Distillery vs. Brewery Business

[thebbqguy]

I have been home brewing for 6 years and have been "all grain" for 5. I have toured some micro beer breweries, 2 major brand name distilleries, too many wineries to count, and today I toured a micro distillery making vodka, gin, and rum.

Something I didn't know until today....it takes significantly more time to make beer than to distill vodka. Not only does the time span help vodka production cash flow much better than beer, it also can be started with 75% less start up expense.

I would have thought the opposite before today. My former reasoning was like this:

-beer is cheap
-vodka is comparatively expensive
-beer much be cheaper to make
-vodka must be expensive to make

Holding beer for nearly a month versus holding vodka for 5 days before selling it provides an extreme advantage to distilling spirits as a business vs. brewing beer.

There does seem to be nearly an equal amount of government red tape in both. Beer has much more competition, although spirit distillers are getting more and more competition by the week and day.

In my state a micro distiller can get a permit to produce up to 60,000 gallons of vodka annually for $100 plus whatever the federal license costs. A micro brewer can get a permit to produce up to 30,000 barrels for $50 plus a $70 inspection fee plus any federal requirements.

The main difference is the equipment to hold the beer needs to be much bigger and that results in higher overhead costs. The building alone needs to be quite large to hold the equipment. Vodka is produced in 4 days and therefore the equipment to hold it can be much smaller and there is less overhead costs. The building can actually be quite small. 90 gallons of beer vs. 90 gallons of vodka is a night and day difference in retail sales.

Anyway...what I learned today was very interesting to me and I thought I'd share for anyone else that may find it interesting.

[jacob]

Potato wine is the cheapest(*) country wine that can be made. Vodka is distilled potato wine. Therefore...

(*) Tea wine is cheaper, but you can eat the potatoes whereas you can't eat the teabags, so it depends on whether you close the cycle

[Chad]

Actually, on an alcohol by volume/price basis, even moderately priced spirits are cheaper than beer. Especially, cheaper than micro-brews.

I would say that a micro-distillery is much better business venture at this time. We are getting close to peak micro-brewery status. There are almost 3,000 micro breweries in the US right now. Plus, another couple thousand are in the licensing process.

This is coming from someone who loves micro brews and won't drink anything else.

Tito's Vodka in Austin, TX is a prime example of a quality micro-distillery. It's better than Grey Goose and cheaper.

I don't love spirits like I do beer or I wold seriously consider starting a micro-distillery. You have a chance of becoming Stone or Dogfish in the micro-distillery industry. You don't in the micro-brewery industry at this time.

[Sclass]

Do you know what part of the process differentiates the good vodka from the bad?

Premium potato? Precise temperature control? Cleanliness?

I looked into making ethanol for cars and biodiesel feedstock. It looked very easy to make bad ethanol that would be good for E85 or biodiesel catalyst. The hard part was finding feedstock...I toyed with buying sloppy fruit from the farmers market. Never built the still. It looked cheap to do.

This is interesting because vodka sells for a heck of a lot more than race gas.

[sshawnn]

I have been home brewing for 6 years and have been "all grain" for 5..

I am wrapping up three 5 gallon batches today. We are giving six packs of home brew for Christmas gifts this year and a couple of months of cool conditioning is never a bad idea for home brew bottles. I am mostly just a quality control taste tester now but making it for my wife and friends is fun.

I am still a malt extract brewer but intend to look into "all grain." My next step is likely figuring out how to reuse part of the yeast cake as that is the second most expensive aspect after the malt extract.


Opening a restaurant brewery


I spent some time last week with a good friend of mine (total extrovert ) who wants to open up a microbrewery/restaurant. He continues to mention me as a potential partner. He knows am I am a good, original idea cook and would want me to head the brewery portion. I continue to completely decline the chef/restaurant owner aspect and gently decline brewing as a mass production (micro brewery) as well. My reasons for declining.

1. I greatly enjoy cooking and brewing and doing it as a business would likely extract the enjoyment.
2. Running a restaurant and likely a brewery is hard, thankless work
3. If money is what I am after, I can make a lot more money by doing my specialized occupation for a period of time rather than cooking and brewing

tl;dr I would consider being a brewmaster of a micro brewery but only if I had a few subordinates!

@bbqguy, have you ever distilled? I am not saying I have or have not as it is against the law but I would assume that it is MUCH more enjoyable than home brewing! When I started home brewing I was a bit disappointed when comparing it to other techniques as home brewing is fairly cookie cutter (at least when making clones) as compared to distilling.

and if you are considering a foray into selling, I completely agree with this

I would say that a micro-distillery is much better business venture at this time. We are getting close to peak micro-brewery status. There are almost 3,000 micro breweries in the US right now. Plus, another couple thousand are in the licensing process.


I don't love spirits like I do beer or I wold seriously consider starting a micro-distillery. You have a chance of becoming Stone or Dogfish in the micro-distillery industry. You don't in the micro-brewery industry at this time.

[jacob]

Alright, so dumb question ... can I start distilling my own hooch legally (non-commercially) if only I get a $100 permit?! My uninformed opinion would be that permits would be limited/much more expensive since I would only need to distill a gallon's worth to break even with CostCo.

[thebbqguy]

"You cannot produce spirits for beverage purposes without paying taxes and without prior approval of paperwork to operate a distilled spirits plant. [See 26 U.S.C. 5601 & 5602 for some of the criminal penalties.] There are numerous requirements that must be met that make it impractical to produce spirits for personal or beverage use. Some of these requirements are paying excise tax, filing an extensive application, filing a bond, providing adequate equipment to measure spirits, providing suitable tanks and pipelines, providing a separate building (other than a dwelling) and maintaining detailed records, and filing reports. All of these requirements are listed in 27 CFR Part 19."

http://www.ttb.gov/faqs/genalcohol.shtml

[thebbqguy]

This might help too: http://www.distilling.com/start.html

[sshawnn]

bbqguy is right, it is felonious/illegal unless you open a regulated, inspected distillery. I went as far as to get the forms for application for fuel production permit when I had the farm but that would have allowed zero production for consumption and the outfit would be subject to frequent inspections.

That being said, things like this are extremely common......

http://www.ebay.com/itm/Copper-Alcohol- ... 1c37f27c95

[Riggerjack]

The regulations on distillation are intense. Federal approval of dedicated site, recipes, even labeling. All that has to be approved before you start, meaning eating the costs to startup, then waiting for approval, then beginning distillation, then paying taxes, then trying to sell. Alcohol is taxed at production, not sales. The feds will make their money, you might make yours.

As for craft brewing vs craft distilling, Rogue does both. They have a neighboring property for the distillery, and just truck the mash across the parking lot. Expect a lot of this in the future, breweries can become distilleries without doubled equipment costs, and share marketing. You can buy dead guy ale, and dead guy whiskey!