getting started. It is often said that small business loans are hard to get for startups. Why? Because startups don’t have a track record that banks can look at. This is not to say that getting a small business loan is impossible. It’s not. It is just difficult.
Entrepreneurs generally have to rely on multiple funding sources to get a new microbrewery off the ground. Perhaps you start with one or two private investors willing to provide seed funding. Then you bootstrap, using as much of your own resources as possible. You top everything off with a small business loan from your local bank. At any rate, it is not going to be cheap.
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