Steps in opening a distillery

Place for craft/micro distillers in all stages of build to show and share.

Moderator: Site Moderator

User avatar
fqu8847
Swill Maker
Posts: 179
Joined: Tue Dec 03, 2013 9:36 pm

Steps in opening a distillery

Post by fqu8847 »

Since I started this hobby I have wanted to follow in the footsteps of others here and open a craft distillery. Dreams haunt my sleep of me going to work and making a career out of something I truly enjoy. While this is several year away (as my understanding and usable personal experiences are sorely lacking in the ready to do it department) I am starting to gather information related to this desire.
Recipes, aging, flavorings, experiments... all this is a constant in my mind, but what I am really wanting/needing is few successful people who can help point me in the right direction.
Where to start?
What exactly is the first step?
What do I need first: the license, bonds, and permits or the building?
Are my initial thoughts and beliefs regarding the size of space ideal?
Estimation of initial start-up costs... even in the ballpark?
These are just a few of course and they are ever evolving. Any tips or members willing to "lead the blind"?
Old Copper Road Distillery
Ducktown, TN 37326
DSP- Pending
User avatar
Odin
Site Donor
Site Donor
Posts: 6844
Joined: Wed Nov 10, 2010 10:20 am
Location: Three feet below sea level

Re: Steps in opening a distillery

Post by Odin »

I have some sheets for business planning. That's really the first step. Knowing you can sell it, rather than knowing you can make it. And knowing you can finance this step to start with. If I can help you out, let me know!

Regards, Odin.
"Great art is created only through diligent and painstaking effort to perfect and polish oneself." by Buddhist filosofer Daisaku Ikeda.
User avatar
fqu8847
Swill Maker
Posts: 179
Joined: Tue Dec 03, 2013 9:36 pm

Re: Steps in opening a distillery

Post by fqu8847 »

Thanks odin! Will pm you later today. At work right now. Would love to see those! I appreciate that more than you know, sir!
Old Copper Road Distillery
Ducktown, TN 37326
DSP- Pending
woodshed
Master of Distillation
Posts: 2970
Joined: Tue Aug 27, 2013 5:21 pm
Location: Pagosa Springs,CO

Re: Steps in opening a distillery

Post by woodshed »

In the States get on the TTB website. Read though the regs. Without approval from the TTB you don't operate.
Location and equipment come first. Location must be approved and equipment registered.

Check for state and local hoops you may have to jump through. I'll help if I can to answer questions. The ttb regs can be a little hard to understand.
BoomTown
Site Donor
Site Donor
Posts: 1498
Joined: Thu Apr 19, 2012 7:41 am
Location: Virgina

Re: Steps in opening a distillery

Post by BoomTown »

woodshed wrote:In the States get on the TTB website. Read though the regs. Without approval from the TTB you don't operate.
Location and equipment come first. Location must be approved and equipment registered.

Check for state and local hoops you may have to jump through. I'll help if I can to answer questions. The ttb regs can be a little hard to understand.
We've only barely made the first cycle on this track to legal distilling, and I would echo what Woodshed says....knowing how to make the liquor is only a very small part of the front end load of this trip.

You really need to understand the lag times, the financing, and the reporting obligations before you drop a dime on any part of it. My advice is stay clear of attorney's schemes; what I've found works best with those charlatans is simply make up the paper first, and have an attorney then file it. That way, having their signature on the filing helps the regulators feel more comfortable, and you get the paper done right the first time. Next big hurdle is financing - not a simple challenge.

Good luck, and I suggest you take Odin up on his business planning help. He's been round the track with lots of distilleries, and likely has many tales of woe that will help you avoid potholes. We've developed an pretty comprehensive projection model to demonstrate our business planning. It has 38 worksheets, linking COG, labor, production predictions, revenue by bottle and hundreds of other considerations back to a single worksheet that shows the process as graphs. It can be controlled very simply from one input worksheet, allowing us to do 'what if' studies on various options, like stilling capacity and production, grain recipe (cost and yield) by class of liquor, financing costs for SBA and Commercial Loans (payment broken down by month and year to principal and interest), depreciation, and a listing of other business expense profiles. This is a complex business and being able to talk about how much money you need to commit before you have revenue is probably the single most important challenge. Each worksheet has a series of formulas that feed back to the income projections and a single adjustment can ripple forward for 10 years. We are using it for business planning and investor explanation meetings. I'll likely tangle these sheets into a Gnatt chart program as time goes on.

It will be fun to see how your journey goes.

Boom



Boom
“…Let’s do this one more time....”
MDH
Distiller
Posts: 1001
Joined: Tue Nov 29, 2011 4:33 pm
Location: Pacific Northwest

Re: Steps in opening a distillery

Post by MDH »

One person on the American Distillers Institute forum put it well: You are running a marketing business that happens to make spirits.

You have to think of everyone who is going to be handling your product and what their incentive is: to sell. Distributors and importers want retailers, retailers want consumers to want it, and so you have to work backwards from consumers.

What do consumers want around the holidays - "nice", spruced up looking packaging around Christmas, or novelty Pumpkin spice vodka around Halloween? What about a product for a younger target audience who likes affordable, novelty products they can show to their friends? What about a more spirits-educated audience - they want to be patronized, so you have to speak their language, right? You have to be versatile if you want a diverse audience.
The still is not a liar. Mash and ferment quality is 99.9% of your performance.
User avatar
fqu8847
Swill Maker
Posts: 179
Joined: Tue Dec 03, 2013 9:36 pm

Re: Steps in opening a distillery

Post by fqu8847 »

All very good points! I can't wait to get started, but there are more steps in this than a down home square dance!!! I am currently reading through and trying to understand the ttb and state regs. More important to me is timing, as the county I wish to operate in is still dry. It will be approximately another 2-3 yrs before this will change, so right now planning is indeed the right course!
Old Copper Road Distillery
Ducktown, TN 37326
DSP- Pending
rad14701
retired
Posts: 20865
Joined: Wed Dec 19, 2007 4:46 pm
Location: New York, USA

Re: Steps in opening a distillery

Post by rad14701 »

fqu8847 wrote:More important to me is timing, as the county I wish to operate in is still dry. It will be approximately another 2-3 yrs before this will change, so right now planning is indeed the right course!
Perhaps you should be testing the waters to get local feedback because just because the county may switch from dry to wet that doesn't mean they will allow a distillery... Choose your battles wisely, and save up lots of money... You'll burn through a quarter to a half million dollars in a hurry with no guarantee of return on investment...
User avatar
fqu8847
Swill Maker
Posts: 179
Joined: Tue Dec 03, 2013 9:36 pm

Re: Steps in opening a distillery

Post by fqu8847 »

Wow... that's a lot of money! I would probably start a lot smaller than most. And the local government would be the issue. With that being said it is precisely the local government that is keeping the county dry. So when the switch is in progress it should be about thr right time to start testing those waters. Safe assumption rad?
Old Copper Road Distillery
Ducktown, TN 37326
DSP- Pending
User avatar
rgreen2002
Site Donor
Site Donor
Posts: 1309
Joined: Sun Dec 08, 2013 2:57 pm
Location: Northeastern USA

Re: Steps in opening a distillery

Post by rgreen2002 »

I thought this thread was timely...and I certainly don't want to steal the post but I just came from a day course at our local distillery in NJ. Nice place and great staff but the only point I wanted to make was that EVERYTHING he mentioned...distilling, marketing, TTB, state and local regs, start up costs... I have seen in some form or another RIGHT HERE. Sometimes you don't realize a good thing when you see it and I have to say that the folks here are some of the finest and most knowledgeable people on the subject you could want to find... and that's not the complimentary alcohol talking!
HD Glossary - Open this
A little spoon feeding *For New & Novice Distillers - start here
BEST WAY TO GET ANSWERS FROM HOME DISTILLER
"In theory there is no difference between theory and practice. In practice there is."
rad14701
retired
Posts: 20865
Joined: Wed Dec 19, 2007 4:46 pm
Location: New York, USA

Re: Steps in opening a distillery

Post by rad14701 »

fqu8847 wrote:Wow... that's a lot of money! I would probably start a lot smaller than most. And the local government would be the issue. With that being said it is precisely the local government that is keeping the county dry. So when the switch is in progress it should be about thr right time to start testing those waters. Safe assumption rad?
The amount of money is not an exaggeration even for a small craft distillery... I had the dream once but virtually every dime of my anticipated inheritance has gone to the nursing home for my fathers care... And there was enough to open a craft distillery... The operative word being "was"...

And I wouldn't be showing my hand until the wheels are well in motion to end local prohibition...
BoomTown
Site Donor
Site Donor
Posts: 1498
Joined: Thu Apr 19, 2012 7:41 am
Location: Virgina

Re: Steps in opening a distillery

Post by BoomTown »

rad14701 wrote:
fqu8847 wrote:More important to me is timing, as the county I wish to operate in is still dry. It will be approximately another 2-3 yrs before this will change, so right now planning is indeed the right course!
Perhaps you should be testing the waters to get local feedback because just because the county may switch from dry to wet that doesn't mean they will allow a distillery... Choose your battles wisely, and save up lots of money... You'll burn through a quarter to a half million dollars in a hurry with no guarantee of return on investment...
++++
“…Let’s do this one more time....”
User avatar
fqu8847
Swill Maker
Posts: 179
Joined: Tue Dec 03, 2013 9:36 pm

Re: Steps in opening a distillery

Post by fqu8847 »

Great advise rad! I have a few friends with enough money (and want to) that I could more or less get financing, but I haven't wanted to mention it just yet. For the time being I am trying to get everything else together for when that ending happens. Just want to right down a game plan/time line of what I need to do and when.
Old Copper Road Distillery
Ducktown, TN 37326
DSP- Pending
User avatar
3d0g
Site Donor
Site Donor
Posts: 317
Joined: Sun Nov 23, 2014 9:02 am

Re: Steps in opening a distillery

Post by 3d0g »

rad14701 wrote:
fqu8847 wrote:Wow... that's a lot of money! I would probably start a lot smaller than most. And the local government would be the issue. With that being said it is precisely the local government that is keeping the county dry. So when the switch is in progress it should be about thr right time to start testing those waters. Safe assumption rad?
The amount of money is not an exaggeration even for a small craft distillery... I had the dream once but virtually every dime of my anticipated inheritance has gone to the nursing home for my fathers care... And there was enough to open a craft distillery... The operative word being "was"...

And I wouldn't be showing my hand until the wheels are well in motion to end local prohibition...
Confirmed. I'll be in for a half mil before my doors even open this fall, and I'm FAR from an extravagant operation.
User avatar
bluefish_dist
Distiller
Posts: 1502
Joined: Fri Jan 16, 2015 10:13 am
Location: Eastern Ia

Re: Steps in opening a distillery

Post by bluefish_dist »

First step is getting the building in place, then all the licensing. We are 11 months in and about a $100k not counting time. So far I have 5 licenses/permits and need a couple more. Little things, like you serve ice, so now you need to have a food service license, you have large quantities of flammable so you have to have a hazmat permit. The dsp and state licenses were actually the easy part.

Pm if you want to talk more detail.
Formerly
Dsp-CO-20051
User avatar
fqu8847
Swill Maker
Posts: 179
Joined: Tue Dec 03, 2013 9:36 pm

Re: Steps in opening a distillery

Post by fqu8847 »

Pm sent!
I can do about 90% of the work myself, so I can save quite a bit of money there. And I have many acquaintances that owe me a favor or two... so more money saved. Mostly materials will be the biggest expense I believe. But permits seem to be daunting...
Old Copper Road Distillery
Ducktown, TN 37326
DSP- Pending
Snowe
Novice
Posts: 45
Joined: Mon Jan 26, 2015 6:02 am
Location: Michigan

Re: Steps in opening a distillery

Post by Snowe »

I'd head over to the ADI forums and start lurking over there. There's some decent information from people that are already in the industry. To reiterate, you're a marketing company that just happens to sell alcohol.

Figure out your state regs, some states are friendlier to craft distilleries than others. For instance, my home state is a control state and marks up everything you distribute 60%, BUT they also let craft distilleries sell out of their own tasting rooms (think bar where you can only sell whatever you produce) for no mark-up other than taxes. The difference in revenue per bottle is significant to the point that several distilleries here do not distribute, there's one distillery that has opened up 6+ tasting room around the state to sell their product.

Another little tidbit... Most of the craft distilleries that I know of around me buy and then bottle bulk spirits from another distillery under their label. The one distillery that I know for fact does NOT do this is so small that I live a block away from it and didn't know about it until a year after they opened their tasting room :wtf: and they were producing (with all the overhead costs) for two years before they even opened that, and they don't distribute. You WILL be sinking money into this business for 1-2 years minimum before you generate positive cash flow, and that's if you're lucky.
User avatar
fqu8847
Swill Maker
Posts: 179
Joined: Tue Dec 03, 2013 9:36 pm

Re: Steps in opening a distillery

Post by fqu8847 »

I don't think buying from another would be in my wants. Something about making it all on my own would be preferable to me. However survival is key I suppose. I browsed over ADI... seems I will be busy over there as well!!!! Thanks a bunch guys! Also... ADI membership: worth it or not?
Old Copper Road Distillery
Ducktown, TN 37326
DSP- Pending
User avatar
3d0g
Site Donor
Site Donor
Posts: 317
Joined: Sun Nov 23, 2014 9:02 am

Re: Steps in opening a distillery

Post by 3d0g »

fqu8847 wrote:I don't think buying from another would be in my wants. Something about making it all on my own would be preferable to me. However survival is key I suppose. I browsed over ADI... seems I will be busy over there as well!!!! Thanks a bunch guys! Also... ADI membership: worth it or not?
Very worth it (and required) if you're going to the annual conference (which is excellent, BTW).
User avatar
fqu8847
Swill Maker
Posts: 179
Joined: Tue Dec 03, 2013 9:36 pm

Re: Steps in opening a distillery

Post by fqu8847 »

The annual conference... sounds like a big to do! Supposing it is tax deductible? Bahahahaha!!!!!!
Old Copper Road Distillery
Ducktown, TN 37326
DSP- Pending
User avatar
LWTCS
Site Mod
Posts: 12836
Joined: Mon Jan 26, 2009 6:04 pm
Location: North Palm Beach

Re: Steps in opening a distillery

Post by LWTCS »

Seems like 3 years is about what it takes before any real traction can be realized.

It doesn't do it on it's own however. Your going to have to pound the pavement.
Trample the injured and hurdle the dead.
User avatar
fqu8847
Swill Maker
Posts: 179
Joined: Tue Dec 03, 2013 9:36 pm

Re: Steps in opening a distillery

Post by fqu8847 »

I've noticed that marketing/selling is covered at ADI and I have bought several books on the subject to peruse, but might any of you guys offer what has worked the best for you personally in regards to boosting sales?
Old Copper Road Distillery
Ducktown, TN 37326
DSP- Pending
User avatar
LWTCS
Site Mod
Posts: 12836
Joined: Mon Jan 26, 2009 6:04 pm
Location: North Palm Beach

Re: Steps in opening a distillery

Post by LWTCS »

The consistent message from the ADI folks is to win your back yard first and foremost.
Trample the injured and hurdle the dead.
User avatar
Bushman
Admin
Posts: 17988
Joined: Tue Mar 30, 2010 5:29 am
Location: Pacific Northwest

Re: Steps in opening a distillery

Post by Bushman »

LWTCS wrote:The consistent message from the ADI folks is to win your back yard first and foremost.
Good advice, or you need connections with a distributor that will push/market your product.
User avatar
Jimbo
retired
Posts: 8423
Joined: Wed Oct 10, 2012 1:19 pm
Location: Down the road a piece.

Re: Steps in opening a distillery

Post by Jimbo »

Finding distributors is key, and its important to select carefully. In a class Windy and I took, they warned us about the pitfalls of small, medium and large distributors. From being too small to have any real influence and/or not energetic about beating the street to find a market for you, to large guys signing up then burying you by doing nothing, to 'play' positioning of product they make better cuts on or are engaged in for whatever reason. They also told us some distributors will try to game you with bullshit like 'give me a case for every 5 I sell' and I'll work hard for you. Koval told them types to pound sand. The whole finding good distributors concern is reportedly one of the biggest headaches of getting a new likker business going strong. Doesnt surprise me. Making the product is definitely the easy part.
In theory there's no difference between theory and practice. But in practice there is.
My Bourbon and Single Malt recipes. Apple Stuff and Electric Conversion
User avatar
LWTCS
Site Mod
Posts: 12836
Joined: Mon Jan 26, 2009 6:04 pm
Location: North Palm Beach

Re: Steps in opening a distillery

Post by LWTCS »

So much of what happens here in South Florida is predicated upon the local distiller setting up tastings and bottle signings, going from bar to bar and educating the bar tenders, creating signature cocktails with which establishments can highlight drink specials. etc, etc, etc.
Trample the injured and hurdle the dead.
User avatar
Jimbo
retired
Posts: 8423
Joined: Wed Oct 10, 2012 1:19 pm
Location: Down the road a piece.

Re: Steps in opening a distillery

Post by Jimbo »

That sounds sensible Larry, like what one might expect. What I was describing is Chicago, and like the rest of this Godforsaken state is probably more about greased palms and horse shit like more than anything. It's the land of Al Capone, corruption ala mode, daily murders and six indicted governors for corruption. I freaking hate this state
In theory there's no difference between theory and practice. But in practice there is.
My Bourbon and Single Malt recipes. Apple Stuff and Electric Conversion
User avatar
LWTCS
Site Mod
Posts: 12836
Joined: Mon Jan 26, 2009 6:04 pm
Location: North Palm Beach

Re: Steps in opening a distillery

Post by LWTCS »

More often than not, the distributor is not going to do anything extra. They are not going to push.

The distiller really has to take the bull by the horns and crow bar his products into the public awareness.

Also, setting up a distillery in an area that has other distilleries is a good way to create a destination for the folks that are interested in this distilling thing. The enthusiasts that understand the trend want to visit these little distilleries.

My buddy has a good friend that runs a small brewery. They found themselves panicking because another brewery decided to open just across the street. Evidently the brewery across the street had a much more substantial budget and was able to create a more impressive tasting/pub space.
So the little guy across the street felt certain that they would see their business decline.
But what happened was that their business actually increased because there ultimately was more traffic flow into the neighborhood by people,,,,,enthusiasts looking for good beer.

Additionally setting up shop in an area that already has a distillery means that the municipality is already distillery friendly and the process may very well be an easier row to hoe.

Distilleries are getting together with city planners and working out strategies to create,,,or more specifically mimic the "bourbon trail" type of destination. A distilling district or the like.
For these guys it is good business to work together and help each other rather than get side tracked with the circle the wagon mentally and view their distilling neighbors as enemies.....If you see my meaning?
Trample the injured and hurdle the dead.
User avatar
LWTCS
Site Mod
Posts: 12836
Joined: Mon Jan 26, 2009 6:04 pm
Location: North Palm Beach

Re: Steps in opening a distillery

Post by LWTCS »

Distillers are teaming up and putting together kyosk designs that are used at the front of the retail liquor stores. These kyosks or displays will call attention by promoting that particular state's local distilleries. It's a way to promote local business and help educate local drinkers that there money is going to be used to help local families not giant corporations.
Trample the injured and hurdle the dead.
User avatar
fqu8847
Swill Maker
Posts: 179
Joined: Tue Dec 03, 2013 9:36 pm

Re: Steps in opening a distillery

Post by fqu8847 »

The town where I live is a tourist attraction of sorts already. It is on the state line and there are many options for promotion. And with the travelers, it could prove more lucrative than I know. Changing the mindset of the local government will be the problem... any suggestions on that?
Old Copper Road Distillery
Ducktown, TN 37326
DSP- Pending
Post Reply