How much does it cost to start a craft distillery? What are the hidden charges behind initiating distillery operations? There is no set amount to start a distillery. It is estimated that the minimum costs are between $3 - $5 million to create a scalable distillery and brand.
There are too many variables that dictate expense variances in the start-up cost estimate. Here, we intend to describe where the money is to be spent, and your task will be to determine how this data breaks down as it relates to your particular scenario. Variables like location, quality, and scale will be critical factors in deciding cost specifics.
Legal Compliance Costs
As you may already know, the alcoholic beverage industry is full of red tape and regulations. Craft distilleries have policies and regulations imposed by the federal, state, and local authorities.
The Alcohol and Tobacco Tax and Trade Bureau (TTB) is responsible for governing alcoholic beverage crafting facilities on the federal level. The regulations for distilleries are explicitly identified in the Federal Alcohol Administration (FAA) Act. It is wise to seek an attorney's counsel with expertise in the code to help you navigate through these regulations.
You will also need to secure any local or state-required permits and licensure for distilleries operating in the state, county, and or city. That includes fire and building codes in addition to specific distillery operation codes.
Facility Costs
Securing and renovating a location plays an essential role in the success of a distillery. Whether you intend to custom-build or lease a site, you will need to ensure that you consider your desired layout, square footage, size of your equipment, and expected foot traffic.
If you plan on serving cocktails and samples of your wares, your distillery will need a tasting room. The cost of the construction will need to be estimated by an experienced contractor.
The power and water sources need considerable attention since the distillery production requires excessive electricity and water. Dive into your water source and make sure you have the right filtration equipment if needed.
Distilling Equipment
Distilling equipment is the true heart of a distillery. Every business plan for opening a distillery must include the costs for all of the equipment needed for your operation.
These are the three basics but your operation may need more or less:
- mash tun
- fermenter
- still
You will also need bottles, closures, and a means to fill them, whether that be added labor costs to do by hand or with bottling equipment. You'll also need to have your TTB approved labels printed to put on the bottles. The label approval process can take several months so it's a good idea to get this started as soon as possible.
Marketing and Sales Costs
A business with no customers cannot turn a profit; this is why you need a strong marketing plan to target your desired demographic. What methods will you employ to attract your customers? When guests come to your facility, how will you make sales? What will the internal sales culture within your establishment be? Lastly, what will it cost to market and implement your sales culture? There are many apps that can help you manage your FOH sales and tasting room in addition to your distillery management software.
These startup costs are to make you aware of the areas that need attention and investment to launch and scale a successful brand. Depending on your specific needs, location, and funding, there may be more or less to consider when building your business plan or taking those initial steps.
OnBatch provides software that helps distillers manage their operations and create repeatable, scalable production processes. If you're looking to start a distillery, implement software from the beginning to make scaling your operations simple and more affordable. We'd love to hear about your project. Connect with us directly or through our various social media channels.
Written by Shawn Patrick