Food and Beverage Advisory: Are You Taking Advantage of the Hopportunities in the Craft Beverage Industry?
By: Carter Conboy
Are you thinking of starting your own brewery? Here are five questions to ask yourself when developing your brewery business plan:
- What Type of Brewery Are You Creating?
First you need to consider what type of brewery you want to create. What is the brewery going to look like? Is the brewery going to be in an urban neighborhood or on rural farmland? Are you going to offer tours of the brewery? What types of customers will you market to? Will there by a restaurant? If so, will the brewery operate the restaurant or will the space be leased to an established restaurant group?You will also need to think about how big of a brewery you want to build. There are three unofficial brewery categories that are based upon how much beer a brewery produces: nanobreweries, microbreweries, and macrobreweries. A nanobrewery is the smallest scale of a commercial brewery. This type of brewery is typically owned by an individual or small group of partners. Brewing capacity is likely limited to one or two styles of beer at a time. Most of the beer sales are made directly to the customer at the brewery. A nanobrewery might also “self-distribute” at local grocery stores and farmers’ markers. A microbrewery is the next step up in size. While there is no specific definition for a microbrewery, typically any brewery outside the ten largest breweries could be referred to as a microbrewery. Macrobrewery is typically used to refer to the ten largest U.S. breweries.
- What Are You Going to Name It?
It is critical that you consider what you are going to name your brewery early in development. You wouldn’t want to apply for licenses, design a logo, and construct the brewery, only to find out later that the name you chose is already registered or trademarked. To avoid such a scenario, the aspiring brewer should review New York State business filings at the Department of State to determine if the name has already been registered. You should also search filings with the United State Patent and Trademark Office. In addition to the brewery name, similar searches could be done for potential names of your flagship beers.
- How Are You Going to Distribute Your Beer?
A lot of decisions will need to be made for how you want to distribute your beer, including onsite sales at the brewery and distribution to other outlets. For onsite sales, consider what options you want to provide customers. This can include cans, bottles, and draught lines to fill growlers. You should also determine whether you intend to operate a bar where customers can buy and drink pints of beer on the premises as this could impact what type of licenses you will need.For sales outside of the brewery, think about if you want your beer sold in grocery stores, beer retailers, restaurants, and/or bars. This can be accomplished through self-distribution, although there are limits on the amount of beer a brewery can self-distribute depending on its licenses. Some breweries choose to partner with a third-party distributor rather than self-distribute.
- What Corporate Structure Is Right For Your Business?
Before you apply for your brewing licenses, you should establish your corporate structure. Options include: sole proprietorship, partnership, limited liability company, and corporation. Each structure has benefits and shortcomings. Which corporate structure is used will impact many areas of yours business beyond brewing beer including taxes and employment.
- Which Brewery License is Right for Your Business?
Getting the correct licenses to begin brewing beer for sale is a two-step process. First, you will need to apply for a license at the federal level through the Alcohol and Tobacco Trade and Tax Bureau. The federal process involves several steps and applications. It is a time consuming process and can take up to five to six months before getting federal approval. Next, you will need to get a brewer’s license from New York State. There are several different license options including brewery, microbrewery, and farm brewery. The farm brewery license is a relatively new option and offers unique options intended to make the licensing process quicker and less expensive. However, to maintain the license, a brewery must use a minimum percentage of New York State grown ingredients, such as hops, in their beers. The law requires a specific escalation in the percentage of New York State ingredients used in the beer over time.
Thinking about these five questions early in your brewery development should make the journey smoother and more efficient. Happy brewing!
Matthew J. Dillon is an attorney at Carter Conboy. His practice related to the Food, Beverage and Consumer Packaged Goods industries involves representation of food producers and manufacturers on issues including start-up and emerging company services, navigation of the licensing process on state and federal levels, drafting and negotiating distribution and sales contracts, and development of employment and non-compete agreements. Mr. Dillon is active in numerous professional and civic associations, including Vice-President of the Italian American Bar Association and the Capital District YMCA (Bethlehem) Board of Advisors. He can be reached at firstname.lastname@example.org and 518-465-3484.
FOOD AND BEVERAGE ADVISORY – Are you Taking Advantage of the Hopportunities in the Craft Beverage Industry?
This Advisory provides general information, is not intended as legal advice, and does not create an attorney-client relationship between Carter Conboy and the reader. Should the reader desire additional information about the content of this Blog and/or its application to a particular circumstance, please contact attorney Matthew J. Dillon.