What size brewery are you going to be?
What a good question! Ever since we started this venture, it's a question that's constantly been on my mind. The craft brewery movement hasn't been overly pushed by giant breweries jumping right out the gate with zillion barrel systems. In fact, more often than not in the past half decade, breweries have started at the nano (3-9 barrel production capacity) or pico (less than 3 barrel production capacity) level . FYI, 1 barrel = 31 US gallons. There are definitely pros and cons to starting big or starting small and most often the final decision comes down to the most common answer out there in business: Money.
After a great conversation this week among myself, Corey F. & Robert C. (who as a group, we've now lovingly named ourselves the Three Kings), it's a good a time as ever to talk brewery size. That innovative conversation directly informed a large part of this two-part article. Corey & Robert are both entertaining the idea of starting a nano-brewery (each) in Tally - this is in addition to several other nano/picos in-planning as well (told you this town is awesome!)
There are many reasons to start small. Sometimes its a necessity: the brewery's size is determined by its market (or lack thereof), the owners aren't flush with capital, the brewers want to be extra-experimental (which is tough to do at a larger capacity), etc., etc. etc. There was a time when bigger micros simply scoffed at the nano concept (and some still do). However, as breweries like Hess Brewing, St. Somewhere, 7eventh Sun, Green Room and many, many others have shown, nanos and even picos can be successful, despite the odds that are (seemingly) stacked against them. It really just depends on what the owner/brewer defines as "successful." Some guys/gals just want to brew beer and sell it retail - that's all there is to it. In fact, many of the inspirational breweries I followed before GrassLands was even a hint of a reality started as nanos/picos - and some still are!
There are certainly long odds against, but nanos & picos have the ability to carve out a specific niche of supporters. As a nano/pico brewery, retail is your best friend. Most production breweries are accompanied by a taproom where patrons have the ability to enjoy the brewery's suds on site. The wholesale side is where kegs are distributed in and around the community. Nano/pico-breweries have a hard enough time keeping up with demand via retail...and wholesale distribution may not be of the highest priority - or even desired. It's an incredibly cool concept - similar to an artist's personal studio. Sell your stuff on site and let the people be directly exposed to what you're doing. Many nano/pico breweries are very proud of their size.
Additionally, starting out smaller doesn't represent that large of a hit on one's wallet. Many nano/pico breweries are only a few steps above a large homebrewery setup; making the transition for homebrewers to professional brewers that much easier. Nanos & picos don't necessarily need to bring on additional partners, so the ownership often stays with the brewer him- or herself. If the bottom falls out on the business, the owners aren't raked over the coals with debt.
Hang a tick...
However, there are definitely drawbacks to operating a small shop. The cost of labor to cost of goods ratio is perhaps the biggest burden for a small brewery. Here's what I mean: It takes just about the same amount of labor to produce 10 barrels of beer as it does to produce 5. Just keep in mind, though, that the equipment capital costs for a 10 barrel system aren't twice as much as that of a 5-barrel system. With increasing malt and hop prices due to increased demand, this poses a problem for a smaller brewery that's struggling to keep its doors open.
Most likely, if the beer is good (and it typically is) a nano/pico brewery will be forced to expand to accommodate increased demand. Either that or they'll have to operate 'round the clock on their small system just to eke out more barrels per week. As we discussed in previous articles, growth is great - as long as you've planned out the consequences (both good and bad) of growing quickly. The last thing you want is to be unable to put a beer in a consumer's hand.
Another point to consider - when/if picos and nanos do show success and signs of profit, they typically expand within a relatively short amount of time (sometimes less than 1 year) after launching to satisfy the increased demand. That can be a tough bullet to bite, capital-wise, wouldn't you think? I've also heard crazy stories where brewers have tried to open a nano/pico brewery and run it while keeping their day job on the side - think no free time...ever. To me, that sounds like a LOT of work; like wayyyy more than your typical entrepreneur might work. I'd like to at least get a couple hours of sleep in the day; even though I shouldn't be talking, I know the first few years are going to be a tad on the busy side for GrassLands and its operation :)
With that said, it really just depends on the mission/goals of the brewery in question...as well as their definition of "success."
Thus ends Part I of our obsession on size. Next week we'll talk GrassLands! So I'll leave you to it for now, my dear readers. Have an awesome weekend, because you most definitely deserve it!