Start a new craft distillery

There has never been a better time to start a craft distillery. As previously explored, new distillers can stand on the shoulders of established craft distillers who have paved the trail over the last five years. There is an abundance of resources available including online forums, distillers’ conferences, craft-focused trade shows, local distiller guilds, experienced consultants, and a Tax and Trade Bureau that has never been more approachable.

However, this is by no means an easy and well-lit path. It can be a very expensive and frustrating adventure. What can we learn from others who have successfully accomplished the startup gauntlet? Hopefully the history of toe stubbing and blindly stumbling through starting a new craft distillery doesn’t need to repeat itself. Here are some of the most common pitfalls of starting a new distillery:

1.   No Business Model or Minimal Operations Cash Reserve

This is the most common issue I have seen. Distillers should ask themselves some fundamental questions like: What are your revenue goals? How many cases do you need to sell to make those goals? What are your Costs of Good Sold (COGS) for the raw materials needed to make those cases? What are your fixed expenses like rent, full time labor, and loan interest? How much capital investment do you need to start up? How much cash do you need in reserve to run the business until the distillery starts shipping orders? An easy to understand business model is invaluable to setting sales and production goals, getting a loan, or enticing investors.

2.  No Chilling System

Distillers will spend lots of time and money to add heat, steam, and energy to cook their mash and to run their still but completely overlook the equipment needed to remove that same heat from the system. Crash cooling a hot grain mash with chilled water can help to minimize bacterial growth. Having an abundant supply of cold water keeps your chiller running efficiently. Cold water can also be used to cool your fermenters to help avoid overheating and stalling fermentation.

3.  No Thought to Waste Water

I have seen many craft distilleries rely on cheap, abundant municipal city water to cool their condenser but run that water straight down the drain. Many distillers waste thousands of gallons of water daily. Even if waste water is practically free to dump down the sewer, that water could be re-used and recycled. Try using the hot, clean water from your condenser as the water for your grain mashing. Investing in a cheap poly tank to hold some of the water as part of a recycling system can save thousands of gallons of water every day.

4.  Difficult Layout, Too Small of a Space

Distillery equipment is big. Vodka columns can be 20+ feet tall. A 600 gallon pot still kettle can be 8 feet wide. Fermenters, pallets of glass, racks, grain sacks, bottling equipment, finished goods, mash cookers, storage totes… they all take up space. Can you access and move everything with a forklift? Are your doorways big enough to move equipment and materials? Do you have a dock door for truck loading? Don’t underestimate the space needed to operate an efficient distillery.

DEGONG 500L Craft Distillery Equipment

5.  The DJ Dilemma

While sitting in a dark studio it is very easy for a radio disk jockey to play the music he wants to hear, even though it may not be the music his audience enjoys. Just because a distiller wants to make something, doesn’t mean it will sell. I know a distiller who adamantly wants to make brandy even though the market for brandy in his area is next to nothing. It is important to be passionate about what you make but don’t let that blind you from making a solid business decision. Find the line between running a profitable business and having a hobby.

6.  Making Whiskey with No Available Barrels

Whiskey is hot right now. Brown spirits like bourbon are experiencing double digit growth with record high shelf prices and consumer demand. But there is a serious problem for new craft distillers hoping to jump on the whiskey bandwagon. There are no new oak barrels available. In order to make bourbon, you need a consistent supply of new, charred, white oak barrels. Although cooperage capacity is slowly opening back up, the waiting list for barrels is anywhere from six months to over a year. If you want to open a craft distillery today, white spirits like gin, vodka, rum, non-grape brandies, corn whiskey, or flavored liqueurs may be your only options to make for a while.

Summarize

We are in an exciting period of growth for the craft distilling industry as more and more consumers are seeking something new and different. The first distillers muddled through complete darkness and came out successfully on the other side. We may all stub our toes while wading through the unknowns of beginning a new distillery but learning a few of these cautionary tales will help light your path.