Breweries
How to Start a Distillery in 2020 (+Free Business Plan Template)
December 05, 2019
Starting a distillery today is a lot different than it was back in the 1800’s when some of the world’s most beloved liquor brands, like Jack Daniels and Tanqueray Gin, were beginning to boom.
In 2019, not only is distillery equipment more advanced, but there are many regulations, permits, and licenses distilleries must abide by. More than that, there is a lot more competition between distilleries – meaning a lot more branding is necessary to succeed.
Starting a distillery in 2019, there are important aspects to consider.
First, opening a distillery costs money, so funding and a strict budget are needed. On top of that, vital considerations when opening a distillery include gathering the proper equipment, choosing the right location, ensuring you have all your permits and licenses, and branding your distillery to increase brand awareness and gain customers.
Below is a guide that lists all the necessary steps when opening a distillery in today’s market and how much it will cost.
Whether you’re looking to open a distillery of your own in the future, or have recently opened one and want to double check that you haven’t missed a step, this article will act as a how to guide to opening your own distillery in 2019.
How Much Does It Cost to Open a New Distillery?
Opening a distillery is not cheap. It’s a huge commitment that will likely cost you hundreds of thousands of dollars at a minimum.
At bare minimum, a distillery, including equipment, location, and permits can cost around $200,000. However, if you’re creating liquor that needs to age and be stored, this number increases very quickly.
There are a lot of factors that can increase or decrease the cost of starting your own distillery.
Below are some of the most influential factors and how they will affect your spending:
- Location: The bigger the space and the nicer the location (i.e. near a city, near a body of water, etc.), the more the space will cost.
- Equipment: The more equipment and the larger the equipment, the more it will cost. Typically, all the equipment can cost around $100,000. However, there are many used equipment websites out there where you may be able to save some money.
- Business License: There is a flat registration fee of $50, and then the license can cost anywhere from $25-to-$7,000, depending on the business.
- Certificate of Occupancy: There is a flat fee of $100 in most local governments.
- Staff: Being likely that you will have staff, you will have to pay them and consider those salaries in your budget. The more staff, the bigger budget you’ll need. However, more staff or higher qualified staff can be a long term investment that can help bring your product to the market faster and create profits faster.
- Branding and Marketing: A large chunk of your budget will need to go to branding and marketing. This can include hiring branding or marketing agencies, graphic designers, and paying for online and physical promotional content.
- Aging: If you’re making liquor that needs to age, such as whiskey, you’ll need space to safely store and age your product. This will add to your budget and delay turning a profit while you wait for the liquor to become sellable.
5 Steps to Opening Your Own Distillery
Opening a distillery is tedious work that requires a lot of patience, and when I say a lot of patience, I mean years. If you’re building a distillery for liquor that needs to age, like whiskey, you won’t begin to see profits until that product is ready to be distributed.
If you have that patience and are excited to get distilling, follow the steps below to guide you through the process of opening a distillery in 2019.
It is important to note that these steps are to act as a starting point to direct you on the right path to opening a distillery and launching your brand. However, as with all business ventures, further in-depth research will need to be collected specific to your distillery and business operations.
1. A Distillery Business Plan
This step may seem obvious, but before making any big purchases, such as space and equipment, you need to set a budget, plan how you’ll make profits and when those profits will start coming in, and considering your company branding.
Creating a business plan will make steps two through five go much smoother, as you’ll already know how much you can and are willing to spend during each step and have mapped out a 360 view of how your business will run successfully in the long term.
Some questions to ask yourself when creating a business plan for your distillery include:
- What are the startup costs?
- What are the long term, ongoing costs?
- What is the recipe for my product(s)?
- Where will I open my distillery?
- What is my brand/what is the mission statement of my company?
- Who is my target market?
- How will my distillery make money/how much will I charge my customers?
- How long will it take for me to see profits?
2. Finding a Location for Your Distillery
If you’re planning to start a distillery, the first step following the creation of a business plan is finding a place to actually create your product.
While you may already have a general location in mind, such as the place where you live, it may do you some good to research further and make sure this location is not just convenient for you, but will offer the best results for your business.
For instance, in order to make alcohol, you need water. In order to make large sums of liquor in a distillery, you need a lot of water. So much water, in fact, that you’ll likely want to choose a location near a good water source, like a stream or river.
When considering location, you also may want to think of the recipe for creating your product and if certain water (tap, fresh, distilled, etc.) may change the final product and taste of your liquor.
3. Distillery Equipment
Now that you have a place to create your product picked out, it’s time to get the equipment that you’ll need to actually make the product. For each distillery, the amount and size of equipment needed will change depending on how much product is being produced, if there are different products being produced, and, of course, budget.
Below lists the most often used distillery equipment that you will likely need when opening your own distillery.
Mash Tun
A mash tun is where the yeast, water mashed, combined, and heated to extract the sugars from the starch and create the wort to be used during fermentation.
Fermenter
A fermenter is a temperature-controlled environment where the worst is transformed into everyone’s favorite ingredient: alcohol.
When making liquor, this is the stage where the yeast turns the sugar in the wort into ethyl alcohol and carbon dioxide gas.
Still
A still is the most basic piece of distillery equipment there is; every distillery needs at least one.
Until this stage, the beverage being produced could be beer.
However, a still is where beer and liquor differentiate in the production process. In a still, the ethanol and water are heated and cooled, as they boil at different temperatures. This is where the liquid alcohol is separated from the water.
The size and shape of a still can impact the taste of the liquor, so it’s best to do research on the right still to create your ideal product.
Pumps
While pumps may not be the most essential piece of equipment, their importance is often overlooked. Pumps are sealed tubes where the liquid can travel from one piece of equipment to the next sanitarily and while preventing loss.
4. The Permits and Licenses to Open a Distillery Business
Similarly to brewery licenses and regulations for new taprooms, your distillery will need permits and licenses to operate legally.
Business License
All businesses operating in the United States are required to obtain a business license. This is a general license that is monitored on a national level.
Employer Identification Number (EIN)
It’s likely you won’t be running your distillery alone. To operate a business and hire employees in the United States, you will also need an EIN for national tax purposes.
Certificate of Occupancy
Similar to the two licenses mentioned above, every business in the food or beverage industry needs a certificate of occupancy. However, this is a certificate received at a local level, as it requires abiding by health and safety laws and passing inspections from the local government’s guidelines.
Liquor License
This one shouldn’t come as a surprise. If you’re opening a distillery, it’s probable that you will be selling liquor. In order to sell liquor, you’ll need to acquire a liquor license from your local government.
5. Branding Your Distillery
No matter how great your liquor is, most products typically don’t sell themselves.
Branding your company to represent the taste and feel of your liquor is vital when marketing your product to consumers and retailers – especially for a new brand. People want to know they’ll likely enjoy your product before they purchase it, so your brand should showcase the experience consumers will have while drinking your product from your grand opening and beyond.
Additionally, find out where your target market is. What social media platforms do they use? What bars do they frequent? What stores will they be most likely to buy your product in?
Do your research and build your brand around who your company is and market it to who will buy into your brand.
Ready to Distill?
Starting a distillery is no easy task, but following the steps and tips listed in this article can help better prepare you for the long journey ahead.
So, if you’re ready to share your liquor with the world, then we are ready to taste it.
Start with a stellar, realistic business plan, find a prime location, acquire all your equipment and licenses, and sell your product to the world. Cheers!
Additional Resources for Craft Distillers and Brewers: