The Economics of Small-Scale Distilleries

Establishing small-scale distilleries

Starting up a distillery can be costly. From premises and licensing fees, building (especially if creating tasting room, tour facilities and shop facilities), stills, equipment, ingredients, bottles and marketing your brand all add up quickly – this includes time taken before seeing profits as operating costs must first be covered before any potential profits become visible; which could take years at least!

As with any business, distilleries must navigate carefully on their journey towards profitability and the distillery industry is no exception. One common pitfall involves cutting back investment in brand building to reduce marketing and sales expenses; this will diminish product availability in the market place as well as create repeat and new customer interest and ultimately affect strategic profitability in the long term.

Purchase and inventory management are also critical elements to be carefully considered. While it can be tempting to buy everything that goes on sale, making this your number-one priority can be costly and compromise a healthy cash flow.

State licensing fees can be an unintended yet crippling expense for small distillers. While states should encourage this burgeoning industry, many do not do so and often cite fees as one reason some distillers can no longer produce alcohol – although these laws don’t protect the public, promote safety or limit abuse; rather they only hurt business.