Viability of really small breweries

[Moonlight]

I have seen many posts from people wishing to start pico breweries of sometimes even a barrel or less. I cannot fathom the viability of such endeavors. Seven barrels, while still a lot of work seems like a minimum viable size, unless you have some mitigating factors.
I am afraid for people like you and I once were, who with the best of intentions wish to become brewers but are headed for disaster.
Could everyone post a list of commercial breweries of 3.5 bbl or less, and an update on how long (or if) they have survived, perhaps even a note on what allowed them to have an edge?
.

[Moonlight]

New Albion Brewery

Started in Sonoma, CA in 1976. Fifty gallon brewhouse. Staff overworked and underpaid, burned out. Multiple attempts at more funding failed, the brewery closed about 1981.

[canyon]

Small is Beautiful

New Belgium started in their basement. Look at them now.
Bell's (formally Kalamazoo) started and brewed for a number of years on a one barrel and look at them now.
We started Homer Brewing Company on a 3 bbl and my former partners finally upgraded to a 7 bbl after 7 successful years (albeit hard work).
I'm sure there are many more.
The key is to start with low overhead/debt load and grow at a natural pace.
This can more easily be done with a smaller size. You can always grow!

[BeerBoy]

Small is nimble

I know what you speak of when you talk of the "dabblers" and their thinking small is an "easy" entry into commercial brewing. Brewing, a brewery, and the beer biz ain't a cheap nor easy endeavor.
As with most things, it all depends.
My initial entry into commercial started out relatively small and ballooned into a multi-million project (which thankfully didn't reach fruition in hindsight). There is that "bigger is better" line of thinking, especially when investors are involved (bigger = making bigger $$$. Uh-huh).
Back to small. My current brewery plans call for a 7 bbl / 10 hl brewhouse, and knocking out 500 bbls annual - and staying at that volume. Do the numbers work? Yes. Is my market viable for what I'll be brewing and selling it for? Yes. By keeping initial debt and costs low (especially labor (i.e. just me), a "Frankenstein" brewery, and packaging) it does work. The nimble I speak of is my plan to brew with whatever is available (i.e. spot hop market). I've learned a lot during the past 12+ years in the industry and have learned what, and often more importantly, what not to do as I approach this project. Debt management is really key. Experience is very helpful as well.
I really think being "mid-sized" is a tough position to be brewing in at the present, especially if you're tied to a certain hop/recipe. Small and flexible is where it's at if you ask me. As always, there are some that "should" be in the biz and probably a lot more that shouldn't.

[blueskybrwr]

Dogfish Head Brewing Co

Sam Calagione started with a Sabco Brewmagic (and Miles Davis ).

[Gordie]

If you keep an eye on your profit margin and avoid debt, a small brewhouse can actually become profitable very quickly. It requires a different marketing program and product placement though. While you can be profitable, you're not going to make a whole lot of money simply because you don't have the volume for a large cash flow. Problems happen when the debt load crushes the cash flow and if you're leveraged from acquiring equipment, leasing space, etc, you'll never get out from under. Small breweries can work, but they have to keep a closer eye on their debt to income ratio and have the patience to grow naturally. That said, you're also not talking about making a lot of money until you establish your brand and can responsibly expand production.

[Sulfur]

100%

Beware of being in the position with 100% production i.e. maxing it out and still being in the minus on the books.

[gitchegumee]

Obviously it has been done, but I'm with Moonlight. How can you possibly cover the fixed costs of licensing, accounting & legal, utilities, equipment, etc, etc with an eyedropper-sized brewery? The variable costs of labor and ingredients are deceptively inexpensive if you don't look at what it takes to open the door to begin with. Perhaps it would work if you're ready to lose money for the first few years before investing even more in size upgrades. I wouldn't want to do it. Good luck to those who think differently and put their hard-won cash on the line. I hope they have all the success of Bell's and Dogfish Head.

[Rosie]

As usual a lot of wisdom on these pages and I think I agree with everyone's thoughts.

We started this way - though I almost hesitate to talk about it, cause I don't think we are out of the woods yet, but here are some of my thoughts.

I think that starting small has several advantages and a couple them are the reason that we are still brewing beer at Lovibonds. I, like many of you, didn't come from the beer biz, but just from some crazy homebrew thing gone mad. By starting small you can minimise your risk and you can do market research with a real product. I had a massive loan lined up, a building with a huge lease and almost pulled the trigger until a very wise man told me that maybe that should be phase 2 and that it would be good to have a product and a couple customers first. I would have crashed and burned under the debt load within months for sure.

So, minimising the risk we started small. Two back to back brews was enough to knock out 4 firkins and it was a total ball breaker. But, by getting the beer out there, I got a crash course in the UK beer market and discovered many things that allowed us to reshape what we do to better match the market. Starting small means you are super nimble and flexible. Without this, again I am sure that a lot of beer would have been going down the drain due to lack of initial sales.

By starting small I also think that you can stick to your pricing model as I have seen many bigger startups have to give away their beer in order to sweat their new shiny assets and try and buy market share.

If you aren't a professional brewer, I think starting small does have it's advantages and you will learn a heck of a lot more about brewing because of the shear number of batches you will be doing. And when you bust your ass and create the inevitable mistakes that must be sold on, you will again minimise the risk to your brand.

If you are going down this road, you need to be prepared that your growth will take time and that the business is going to take a while to hit that magic break even point - which is where we sit today brewing at 5 UK bbl now. Getting to this, no matter how low cost and low risk your operation is still going to burn a considerable amount of cash, please don't underestimate this. If you have dependants, you'll need to make sure you also have the cash to cover this when no money is coming out of the venture...don't underestimate this. You also need to be aware that all of this brewing, packaging and delivering is going to take a considerable amount of your time - time which should be spent Selling Beer.

My 2p...

[sdgbrew]

Would you guys consider a 7BBL brewery too small to start, not a brewpub, a bottling micro with limited keg accounts.

[pennbrew2]

Rosie stated a lot of my thoughts in a much better fashion than I could have.

Particularly in a brewpub setting a pico brewery can be viable. Gross revenue is anywhere from $400 to $1000 per bbl depending on your pricing. A one-person operation with a 2-bbl system can produce a few hundred barrels per year. Not a model to become wealthy but it can be viable. AND most importantly, as Rosie said, it's a way to get started.

I did it the other way once, raising piles of money thru equity sales and debt. Big, beautiful brewhouse, shiny new tanks, high-speed bottling line, etc. We sunk like a stone and I couldn't sleep at night. This time I'm too risk averse to put so much on the line. God bless and good luck to all of you with $500k loans to finance a start-up. You have to sell a *lot* of beer right out of the box to keep current with your debt payments, expenses, payroll, etc.

---Guy

[einhorn]

Particularly in a brewpub setting a pico brewery can be viable. Gross revenue is anywhere from $400 to $1000 per bbl depending on your pricing.

A brewpub setting as a pico brewery still means some sort of taproom situation, meaning being set up like a bar - with (somewhat) appropraite settings to attract customers and have them coming back. I see this as a considerable investment for 1-2 bbl breweries, even to get to this stage.

There are always good examples of people who motivate and inspire start-ups and do make it on a shoestring (or a stroke of luck, which is also part of the game), but the list of projects gone bad is much longer.

[pennbrew2]

Well in my case it's more of a taproom than a brewpub. Come in, have a beer or 2, fill a growler. BYOF if you want. Small and rather plain, but I keep it clean:

http://lewbryson.blogspot.com/2008/01/one-thing-about-one-guy.html

[einhorn]

Respect

I seems as though you invested quite a bit of time, blood, sweat & tears yourself in this project - things that not all have in their "skills portfolio". I totally respect your venture, and hope that many folks stop in for a cold beer - if I do make it to Philly (let's wait until my Ford stock gets over $2.50 and hopefully by then, the winter will also subside), I will take you up on your offer.

Prosit !

[Moonlight]

I see comments about space or costs of a lager system. Imagine that if you want to sell 200 bbl per year. A 7 bbl system would require about a brew every other week. A 1.5 bbl system would require about 3 brews a week. Figure what needs to happen in the brewery besides brewing, and consider who would do it all.
Besides the never sleeping option, you would still need to hire someone to package, sales, paperwork, maintenance, errands, etc. (Your girlfriend will dump you if you ask her to help with all that!) The larger system frees you up to wear multiple hats and keep more of the meager profit for yourself, or just breakeven sooner. Also has the ability to grow.
The cost of a seven barrel system isn't all that much more than the smaller one if you are a good shopper and get something used that isn't top of the line.
As for required space, your aging capacity is a function of sales so would need to be the same barrelage regardless of vessel size, and your packaging space would need to be the same regardless of batch size. Many smaller vessels would cost more than fewer larger vessels, although there is problems with vessels too large compared to production, too- but that is fodder for some other post.
From outside looking in, it may not seem so, but running a surviving brewery is really not so much about just cooking beer as it is about balancing everything else.
Just my opinion from experience.