https://www.theguardian.com/business/2017/apr/15/how-the-beery-vision-of-brewing-a-small-fortune-can-fall-flat

Tax relief, light regulation and crowdfunding has spawned nearly 2,000 craft beer firms in the UK with experts predicting the bubble to burst very soon.
Barley, hops, yeast and water: the basic formula for beer is staggeringly simple.
Equally simple, it sometimes appears, is the formula for setting up your own brewery. Quit the day job, buy the requisite kit and brew up batches of foaming nut-brown ale.
If you’re particularly successful, you can cash in your chips by selling to a global mega-brewer, like Camden and Meantime, or make a cool £100m by wooing a private equity backer, as the founders of BrewDog did earlier this month.
Success stories like these have fostered an explosion in the number of micro-brewery startups, whether they do it for profit or sheer passion.
The number of UK craft brewers has grown 65% from 1,026 in 2011 to around 1,700 today, more per capita than any other nation in the world. Such rapid growth was made possible by tax reliefs introduced by Gordon Brown as chancellor in 2002 and further fuelled by a shift in appetites towards independent “craft” beers.
However, for all the cockle-warming success stories, many a beery vision has fallen flat. Figures from the Insolvency Service show that 19 drinks manufacturers went bust in 2014, 23 in 2015 and 24 in the first nine months of 2016.
Not all were breweries. But enough nascent beer firms have hit the wall recently – Loch Ness, Delaval and Copper Dragon to name but a few – to show that brewing is far from a licence to print money.
Rob Lowe was following his dream when he founded Rebel Brewing in Penryn, Cornwall. But six years after it started, and despite winning awards for its output, Rebel went into administration.
“Our sales slipped due to increased competition and a lack of available funds to invest in bringing new products to market,” he said.
Lowe thinks there is a danger that people are leaping headlong into the industry without thinking it through. “It is great that so many new breweries are emerging but unfortunately many are started by complete novices.
“If everyone who wanted to start a brewery spent six months working in one they would see that the work is hard and dirty, margins are tight and competition is fierce.”
Growing competition, says Lowe, also means the bar is constantly being raised on quality.
“It is no longer OK to produce mediocre beer. It has to be better than all the local competition yet too many new brewers are making boring, bland beer and wondering why it doesn’t make money.”
Rebel Brewing was bought out of administration and is up and running again, but Lowe is not involved.
Another brewer, who asked not to be named, fears he will end up in bankruptcy court after his business failed, causing friction with family and friends.
“We made all the classic mistakes and grew too far, too fast,” he said. “We owed HMRC money and before we knew it, they’d turned up with a lorry to take all our beer away.
“I was perhaps too soft and you have to be more hard-nosed. A lot of people think it’s the case that you just start brewing beer and you’ll make money. It’s not that easy.”
One of the UK’s success stories is Bristol-based Moor Beer, set up by American Justin Hawke, who decided to export the Californian craft beer revolution to British shores.
“The UK seems to me to be the least regulated brewing industry in the world,” he said. “The cost of entry is virtually nothing. You can just log on, get the form from HMRC … nobody inspects you initially to make sure you’re trading in a good way.
“That’s great in that it gives everyone an opportunity but it allows people to enter the market who don’t have the skills or business acumen to be successful.”
Hawke is also concerned about the increasing number of wannabe brewers crowdfunding their way into the industry. “It’s a largely unregulated and unknown way of investing used by people who a bank wouldn’t lend to because they don’t have a sound business model,” he said.
“It allows hobbyists to entertain their notions. Brewdog would point to themselves as the exception but a lot have failed and will fail in the not-too-distant future.”
Some industry observers think a reckoning is coming in the British brewing world. “The UK has the highest number of craft breweries per capita of anywhere in the world, even in America,” said Jonny Forsyth, global drinks analyst at market research group Mintel.
“Yet, unlike America where craft is now a mainstream segment, only 23% of UK adults drink craft beer, according to Mintel’s latest [2016] beer report. In other words, there is massive over-supply and something has to give.
“There is also an issue with the consistency of craft beer quality. The UK is seeing a certain amount of profiteering and some micro-brewers are charging a lot for very average beer.
“So there is likely to be a cull of craft brands which do not justify their price tag in consumer minds.”
Despite the warning, Hawke thinks the UK has room for more breweries before there’s any danger of the bubble bursting.
But both he and Lowe warn that prospective brewmasters should have plenty of experience to draw upon and plenty of money to burn.
“Go on a practical brewing course, get a job or volunteer at more than one local microbrewery for at least six months,” said Lowe.
“Brew as many small batches at home as possible to the highest possible standards and get a six-figure sum behind you before you start. If you want a production brewery as a commercial thing, [start-up costs] are in the hundreds of thousands, if not millions,” said Hawke. “If you don’t have that, you probably want to go home.”

The cost of starting your own brewery
Setting up a microbrewery isn’t cheap. It’s possible to get a small business started with a homebrew kit that costs a few thousand pounds. But if you want to set up a commercial enterprise straight away, that sort of cash won’t get you very far.
We asked industry experts to estimate start-up costs for a brewery capable of producing 6 barrels (982 litres) on a budget, as well as a 20 barrel brewery for a big business or rich investor wanting to pull out all the stops.
The list is by no means exhaustive but outlines the rough cost of the basics.

Six-barrel budget option – £110,000
PBC Brewery Installations will sell you a six-barrel brewhouse set for £78,000 and thinks you should settle for up to £30,000 in additional equipment and running costs. This brewery would produce beer in casks and bottles.
Start-up costs include:
£78,400 – brewhouse (including mash tun, hop tank and copper kettle)
£4,000 – stock including malt, hops, bottles and labels
£2,700 – 100 plastic casks
£4,000 – electricity and drainage
£3,000 – delivery vehicle
£3,000 – cask washing equipment
£3,500 – building works for fermentation and cooling
£3,000 – annual rent and rates
£1,000 – marketing

Expensive 20-barrel option – £1.5m
One experienced brewer, who asked to remain anonymous, reckons a top-end 20-barrel brewery for making beer in both casks and kegs could set you back as much as £1.5m, not including beer ingredients.
Start up costs include:
£1.2m – automated brewhouse (including mash tun, hop tank, copper kettle)
£5,500 – 100 colour-coded and branded casks
£7,000 – 100 colour-coded and branded kegs
£100,000 – four high-end vessels/tanks
£30,000 – cooling equipment, pallet truck, lab kit
£30,000 – annual rent on large premises
£35,000 – to hire an experienced brewer
£100,000 – branding and consultancy