23 data to include in the business plan of your craft brewery

This article was written by our expert who is surveying the industry and constantly updating the business plan for a craft brewery.

Our business plan for a craft brewery will help you build a profitable project

Ever pondered what the ideal grain-to-glass ratio should be to ensure your craft brewery remains profitable?

Or how many barrels your brewery needs to produce during a bustling weekend to meet your revenue goals?

And do you know the optimal hop utilization rate for crafting that perfect IPA?

These aren’t just interesting figures; they’re the metrics that can determine the success or failure of your brewery.

If you’re drafting a business plan, investors and lenders will scrutinize these numbers to gauge your strategy and potential for success.

In this article, we’ll explore 23 critical data points every craft brewery business plan needs to demonstrate you're prepared and poised for success.

A successful craft brewery keeps raw material costs below 25% of revenue

A lot of yoga centers' success can be attributed to keeping their raw material costs below 25% of revenue, and the same principle applies to craft breweries.

For a craft brewery, maintaining raw material costs under this threshold is crucial because it allows for a healthy profit margin, which is essential for reinvestment and growth. This means that the brewery can allocate more funds to other important areas like marketing, equipment upgrades, and staff training, which are vital for long-term success.

However, the percentage can vary depending on the type of beer being produced, as some styles require more expensive ingredients.

For instance, a brewery specializing in high-end IPAs might have higher raw material costs due to the premium hops used, but they can offset this with higher pricing. On the other hand, a brewery focusing on session beers might have lower costs and can maintain the 25% threshold more easily, allowing for competitive pricing and potentially higher volume sales.

Staffing costs should ideally stay between 15-25% of total sales to ensure profitability

Insiders often say that staffing costs should ideally stay between 15-25% of total sales to ensure profitability in a craft brewery.

This range allows breweries to maintain a healthy balance between paying their staff fairly and keeping enough revenue to cover other expenses like ingredients, equipment, and marketing. If staffing costs exceed this range, it can eat into profits and make it difficult for the brewery to sustain itself financially.

On the other hand, if staffing costs are too low, it might indicate that the brewery is understaffed, which can lead to poor customer service and ultimately hurt sales.

However, this percentage can vary depending on specific factors such as the size of the brewery, its location, and the type of services it offers. For example, a brewery with a large taproom or restaurant might have higher staffing costs due to the need for more service staff, while a smaller operation focused solely on production might keep staffing costs on the lower end of the spectrum.

The average turnover rate for brewery staff is 50%, so budget for moderate recruiting and training costs

Most people overlook the fact that brewery staff turnover is quite high, averaging around 50%.

This high turnover rate can be attributed to the seasonal nature of the craft beer industry and the physical demands of the job. Many employees are young and transient, often moving on to other opportunities or industries.

As a result, breweries need to budget for moderate recruiting and training costs to keep operations running smoothly.

However, turnover rates can vary depending on the size and location of the brewery. Smaller breweries in tight-knit communities might experience lower turnover, while larger ones in urban areas could see higher rates.

60% of craft breweries fail within the first three years, largely due to cash flow issues

It's worth knowing that 60% of craft breweries fail within the first three years, primarily due to cash flow issues.

Starting a craft brewery requires a significant initial investment in equipment, ingredients, and facilities, which can strain financial resources early on. Additionally, the seasonal nature of beer sales can lead to unpredictable revenue streams, making it difficult to maintain a steady cash flow.

Many new breweries also face intense competition, which can limit their market share and further impact their financial stability.

However, the success rate can vary depending on factors such as location, business model, and management expertise. Breweries that focus on unique offerings or have a strong local following may find it easier to navigate these challenges and achieve long-term success.

Breweries should aim for a break-even point within 24 months to be considered viable

Maybe you knew it already, but breweries should aim for a break-even point within 24 months to be considered viable because it indicates that the business can sustain itself financially in a competitive market.

In the craft brewery industry, achieving this milestone quickly is crucial due to the high initial costs of equipment, ingredients, and labor. If a brewery takes longer than 24 months to break even, it may struggle to cover these costs and risk running out of capital.

However, this timeline can vary depending on factors like location, market demand, and the brewery's business model.

For instance, a brewery in a high-demand area with a strong local following might reach its break-even point faster. Conversely, a brewery in a less populated area or one that focuses on niche products may take longer to achieve financial stability but could still be successful in the long run.

Beer profit margins are generally 50-60%, making taproom sales crucial for profitability

Believe it or not, beer profit margins in craft breweries are typically between 50-60%, making taproom sales a key factor for profitability.

When a brewery sells directly to customers in its taproom, it cuts out the middleman, allowing them to keep a larger portion of the revenue. This is crucial because distribution costs and retailer markups can significantly eat into profits when selling through other channels.

In a taproom, breweries can also offer a unique experience, which can attract more customers and increase sales.

However, the importance of taproom sales can vary depending on the brewery's size and location. For instance, a small brewery in a tourist area might rely heavily on taproom sales, while a larger brewery with a strong distribution network might have more balanced revenue streams.

Prime cost (ingredients and labor) should stay below 50% of revenue for financial health

Experts say that keeping the prime cost—which includes ingredients and labor—below 50% of revenue is crucial for the financial health of a craft brewery.

This is because a lower prime cost allows for more flexibility in pricing and helps maintain a healthy profit margin, which is essential for covering other expenses like rent, utilities, and marketing. If the prime cost exceeds 50%, it can squeeze the brewery's profitability and make it difficult to sustain operations.

However, this 50% benchmark can vary depending on the specific circumstances of the brewery.

For instance, a brewery that focuses on high-end, specialty beers might have higher ingredient costs but can offset this with premium pricing. Conversely, a brewery with a strong local following might benefit from lower marketing costs, allowing for a slightly higher prime cost while still maintaining financial health.

Breweries should ideally reserve 1-2% of revenue for equipment maintenance and replacement annually

Few yoga centers' equipment needs compare to those of a craft brewery, where reserving 1-2% of revenue for equipment maintenance and replacement is crucial.

Craft breweries rely heavily on specialized equipment like fermenters, kettles, and bottling lines, which are essential for maintaining product quality and consistency. Regular maintenance helps prevent unexpected breakdowns that could disrupt production and lead to significant financial losses.

By setting aside a small percentage of revenue, breweries can ensure they have the funds available for both routine maintenance and unexpected repairs.

However, this percentage can vary depending on factors such as the age of the equipment and the size of the brewery. For instance, a newer brewery with modern equipment might require less frequent maintenance, while an older brewery might need to allocate more funds to keep aging machinery in good working order.

A successful brewery turns over kegs at least 1.2 times during peak weekends

Please, include that in your business plan: a successful brewery turns over kegs at least 1.2 times during peak weekends because it indicates a high demand for their beer.

This turnover rate suggests that the brewery is effectively managing its inventory and production to meet customer needs. It also reflects a strong customer base that consistently chooses their products over competitors.

However, this rate can vary depending on factors like location and seasonality.

For instance, a brewery in a tourist-heavy area might experience higher turnover during certain times of the year. Conversely, a brewery in a smaller town might have a lower turnover rate but still be successful if it has a loyal local following.

Inventory turnover for raw materials should happen every 14-21 days to ensure freshness and quality

A precious insight for you, inventory turnover for raw materials in a craft brewery should ideally occur every 14-21 days to maintain the freshness and quality of the ingredients.

This frequency ensures that the hops, grains, and yeast used in brewing are at their peak condition, which is crucial for producing high-quality beer. Fresh ingredients contribute to the flavor profile and overall taste, which are essential for a craft brewery's reputation and customer satisfaction.

However, the ideal turnover rate can vary depending on the specific type of beer being brewed and the seasonal demand.

For instance, a brewery producing a high volume of a popular seasonal beer might need to turn over its inventory more frequently to keep up with demand. Conversely, a brewery focusing on specialty or limited-edition brews might have a slightly longer turnover period, as these beers often require unique ingredients that are not used as frequently.

It’s common for breweries to lose 2-4% of revenue due to spillage or inventory shrinkage

This is insider knowledge here, but it's common for breweries to lose 2-4% of revenue due to spillage or inventory shrinkage.

In a craft brewery, the process of brewing involves handling large volumes of liquid, and even a small mistake can lead to significant beer loss. Additionally, the nature of craft brewing often involves frequent experimentation with new recipes, which can result in batches that don't meet quality standards and must be discarded.

Moreover, inventory shrinkage can occur due to inaccurate record-keeping or theft, both of which are challenges in any business dealing with high-value consumables.

However, the extent of these losses can vary significantly depending on the brewery's size and operational efficiency. Smaller breweries might experience higher percentages of loss due to less sophisticated equipment, while larger operations may have more resources to invest in loss prevention strategies.

A brewery’s rent should not exceed 8-12% of total revenue to avoid financial strain

Most of the yoga centers' financial guidelines suggest that a brewery's rent should not exceed 8-12% of total revenue to avoid financial strain.

This percentage ensures that a brewery maintains a healthy balance between fixed costs and other operational expenses, such as ingredients and labor. If rent costs are too high, it can squeeze the budget for these essential areas, potentially impacting the quality of the beer and the overall business.

For a craft brewery, which often operates on tighter margins, keeping rent within this range is crucial to ensure sustainable growth and profitability.

However, this percentage can vary depending on specific circumstances, such as the brewery's location and size. For instance, a brewery in a high-rent urban area might need to adjust its revenue expectations or find ways to increase sales to accommodate higher rent costs, while a smaller brewery in a rural area might have more flexibility with lower rent expenses.

Upselling during taproom events can increase average ticket size by 15-25%

Not a very surprising fact, upselling during taproom events can boost the average ticket size by 15-25% for craft breweries.

When people attend these events, they're often in a relaxed and social mood, making them more open to trying new things. This is the perfect opportunity for staff to suggest premium or limited-edition beers, which can significantly increase the total spend per customer.

Additionally, offering food pairings or merchandise can further enhance the experience and encourage customers to spend more.

However, the effectiveness of upselling can vary depending on the type of event and the demographics of the attendees. For instance, a beer tasting event might see higher upselling success compared to a casual gathering, as attendees are already primed to explore and purchase more.

The average profit margin for a brewery is 8-12%, with higher margins for direct-to-consumer sales

This valuable insight highlights that the average profit margin for a brewery is typically between 8-12%, with higher margins often achieved through direct-to-consumer sales.

One reason for this is that selling directly to consumers, such as through a taproom or brewery-owned retail outlet, allows breweries to eliminate the middleman and retain more of the sales revenue. Additionally, direct sales often involve higher price points compared to wholesale distribution, further boosting profit margins.

However, these margins can vary significantly depending on factors such as location, scale, and business model.

For instance, a brewery located in a high-rent urban area might face higher operational costs, which could reduce its profit margins. Conversely, a brewery that successfully leverages local ingredients and community support might enjoy lower costs and higher margins, especially if it can cultivate a loyal customer base through unique offerings and experiences.

Average check amount should grow by at least 4-6% year-over-year to offset rising costs

This insight highlights the need for a craft brewery's average check amount to grow by at least 4-6% annually to counteract rising costs.

In the craft brewing industry, costs such as raw materials, labor, and distribution are continually increasing, which can squeeze profit margins if not addressed. By increasing the average check amount, breweries can maintain their profitability and continue to invest in quality and innovation.

However, the exact percentage increase needed can vary depending on specific factors such as location, competition, and the brewery's unique cost structure.

For instance, a brewery in a high-cost urban area might need to increase its average check by more than 6% to keep up with local expenses. Conversely, a brewery with a strong local following and lower overhead might manage with a smaller increase, as long as they maintain customer loyalty and brand strength.

Ideally, a brewery should maintain a current ratio (assets to liabilities) of 1.5:1

This data does not come as a surprise.

For a craft brewery, maintaining a current ratio of 1.5:1 is crucial because it indicates a healthy balance between assets and liabilities. This ratio ensures that the brewery has enough liquid assets to cover its short-term obligations, which is vital for smooth operations.

Craft breweries often face seasonal fluctuations in demand, so having a buffer in the form of a higher current ratio can help them navigate these changes without financial strain.

However, this ideal ratio can vary depending on specific circumstances, such as the brewery's growth stage or market conditions. For instance, a newer brewery might operate with a lower ratio as it invests heavily in expansion and equipment, while a more established brewery might aim for a higher ratio to ensure stability and risk management.

Effective taproom layout and design can boost revenue by 10-20% by enhancing customer experience

Yes, an effective taproom layout and design can indeed boost revenue by 10-20% by enhancing the customer experience in a craft brewery.

When customers walk into a taproom, they are looking for more than just a drink; they want an experience that feels welcoming and engaging. A well-thought-out design can create a comfortable atmosphere that encourages patrons to stay longer, try more beers, and even bring friends along next time.

Moreover, a strategic layout can optimize the flow of foot traffic, making it easier for customers to order and receive their drinks without feeling crowded or rushed.

However, the impact of design can vary depending on specific factors such as the size of the taproom and the target demographic. For instance, a smaller taproom might benefit more from cozy, intimate seating arrangements, while a larger space could focus on creating distinct zones for different activities, like tasting flights or social gatherings.

A brewery should have 1-1.5 square meters of production space per barrel to ensure efficiency

Did you know that a brewery should have 1-1.5 square meters of production space per barrel to ensure efficiency?

This guideline helps maintain an optimal balance between equipment, storage, and workflow, which is crucial for a craft brewery's success. Adequate space allows for the smooth movement of ingredients and personnel, reducing the risk of accidents and delays.

However, the specific space requirements can vary depending on the type of beer being produced and the equipment used.

For instance, breweries focusing on barrel-aged beers might need more space due to the additional storage requirements. Conversely, a brewery with highly efficient, compact equipment might operate effectively with less space per barrel.

Health inspection scores can directly impact foot traffic and should stay above 85%

This data highlights how crucial it is for a craft brewery to maintain high health inspection scores, as these scores can significantly influence customer foot traffic.

When a brewery's health inspection score drops below 85%, it can raise red flags for potential customers, who may associate lower scores with poor hygiene and safety standards. This perception can deter visitors, impacting the brewery's reputation and bottom line.

Conversely, maintaining a score above 85% can reassure customers that the brewery is committed to high standards of cleanliness and safety.

However, the impact of these scores can vary depending on the brewery's location and customer base. In areas with a high concentration of breweries, competition is fierce, and a low score can be more damaging, while in regions with fewer options, loyal customers might be more forgiving.

Breweries in urban areas often allocate 2-4% of revenue for distribution partnerships and fees

This data point highlights how breweries in urban areas often allocate 2-4% of revenue for distribution partnerships and fees due to the competitive nature of the market.

In urban settings, there is a higher concentration of breweries, which means that craft breweries need to work harder to get their products noticed. By investing in distribution partnerships, they can ensure their beers are available in more locations, which helps them stand out in a crowded market.

These partnerships often come with fees, which is why a portion of revenue is allocated to cover these costs.

The percentage of revenue allocated can vary depending on the size of the brewery and the specific distribution agreements they have in place. Smaller breweries might spend a higher percentage to gain market access, while larger ones might negotiate better terms due to their higher production volumes.

Digital marketing should take up about 4-6% of revenue, especially for new or growing breweries

Actually, digital marketing should take up about 4-6% of revenue for new or growing breweries because it helps them establish a strong presence in a competitive market.

For craft breweries, which often rely on local and niche audiences, digital marketing is crucial for reaching potential customers who might not be aware of their products. By investing in digital marketing, breweries can effectively use social media platforms and targeted ads to build brand awareness and engage with their community.

However, the percentage of revenue allocated to digital marketing can vary depending on the brewery's specific goals and market conditions.

For instance, a brewery in a highly competitive area might need to spend more to stand out, while one with a unique product offering might spend less because of its inherent appeal. Additionally, established breweries with a loyal customer base might allocate a smaller percentage to digital marketing, focusing instead on retention strategies and word-of-mouth promotion.

Seasonal beer releases can increase sales by up to 30% by attracting repeat customers

It's very common for craft breweries to see a sales boost of up to 30% with seasonal beer releases because they attract repeat customers.

These limited-time offerings create a sense of urgency and exclusivity, encouraging customers to return to try the new flavors. Additionally, seasonal beers often align with festive occasions or weather changes, making them more appealing during specific times of the year.

For instance, a pumpkin ale might be more popular in the fall, while a refreshing citrus beer could see higher sales in the summer.

However, the success of these releases can vary depending on factors like local preferences and the brewery's marketing efforts. Craft breweries that effectively promote their seasonal offerings and engage with their community are more likely to see a significant increase in sales.

Establishing a raw material cost variance below 4% month-to-month is a sign of strong management and control.

A lot of craft breweries strive to maintain a raw material cost variance below 4% month-to-month because it indicates strong management and control.

In the brewing industry, raw materials like hops, malt, and yeast can fluctuate in price due to factors like seasonal availability and supplier changes. Keeping these costs stable within a 4% variance shows that the brewery has effective cost management strategies in place and is adept at forecasting and planning.

This level of control is crucial for maintaining consistent product quality and pricing, which are key to customer satisfaction and business sustainability.

However, the acceptable variance can differ based on the size and location of the brewery. Smaller breweries might experience higher variances due to limited purchasing power and less negotiating leverage, while larger breweries might achieve even lower variances due to economies of scale and more stable supplier relationships.