Opening a craft brewery can be an exciting adventure for beer lovers. However, it requires a lot of passion, expertise, planning, and investment. Luckily, being a rising phenomenon with high demand, it can be a very profitable business, especially given the fact that, unlike commercial beers, craft beers have a whole different flavour – in every sense.
This could not be more true, as craft breweries’ goal is quality and not quantity. The difference between a craft production and a commercial one is indeed the production process, especially because, also according to the law, craft beers do not need to be pasteurized nor microfiltered in their production process. Consequently, the final product will contain additional substances that make it qualitatively superior compared to commercial beers. Craft beers are also produced with a long shelf life in mind.
In this article, we will explore the necessary steps to open a brewery, the associated costs and the potential gains, in addition to analyzing the advantages and disadvantages of opening a franchise and the different subsidies you can receive.
Everything you need to know to open a craft brewery
The very first step to open a brewery is to learn the beer production process, as well as the local laws and regulations. It is also important to have a good overview of the costs to open a brewery and the potential earnings, so to be able to plan an adequate budget and determine the feasibility of the project.
Let’s have a closer look at what you need to open a craft brewery in the UK!
On a practical level, you will need:
- A suitable location to place the production plant
- To purchase the production equipment
- To register as a brewer with HRMC
- To pay the Beer duty – the rate will depend on the quantity you mean to produce, as you might be eligible for a relief for small brewers
- To apply for a premises and a personal licence
Moreover, you need to take into account the type of business or brewery you mean to open, as the legal requirements might be different.
The different types available are:
- Craft brewery: an independent business and usually produces small batches of beer that usually distribute their product in their immediate surroundings
- Nano or microbrewery: an even smaller business that produces very small quantities of beer
- Regional brewery: a larger scale type of business that distributes its products across a specific region or country
- Contract brewery: this kind of business does not produce its own beer and instead contracts other breweries to produce it.
- Brewpub: a hybrid between a brewery and a restaurant or pub, where at least 25% of the beer is served directly from the brewery and sold on-site.
How much does it cost to open a craft brewery?
As for the costs to open a craft brewery, these can be rather high. In addition to the initial investment for the equipment (fermenters, dispensers, bottling machines) and the building or lease of the space, there are also operational costs, such as the raw materials, licences, and taxes and duties. However, the potential profits can be notable, especially if the brewery manages to create a loyal client base and expand its product range.
The initial expense can be rather high: the cost of the lease of the premises and the equipment can vary, but overall it is generally around £300.000. Of course, this is an approximate estimate, and it is extremely recommended to speak to a local advisor to know all the costs to open a brewery.
Reliefs to open a brewery
The figured mentioned above can be pretty discouraging, but nothing is lost! The government has some relief schemes in place to help newbies set up their brewery. For example, a small brewer who produces less than 60,000 hectolitres of beer a year, as part of the Small Breweries’ Relief scheme, the brewer in question could definitely be entitled to a reduced Beer duty rate.
On the other hand, the brewer could consider getting a loan, such as the Merchant Cash Advance for microbreweries or a Small Business Loan for Brewery. This would mean creating debt, but it is still an option to realise your dream.
Starting a micro or nano brewery
As mentioned before, among the different types of breweries one can open, the latest trend is to open a microbrewery (or even a nano brewery).
After all, a microbrewery is nothing more than a business for brewing beer and selling it to restaurants and pubs across the country, even though not every brewery has this goal. For example, some might sell their beer in the immediate surroundings, while some might produce and bottle their beers to sell them directly on the premises. As you can imagine, each of these activities implies a slightly different legal procedure.
Here are the essentials to start a microbrewery:
- The premise and the personal licence
- Revenue trader registration
- Certificate to brew, which ca be obtained by paying the Beer duty to HRMC
- Registration of beer brewer or beer packager
- Environmental permit or exemption for the discharge of trade effluent into inland freshwaters, estuaries, or coastal waters
- Environmental permits are issued by the Local and the Environmental authorities of your location.
- Notification to the authorities to handle, produce, use or store dangerous substances
- Greenhouse Gas Emissions Permit if you do activities under the European Union Emissions Trading System.
Opening a franchise brewery
Opening a franchise brewery can be a less risky alternative compared to an independent business. On the one hand, it comes with many advantages, such as being part of a renowned brand and an already-tested and working business model. On the other hand, the new partner must abide to the rules and guidelines established by the mother company, as well as investing in employees training in order to be completely able to follow said rules and guidelines. The biggest advantage in opening a franchise brewery is definitely an economic one: working under an established brand means that the initial investment is significantly lower than starting a completely new one. As an idea, the proposals can start at £30.000, much less than the value previously mentioned in this article.
