Shared Facilities Incubate Success Among Fledgling Beverage Makers
Sharing facilities can help brewers achieve success by reducing equipment operating costs. From incubators and partnerships to co-ops and alternating proprietorships, neophyte craft beverage makers are tapping into innovative business models designed to help them break into the industry.
Whether brewing beer, distilling spirits, or delving into small-scale wine production, the growth in the craft beverage market is spurring entrepreneurs to pursue innovative ways to develop products and introduce their brands to a thirsty public.
Brew Crew's nanobrewery offers 16 taps with varieties from the current brewers, plus a guest tap.
According to the Brewers Association of the $101.5 billion U.S. beer sales in 2014, craft beer brought in $19.6 million. The potential for profits is real but start-up costs can pose an obstacle.
To offset them, avoid substantial regulations and give new brewers an opportunity to test their brews in the marketplace nano breweries or “incubators” have cropped up around the country.
A relatively new concept in craft beer nano breweries, also known as "pico" or "bucket" breweries, constitute a legally-licensed, equipped space where small-scale brewers can create and test commercial recipes without the initial cost and time investments of starting their own breweries.
Some nano breweries lease their equipment, others provide on-site taprooms for the public to try. Although the breweries can vary in size and scope, they generally only distribute to a narrow demographic and limit the number of barrels a brewer can batch. That helps nano brewers experiment and take creative risks in a collaborative environment.
Strength in Numbers
Blazing the incubator/nano brewing trail is Brew Crew, a manufacturing and retail facility currently housing three breweries that share equipment, storage space and taps: Delicious Science, Polymath, and Seven Brethren.
Brew Crew's taproom accommodates seating for 50, including 25 in the storefront and 25 in the warehouse when there's a break in brewing. A variety of drink sizes sell for $1.50 to $7.
Starting out as a home brewer, Brew Crew owner and CEO Brad McCauley started the business in the 2014 because he wanted to launch his own brews under label Delicious Science.
After doing all the licensing footwork, he decided to open up a facility for brewers. “I wanted it to be a versatile and unique vessel that could be extended to others,” says McCauley.
The 1,800-ft2 facility located in Riverside, California, houses two brewing systems, a walk-in cooler and a 16-tap bar.
Clearing Legal Hurdles
The three nano brewers at Brew Crew operate as contract laborers. Their businesses are legally owned by their host. Each business uses equipment and space on an alternating schedule to prevent overlapping brew days. Each pays for its own ingredients and a portion of sales goes back into the facility.
Brew Crew owner, Brad McCauley
From the exposure they gain in the taproom, the brewers can earn enough to eventually go out on their own. Brewers keep the rights and names of their signature beer products if they choose to do so.
In an interview with CrushBrew, a digital publication for fans of artisan food and drink, Seven Brethren head brewer Philip Vieira discussed some of the benefits of sharing space with other nano brewers.
“Home brewing is great: low investment, plenty of room for experimentation and the only person you have to please is yourself,” says Vieira. “However, you can't legally sell your backyard concoctions to the general public. On top of that, few home brewers invest in commercial grade products for their brews, creating room for variables that can affect the overall quality of their beer. As a part of the Brew Crew incubator, I can easily play with variables like temperature controls (with several temperature-controlled rooms), water profiles (adjusting a direct reverse osmosis source), yeast production (with access to our own microbiology lab), grain crush, etc.”
Small Batches Mean Experimentation
The Brew Crew incubator model also enables brewers to brew relatively small batches according to Vieira, which allows brewers to experiment without having to dump hundreds of gallons of beer if a test doesn’t work out. “I have room to play with lots of different ingredients,” he said. “As a nano brewer, this was a huge opportunity for me, since it would’ve been too expensive and time-consuming for me to establish a legal brewery on my own.”
Brewing Co-ops and Partnerships
Fledgling brewers can also join a co-op, which functions similarly to incubators.
One example is Chicago’s CO-HOP, a cooperative brewery for start-up brewers that: “removes the high barriers to entry and increases the profitability of...tenant brewers through a state-of-the-art shared brewing facility, high-margin taproom and retail storefront.”
Operating on a slightly larger scale is Florida-based Brew Hub, an: “incubation center for partner brewers.”
Partnerships allow craft brewers to brew their own recipes at the host facility using their own brewmasters while a contract brewer hires a brewery to produce its beer. That can also include options for recipe development, marketing, sales and distribution.
Brew Hub is operated by a group of industry experts to provide equipment, mentoring and additional buiness services like packaging, distribution, sales, marketing, logistics and help with legal and government affairs.
Partner brewing might be a good option for brewpubs or microbreweries looking to start or expand distribution without a huge financial investment. Larger brewers looking to reduce their shipping footprint or localize production close to retail outlets may also find this a good option. Breweries with special equipment or packaging needs may also want to investigate this option.
Inbucating More Than Just Beer: Micro-Distilling
Like the craft brew industry, craft distilling comes with steep start-up costs yet it too is a growing market.
According to Forbes, the American Distilling Institute (ADI) reported that the number of U.S. micro and craft distillers has increased nearly 30% y/y for the last decade.
Opportunities are opening up for small-scale distillers to break into the market via smaller batches and by renting out production facilities or working cooperatively with another craft distiller.
Stephen Thompson, an executive with 25 years of experience in the spirits industry says in Forbes: “When I tell people it will likely take at least two years to even begin processing a first full batch to make something commercially viable and anywhere from $350,000 to a million dollars to get off the ground, you see some disbelief. I don’t want to discourage people from their dream but they need to be prepared.”
Thompson and several partners started Kentucky Artisan Distillery to provide opportunities for individuals to distill their spirits without the huge expense and time of building their own distilleries. The organization aims to help micro-distillers “develop new distilling methods and spirit products and to create their own Kentucky-based brands,” according to its web site. In addition to the distillery, the facility has a complete bottling line, barrel warehousing and a laboratory for distillers to experiment on a small-scale."
Wine’s Alternating Proprietorships
Building a wine production facility is an expensive endeavor. A single piece of equipment
can cost as much as $250,000. This has led new winemakers to choose an alternative approach to production.
A few wineries are now experimenting with a business model called alternating proprietorship:
a winery within a winery. This co-op style of production allows wineries to provide production space for other grape growers to process their own wines from grape to bottle.
In the shared facility, growers each have their own space but share equipment
. Some facilities are co-owned, others have a separate owner who leases the space. Many owners also have their own wineries. Some are owned by more than one wine company, but also rent space to other producers.
The most common alternative is having wine made at another winery or custom-crush
operation such as Barrel 42
and Pallet Wine
, where growers provide grapes before the facilities produce and package.
Pallet Wine based in Southern Oregon focuses on custom winemaking for growers who want to sell their own brand. They currently support 25 wine brands. Photo: David Gibb Photography.
Keep Up With the Ever-changing Market
For brewers, distillers or small-scale wine producers, industry growth will likely spur innovation to bring a variety of new faces and new brews to a thirsty public.
By Sharleen Nelson and J.V. Bolkan
The Equipped Brewer is an online publication dedicated to the success of young craft beverage companies, including breweries, cideries, distilleries and wineries. It shares insights, advice and strategies that give you the edge in a competitive market. Whether you're an owner, head brewer, production manager or operations manager, The Equipped Brewer will help you make smart decisions and build a thriving business.