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The main goal of the business plan is to open a new brewery in Pittsburgh. The production capacity of the equipment amounts to 20,000 liters per year.
According to the craft beer market research, the United States is ranked 25th in the world in terms of alcohol consumption. On average, in 2019, one resident of the country consumes about 75 liters of beer per year. Most U.S. residents enjoy the beer produced by Molson Coors Brewing Company and Anheuser-Busch InBev. First of all, this is due to the fact that these manufacturers actively advertise their products during sport events. These producers also export millions of barrels of beer worldwide. However, craft beer, not a factory one, becomes increasingly popular every year. Experts agree that as the number of beer connoisseurs grows, the craft beer market will continue to expand in the future.
Main Benefits of a Brewery Business Plan
- Great demand for a so-called “live” high-quality beer. Such beer has a richer flavor. In terms of health considerations, it brings more benefits to the organism than the pasteurized beer. Demand for “live” beer is constantly growing, conquering an increasing share of the alcohol market.
- Relatively low initial investments. Even a beginning entrepreneur, who has not yet made his fortune, can try himself as a brewer launching a production at home. The most cost-effective and promising option is a brewery with a production volume of 500 liters per day.
- It is possible to change production volumes quickly. Frequently, mini breweries increase their productivity after getting familiar with the production technology, researching the market and finding wholesale or retail customers. This requires a small amount of second-round investments. Once they are attracted, the production volume increases very quickly.
Template of a brewery business plan
You are viewing an example of a brewery business plan created by Runumber. Following this link, you can download a full version of the business plan of brewery in PDF. The example demonstrates the possibilities of Runumber service of financial calculations in a business planning process. You will get 20 pages of spreadsheets, charts and descriptions of business metrics for the coming five years.
Major Tasks for Implementing the Business Idea of Brewery in Pennsylvania
- Warehouse rental. It is planned to locate production facilities in the city of Parker, however, a warehouse in Pittsburgh is necessary to organize storage and sales. At the initial stage of activity, a warehouse of a smaller area is going to be rented. Warehouse space will increase along with growth of production volumes. Parker is 62 miles away from Pittsburgh.
- Purchase of equipment. To organize brewing, one needs to purchase equipment. A Chinese-made brewery equipment is planned to be installed and launched within six months from the date of purchase.
- Creation of product. The brewery is going to produce beer of three brands that will be offered to the market both in bottles and barrels. It must be a product that everyone would like. On the one hand, it should have a special taste, but on the other hand, it should not be very different from traditional drinks. It is planned to expand the assortment over time.
- Personnel. A leader who finances the development of the business is the head of the company. In order to manage the brewery in a proper way, it is necessary to hire 11 people. In particular, it is necessary to find a specialist familiar with brewing technologies as well as brewers and their assistants. A sales department, drivers and an accountant are also needed.
- Organization of sales. The primary task is to reach out to regular customers and sign a contract for a regular supply. After using the equipment at full capacity, it is possible to launch the production of the bottled beer and expand sales in Pennsylvania.
- Obtaining a solid market position and expansion of activity. This step envisages renting a larger warehouse in Pennsylvania to optimize logistics operations as well as entering a broader market.
Production Facilities of Brewery
Production equipment with a capacity of 20,000 liters of beer per month will be purchased. This capacity is enough for the enterprise for several years ahead. At the initial stage, it is planned to produce three brands of beer. After producing the first batch of beer, the company will receive a hygiene certificate and acquire a license to sell its products.
To promote its products, the brewery is going to maintain personal friendly relations with the managers of restaurants, clubs and other leisure establishments located in the city. The company will deliver beer by its own transport owned by the head of the enterprise.
There is no single definition of craft beer. The Brewers Association defines craft beer as a low-alcohol drink produced by the individual entrepreneurs and small businesses. There are no definitions regarding the production technology or characteristics of beer, therefore, in general, any product produced in a microbrewery can be considered a craft beer.
The project deals with the production of three types of beer:
- IРА – a light low-alcohol pasteurized beer;
- Рilsnеr – a light low-alcohol pasteurized beer;
- Stout – a dark pasteurized strong beer.
This article is a part of a craft brewery business plan prepared by Runumber. A full sample of the business plan for brewery can be downloaded here. You’ll find out how to make a business plan, using the example of brewery or any other business activity. The document provides you with the results of a free financial planning service Runumber demonstrating the possibilities of applying calculations in practice.
Features of IРА beer
The abbreviation IPA (India Pale Ale) has become synonymous with American craft beer. This fruit and hop beverage is known for its pronounced bitterness, high percentage of alcohol and heady hop aroma. Influenced by IPA, almost all traditional sorts of beer, from seasonal and Scottish ales to pilsners and porters, were produced using hop.
India Pale Ale owes its origin to English domination in India. An ale with a high concentration of hop not only withstood long maritime voyages, but also acquired a mature taste during that time. The concentration of hop in IPA was two times higher, so, following the traditions, a large quantity of hops of Kent Fuggles and Goldings sort is used to produce it allowing create a full and fresh taste. A voluminous malty beer with a deep taste and hoppy bitterness perfectly complements Indian cuisine as well as English cheeses and tastes well with pickled steak.
Aroma: Intense hops aroma is obtained from American hop (citrus hop characteristics are almost always present). Beer is dry-hopped and may have an additional herbal aroma. On the background, a slightly pure malt sweetness is felt. Light hop fruitiness can also be found in some versions, although neutral fermentation characteristics are typical for it.
Description: The color of the beer is of medium golden shades. It is transparent, although unfiltered dry-hopped versions may be slightly hazy. It is characterized by a good foam resistance.
Taste: The taste of hop is strong and complex. Hop bitterness is high, although the malt base emphasizes strong hop characteristics and provides the best balance. The malt taste varies from low to medium. There is no diacetyl and a weak fruitiness is felt. Long-lasting remaining bitterness is usually available in the aftertaste, but it is not harsh. The ending is dry.
Mouthfeel: Smooth, fullness varies from medium to full. There is no hop astringency, although carbonation (moderate to medium-high) creates an overall dry sensation along with the presence of malt sweetness. The beverage has a mild alcohol warmth.
General impression: This is an intense and very strong pale ale without much malt and/or deeper malt flavors of American barleywine. Heavily hopped, but pure, without harshness, this is a true tribute to original IPA.
Ingredients: Pale Ale malt (well-dissolved and suitable for single-temperature mashing); a complex of hop varieties (English, American and noble ones); American yeast creating a clean or slightly fruity profile. Usually pure grain, but mashed at lower temperatures to achieve a high degree of fermentation. Characteristics of water vary from mild to moderately sulfate.
Table 1. Parameters of IРА beer
Beer analogues in the market: Dоgfish Hеаd 90-minutе IРА, Rоguе I2 РА, Stоnе Ruinаtiоn IРА, Thrее Flоyd’s Drеаdnаught, Russiаn Rivеr Рliny thе Еldеr, Mоylаn’s Mоylаndеr Dоublе IРА.
Features of Рilsnеr beer
The beer of Pilsner type, i.e. Pilsener, Pilsner or just Pils, is a kind of lager. Nowadays, Pilsner is one of the most popular kinds of beer. Many people confuse or even combine Czech and German Pilsner into a single beer. In fact, both are independent, separate styles. German Pils has Bavarian features, i.e. it is lighter, slightly poorer in color, bitter, stronger, drier and more carbonized than a Czech Pils. In terms of character, the German version of this style is closer to the Munich Helles. Pilsner advertisements often use a candle, the brewer’s tried and tested tool. A candle represents a source of light through which brewers looked at the glass to check the transparency of beer.
Aroma: Hop bouquet with spicy floral tones.
Appearance: A color of this beer has deep golden shades. It is transparent, although unfiltered; dry-hopped versions may be slightly hazy. It is also characterized by a creamy foam and good foam resistance.
Taste: The beer is rich with malt notes with hints of bread and honey, combined with floral or spicy hop components. Bitterness is not sharp. The aftertaste is the balance of hop and malt, though dominated by malt.
Mouthfeel: Smooth, fullness varies from medium to full. There is no hop astringency, although moderate carbonation creates a general dry sensation along with malt sweetness. A mild bitterness as well as soft alcohol warmth is felt.
Table 2. Parameters of Рilsnеr beer
Beer analogues in the market: Victоry Рrimа Рils, Bitburgеr, Wаrstеinеr, Trumеr Рils, Оld Dоminiоn Tuрреr’s Hор Роckеt Рils, König Рilsеnеr, Jеvеr Рils, Lеft Hаnd Роlеstаr Рilsnеr, Hоlstеn Рils, Sраtеn Рils, Brооklyn Рilsnеr.
Features of Stоut beer
Stout is a dark ale sort of beer produced using roasted malt made of barley grain and adding some caramel malt. It was originally brewed in Ireland as a kind of porter. Stout is very popular in the UK and Ireland. Stout differs from the porter by a darker color, which is due to a more strongly roasted malt, as well as a more pronounced burnt taste and aftertaste of cold coffee. In terms of the strength, English and Irish stouts are lighter than porters.
Our beer is a very dark, sweet, full-bodied, slightly roasted ale, in which there may be notes of coffee with cream or sweet espresso.
Aroma: Medium roasted grain flavor, sometimes with coffee touch. There is an impression of creamy sweetness and light fruitiness. Diacetyl level is low or absent. Hop aroma is weak with earthy touch.
Appearance: Almost black matted shades.
Taste: Sensations of dark fried malt and chocolate flavors dominate. Hop bitterness is moderate. Sweetness is medium that balances the fried taste as well as hop bitterness and remains until the very end. Fruit ethers are moderate. Diacetyl is absent. The balance between malt and sweet is moderate.
Mouthfeel: Full creamy taste with moderate carbonation.
Comparison of styles: Much sweeter and less bitter than other stouts (except for stronger tropical stouts). The fried character is soft, but not burnt, like in other stouts. In terms of balance, it is somewhat similar to oat stouts, although with a higher sweetness.
Table 3. Features of Stout beer
Packaging. About 33% of produced beer will be bottled, while the rest will be kept in barrels for supplying to the restaurants and clubs.
To manufacture the bottles, a contract will be signed with domestic factories that produce glass containers. When purchasing large volumes, the price of one beer bottle of a unique shape (with logo) is RUB 22 per unit.
A unique design is developed for each beer. Each type of product is marked with self-adhesive labels for both a bottle of beer and a barrel. Barrels are purchased by the company based on double demand, since taking away empty containers from the points of sale, it is necessary to provide full ones immediately. The cost of replacing barrels and bottling equipment is covered by the brewery.
You are reviewing part of a business plan for a brewery startup. To access the full document, follow the link. This example was developed by Runumber to demonstrate the results of financial planning. You can prepare a business plan for brewery or any other business by means of our website. The results of the analysis take 20 pages of calculations with tables, graphs and conclusions.
Legislative Regulation and Licensing of Brewing in Pennsylvania
Several years ago, breweries in Pennsylvania enjoyed a variety of opportunities having purchased a GP-license which allowed to open a brew pub on their production sites. However, new brewery licences were adopted that changed the situation.
Act 166 went into effect on January 14, 2017.
The law provides breweries operating under a G-license with a right to sell Pennsylvania limited wines, Pennsylvania limited distillery products and Pennsylvania beer brewed by other manufacturers.
Before the adoption of Act 166, only pubs with a GP-license sold Pennsylvania limited distillery products and limited wines.
Furthermore, Act 39, passed in August 2017, demands the licensees to pay extra $700 for the renewal of their brewery license in Pennsylvania.
Let’s examine in more detail all the cons and pros of obtaining G-license and GP-license.
If a brewery owns a G-license only, it is obliged to have ten seats and provide snacks for beer. This enables them to sell beer for on-premises consumption.
Expo and farmer’s market permits
It is possible to purchase expo permits allowing to sell beer at festivals. The bottles/glasses or package shouldn’t exceed 192 onces. Expo permit costs $30 per day, however, it can’t be used for more than 30 days at a row and 100 days per year.
Farmer’s market permit is another permit that can be obtained to sell beer at a farmer’s market. The price is $250 per year but it can be used at many farmers’ markets at the same time. The volume is limited to 192 onces as in case with expo permits. Finally, the breweries are allowed to self-distribute beer to other licensees.
Nevertheless, a G-license allows breweries to have their tasting rooms open until midnight only. Another shortcoming is that G-license forbids a brewery to obtain an off-premises permit.
Unlike G-license, GP-license allows brew pubs to stay open until 2 a.m. At the same time, PA licensed breweries can obtain off-premises catering permits. It allows to serve beer and limited wines for on-premises consumption.
The negatives of GP-license are as follows. First and foremost, the brewery should have enough seats and food to serve thirty people. Extra license requires additional fees for renewal and the surcharge fee is $700. Also, self-distribution is forbidden which means the breweries with GP-license have to sell their products to wholesalers.
Obviously, brewery law in Pennsylvania has plenty of positive and negative aspects when it comes to adding a GP-license to the existing G-license. So only a careful consideration of even the smallest details can result in a positive outcome.
Taxation of breweries in Pennsylvania
Since beer is an alcoholic beverage, it is subject to excise taxes in Pennsylvania. Excise tax is commonly applied on a per unit basis, i.e. gallon. The tax is paid by the vendor selling beer. However, in fact, excise tax is passed on to the customer who has to pay a higher price.
Pennsylvania state laws demand beer merchants to pay the excise tax of $0.08 per gallon. Apart from this rate, a federal excise tax should also be paid.
Federal beer excise taxes are included into the price of all beer sold in the state of Pennsylvania. Federal excise tax is paid by the brewer and collected by the Alcohol and Tobacco Tax and Trade Bureau. Small breweries can count on certain tax discounts.
The rate of the Federal excise tax on beer amounts to $0.05 per 12-oz can or $18.00 per 31-gallon barrel.
This summer an active discussion arised regarding the intentions of Pennsylvania Department of Revenue to impose a 6% sales tax on breweries that sell their beer from a taproom. Many brewers were afraid that increased prices on beer would result in losing their clients or laying the workers off. For local communities, brewing industry is a very important business based on old traditions. Besides, it provides thousands of jobs. So the negative effects of imposing a sales tax would be far-reaching.
Initially, a tax bulletin prepared by the Pennsylvania Department of Revenue demanded brewers pay a 6% sales tax for each dollar of beer that was sold to customers in brew pubs, taprooms and tasting rooms. The law was planned to go into effect on July 1, 2019.
The Brewers of Pennsylvania cooperated with the office of governor Tom Wolf on this matter. The aim was to find a mutually acceptable solution to allow Pennsylvania brewers pay fair rates of sales tax.
As a result a bill was created that would impose a sales tax on breweries but the whole process would not be as rapid and painful as the one offered by the Pennsylvania Department of Revenue.
Theodore J. Zeller, general counsel for the Brewers of Pennsylvania, in his interview to The Morning Call told that “This legislation will allow breweries in Pennsylvania to continue to build their businesses and try to make Pennsylvania the best beer state in the U.S., if it isn’t already”.
Peculiarities of Alcohol Laws in Pennsylvania
The state of Pennsylvania has tough laws regarding alcohol consumption. This traces its roots back to 1933 when the Pennsylvania Liquor Control Board was established aimed at making drinking alcohol as expensive and inconvenient as possible. Nowadays, there is a state monopoly on the sale of gin, whiskey, rum, vodka, tequila, etc. in Pennsylvania.
Let’s review the main categories of restrictions on alcohol consumption that concern both residents and visitors of Pennsylvania.
In Pennsylvania, a person of 18 or older has the right to tend bar and serve in places selling hard drinks for on-site consumption. When it comes to selling alcohol off-premises, the same age rule applies. A person of 17 years of age can sell alcohol in off-premises venues or tend bar under one of two conditions. Such person should either graduate high school or have a document certifying the person has reached his academic potential.
It is illegal to use a false ID to purchase drinks containing alcohol. It’s forbidden for people under 21 to drive a car with the blood alcohol concentration exceeding 0,02%.
People under 21 are not allowed to buy alcohol. Pennsylvania alcohol laws are so strict that they even forbid such people to drink communion wine. If a person under 21 is a Designated Driver, it may still be convicted of drinking, especially driving from the party. It happens just because policemen sometimes don’t want to spend time testing all the participants of the party.
Pennsylvania alcohol laws impose heavy penalties for driving under the influence, though the final decision largely depends on circumstances and the judge. A driver also has the right not to pass a BAC test. But the state interprets such refusal as a direct evidence of guilt and punishes by a license revocation for one year.
Government monopoly stores in Pennsylvania sell wine and spirits (beer is excluded) from 9 a.m. to 10 p.m., Monday to Saturday. A special category of beverage distributors is allowed to sell beer in cases and kegs. But even having obtained a license, they are not allowed to sell before 11 a.m. Retailers like bars and restaurants sell wine and beer in quantities that does not exceed 192 fluid ounces of beer per single purchase. Also, they sell four bottles of wine per purchase. Bars and restaurants close at 2 a.m., while the private clubs sell alcohol until 3 a.m. As for grocery stores, they may sell wine, if a special license is purchased.
This example of a business plan for a small brewery was developed by Runumber. A full version of the sample business plan for craft brewery is available at: https://runumber.net/wp-content/uploads/2019/09/BP-Brewery-2019.pdf. You can review the stages of business plan preparation as well as the main sections that should be covered. The paper also provides an example of financial calculations to plan the business activity of brewery.