Going Pro... Is a good recipe enough?

by Thomas C. Kolakowski

Every home brewer has probably fantasized at times whether his beer has what it takes to become the next Sam Adams or Sierra Nevada. But is having a good recipe enough? Just because my local home brewers club rates my beer highly does that mean I can actually make some money off of it? And how does one go about taking that big leap from home brewer to commercial brewer? What follows should give some insight into getting started as a professional brewer.

The first question that has to be asked is which path to take, becoming a contract brewer or opening a brew pub. Each method has it's strengths and weaknesses, so one should make their choice wisely. The first method, contract brewing, is by far the least expensive. In contract brewing you contract with a large brewery that will brew the beer to your specifications. You create the recipe and they brew it for you. The major advantage of using a contract brewer is that they have the expertise that will ensure a quality product that is consistent with each batch produced. In researching this article I spoke to representatives of F.X. Matt Brewing Company of Utica, NY as to how they handle contract beers. F.X. Matt contract brews such beers as Brooklyn Lager, Dock Street, New Amsterdam and Harpoon Ale.

From the information F.X. Matt provided, a new contract brewer will have to order approximately 6,500 cases of beer with each order. Based on an average price per case of $10, we are talking about a price of around $65,000 per batch produced. They go on to recommend that producing six batches per year, raising the annual cost for production to around $390,000 a year. Before the first batch of beer is produced there are several start-up expenses that must be incurred. First, you need to have labels and six packs designed for your beer, the up-front art charges will be around $10,000. Additionally, the brewery will need you to prepay for the packaging materials for the first 10-15,000 cases, coming in around $25,000. All totaled, your first batch of beer should run you somewhere between $75,000 to $90,000. This amount could be higher depending on the style of beer produced and any special ingredients you may require.

So... now you are about $80,000 poorer, but have 6,500 cases of your new beer sitting on the brewery's loading dock. Here's where your real problems begin. You have beer, but as of yet, nowhere to sell it! A successful contract brewer has to be a good salesman, even more so than a good brewer. I remember spending a day with Sal Pennacchio of Old World Brewing (makers of New York Harbor Ale and Porter), in which hours were spent trying to arrange transportation for his beer from the brewery (in Stevens Point, WI) to the various distributors he services. There is a lot of work involved with making your new beer a success. You will have to travel from beer show to beer show... host beer tastings... etc. By attending these beer shows you hope to generate new customers, but you wind-up giving away many beers in the process! If your beer starts showing promise you may be able to hook-up with other small breweries to help you distribute your beer. In New York City, Brooklyn Brewing acts as distributor for many regional MicroBrews. Unless these established brewery/distributors feel they can sell your beer to the bars and distributors they deal with, you will most likely be on your own.

The second brewing option is opening a brew-pub. The main advantage of being a brew-pub is that you don't need to market the beer, since the beer is sold in-house. Since you only need to produce as much beer as you need for your customers you can better control how much beer you brew with each batch. You will first need to find a location for you pub. The site must be properly zoned to allow on-site brewing and also be located where the beer will sell... if the location chosen is not right for a brew pub you may be doomed no matter how good you beer is! Additionally, the site will have to be large enough to house all the brewing equipment needed (brew kettle, fermentor, conditioning tank, etc.). The expenses are high. You will need to purchase or lease the pub and buy all the brewing equipment and ingredients. One should expect to spend at least $50,000 on all the equipment you need, unless you either you buy used equipment or start with a 5-8 barrel system. On the positive side, it is easier to finance a brew pub than a contract operation. You can always get a mortgage on the pub and use the brewing equipment as collateral for a loan. With a contract operation you will need to have the cash up-front.

Many brew pubs, such as Park Slope in Brooklyn, can easily add the capacity necessary to supply their beers to other bars. An additional consideration is who is going to operate the brewing equipment. There is a big difference between brewing a 5-gallon batch of home-brew and producing 15 barrels of beer. Many brew pubs hire a professional brewer to get them started and train them to run the business themselves. This where many brew pubs fail. Often, once the Head Brewer leaves the quality drops. The Manhattan Brewery has opened and closed many times because of the poor quality of their beers. Once the brewery reaches the level of popularity where they can sell their product in bottles they usually contract their beer out to a brewery like F.X. Matt. Even big name micros like Samuel Adams would produce their keg beer at one site and contract out their bottled beer to another brewery.

This should give some basic insight into the problems with getting started as a commercial brewer. Good luck and good brewing!

Rolf's

by Thomas C. Kolakowski

	Rolf's Bar & Restaurant
	281 3rd Avenue
	Phone: (212) 473-8718 or 477-4750
	Open 7 days a week for lunch and dinner

Last modified: 04/15/07