If you’ve been looking to start a craft distillery, or perhaps are making plans to scale it up, you’re probably looking at some mighty big numbers at the moment. In fact, the average cost of a craft distillery could take from on average $200,000 to the millions!
A natural step in the evolution of your craft distillery is looking for people who might be willing to invest in your growth, giving you the capital necessary to make your next move.
But, what reasons would an investor have in looking at your business? What options for investment are even out there for a craft distillery? Read on to learn more about how to find investors for your craft distillery, and what kinds of investments you can offer them.
Why are investors interested in craft distilleries?
Craft Distilleries are a fast-growing but long-looking business
In the past 10 years, craft distilleries have seen rapid growth, thanks to growing interest in unique kinds of spirits as well as the experiences that many craft distilleries offer consumers, such as hip taprooms and specialized tasting experiences.
This growth isn’t going away, either, although many craft distilleries are focusing on building up their local communities through their popularity and presence with a hyperlocal approach. This locality is an appealing aspect to many local investors who are also looking for ways to improve their community.
Bob, an investor in Guidance Whiskey, a Honeycomb Credit campaign that raised $120,000 to expand their whiskey brand, noted, “I’m very excited to be able to invest in one of the fastest-growing Black-owned spirits companies. Their product is amazing, and their distribution is expanding into multiple states.”
Interest in the craft of distilled spirits
Many craft spirits aficionados are looking for ways to deepen their knowledge of the industry and get more involved where they can, but not everyone can start a craft distillery. So, a lot of these distilling nerds look to investing in craft distilleries!
One of these spirits fans was Michelle, who invested in Western Reserve Distillers in Cleveland through Honeycomb Credit. She said, “We enjoy making cocktails at home - visiting and experiencing the products and services at Western Reserve confirmed our decision to support this business.” Thanks to the support of investors like Michelle, Western Reserve raised over $100,000 to go towards expanding their whiskey barrel and aged rum operations.
Craft distillery investors desire asset-backed investments in a stable market
As we’ll get into in the next section, many craft distilleries, especially those that age their spirits, are asset-backed. There’s always something of value at a distillery, which is a lucrative selling point for investors.
Craft distilleries are also generally a stable investment, projected to continue growing and stay that way. Even in the face of adversity, such as the coronavirus pandemic, craft distilleries have done very well. In fact, despite the pandemic, spirits sales have grown immensely!
These trends make people interested in investing in small businesses look at craft distilleries as a lucrative option - one that’s less likely to go under and is destined for growth.
Ways people invest in craft distilleries
Cask Purchasing
One way that some distilleries offer investment opportunities is by pre-selling casks of their whiskey at wholesale prices. This is a way that they can generate revenue in the present moment to put into their business, and investors can purchase whiskey for a much lower price than they would be buying it already aged.
This is really popular in the whiskey industry, where investors will purchase these barrels either for their own personal use or to sell for a profit once the barrels have aged. A local craft distillery might offer a cask purchasing program themselves, or they might be part of a collective that offers up barrels together, like the Whiskey and Wealth Club.
On the subject of barrels, as a distillery owner, investing in quality barrels is super important! Brokers like Barrels Direct can connect you to barrels, and for a limited time, you can enter the $5,000 barrel giveaway we’re hosting in partnership with them.
Equity Investors
Some craft distillery owners look to equity investors to finance their distillery’s growth. This makes a lot of sense, especially since many distillery capital needs are so large - having an investor back you up can change everything.
There are some advantages and disadvantages to finding equity investors. With equity, it’s sometimes easier to get larger amounts of cash influx, but you’re also giving up a portion of the profits in exchange. You also might have to compromise and make ownership decisions with your equity investors, so it helps to be a bit picky when choosing who can invest in your distillery in this way.
Crowdfunding
Crowdfunding is another mode through which many craft distilleries are raising capital for their projects. Being able to crowdfund capital through investments has only been legal since 2016, but since then has become a popular means of funding large capital projects for craft distilleries.
There are many reasons why you should consider crowdfunding to find investors for your craft distillery. For one, it’s an excellent way of marketing your distillery to potential investors and future customers. Not only does it give you a chance to tell your story and invite your regular customers into it, but you can also connect with a network of investors already interested in helping small businesses.
Debt crowdfunding also makes it much easier for many different kinds of investors to find your distillery - at Honeycomb Credit, investors can put in as little as $100 into a campaign, making it more accessible for anyone to invest, and increasing opportunities for investment for you.
Traxler Littlejohn, owner of Nippitaty Distillery in South Carolina notes, “Our community invested in us because they wanted to see us there in Park Circle, thriving where so many other people have shut down because they weren’t given this opportunity.” Nippitaty raised $67,377 to help build out their taproom, bringing their organic spirits into the community.
One of the best features about Honeycomb’s debt crowdfunding for small businesses is that it doesn’t share equity among investors - meaning, you’re only paying back interest on a loan, not part of your profits or ownership. You get to retain ownership as well as create a stronger bond with the customers who chose to invest in your craft distillery.
Community capital, distilled to its finest qualities
Established distilleries such as Western Reserve Distillery and startups like Nippitaty Distillery alike have been able to find success in finding investors for their craft distilleries through Honeycomb Credit.
Learn more about our crowdfunded small business loans by checking out www.honeycombcredit.com/grow and fill out the form below for more information!