Now is an excellent time to start a nanobrewery—and not just because beer is amazing and more beer makes the world a better place.
With the craft beer industry showing increased growth year on year, starting a nanobrewery could be a very lucrative business decision.
If you’re considering diving into the world of craft beer, then it’s important to know what to expect. Read on to find out everything you need to know.
What Defines a Nanobrewery?
Nanobreweries are breweries that produce no more than 15,000 barrels per year, or around three barrels per batch. The lower scale of production of these small breweries keeps costs down, making them popular among entrepreneurs who are just starting out.
But before you start thinking about brewing your first batch, you’ll need to consider how much it will all cost.
Starting a nanobrewery can set you back anywhere between $10,000 and $70,000.
It’s a wide cost range because there are so many different factors that determine the cost of setting up your nanobrewery. Your vision for your brewery business will dictate the kind of prices you pay.
The main expenses involved in setting up a nanobrewery will be your premises, insurance equipment, and taxes. Smaller but equally important costs may include marketing, staff salaries, and permits. To factor in all these costs and budget accordingly, it’s important to have a business plan.
Having a coherent, flexible business plan should be your top priority when you set out to start a nanobrewery.
This guide will cover all the expenses involved in starting a nanobrewery, so you’ll know what to figure in.
Between property costs, insurance, and the associated taxes, there is a lot to consider when starting a nanobrewery. Only when you understand the different costs and overheads will you be able to start planning and budgeting.
The first major cost to consider is the location for your nanobrewery. Regardless of where you set up your production facility, you can assume that rent will be one of the biggest costs. First, you should consider how important the location of your nanobrewery will be for your business.
If you hope to rent a space in the center of a major city, you can expect significantly higher costs. You can reduce the cost of rent by finding a property in a less central area. The decision ultimately comes down to what is best for your business.
If you plan to only sell your beer to retailers, then the location of your nanobrewery is less crucial. However, most nanobreweries serve their beer on site as this is generally more profitable. If you take this route, having a good location in a suitable city or neighborhood may be worth the higher cost.
When deciding on a location, you should also consider local laws and regulations related to brewing and serving beer. If you set up somewhere with strict laws on serving alcohol, then you’ll miss out on revenue.
To facilitate your nanobrewery, you will need a space of between 300 and 500 square feet. Again, this depends on your intentions for your brewery. You can get by with a smaller area if you only need the space to brew and store your beer. But if you’re serving beer on the premises, you’ll need space for a bar as well as furniture and customer facilities.
With this in mind, you can begin to calculate the average rent in different locations.
In major cities such as New York or San Francisco, you can expect to pay around $2,500 per month for an adequate space.
Rent in more affordable cities such as Atlanta or Oklahoma City can be far less, at around $700 per month.
This can give you some idea of the rent you can expect to pay in different cities across the country based on their size.
Although it might seem obvious to choose the cheapest commercial space, it’s important to consider the suitability of the area. Do some market research to decide whether or not there is demand for your brewery business in your chosen locality. Also, don’t forget to check the laws and regulations in each area and be sure to take municipal laws as well as state laws into consideration.
When choosing a property, it comes down to finding a good balance between price and suitability. Don’t make the mistake of simply choosing the most affordable location without checking if it suits your business needs.
Once you have your premises decided on, you’ll need to make sure you have the right insurance. The types of insurance you need and the amount you spend will depend on your business activities.
The way your brewery operates will determine the liabilities that you need to cover. If your brewery is solely for producing beer, then you may be able to spend less on insurance. But if
you invite customers onto your premises to consume alcohol then you will need different coverage.
The minimum insurance you should have is general liability. This will cover you against incidents such as property damage and personal injuries. You should also have property coverage to protect your premises and equipment.
There are additional insurance policies that are especially relevant for breweries. Liquor liability insurance is essential for nanobreweries serving beer on site. This protects you in case your brewery is held liable for injuries sustained by intoxicated customers.
You may also consider purchasing insurance for equipment breakdown, product contamination, as well as coverage for your storage tanks.
The average cost of insurance for a small brewery is around $70 to $100 per month. As mentioned, this will differ depending on the level of coverage and the type of insurance your business needs. The standard insurance policy for a nanobrewery should cover $1,000,000 to $2,000,000.
Even with equipment, ingredients, and insurance, you cannot start brewing or serving beer until you have obtained the necessary permits. There are important licenses required to operate a brewery which will permit you to produce and serve beer.
As long as you have already established a legal entity under which to operate, you can apply for your brewer’s license. This is a necessary license that legally permits you to brew beer and produce alcoholic beverages for consumption.
To obtain this license, you need to prepare documentation relating to your business, property, and financing.
Next, you’ll need a Brewer’s Notice from the Tobacco Tax and Trade Bureau (TTB), as well as a Brewer’s Bond. A Brewer’s Bond will cost you $1,000. These permits relate to the manufacturing and selling of beer as well as the related taxes you’ll be required to pay.
If you want to serve your beer on the premises, you are required to hold a liquor license. The cost of such a license depends on your state and can be between $300 and $14,000. Additional requirements include local business licenses, building permits, and local health department permits. The cost of these will vary depending on your state.
It can definitely be a long and arduous process to get all these licenses and permits in order. But there’s simply no way around it if you want to produce and sell your beer legally. Getting all of the legal matters in order as early as possible will be well worth the time and effort.
Investing in the right brewery equipment and basic utilities is essential. Prices vary widely when it comes to brewing equipment, but you can expect it to take up a considerable portion of your budget.
One of the benefits of opening a nanobrewery is that you only need minimal equipment and storage. This is one of the reasons nanobreweries are often seen as more attainable business ventures than microbreweries or larger operations.
Even so, any brewery needs quite a lot of equipment. From storage and fermentation tanks, kettles and boilers, and kegs and cooling systems, the costs can quickly add up. Fortunately, the recent boost in popularity seen by nanobreweries has made it easier to find tailored and affordable equipment.
For example, you can purchase a 1-barrell brewing system for around $4,500, or a larger 2-barrell system for just over $7,000. Storage and fermentation tanks will set you back between $200 and $800, each depending on capacity. A small brew pot costs as little as $50, but again, prices vary with capacity.
You’ll also need extra materials such as measuring jugs, funnels, bottles, cans, and sanitization equipment. These additional materials can amount to several hundred to several thousand dollars depending on the scale of your operation.
Once you have all your equipment in order, it’s time to gather your ingredients. There are certain ingredients that are essential for brewing beer. You can’t start brewing without yeast, grain, hops, and of course, water.
The quality of the water you use is more important than you might think. And because it makes up about 95% of the beer, the water itself can greatly affect the resulting taste. You can use tap water if your local supply is reliable, but you might consider investing in a filtration system.
Take some time to research the quality of your local water supply and how its pH, hardness, and additives might affect your brew.
Beyond the base ingredients of yeast, grain, and hops, you can add extra ingredients called ‘adjuncts’. These include ingredients that are not required to make beer but that are added to impart different flavors and aromas.
Commonly used adjuncts are unmalted rice, corn, and barley, or malted wheat and rye. Sometimes adjuncts are added to alter the quality and mouthfeel of the beer. They can also be used to add clarity or to reduce foaming.
In terms of cost, there are many variables that will determine how much you pay for ingredients. The quality, quantity, and type of ingredients varies widely, so it largely depends on the scale of your operation. With a nanobrewery, however, you will generally produce only three barrels per batch.
You can purchase 1lb of hops for $10-$50, while most grains go for around $3 per pound. The final base ingredient, yeast, can be bought in 500g bags for around $60.
Based on the capacity of your equipment, you can determine how much you will need to spend on ingredients.
It may not seem as important as the previous points, but marketing is one thing you don’t want to overlook. When it comes to starting a nanobrewery, you’ll want to get the word out about your brand to attract consumer interest. Marketing doesn’t just help you to sell beer though.
Having a recognizable brand will help create customer loyalty which can then translate to increased demand for your beer. With increased demand and income, you may be able to upgrade to a microbrewery. But, of course, there’s no reason to scale from a nanobrewery if you don’t want to fully commit to brewing.
A nanobrewery allows you to pursue your passion as a side project rather than a full-time commitment. So, keeping your brewery nano-sized can be a more attractive option for hobbyists or those who simply don’t have the time.
When it comes to marketing your nanobrewery, social media can be an easy and affordable way to go. Social media ads are relatively cheap, and you can even get the word out for free by gaining an online following.
An important consideration for your nanobrewery is whether or not you will need staff. It is a good idea to decide sooner rather than later if you plan on hiring staff. This is because you will need to arrange extra insurance and account for other costs in your business plan. Staff wages and benefits may constitute a significant portion of your budget.
It is likely that you will need to hire a head brewer to oversee brewing operations. Depending on the size of your business, you may need additional workers. For example, if you have a bar in your brewery you will need additional bar staff.
Starting a nanobrewery is somewhat easier than starting a microbrewery due to its smaller scale. But like any brewery, it is still a large undertaking to get it started. Between finding a suitable property, arranging adequate insurance and permits, and buying all the necessary equipment, it can get costly.
However, having a clear vision and a sound business plan for your nanobrewery will pay dividends in the long run. And if brewing is your passion, then you’ll find that the time and effort is well worth it. Plus, you’ll have plenty of beer to drink!
Ruben has been doing online marketing for the last 4 years. Prior to that, he spent 15 years managing different brick-and-mortar businesses, in the home improvement and logistics industries. Overall, he has 20 years of business experience under his belt. Recently, he added SEO, affiliate marketing, and link building to his business skills.