How Much Does it Cost to Start a Craft Distillery?
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Have you ever dreamed about distilling your own whiskey, or rum, or gin? How much do you think it’d cost to make that a reality?
Much like with any business, the exact start-up costs are going to vary based on your distillery’s positioning, scale, and location. Are you trying to be a high-end or a budget distillery? Are you looking to build out a taproom as well as the distillery? What kinds of taxes and fees does your state place on spirits?
At a minimum, you should expect to budget $30,000 to start up a small craft distillery. By that, we mean, very, very small. If you want to be scalable, $200,000 is the estimate given by Kellie Shevlin, executive director of the Craft Beverage Expo. She also says that if you’re looking to produce something that ages, like whiskey or tequila, expect to invest millions.
All these factors and more will depend on what you pay to start your distillery, but we can give you the foundational estimations of what these things might cost. Read on to learn more about the startup costs for a craft distillery, and how you might be able to pay for them!
One Time Costs
Obviously, the distilling equipment you need will be one of the major investments you take in building your distillery. At the most basic level, you’re going to need a cooker (or mash tun), a fermenter, and a still. A cooker can cost roughly $11,000, a fermenter $6,500, and a still anywhere from $3,000 to $12,000. These costs are really going to vary depending on the size of your equipment, the quality, and where you source them from.
And this is just the big stuff! There will be all other kinds of equipment you’ll need to get, from barrels to bottling equipment. It’s safe to say that in total, the startup equipment costs for your distillery will probably average out to around $100,000.
Distillery and Taproom buildout
Depending on your business model, if a taproom is something you’ve got your heart set on, be prepared to set aside another $200,000 for that. That would include build-out costs (although there are ways to cut down on those), furniture, serving equipment, and so on.
A taproom is a great idea for many distilleries because it’s a way of making revenue using the spirits you can make now (vodka, gin, unaged whiskey) when you might be sitting on aging spirits for a while.
Inspired by Spirits, a Pittsburgh-based distillery, raised $69,050 from 79 investors through Honeycomb credit to purchase furniture and pay for build-out costs of their steampunk-inspired Apothecary and Tasting Lounge. Soon, investors who’ve contributed to their crowdfunding campaign will get to taste their wares and relax in the space they helped fund!
Mike, co-owner of Inspired by Spirits, next to one of the stills he designed himself. Find out more about how Honeycomb Credit supports this kind of innovation with small business loans here.
The absolute most important upfront cost for starting your craft distillery is getting all your legal requirements in order. It’s actually illegal to distill alcohol without a license - even at home!
Here’s a rundown of all the legal requirements you’ll need to take care of - and of course this will vary by state and what kind of zone you’re operating in. The actual cost will vary depending on your lawyer’s fees as well as the permit costs of the state you’re in, but this is a necessary investment for any craft distillery and not something you want to skimp on.
A popular trend with craft distillers at the moment is to have their own bespoke bottles. This is smart from a marketing standpoint, since it’ll allow your bottle to stand out on the shelf, and is another way to assert your branding.
However, it’s pricey! A bottle mold can cost you from $20,000 to $70,000. But, Oregon State University has a hack they suggest to distillers - find a prototype another distiller was thinking of using for their bottles, and use that for a fraction of the cost.
With that upfront cost in mind, if you’re looking to just purchase bottles wholesale, keep in mind that the costs could vary from roughly $1.50 - $4.00 apiece, which adds up when you’re buying cases of bottles to sell. If you’re doing bespoke bottles, expect to pay up to 40% more per bottle.
In addition to this, you might want to consider shipping costs or other packaging, especially if you’re selling direct to consumers.
Ingredient costs will vary depending on what kind of spirits you’re making, the quality of ingredients, and where you’re sourcing them from.
In a cost-accounting exercise, David Chew, a CPA and distillery consultant estimates that for a batch of rum, raw ingredient costs will be roughly $900. So, using that as a baseline, estimate roughly $1000 per batch of raw ingredients for your spirits.
Western Reserve Distillery in Cleveland, Ohio, raised $100,000 with Honeycomb Credit in order to purchase raw materials for their agave spirits, as well as barrels of whiskey to expand their aged whiskey inventory. After having spent much of their resources in distilling hand sanitizer for coronavirus relief, they needed a bit of a boost in capital to continue their growth plans and get the necessary raw ingredients.
Spirits Taxes (and other taxes)
Excise taxes for spirits is another cost to keep in mind - it can cost anywhere from $0.00 to $32.00 per gallon, depending on where you are. You can find the state excise tax for spirits for your location here.
No craft distillery owner is an island, and so a recurring cost that is going to be especially important to your success will be your payroll. The national average salary for a master distiller is $50,679, with assistants making roughly $37,000. The number of employees you hire will of course depend on your scale, but you want to make sure you’re offering a fair wage and benefits if you can manage it. Don’t forget to pay yourself, as well, if you can!
Utilities and Rent
These will of course depend on where you’re located, but you can assume that rent (or a mortgage) for a distillery property could cost about $2,500 a month.
Distilling is highly energy and water-intensive, so be prepared for a hefty utility bill, as well. It’ll be a good idea to get estimates from your utility provider, but we’ve heard on average craft distillers pay about $1000/month on utilities.
The most important cost: Time
There’s really no such thing as an “overnight success” for craft distilleries. As Shevlin puts it, an overnight success is 10 years, and for some brands like Tito’s Vodka, that can take 20 years. Be prepared to be in it for the long haul, and invest time, marketing, and effort into building your craft distillery’s brand in order to keep the excitement for your business sustainable.
Crowdfunding can be an excellent way of stoking the fires for your craft distillery’s brand awareness, on top of raising the capital you need to get started. If your customers invest in you from the beginning, they’re more likely to stick around and check out the fruits of their investment. With loans that amortize over 3-5 years, you have time to use these funds to start up your craft distillery so that it’s more ready to be profitable quicker.
How do I pay for these startup costs for my craft distillery?
Unless you’re already a millionaire, you’re probably wondering how you could possibly chase your dream of starting up a craft distillery with these kinds of numbers. Well, many craft distillers look to a variety of funding sources to get up and running.
Some craft distillers get bank loans to finance their startup costs - however, these kinds of loans are rarer and rarer, especially to those who have been in business for a short time. Others look to equity investors, who finance the startup in return for a portion of the profits and sometimes decision-making capabilities.
Even more distilleries have looked to crowdfunding as a means of supporting their craft. While some turn to gift crowdfunding like Kickstarter or Indiegogo, others have found regulated debt crowdfunding to be a tool to build up their distillery’s credit, unlock capital, and build relationships with their customers right off the bat.
Traxler Littlejohn, the owner of Nippitaty Distillery in North Charleston, South Carolina, crowdfunded with Honeycomb and raised $67,377 to go toward his taproom’s buildout. To him, this raise was important not only in getting him the capital he needed but also in building a sense of community.
“You can play on Albert, Ameritrade, whatever all you want, and you won’t get to go to that place, meet the owner, and get any face time with them, whereas with us, we’re your local distillery down the street. This is me, the owner, here’s a picture of my family, it’s a lot more personal for people because we put a face to the name and a face to the campaign,” says Traxler.
Your best shot at financing a craft distillery - crowdfunding!
There are many reasons to consider starting a craft distillery. Love of the craft, entrepreneurial drive, desire to create community over a beloved product. There are also as many reasons to consider crowdfunding to help fund that dream into a reality.
Find out more about Honeycomb Credit crowdfunded small business loans at www.honeycombcredit.com/grow, and fill out the form below for more information!