How does someone actually start a brewery? Where does the money come from? What does a brewery do when they need better equipment but have no cash? For every brewery, there is a unique path to success. But there are some common problems and solutions.
For John Stemler, of Free Will Brewing, opening a brewery was never something he would have done alone. He and longtime friend Dom Capece put two years into R&D to prove to themselves that they could make beer worth selling. Then, Dom sold his stake in another company and plunked down $90,000 to get the brewery off the ground. Stemler followed suit shortly after using money borrowed from his family. They built a lot of their own brewing equipment and, Stemler stresses this is key, they didn’t buy new gear until it was absolutely necessary to do so.
Tim Patton started Saint Benjamin Brewing in his house. When it came time to upgrade, he found that there wasn’t much used equipment available for the scale at which he was brewing. So, buying new was his only good option. Patton, who had previously worked in web application development, decided to invest in a space he could grow into, so he also bought the building in which Saint Benjamin’s currently resides. That decision ended up being a good one, as Saint Benjamin’s has recently expanded production and opened their Taproom.
When it came time for Free Will to upgrade and expand, they needed to borrow. Stemler realized early on that brewery-specific banks charged a higher interest rate. Instead, they turned to their neighborhood bank and they ended up being a great partner for Free Will. They had looked into economic development programs funded by the Commonwealth of Pennsylvania and their own county, but those programs focused on hiring, not on equipment. For a brewery, the goal is to make their employee’s hours more efficient, not to add people to the floor, Stemler said.
Saint Benjamin’s did make use of a Philadelphia City grant to improve the façade of their old building. Patton found FDA loan paperwork to be too overwhelming, so he also has turned to traditional financing when needed. Equity investors, those Wall Street types who have sniffed profit in the craft beer industry, don’t always make great partners. According to both Stemler and Patton, it’s paramount to have solid contracts in place and to know the people in the partnership door have the best interests of the brewery in mind.
Any advice for someone thinking about making the plunge?
Stemler suggests waiting. Now is not a great time to open a brewery.
If you’re going to do it anyway, though, bring someone in who can help write a solid business plan. Follow market trends and seek out real data. Start with a brewpub and grow from there. Most importantly, hire a great brewer. Because you can hide a lot of flaws, but if the liquid isn’t good, then no one is going to take you seriously.