Nanobreweries are perhaps the ultimate goal for many homebrewers in the craft beer industry: selling just enough beer to make your production brewery viable without getting into the complications of running a full-scale brewery. Like any business, it’s not easy to turn your brew hobby into a nanobrewery, but it is possible in most areas.
Nanobrewery vs. Microbrewery
This is an important distinction for businesses because different rules affect your humble brewery business as it increases in size. That’s why knowing the difference is key to starting a proper nanobrewery.
As the Brewers Association explains, a microbrewery is a facility that makes less than 15,000 barrels of beer each year and which also sells at least seventy-five percent of its beer off-site. Most microbreweries sell their drinks locally, although some will ship small amounts around the country.
Taproom breweries are similar to microbreweries but sell more than twenty-five percent of their beer on-site without having any notable food services to go with it.
Most nanobreweries are essentially taproom breweries but with a lower volume of drinks than usual. It’s not rare for a nanobrewery to produce less than 5000 barrels a year, although going too low prevents it from being a viable business model at all.
Now that we know the difference in breweries, let’s take a look at the process of starting one.
Can We Go Even Smaller?
Theoretically, yes. Some people with an aptitude for brewing run picobreweries instead of nanobreweries. There’s no formal brewing industry definition for this distinction, but most consider a picobrewery to be a location making less than five hundred kegs per year. Anything below this, and you’re probably just making beer for yourself and potentially a few friends.
Picobreweries are usually too small to be successful as businesses. This is something people do more for fun than for the money. Running a picobrewery is also a source of good professional brewing experience for learning how to make beer, though it can be a good stepping stone towards running a nanobrewery.
Homebreweries can produce about two hundred gallons of beer each year as long as there are two adults in the household. This is a little over six kegs.
Step One: Check Your Local Laws
This is the first real step to starting a nanobrewery, and it’s not enough to go with your gut or familiarity with the area. Some places that look like nanobreweries may be larger breweries with a lot of equipment and fermentation tanks in the back or even taprooms that simply buy their drinks somewhere.
Regional laws may prevent breweries below a certain size, or any size, from operating. You also need a good customer base in the area. You probably won’t see enough foot traffic in rural areas, for example, so you should aim to open in an area that’s at least suburban, with a decent population.
You’ll also need to sell beer in pints to get meaningful income. If you can’t sell by the pint, you probably won’t be successful. Selling directly to the public is usually much more effective than shipping to distributors, all of whom want both a cut of the profit and a sale price low enough to be competitive with others.
The sad truth is that some areas aren’t good locations for nanobreweries. As a last resort, you can try persuading your local government to change their liquor license laws and give you a license. Getting one this way isn’t guaranteed, but local governments can usually allow things as long as there are no state laws against it.
Step Two: Calculate The Money
Nanobreweries are businesses, which means you need to make enough money to cover all of your expenses, or you’re going to go under real quick. This means figuring out how much money you need to earn, as well as your day-to-day operating costs.
The good news is that most of the beer you sell is direct profit for your business. As mentioned above, selling through other companies means that everyone wants a cut. You have to sell a lot of beer to do well under those circumstances.
Nanobreweries don’t need to pay a bunch of distributors, so more of your income can go straight to paying off your expenses. You can also supplement your income with other services, such as operating a restaurant, although this comes with its own fees.
The trick to success as a nanobrewery is charging enough per pint, but still less than nearby restaurants, to be profitable. This type of competitive pricing attracts people looking for a good deal on a great drink, and those people can become long-term, reliable customers.
You can sell some of your beer for distribution, but as a nanobrewery, the goal is usually to sell as much as possible on-site.
Step Three: Learn How To Run A Business
You don’t necessarily need an MBA to run a microbrewery, but some formal education in business management is invaluable to achieving success. You can go to a regular school, attend classes online, or even study on your own. Previous experience in managing a food-service location is beneficial for learning how to run things.
As part of this process, make sure you learn about local zoning laws, licenses, and accounting to make your brewery legal. Running a business involves a lot of paperwork, so you won’t be able to spend all day brewing and serving drinks. Learning how to manage your time is also helpful.
Realistically, you can expect to spend at least several thousand dollars starting up your business and potentially much more if you need to rent a new location, buy brewery equipment, and otherwise set things up.
Step Four: Get Better At Brewing
Unless you’re already a professional, you’ll need to learn how to brew great beer to get people in the door. The reason this isn’t at the top of the list is simple: bad business practices will ruin your nanobrewery even faster than bad beer. That’s why you should think of this as a business first and a brewery second.
There’s no substitute for experience when you’re brewing. You can follow online guides all you like, but you probably won’t have a business-worthy beer after your first few attempts.
Realistically, you can expect to brew several hundred batches before you have the skills needed to create a beer that’s good enough for a restaurant. You’re not going to see much (if any) profit on any of those batches, although you can certainly enjoy them yourself or share them with your friends.
Generally, your beer should be good enough to score well in professional competitions before you start a nanobrewery. You don’t need to take first place in every contest you enter, but you should be able to convince professional judges that your drink is worth the time to consume.
Don’t settle for comments from people you know, even if they say they’d buy your beer. Friends usually mean well, but even if they’re telling the truth, not everyone will agree with them. Consider engaging a brewery consultant to get a real feel of what you need to do to get the business going.
Realistically, it will take several years of practice as a homebrewer to get good enough to start a nanobrewery. You can cut this down somewhat by getting a job at an existing facility and learning brewery tips from professionals in a commercial brewing environment. However, larger commercial breweries will have different equipment than you’ll use, so you’ll still need to practice with your actual equipment.
Step Five: Prepare For Bad Batches
Even professionals make bad batches occasionally. Maybe there’s something off about the grains, or it stayed in the machine a little too long. The brewing process is ultimately a science, but it’s easy to get wrong, especially if you’re doing everything yourself.
In short, bad batches are inevitable. Naturally, you should try to minimize the number of them, but it’s not realistic to assume that every batch of beer you brew will be a great one. This is particularly true when you’re experimenting and trying to create new flavors.
Fortunately, brewing experience will help you identify the problems in your batches and determine the best way to avoid them in the future. If you don’t know what’s wrong, you have bigger problems and, frankly, need more experience. I can’t overstate how important experience is to running a good nanobrewery.
When possible, dump your bad batches and try again. However, if you don’t have anything else to serve, you may need to offer some to customers regardless.
Be honest if someone brings up the flavor. Most regular customers understand that consistency is more problematic in a nanobrewery, and they’ll usually give you another chance if you’re direct about the problem and explain what you’re doing to try and fix it. If you act like there isn’t a problem, you’ll probably just push them away and lose all of their future revenue.
Remember, many people who visit microbreweries will be craft beer brewers themselves, or at least deeply interested in the production process. They might have some good advice, so engaging your regulars in conversation can be a surprisingly effective way of fixing bad batches.
Step Six: Decide How Much To Produce
As a good rule of thumb, try to brew at least one keg (31 gallons) at a time. Brewing larger amounts isn’t much harder than brewing smaller ones, and the more you brew at once, the more effective you’ll be—scale matters.
The main issue here is that brewing more often means spending more time you could be using to run other parts of your business. You still need to clean the area, do paperwork, pay taxes, maintain the facility, advertise your business, and do everything else that comes with managing a company.
There’s no practical reason to brew less than one barrel of beer at a time, even if you’re still learning how to brew or experimenting with different batches. Brewing a whole keg means you’ll have enough to share and get people’s opinions if it turns out well. Even if it doesn’t, you’ll still be brewing similar amounts to what you usually make.
Remember, some ingredients are affected by how much you’re brewing at once. Constantly changing your brewing amounts can introduce errors and modify the flavors of your drinks. Many nanobreweries produce two or three barrels simultaneously, though you can wait to do that until you have enough experience.
Step Seven: Research Your Business
Contrary to popular belief, entrepreneurs are not risk-takers. That’s precisely the opposite of their real job, which is eliminating as many risks as possible when starting the company. Risks are bad. It’s easy to overlook them if you’re excited about starting a nanobrewery and serving drinks to people, but ignoring risks is essentially asking to fail.
Set aside your pride, even if you have experience running a business, and try to learn from as many sources as possible. Actively seek out experts to hear what they have to say, check the market information, learn about current brewery trends, and talk to other craft brewery owners.
There’s a lot of good advice out there, and all you need to do is take it. Assuming you know better than someone with decades of experience in a similar situation is just hubris. Getting arrogant about your abilities in the art of craft beer is one of the sure-fire ways of dooming your nanobrewery.
Step Eight: Develop Your People Skills
Most people visit nanobreweries for good drinks and conversations. If you’re running the business alone, as most people do, this means that you’re the face of your company and how you act with customers has a massive impact on the way they view your business.
Fortunately, you can also treat this as an opportunity. Making friends with regulars is a great way to get them back through your doors. Regulars are an integral part of running a successful nanobrewery business, and the more you have, the better.
Customers can also give you more information about their tastes and what sorts of drinks they’d like to try. As a nanobrewery, you’re in an excellent position to test different recipes and adjust things to match your customers’ tastes. You can even cater batches towards specific groups of people, something larger restaurants and large-production craft breweries can’t do.
That said, it’s hard to be friendly all day, every day. This is another area where experience is vital.
Make sure you communicate effectively in other areas, too. Return phone calls as soon as possible, answer emails promptly, and otherwise try to come across as friendly and welcoming to everyone who reaches out to you in any way.
Step Nine: Develop A Business Plan
A comprehensive business plan is crucial to starting a good nanobrewery. These plans should include a market analysis, organization information, a description of your products, marketing strategies, funding information, financial projections, and more. Great business plans can help you get loans from banks and measure your progress towards your company goals.
Be as honest and comprehensive as possible when developing your craft brewery business plan. Don’t hesitate to acknowledge any potential flaws or problems. Instead, look at this as an opportunity to address them and determine the best way to reduce your risk.
Frequently Asked Questions
Here are some of the most common questions that people have about starting a nanobrewery.
How Much Does It Cost To Start A Nanobrewery?
Start-up Costs can vary greatly depending on how much equipment you already have and how you’re trying to run your business. On the high end, you could be paying up to $30,000 per barrel. However, if you don’t have any employees, don’t need a lot of furniture, and don’t need to do much construction, you can bring this down a lot.
In other words, location matters. Planning ahead and opening a nanobrewery in a well-prepared spot can drastically reduce your startup cost.
Don’t forget to get several bids for each job you need. That can help reduce your building cost, too, making it much easier to start brewing on a commercial scale.
Can I Just Brew Beer At Home And Sell It?
In most cases, no, although you may be able to have a hybrid home/business facility and get around these regulations.
In most cases, you can only brew beer at home for one of the following circumstances:
- For personal use (including family and friends)
- For competitive use (such as competitions)
- For some types of donations
You cannot brew beer at home, then sell it to local restaurants. In most cases, you can’t even take the beer outside your home unless you’re transporting it to an acceptable venue, which is usually a place where no drinks produced under a liquor license are available.
If your business is at the same place as your house, you probably shouldn’t move any of the beer you brew into your living area.
Local laws and regulations regarding the industry of craft beer may vary, so check with a lawyer if you’re unsure where the area you plan to brew is acceptable.
How Much Can I Earn Per Keg?
Actual earnings vary by how much your local market can support. The higher you can set your price, the better.
Realistically, you should be able to get at least 130 pints per keg, assuming a standard 16 oz glass and a head of about 3/4 of an inch for the beer. At $4/pint, that’s roughly $520 profit per keg, not counting any day-to-day expenses.