Hop to it: How to buy a brewery

As a beer fan, the US expatriate had spent seven years in China and found himself with little choice in unique brews. Although there was the local Tsingtao and imported Dutch Heineken, compared to the west, where microbreweries were popping up all over, China’s beer culture was stagnant.

Four years ago, Setzer and his wife Liu Fang invested $50,000 of their own money and opened Great Leap Brewing, a brewery situated in a 110-year-old courtyard in the old part of the city filled with hutongs, or alleyways. They use locally-grown teas, honeys and spices to make a product aimed at expats and a growing Chinese middle class with a thirst for beer. (Beer consumption in China has grown by 29% since 2007 and the country now consumes more than 50 billion litres, according to Mintel, a market research firm).

Of course, owning a successful brewery wasn’t easy at the start. There was plenty of experimentation before the couple could start selling their first brew to expats who missed craft beer — beers made by small independent, traditional brewers — from their home countries. Using local ingredients made it harder to craft a perfect recipe.

In 2012, the couple raised $1.1 million from foreign investors. Last year they opened a brewpub in a second Beijing location. The company now employs 67 people, will open a third location in the city this year and plans further expansion across China, Setzer said.

 

For beer enthusiasts, buying or opening a brewery can fulfill a lifelong passion. While start-up costs of a brewery can be anywhere from $15,000 to $1.5 million, depending on the location, capacity and construction needs, the cost of making beer is low, but profit margins can be high. A pint of beer that costs 75-cents to make (including overhead costs) can sell at retail for $5, said Chris Farmand, founder of an accounting firm dedicated to the craft brewing industry in the U.S.

“If you have a strong brewer,” he said. “This can be a very viable business.”

How to Buy It

Most people who start their own breweries don’t begin with traditional financing. Banks may refuse loans to first-timers, although financing the purchase of an existing business is easier. Instead, expect to raise your own funds — but don’t despair, early on you might not need that much money.

Two years ago, Ethan Cox, 41, a cognitive scientist working in academia raised $15,000 via a crowdfunding platform, Kickstarter, to start a small brewery in Buffalo, New York.

Sites like Kickstarter in the US and Crowdcube in the UK are a go-to for future brewers. Raising capital from friends and family who are eager to be part owners of a brewery is another option.

Equipment needed for a brewery, including fermenters, filters and mixing machines can start at $3,000 each. Bottling equipment can cost as little as $10,000, and as much as $500,000 per machine, depending on speed and capacity, said Ray Daniels director of Ciserone Certification, an international beer sommelier program based in Chicago. If you aren’t starting small, you could sink $300,000 or more into equipment at the start.

Start smaller — and cheaper

Not everyone who starts a brewery needs to invest their life savings: 5% to 10% of microbrewers start without significant investment, Daniels estimated.

Some hobbyists who come to the craft by experimenting at home rent out space inside an existing micro-brewery without paying for equipment, said Daniels. Finding out about such opportunities means networking within your local brewing community, he added. You can also purchase a fermenter and store it on premises at an existing brewery to see how consumers respond to your recipe and perfect a label and branding.

Cox himself first co-founded a nano-brewery, which only makes 1.5 barrels of beer per batch — that’s only about 47 gallons, a fraction of most micro-breweries — which is sold to local restaurants for on tap. A father of two, Cox earns a small salary from the business, but says his wife is the main breadwinner.

He hopes to expand this year after proving their business concept on a small scale and perfecting recipes. Brewing on a small scale, “is a means to an end,” said Cox. One of those ends: financing. Cox hopes that proving his abilities at a small level will help him secure banks loans as well as community investment for a larger brewery.

Location, location

If you’re going in on a grand-scale, finding an appropriate space for a new brewery can be difficult, especially in a large city, said Edward Mason, 43, who in addition to being a pub owner opened the Five Point Brewing Co in Hackney, East London last year.

The company paid £23,000 ($38,000) for a year’s rent — a relative bargain — for industrial space inside a railway arch holding up the city’s transport system.

“We’ve had a really great first year,” said Mason. While the brewery is not yet earning profits, first year revenue was £200,000 ($330,200) and the brewery is on track for revenue of £500,000 ($825,500) for the second year, he added.

Your beer will likely need to build a local following before it takes off. That’s one reason choosing a location that’s visited by tourists was a priority for Kevin Szot, who started Szot Microbrewery in Talagante, a commune in Chile’s Central Valley wine region in 2006.

This year, Szot added a taproom to convince tourists visiting the country’s wine region to take a detour from grapes to hops. For Szot, selling directly to the consumer helps recoup brewing costs. Selling the beer to distributors could reduce profits by about half.

“We’re not getting the markup that the end seller is getting,” he said.

In some areas where there aren’t established microbreweries, it can be tough to get affordable equipment, said Szot. He worked with a company that manufactures wine tanks to customize beer tanks for him, in order to save on import costs.

Standing Out

Branding a brewery can take more work than owners anticipate. With so much competition, developing a website, social media presence and logo that’s memorable and tells a story of how the brewery started is obligatory, but it isn’t always easy, said Daniels. Hiring a graphic designer to create the website and contracting with a social media consultant can help you start to build the brand.

Participating in beer festivals and local partnerships with restaurants or civic clubs can also help breweries introduce their brand to the local community. A brewery’s home town is often its biggest supporter.

With so much competition, tinkering with recipes to get superior taste is difficult — but it’s an absolute must. Sometimes, you’ll need to seek out educational opportunities at some of the trade organisations for microbrewers. “Many people start breweries but don’t know what good beer is,” said Daniels.

Launching in an area with less competition can give your brewery a leg-up, said Kyle Kersey, who co-founded PerroVida in Costa Rica, using uses rainforest spring water to brew his beer. Kersey, age 30, “pre-retired” to Costa Rica after quitting an IT job in the US “got tired of the bad beer” and partnered with two other expats to start the craft brewery — one of only a handful of in the country.

Brew days start at 05:00 and can end well after dark, said Kersey, a father of three who also handles everything from managing ingredients and carbonated gas deliveries to PerroVida’s social media.

For many the hard work is paying off. Mason says London’s consumers are interested in drinking “more authentic” beer that’s made locally and that while the city has hundreds of microbrewers there’s plenty of business to go around.

“Many of the brewers are reporting a similar success story,” he said.

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