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Building a Brewery

Building a Brewery

Imagine you’re sitting at a bar and you overhear someone say that they are thinking of starting a new business in a Kensington basement.

“Are you kidding me? Why the hell would you do that? What, are you planning on selling meth?”

Tom Sheridan is no Walter White, but the founder of Do Good Brewing Company is trying to start up a manufacturing business of a different kind in his Philadelphia neighborhood. Sheridan, a local kid with a gruff Philly accent, has a dream to start a brewery whose beer will be a staple in bars at various Kenzo corners.

Sheridan’s vision of starting a brewery is not an uncommon one for homebrewers, and he’s jumping into the industry with only three years of homebrewing experience. But do you and your friends really know about the kinds of challenges awaiting you if you do decide to set out on such a venture? Sheridan, a savvy business owner with quick wits and balls of steel thought he was up to the task.

“Our vision was to brew a neutral beer that neighborhood guys could drink and have a charity attached to it. We’re not doing it as some gimmick, but [to] actually make sure the money gets dedicated to [each cause],” Sheridan explained.

A percentage of proceeds from each beer Do Good sells goes to its respective cause. The nano-brewery distributes its signature United Ale—a neutral session ale with a little bit of coriander and blood orange—at 16 neighborhood bars in Philadelphia, most of which are located within a mile of the brewery. The brewery unveiled its second style, the Milk Street Stout, in February.

Do Good has been able to keep up with production demands despite a small 3.5 barrel system in a tiny, but cozy, 1,400 square foot room found in the basement of a cooperative art space. There you’ll find Sheridan chewing at a cigarette with his qualified, albeit, ragtag team of helpers stirring away at a new brew early on Sunday mornings.

“You don’t need elaborate stuff [to brew beer],” Sheridan explained. “This system won’t make money but it’s a proof of concept to prove that we can make beer and buyers will keep buying it. The next step is a 10 to 15 barrel system. This is the highest you can go [with equipment] before hitting six-figure numbers. Everything in here cost $65,000—just one element of a 10 to 15 barrel system could cost $100,000. This is the best way for us to start.”

While Sheridan rents his brewery space for a mere $450 dollars a month, he sees his brewery expanding in the future, but only when the time is right. Whereas Sheridan is that guy at the bar clamoring about opening up a nano-brew in Kensington, the guy next to him is chatting about building an idealized, elaborate, 20 barrel system right off the bat with a few of his drinking buddies. They pull out their smart phones, create a Facebook Page and announce their newly conceived brewery to the world. They may meet again and cobble together a business plan, but in reality, these are just a couple of guys with a few catchy beer names and even fewer business strategies. They figured out how big they’re going to be without looking at the numbers first.

John Companick, Mike Oliver, Scott Reading—three guys from New Jersey with wives and day jobs—didn’t want to be just another “Facebook Brewery.” The first time they met about making a brewery was in 2011, and it was not a serious meeting by any stretch. But like those guys back at the bar, these Jersey Boys said “we can do it too” and now they are the founders of Spellbound Brewing in Mount Holly, NJ, which distributes to liquor stores and bars in South Jersey’s Burlington, Mercer, Monmouth, Ocean and Camden counties.

“When people come together in groups and you drink, that’s a bad thing,” Companick said. “That’s when you say that it’ll be easy. You don’t think about the business side when you’re drinking with your buddies.”

Unlike Sheridan, the guys at Spellbound had no entrepreneurial experience going in. As they became serious about their brewing aspiration and began crafting their business plan, they looked to others for help. The team used several resources to get things moving in the right direction, including a business program at Rutgers University and plenty of Google searches. They even got a couple of other breweries to share business plans with them.

“As homebrewers, we were always hanging out at breweries, talking to their owners and other brewers. We always asked a lot of questions,” Companick said. “While the other breweries’ business plans didn’t completely apply to us, they encouraged us take them and see what we could learn from it. They all said to buy as big as you possibly can and stretch yourself as far as you can. They told us to make sure to leave some money in the bank because it always takes longer than you expect and you’re going to have to be paying for rent and utilities.”

With this knowledge, Companick, Oliver and Reading got a business plan together that they thought was real. It outlined their vision, what they had in terms of personal assets, what they needed to get and what they wanted to get. Using funds from an SBA loan, Spellbound Brewing boasts a 20 barrel brewhouse with an in-house canning line that can run 36 cans per minute.

“We mostly focus on being a production brewery—canning lines only, we don’t do any bottles,” Companick said.

The brewery’s operation was intended to be large enough to generate profits through production, as the founders initially believed that what they’d be selling in a tasting room would be negligible to what they’d make through outside distribution. But business plans can always change and a New Jersey law altered the plan not soon after the brewery’s incorporation papers had been signed.

“We incorporated in August 2012 and we had no idea that there was going to be a law that would pass in September 2012 that would allow breweries with a limited brewery license to actually serve pints,” Companick said. “The rule that we were prepared for was that you’d come into a brewery, have to do a tour first, have a couple samples, buy up to two six packs and then have to leave. That’s the way it was and that was one of the things we were up against when we went with a bigger business model. Then, all of a sudden, our tasting room went from small to big and for us, that’s great.”

Along with other brewers and lawmakers, Spellbound also found their resident municipality to be a huge help. When the new brewery reached out to officials in Mount Holly, the township assured the brewers that they would help anyway they could. The township was true to their word. Before Spellbound even needed permits, the township was there handing the paperwork over to them. This helped cut time and costs dramatically.

“We figured we would have to get in front of a zoning board and get this placed rezoned. We’d have to pay to just get everything set up and prepared for the zoning board, but the zoning board handled all of that for us,” Companick said.

The township even helped out with expensive infrastructural issues. All sites have their unique issues and when work began on the Spellbound site, it was discovered that the iron content of the water was too high to use in a brew. The brewery worked with their landlord to pay for water filters to improve the quality of the water, but traces of iron still remained thanks to the building’s 78-year-old water main. Spellbound asked if there was any way to work with the water company, their landlord and the township to improve the situation, but replacing a water main seemed like it a pipe dream. Such invasive roadwork probably wouldn’t be a priority for the township, especially if it was only helping one small business out.

“Then one day I was driving here while we were doing the build out and noticed a detour on my way in,” Companick recalled. “I thought to myself, ‘I wish that this road work and detour would be from the township giving us a new water main.’”

As it turns out, that was exactly what was going on, as Mount Holly switched out part of the main and moved Spellbound’s water connector to the top in order to help remove any excess iron.

“That helped everything. It’s important that the town you’re going into is favorable to what you’re getting into.”

As a production brewery, focusing on getting product out of the brewery to be sold at bars and liquor stores was paramount for Spellbound. In order to ensure consistent production, all equipment had to be working properly and efficiently. If any brewhouse equipment were to break or was set up incorrectly, the brewery wouldn’t be able to produce beer, and that’s something that no brewery can afford. To avoid equipment issues early on, Spellbound bought new equipment from brewer-recommend vendors and worked with vendor representatives to test all brewing and canning equipment with water, making sure that everything worked and that the nuts and bolts were tight. Once everything was in order, the brewery began making beer. Their first two styles were an IPA and a porter.

“We didn’t cut many corners [with equipment] and still went with the biggest system like we originally wanted,” Companick said. “We got a bigger chiller because we wanted to make sure that at no point in time we would have to shut our operation down. We could have lost days, weeks, whatever it may be. If you try to save $1 now you may be paying $5 down the road. We just assumed we were going to be successful. If we’re not, that sucks, but we’re going to give it every little bit that we could possibly give.”

It’s now past happy hour. The man who wants to open shop in a Kensington basement has since left the bar to scrub his brewery’s floor, the guys playing with Facebook have gone home to charge their smart phones, and three new men enter the bar. They sit down, order a round and begin to have a discussion. Unlike the other men sitting around them, these three gentlemen are no strangers to building breweries—many (but certainly not all) of their questions on how to build a brewery have already been answered. The question they are asking themselves is where to build one next.

As breweries like Do Good and Spellbound begin to start up in a growing, yet incredibly saturated beer scene, Iron Hill Brewery just keeps springing up in new locations across the tri-state area. Iron Hill is run by partners Kevin Finn, Mark Edelson and Kevin Davies. Finn and Edelson were college friends who became award-winning homebrewers. With those accolades they teamed up with Davies, an experienced professional in restaurant operations, and opened up a brewpub in 1996 in Newark, DE. Now, almost 20 years later, Iron Hill Brewery has 11 locations in three states, the newest having just opened up in Ardmore, PA.

Because Iron Hill is an established company with fewer financial worries, equipment quirks and licensing headaches that a start up brewery may have, that doesn’t mean that each new brewery Iron Hill puts up is a simple job.

“Shit happens,” Edelson said. “We don’t get a piece of dirt and build a square Iron Hill. Each building is different and we continue to get surprises at each site. You’d think we’d be done with the surprises. We’ve solved some surprises but have found plenty of new ones.”

The newest Iron Hill Brewery in Ardmore was an old auto factory 50 years ago. Most recently, it was a carpet store. As construction began and plumbing was being put in, old basements were found beneath the floors.

“Someone hid [these basements] and wished they went away,” Edelson said. “It was our obligation to fill them and it cost us between $50,000 and $60,000 to fill them with dirt. Luckily, we found no bodies or anything, or at least we didn’t tell anybody. When you go into old existing buildings, not something you built yourself, there’s always something and surprises always cost money. But had we opened the basement and found gold, then it’d be a different story.”

While the prospects of finding gold in a hidden basement are far-fetched, the chances of any new brewery reaching the success of an Iron Hill Brewery is slim to none. While many believe their business plans and recipes are the key to building the next big-money brewery, it’s important to sit down and realize the level of risk it takes to take those goals on.

“All entrepreneurs have their baby ideas but only half a percent of those babies turn into toddlers and almost none turn into adults,” said Sheridan, as he wrapped up a day of brewing in Do Good’s small Kensington basement. “I have a book of ideas I wish I could do and almost all would fail. The core of our vision, for the most part, has stayed the same. Where it has shifted is that we wanted to launch six kinds of beers and that can’t happen any more. We wanted three kinds of bottles, we wanted to be in 50 bars in the first 6 months—that’s not going to happen. We just cannot do it.”

Sheridan knows that if he wants his business to grow he will have to be diligent, resourceful and willing to take risks.

“If you’re starting a brewery you have to be risk averse. It’s scary as hell. The account goes up and down, you have to be okay with that,” he said. “This takes lot of work. We are here starting at 5AM on brew days. When it’s during the week, it’s all about dropping off kegs, picking up kegs, dropping off invoices, getting moneythere’s a lot of work that goes into something that doesn’t make any income, so you need to have a passion that drives you and so far it’s been driving the brewery well.”

He hopes to be in the same playing field as the big guys some day, and hopes to grow his brewery soon, potentially getting a warehouse on Richmond Street or Frankford Avenue in the next four to six months.

“Currently, we have some investors and the dream is to find another investor for that next stage, but if that’s not here, we’ll go after more traditional funding,” Sheridan said. “This is a $60,000 to $70,000 project and that next step is a $400,000 to $600,000 project. It’s just like we’re buying real estate.”

But for now, Sheridan is relishing the small victories, proof that his dream is very much alive and on the right path.

“We just got a new account and we knocked Sam Adams off that bar’s tap. I was happy as shit! It’s a proud feeling to see a local guy drink your beer,” he said. “When you can get your tap in-between major players like Yuengling and Miller, it’s awesome.”

About Mat Falco

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