Distillery Business Plan: What Is It All About?

Let’s first touch on what a distillery is. A distillery is an establishment where the making of strong alcoholic drinks through the process of distilling takes place. Alcoholic drinks are oftentimes also called liquors or spirits. The main ingredients usually found in the making of strong alcoholic drinks are yeast, sugar, alcohol, and carbon dioxide. The actual process itself involves preparing, mashing, fermenting, distilling (evaporation and condensation), ageing, and blending. To make all of this work, a distillery needs to have the right equipment, such as stills, mills, pumps, valves, and storage tanks, the right manpower to run the whole operation, and the right business plan to start generating revenue to sustain the whole business operation

A distillery business plan is a written document on how a business goes through the process of accomplishing its goals. It’s a marketing, financial, and operational plan to keep the distillery business operating and flourishing. The distillery is one of the oldest industries that have survived and thrived, for obvious reasons. Drinking alcoholic beverages has been a part and parcel of any culture there is, regardless of the type of drink. From the street corners to the upper echelons of the society, almost everyone has their own taste for an alcoholic beverage. It’s a source of conversation starter, or a symbolic gesture of closing a business deal. The distillery business is here to stay, and have proved to be a profitable trade through the years.

Starting your Own Distillery Business

Just like any other industry, there are a lot of things to consider when starting your own distillery business. Not only do you need a large capital upfront, you also need to have the right set of tools, the right skillset and manpower required to run the operation, the right knowledge of the whole distillation process and, of course, the appreciation and passion for alcoholic beverages. You certainly cannot go into the alcoholic beverage industry without a certain love for an American Schnapp or a good ol’ bourbon!  Aside from that, here are the other things to consider when starting up a distillery business.

Financial Costs and Expenses: Like we’ve mentioned, opening a distillery doesn’t come cheap. Some of the factors that affect the financial aspects of a distillery business are: 1) Establishment structure and location – You should already have in mind how big a distillery you wanted to have. There are costs associated with putting up a building, such as rental and leasing fees. 2) Tools and Equipment – A distillery business doesn’t just require any ordinary piece of equipment. These equipment are specific, and sometimes personalized, to the distillation process itself. 3) The startup and overhead expenses – Like in any business, you need to set up a budget for your startup costs and overhead expenses, such as paying for the permits and business licenses fees, rental/lease, utilities and maintenance fees, employees’ salaries, branding and marketing, and even for the maintenance of the storage space for the aging process of the alcoholic drink.Target Market: Who will be the people buying your product is an important factor to think about. By now, you should have a concept on the type of alcoholic drink you’ll be making. This is determined by the amount of alcohol, or ABV (alcohol by volume) content you wanted to have in your products. You would want to know to whom you’ll be selling your products, that group of people who have a particular liking to the type of products you’ll be making. Of course, you wanted your market to be wide and as diverse as possible, but having a specific target market helps pull in that steady revenue stream to keep your business in operation. To identify your target market, you can do a demographic classification of your customers according to age, gender, income, lifestyle, et cetera.Product Pricing: How to put a price on your products is a major factor to consider since the revenue stream will determine how long you can sustain your business operation. Be sure that when doing your pricing, you are also determining the market conditions around a distillery business. To help you out, you can do any of the following three common pricing methods: the skimming method, the neutral method, and the penetration method. The skimming method is the strategy of charging high prices initially, and then lowering the prices over time. This strategy is typically being used for new, innovative products. The neutral method is based on the average price on the market for the same product. The penetration method is the opposite of the skimming method. Business owners initially offer a low price for their products, with the intention of cutting off their competitors so that they will be also forced to lower their own prices.Naming Your Business: Another determining factor for the success of your distillery business is how you name your business, or the branding of your business. Branding is an important marketing strategy that will determine the popularity of your product. You would want your distillery business to have a name that can become a household name, a name that’s catchy, easy to remember, and also relatable to the current market out there. Having an effective branding will boost your distillery business’s success, not to mention have an impact of potentially increasing your revenue stream.

Creating that Effective Distillery Business Plan

Starting a business means that you need to evaluate the requirements and the risks involved in the whole operation. Since there are a lot of factors to consider when setting up a distillery business, you need to have a good and effective business plan as your roadmap. Aside from setting the guidelines and the process on how to accomplish the business goals, a business plan is also used as a documentary presentation when trying to secure funding or a startup capital from financial lending institutions or potential investors. Investors would like to be assured that the business owner has the right plans in place in generating the revenue to pay off the loan amount, as well as having the right contingency plans in case of unforeseen circumstances that would put the business operation at risk. So, how do you go about creating that effective distillery business plan?

Step 1: Give an Executive Summary

Your executive summary should contain an outline of your distillery business’s goals. It should provide a brief highlight into the business’s strategy, and could also include the mission and vision statement. The mission statement should explain what was the purpose for setting up the distillery business. The vision statement is what your business hopes to accomplish in a certain period of time. Having a well-written and well-thought of executive summary, including the mission and vision statements, could set the tone for the overall purpose of the business plan.

Step 2: Identify your Products

In this section, outline all the distillery products to be produced by your company. Your products could be based on the alcohol by volume (ABV), or could be based on the common types of alcoholic distilled drinks such as vodka, whiskey, gin, rhum, brandy, and so on. Aside from listing down the products, you could also include the prices for each product, the products’ lifespan, the manufacturing process, and applicable patents and proprietary technology that were used in the making of these products.

Step 3: Create your Market Analysis

The market analysis for a distillery business should explain what are the conditions surrounding the distillery industry and if there is a need for it in the current market. This should provide the foundation for your marketing and sales strategies later on. Part of doing a market analysis is to identify your target market, the current economic trend of the distillery industry, and your existing competitors. Another way to do an effective market analysis is conducting a SWOT analysis. SWOT means Strengths, Weaknesses, Opportunities, and Threats. Strengths are those that you identify as something good that stood out, or the unique characteristics of your distillery business. It could be that you have come up with a new brand of tequila, or your very own cocktail mix. Weaknesses are those factors in your business that need improvement, or maybe more support. It could be in the form of lack of ingredients for producing a certain drink mixture, or even lack of funds to further develop a new product. Opportunities are those situations that you could take advantage of to further your business. These could be the current marketing platforms through social media, having a famous person to patronize your brand, and so on. Threats are those conditions or factors that could put your business at risk. Threats could come as a form of new competitors in the area, or even unforeseeable events that could affect the whole business operation such as bad weather conditions, or force majeures.

Step 4: Marketing and Sales Strategy

A marketing strategy in a distillery business refers to the strategic positioning of the distillery brand in the market. An example of a marketing strategy for a distillery business is having a good brand name, a catchy logo, and a creative slogan.  These three are your business identifiers and would represent your products to the market, and so it’s best to invest and have a good product design and marketing team on board. A sales strategy is the distillery business’s specific sales action plans to acquire new customers and retain existing customers, and to generate sales revenue that can sustain the whole business operation. An example of a sales strategy could be increasing the online presence of the distillery business in the social media platforms. Another could be increasing the number of field sales personnel to approach local bars or restaurants to promote or sell your products.

Step 5: Financial and Budget Planning

This is usually done in a financial statement format, presenting the budget/capital versus the expenditures. As a new business, you would want to itemize the list of your estimated expenses, which should include the startup and overhead costs. This would amount to the total capital you would need to secure to fund your distillery business from either financial lending institutions or from potential investors. You could also include the estimated income revenue targeted amount you could secure based from your sales and marketing plan within a given period of time.

FAQs

What is the usual operation inside a distillery plant?

Having a distillery plant usually entails a large operation. Common processes that happened inside a distillery plant involve: the distillation process itself through mash preparation, fermenting, distilling, aging, and blending; the planning and designing of new product spirits, or alcoholic drinks; the testing of the product; and the marketing and selling of the alcoholic drinks.

What is an alcoholic drink and its classifications?

An alcoholic drink is a processed and manufactured drink that contains alcohol, or also known as ethanol. It has three classifications: wines, beers, and distilled beverages. The difference between all three are usually the alcohol by volume (ABV), or the measure of the alcoholic strength found in each of these drinks classification. A regular beer’s ABV is typically around 5-10%, wine is about 12% and up, and a distilled beverage is usually around 30-40%.

What are the skills or qualifications needed in a distillery business?

Although not an “actual” requirement for setting up a distillery business, still, it would be good to have some specific skill sets or knowledge when starting the business. You have the option of pursuing courses in technical colleges such as brewing and distilling. Having a course certificate could add to your credibility as a distillery business owner. There are some organizations that offer programs and courses for a certification as a Master Distiller. Other than that, you also need to have on board and part of your business operation are some good marketing and sales staff, and some personnel manpower to run the production operation.

There’s nothing like ending a busy and stressful day with a shot of that golden liquid that warms and calms you down to your feet. And we’re not just talking about a whiskey shot here. The thing is, you have a wide variety of alcoholic beverages to choose and enjoy. That’s what the distillery business hopes to bring to its customers. A sense of enjoyment, peace, and fulfillment with every sip from their own products. Distillery businesses put a lot of effort into making that drink that keeps their customers coming back and wanting for more. Their successful planning and strategies are found in their very own distillery business plan. 

Want to find out how to start running and operating a distillery business like a pro? Check out our distillery business plan templates. It is a step-by-step, easy to fill out, and easy to follow through guide that can start you off on your distillery business. Download one now, and start taking those steps towards being a successful entrepreneur in the distillery trade!