Owning and Operating a Brewery: Part 1 of 1000

I’ve stated in a few posts over the past few years on this blog that I started a brewery. That wasn’t bullshit and it was on of the large reasons why I haven’t had time to post to this blog as much as I wanted to. A few months back I decided that I didn’t want this blog to die so I will just write about what I love and what I do, including the brewery operations.

The name of that brewery is “Handsome Beer Company.” Follow us on Facebook, Twitter, and Instagram if you want. Like all breweries, we do all that social media stuff (nicest word I could think of).

The goal of the blog when I started out was write about the beer industry in as granular terms as possible. Sure I post recipes but overall I wanted to post about all aspects of the industry by being “an active observer”. I participated in a hop harvest at a farm and made 30 bbls of pale ale at a local brewery. I interviewed (but haven’t posted) industry sales reps and a lawyer that fights on behalf of breweries for trademark disputes and other items of interest. While I was pursuing this goal, I did the most cliche thing possible; a homebrewer decided to open a brewery.

And since I have this blog and I’ve learned so much about the beer industry in the past 2 years going through the process of opening and operating a brewery that hasn’t made it into the blog, I figured I would go ahead and share some of that knowledge with you. I am no longer an observer of the beer industry, I’m a contributor in whatever small way I can.

First thing is first, then the second thing

First thing is first, when did the brewery open. I guess TECHNICALLY we were legally allowed to operate starting around April of 2015 but we didn’t produce a beer for sale until September of 2015. That makes my brewery just over a year old. The delays, you can probably guess, were due to the permitting runway and generalized logistics of opening a brewery. We had to secure vendors for ingredients, packaging, sign a contract with a distributor and sign an agreement with a host facility…

So that leads me to the second thing. The most common question I get when I’m serving my beer at a beer festival or am making an appearance at an event is “So where is your brewery?” or the slight variation, “Do you have a tap room someplace?” I am a contract brewery so the answer is “My brewery is no where.” and / or “No, I don’t have a tap room.”

There are lots of different segments in the beer industry, lots of different models to bring beer to market. Some of these are nanobreweries, microbreweries, brew pubs, production facilities, contract breweries, farm breweries. Each of these have different definitions and permitting structures, each has their pluses and their minuses. The permits will different based on how and when you will sell the beer (flights, pints, only to go, only to distributors, directly to bars). It is a tangled mess of difficult to navigate garbage.

Contract Brewing

There were several reasons why my brewery is a contract brewery as opposed to a “more traditional” / “brick and mortar” style of business.

1. Cost – There are a lot of costs that go into making beer but if you are a contract brewery, you don’t have to build a brewery. The majority of the cost of a brewery is in the equipment and the building / modifications to the building that have to be done to legally operate a brewery. When people talk about “a million dollars to open a brewery”…about 70% of that million is just in the building and equipment costs. A contract brewery pays for insurance on their production, ingredients, labor, packaging and shipping. That’s it. The rest is just part of the equation used by the contract facility (they are obviously charging us for their overhead but the out-lay of cash is orders of magnitude less).
2. Speed – Starting from scratch, it might take two years before you get to legally make beer for sale on your system. This two years is taken up with construction, equipment installation, trouble shooting and….permitting. If you have a facility, chances are you have to pass a health inspection (I will discuss the permitting structure for various kinds of breweries in a later post). I have a friend who waited 9 months for his county to conduct his health inspection. 9 months while he stared at a completed brewery…waiting for permission to turn it on. I’m not trying to kick sand on some bureaucrat in some office somewhere, but 9 months to get a piece of paper…that’s a lot.
   With a contract facility…all of that work is done. You can start brewing as soon as your contract specific permits (again, I’ll discuss that in a future post) are in place, which doesn’t take years, it takes several months.
3. Presence in Market / Respect – I’ve had a lot of pejoratives tossed my way since I’ve started my brewery. “You aren’t a real brewer.” “Oh so this isn’t a real brewery?” “What are you? Some kind of weekend warrior brewer?” “Do you even brew your own beer then?”
   Yeah, people can be mean. There is nothing a contract facility should be ashamed of. We got our beer in market in less than a year and we join some amazing breweries that YOU’VE heard of that are also primarily contract facilities. For example, Prarie, Boston Beer (Sam Adams), Sixpoint, Terrapin, Stillwater, Mikkeller, Evil Twin, Grimm…all are currently or started out as contract facilities. You can generate a reputation and a name for yourself by getting some beer in market with your marketing on it quickly and for less than 100,000$.
4. Built in staff – I try to do as much as I’m legally allowed to with the production of my own beer. I design the recipes, brew the test batches, I’m present for every single brew day, I’m adding ingredients to the hopper, weighing out hops, adding things to the kettle, opening valves and pushing liquid between vessels, but the reality is the day-to-day operations of the brewery is handled by the existent brewery staff and I am reliant on their competency. Fortunately for me, I brew at a really competent facility and the staff is great and really believes in the product we are making.

For me and my little company, it was the right move to get our name out there and get into the mid-Atlantic market quickly, at least I think so. I suppose time will tell. I don’t regret doing it this way but in many ways, it feels like a half-solution to “brewery owner” puzzle piece of my life. There are a lot of things I don’t like about contract brewing. Things like…uhhh….

1. “So where is your brewery?” – I get asked this question every couple of days and at a beer fest every couple of minutes. People want to go to a place. I can’t blame them, I love going to breweries and hanging out. A brewery is an interesting destination. It’s like going to a car factory to test drive cars. They usually have a somewhat industrial feel and the customer gets the very real sense that they are tasting something fresh and brand new. I would personally love to own a small brewery attached to the contract brewery. Many of the contract brewers I listed above ended up doing this themselves. I imagine it will eventually happen for me one way or another. Currently I don’t have a good answer to this question. It’s rough on me to have to deflect or explain a few dozen times at a beer festival what a contract brewery is and what it means. It usually is an invitation for several follow up questions rather than “Yeah, here’s the address and the hours…stop by!”
2. “Where can I find your beer?” – this is another question I get all the time and related to #1. If we had a space, we could send people there, but we are 100% distributed, in kegs, to bar (I’ll write more about this later). The answer to this question changes daily. Permanent tap line accounts are hard to come by (I’ll write more about this later as well) and people think you know exactly where your beer is at all times. One of our “problems” is that the beer is generally popular but bars will purchase one or two kegs of any given brand of beer. And those kegs will kick within days of them putting them on tap. So I sort of know where the beer is and when I go to a festival I definitely check to see who has purchased it but inevitably someone will say “Well what about at any of the bars near me?” and I don’t have a good answer for that.
3. It’s not your space, it’s not your rules – Related to #1 for sure, you are using someone else’s facility so you have to use their SOP and follow their rules. If their head brewer says, “No Lactobacillus EVER”…guess what, you aren’t making that sour you spent a year developing. Some places have rules about how to sparge or how to ferment, all of them have rules on how to clean and all of those rules are different. They may insist that the beer be filtered before packaging, OK. We used a facility early on that had never dry hopped a beer before so we had to discuss how we wanted to accomplish that. We did and we do dry-hop, so a small victory for me.
4. Production limitations – Again, you are using their equipment so you are limited by their brewhouse. I would love to do tiny batches of beer but the brewery we currently use is a 30 bbl brewhouse, so I brew 30 bbls at a time. This isn’t ideal for our business model but we are adapting. I think facing problems like this generates great and creative ways to deal with these challenges and I’m pretty proud of how we’ve dealt with huge batches of beer for a start-up brewery. Something for a future post.

I think I’ll end it there for now. I want these posts to be fun to read and easy to digest so I’ll cap them around 1500 – 2000 words. I’m going to post a new one every two weeks, I have a lot to say about the beer industry from the point-of-view as a brewery owner. I hope you enjoy them and if you have any questions or comments, things you want me to address in an upcoming post, please comment or send me a message.

What’s in Part 2 of 1000?

There is a lot to cover overall. The next posts will be about the sub-markets in the beer industry, interacting with distributors and accounts, and the general challenges of getting your beer product in the hands of beer drinkers, how running a brewery has affected my personal life, the greatness and horrible nature of beer events, the types of questions consumers care about, the dreaded craft beer bubble…all of that, eventually.

I will have posts about beer production, specific challenges faced by my young company, permit landscape for different brewery types. There is a lot of talk about.

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