Save THEIR Craft: A Homebrewers Trials & Tribulations Of Opening A Brewpub And Why Self-Distribution Matters

In Beer Politics by Ryan

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Last month we told you about one of two breweries in Illinois that distributes their own beer, Argus Brewery in Chicago.  Argus got its start by shopping its beer to restaurants in the suburbs after distributors wouldn’t return their phone calls.  Over a year later, Argus still self-distributes about one-third of its beer, mostly in DuPage County, and relies on distributors to handle the rest.  But it wasn’t until Argus was able to get a toe-hold in the market that distributors took notice, according to owner Bob Jensen. “We weren’t able to get their attention initially because we weren’t established,” he told us.

But what does the pending legislation before the Illinois House and Senate mean for the future brewers of Illinois?  Today we’re going to answer that question and tell you about a homebrewer who is in the midst of starting her own brewpub – and is relying on the ability to self-distribute to do so.

Meet Marika Josephson.

photo courtesy Facebook

Marika lives in southern Illinois and has been homebrewing for about two years, taking a special interest in farmhouse ales, Belgian brewing techniques and spontaneous fermentation.  She has chronicled her homebrew adventures on her website, She Brews Good Ale.  She also covers the craft beer scene in southern Illinois for Examiner.com and is a contributing writer at eHow and travels.com.

Her exposure to what she called the “craft beer renaissances”  in New York and San Diego inspired her to start her own brewpub in southern Illinois, an area in the state that has only one brewery.  In fact, according to the Illinois Craft Brewers Guild’s map of breweries, Big Muddy Brewing in Murphysboro is the only brewery or brewpub south of the state capitol of Springfield.

Her brewpub, which is planned for an area outside of Carbondale, will focus on using locally produced hops, grains, fruits, herbs and spices.  This seems to be an increasing trend among craft brewers to either use locally grown materials or growing their own.  For instance Brewery Terra Firma,  former Right Brain Brewery head brewer John Niedermaier’s latest project, will use hops and spices grown on site.

But before Marika can even get to this point she has to go through mounds of paperwork, establish a location long before it will open and buy tens of thousands of dollars in equipment.  Instead of paraphrasing here, we’re going to let her tell you what she has gone through up to this point to get her brewpub off the ground.

In order to really appreciate the importance of the proposed laws, I think you have to have an intimate sense of what it takes to open and operate a brewery. As far as getting started is concerned, first there’s the space: You need to find a location that’s big enough for your equipment, can be temperature controlled, and will have enough storage room for your ingredients. You also need to secure this location about a year before you actually start brewing because you need an address for all of your paperwork, starting at the local level.

God help you if you’re renting this location during that entire period, however, because the federal paperwork will not be cleared for anywhere from 8-14 months, based on the experience of brewers in the area. That means that on top of the money you just put into remodeling your space and buying your equipment, you have to be prepared to pay rent, insurance, utilities and any other incidentals for a year before you can produce or sell one drop of your beer.

Brewpubs in particular are even more difficult because the health department gets involved. You have to comply with even more regulations on food preparation, services for your customers, including the number of bathrooms you offer, lighting in your parking lot and even the pressure your business will put on local law and health enforcement. Every single one of these additions to your business costs more money. Even if you’re planning to start on the smallest system possible, even if you’re planning to build your brewery on land that you own or someone will let you lease cheaply, your start up costs are close to six digits.

Now, imagine that you’re renting prime real estate downtown during your year-long licensing period, or that you want to buy a 7-barrel system in order to produce beer for distribution. Double your initial costs. Oh, you’re a production brewery? You’ll need to buy a palette of kegs and bottles, bottling equipment a good keg washer, and if your equipment is larger than about 3-barrels, you’ll need glycol-jacketing and will have to pay for a glycol system. Tack on more money.

This, mind you, is before you’ve started producing beer. The tough part is guessing how much you’ll be selling in your first couple of years so that you don’t over- (or under-) estimate the size of equipment you’ll need and how much it will cost you to make your beer. If you don’t sell enough, you can’t pay your utility bills and can’t make beer. If you have too much demand and too little beer, people react negatively, lamenting that they can never get ahold of your product.

This is where self distribution really comes in to play. While distributors have the in-roads with bars, restaurants and beer stores and can get your product to markets outside of your area – it costs money for that kind of access.  Money that not everyone has, according to Josephson.  “If you’re already in for $200,000, with loans from friends, family, and the bank, you need to maximize your profits in those first few years while you’re getting your brand established. That’s when you want to do the legwork yourself, because paying a distributor to do it for you eats into your profits. You want distributors to take over once your business is firmly in place and you’re ready to expand into other markets–once you’ve got stable sales numbers and you’re at the point when you can start paying back your investors, rather than when you’re hoping you can pay your electricity the next month.”

On top of that, since Josephson’s brewpub is not going to be in downtown Carbondale because of high rent and the fact that the cities liquor licenses are capped, she’s worried about getting people in the door.  “We need a presence both at our brewpub and in town, meaning that under current law, we’ll need a distributor. However, because it’s so expensive to pay for a distributor, we have to be exceedingly judicious about what goes out our door. It’s a delicate balancing act, ” said Josephson.

Save The Craft isn’t just about Argus and Big Muddy’s fight to continue self-distribution.  It’s also about the future of craft beer in Illinois.  So the next time you wonder if it’s worth it to call your local lawmaker, send them an email or even a handwritten letter, think about Marika and the dozens of other homebrewers out there that may never see their dream of opening a brewpub fulfilled.

Josephson said it best when she told us, “if the proposed legislation doesn’t pass, it will mean death to the hope of many aspiring brewers who eventually want to open a brewery. We’re talking about creative, energetic people with a passion for the craft, who are likely to start up on loans from family or the bank–not multinational corporations with deep pockets.”

Do her a favor.  Take two minutes and make that call, send that letter or email.  Your voice will be counted, noted and passed on to your senator or representative, and you’ll be doing yourself a favor as well.

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About the Author

Ryan

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Equal parts beer nerd and policy geek, Ryan is now the curator of the Guys Drinking Beer cellar. The skills he once used to dig through the annals of state government as a political reporter are now put to use offering unique takes on barrel-aged stouts, years-old barleywines and 10 + year verticals.