How To Start A Craft Distillery

How do you get started with a craft distillery?


When starting a craft distillery, it is important to plan out as much as possible in the beginning. Distilling usually requires a large investment upfront, and it can sometimes be difficult to even know where to begin.

By thinking through some key questions and points, however, you can be well on your way to building a business development plan that lays everything out. Here are several areas you may want to consider as you lay the foundation for opening your own craft distillery.

STEPS TO START A DISTILLERY

As with any business, you will need to begin with a detailed plan to help you evaluate the benefits, risks and requirements needed to start your distillery.

You will want to think through the following areas when developing your plan.

A. Business Objectives and Budget

The first part of your plan is to determine your capital and assets and compare them with your projected costs. This will help you develop a realistic timeframe for when you can start and how long it will be before you make a profit.

Start with the basics and answer some of these questions:

  • What's the state of the market now and how can you be successful?
  • What's your financial plan and break-even analysis? 
  • How much capital do you need to start your own craft distillery?
  • What will your prices look like? Your costs?
  • Why are you starting your distillery? 
  • What's your mission, vision and goals?
  • What's your executive summary?
  • What are your strengths, weakness, opportunities and threats (SWOT analysis)?
  • Will you outsource the spirits or will you distill yourself?
  • What type of physical location will you need?
B. Target Market

As part of your distillery business plan, you'll also want to identify your target market and product viability. This will help you define your brand and evaluate your financial potential before making a huge investment.

Some market questions to consider might be:

  • Who is your target audience?
  • What is the size of the overall market?
  • Who are your main competitors and what's behind their success?
C. Startup Steps

Become familiar with the formal processes of starting a business. This will help ensure your business is a real entity and that you have a smooth a start.

Some startup questions to consider include:

D. Accounting

You will want to open a new business bank account for your distillery. This will not only help if you're audited, but it will also show customers and suppliers that you're a professional business.

You'll also want to research an accounting plan that works for you. You might start off with free resources, but you will likely upgrade as you grow and your finances become more complicated.

You might also consider hiring an accountant early on to help you track expenses and evaluate whether you're doing everything as efficiently as possible.

E. Permits and Insurance

You'll want to be aware of any needed permits and licenses. The Alcohol and Tobacco Tax and Trade Bureau site is a great resource to find a lot of what you need. Not having the proper paperwork could result in fines or even being shut down.

You'll also want to be aware of the types of insurances that are available for distilleries.

F. Branding

Branding and marketing are the way a consumer initially engages with your company and product. Do it well and your growth can be explosive. Do it poorly and your spirit will fall into obscurity.

Some branding questions to consider might be:

  • What is your brand's story?
  • What do individuals within your target market value? How can you resonate with your potential customers?
  • What makes your brand different from everyone else? What makes you unique?
  • What's your key message? What might a tagline look like?
  • What's the tone, voice and personality of your brand?
G. Design

At this point, you've thought through the business and can start considering elements like logo and bottle design.

Some design questions to consider might be:

  • What do you want your logo to look like? How does it convey your brand?
  • What kind of bottle conveys your brand and your story? 
  • Could you use an existing bottle design to save money?
  • What does your label and packaging look like?
  • If you want to have a store front, what will that look like? 
H. Marketing

You can have the best product in the world, but if no one knows, it will never be successful. Marketing will help you get the word out and build interest in your product.

Some marketing questions to consider might be:

  • What is your marketing strategy?
  • Where is your audience and how can you get in front of them? What is their preferred social media platform?
  • What tools are available for you to spread your message and brand (either free or paid)?
  • What's your marketing budget?
  • What will your website look like? How will you drive your audience to your website so they can learn more about you?
  • What "keywords" are people searching to find you?
  • Where will you build and host your website? Will you do it yourself or hire someone?

QUICKEST WAY TO MARKET 

There are essential elements that you will need successfully launch a legally operated still, but a lot depends on the products and processes that you want in your distillery.

The quickest way get started is to forgo distilling yourself altogether and have it made by a third party instead. Some distillers just own the brand and others make every drop of alcohol.

An optional third step is to apply to become a Distillery Retail Outlet Agent. This is required if you want to sell your products by the bottle to consumers at your distillery or licensed tasting room.

For Oregon distillers, here is a downloadable PDF from the Oregon Liquor Control Commissions that breaks down the steps for manufacturing and wholesaling distilled liquor in Oregon. Other states have similar agencies and resources specific to your area.

UPSIDE OF GIN 

One possible exception to the long startup time is gin. Neutral alcohol is easy to come by, and, as a new distiller, you can dial in any flavor you want. Gin, by definition, must contain juniper, but there is plenty of flexibility beyond that.

Also, you don't have to hold huge inventories when making gin. In theory, you can make gin in the morning and drink it in the afternoon, meaning you could get a product to market relatively quickly.

CRAFT A STAPLE PRODUCT

No matter what you want to produce, make a staple product that is going to satisfy your target audience and your cash flow requirements. Once that's established, you can experiment and make the products that you perhaps really want to make and build your business in a sustainable way.

STATE DISTILLERS GUILD 

Your state distillers guild will be a great resource for networking and learning more about what other people are doing to be successful.

The American Crafts Spirits Association (ACSA) has a helpful page that lists all of the distillery guilds for each state.

Note: The information provided in this blog post is purely for personal use and is not meant to replace the professional business and legal advice you will need to start a distillery.

Distilling Classes

If you would like personalized one-on-one coaching and instruction on how to open your own distillery and avoid common mistakes, you can read more about Oregon State University's Distillery Startup Workshop.

In the expert-led five-day workshop, you will:

  • Learn essential information on relevant practical aspects of making a new spirit and finishing the product.
  • Interact with practical demonstrations of distillation.
  • Address the challenge of adjusting alcohol content to legal requirements.

This course is a great way to gain key insights from an industry expert, start planning your business or even determine if starting a distillery is right for you before making a huge investment!


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About Paul Hughes, OSU Fermentation Science Instructor

paul_hughes_distillery_startup.jpgPaul Hughes, Ph.D., joined Oregon State University to establish a dedicated distilled spirits program. Paul holds a Master of Business Administration with a specialism in innovation and he teaches, trains and consults internationally.

He has co-authored two textbooks (one on beer, one on whisky), more than 60 peer-reviewed and conference papers and has been granted four patents.

Paul teaches the five-day Distillery Startup Workshop where attendees can learn practical tools and techniques to successfully begin and maintain their own craft distillery.

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