Three Basic but Vital Tips to Open a Brewery in New York

With craft breweries, the industry may have many things to toast for. The 2018 data from the Brewers Association revealed that overall sales for this market segment grew by 3.9%. It even bested imported beer, which rose by 3.6%.

Imported beer still owned a more significant market share than craft at 18.4%. However, the craft beer sector increased its market value by 7% and earned over $27 billion. In New York, the number of craft breweries ballooned to 400, according to Governor Andrew Cuomo. It surpassed the previous record that dated to 1876.

With these numbers, the industry sounds like a lucrative field. The question is, how does one open a brewery in states like New York?

1. Start with USP

USP stands for unique selling proposition. With hundreds of breweries and brewpubs in the market, how can a business stand out?

Here are a few ideas:

  • Reintroduce classic or noble hops, such as German Hallertau hops
  • Organize a hops or brewery workshop
  • Offer sample sizes of specialty beers for the price of one
  • Create a simple but unique loyalty program

Finding a business’s USP can be difficult. An excellent way to narrow the options is to develop a business plan. It provides not only direction but also clarity on the business model.

2. File the Necessary Applications and Permits

While pubs are acceptable in New York, the state still has complicated laws on the manufacturing and selling of beers. For example, businesses may not open in certain areas. These are usually places near residential communities.

Manufacturers or business owners also need to comply with many permits:

  • They should apply for a federal license from the Alcohol and Tobacco Tax and Trade Bureau (TTB). They can lodge one online for free, but it may take over two months to get approval.
  • They also have to pay for state licenses, depending on how many barrels they intend to produce and the nature and size of the business. For example, a microbrewer may pay over $800. It climbs to more than $6,000 when they manufacture not less than 75,000 barrels annually.

These fees are on top of the brewer’s bond. This collateral guarantees TTB the brewery doesn’t fail from paying the excise tax. The federal tax can be $0.58 per gallon, depending on the volume or location. The state can also levy it, although New York has one of the lowest excise tax rates.

Another essential document to have is a marketing permit. It allows breweries to sell their products off-premises. These include farmers’ markets and state and county events.

3. Get Ready for the Startup Costs

Working Process at Brewery

Breweries can cost a lot of money. It can be as much as $2.5 million, primarily for expensive states like New York. To help reduce spending, businesses can consider operating as an LLC (limited liability company).

LLC is a form of partnership that can prevent double taxation. In a corporate structure, the business pays tax on their yearly earnings while the shareholders settle taxes on dividends. LLC avoids it by letting the members pay taxes on what they get from the company, not by the amount the business earns. Forming partnerships can also increase cash flow fast. It can also boost the chances of the business to receive financing from lenders, such as banks.

New York is home to millions of people and welcomes thousands of tourists each year. It makes the state attractive to breweries. Setting up a brewery, though, is time-consuming and challenging. Potential manufacturers can spend less time brooding on what to do by knowing the basics.

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