A microbrewery is a small brewery that specializes in a very small number of beers and craft ales. Unlike large breweries which are channeled towards mass production, a microbrewery focuses on the overall craft of its product. Beers from one of these smaller brewers are usually developed to have a distinct flavor even in their names and packaging which is frequently creative or provocative.
The choice of beer at pubs across the UK has changed thanks to the rise of craft breweries. According to reports, it all started with a tax change. In 2002, then Chancellor Gordon Brown introduced the ‘small breweries’ relief’ scheme. Also known as Progressive Beer Duty (PBD), the incentive gave huge tax breaks to small breweries.
Small breweries producing less than 600,000 hectolitres each year – or about ten million pints – qualify for a discount on the amount of duty they pay. Extra small breweries, producing only 5,000 hectolitres each year, pay 50 percent of the duty compared to large companies. According to reports, in year 2000 there were around 500 breweries in the UK. In October 2020, there were over 1,800 – and this trend is only going one way.
In the United Kingdom, there are two main routes people can go though to start their brewery. You can either start as an enthusiastic home-brewer, or get an apprenticeship at a brewery and learn the trade from there. Even if you have no scientific knowledge, brewing is simple. It requires just four ingredients: water, yeast, hops and some form of sugar.
Sugar normally comes from grains like malted barley, which is germinated in a metal container called a mash. The grains are then moved into a mash tun which soaks the grains, converting all the starches to fermentable sugars. The grains are also where the colour comes into it. Lighter beers start out with paler grains, but the grains can also be roasted to give them a more golden colour, or even to make them black, which makes dark beers.
Most home brewers tend to buy the sugar in a kind of malt extract state to avoid these steps. Most breweries will also acquire their grains already roasted, depending on what colour of beer they want to achieve. The next step involves boiling the liquid to create something called wort.
At this point, hops are added to give the beer a bitter flavour. More hops are normally added towards the end of the boiling stage, which can take up to 90 minutes, to give more delicate flavours. Immediately the wort has been cooled, it is moved to a fermenter, usually just a large stainless steel vat, where yeast is added. The last stage is conditioning and allowing the yeast to settle. Depending on what kind of beer you are after, each step is slightly different, but the general process remains the same.
Once you’ve become a master home brewer, the steps to turning it into a microbrewery can be quite daunting. The main challenge will be finding the finances and opportunity to rent large-scale equipment. You might want to think about attracting investors. Getting everything you need to start producing on a large scale can cost between £50,000 and £100,000.
The income you will generate in this business will depend on how much you can brew, and what retail avenues you use to shift your produce. Do not forget that the price of beer duty means your profit margins aren’t great, so if you’re going into this business to make big money then brewing certainly isn’t for you.
10 Simple Steps to Set Up a Microbrewery in the UK
Note that Britain’s appetite for craft beers and ales shows no sign of abating, and while alcohol consumption in Britain is the lowest so far this century, beer sales are actually increasing. You should always consult financial and legal professionals before taking the plunge, and this guide is meant only as a general overview of what you can expect from setting up a microbrewery.
Table of Content
- Seek adequate funding
- Adequate space
- Know your legal obligations
- Include time for ‘slippage’
- Carry out a proper market analysis
- Have a long-term plan for your microbrewery
- Consider carefully your packaging formats & route to market
- Understand your key financial metrics
- Equip your brewery with a refractometer
- Get some experience & do a course
Seek adequate funding
You first have to make sure you have enough funding. Note that setting up a microbrewery in the United Kingdom is not cheap but equally it doesn’t have to cost the earth. You can start very small if you don’t need to rely on your brewery as your main source of income.
If you do decide to set up a microbrewery, you could start with say a 2.5 bbl (600 pints) plant as part of a brew pub then the entire brewing kit could be brought for as little as £10,000. Howbeit, note that at this sort of price you are not going to get a high quality piece of kit even if it does the job.
Also note that there will be other startup costs such as the fit out of your premises, the cost of casks and other incidental brewing and business equipment. Where you do not have a ready route to market through a pub or bar, you will need to look at a larger brewing plant.
According to experts, you will need a size of 10 bbl minimum to produce economically viable amounts of cask-conditioned beer. Bigger is always better in that it affords your brewery economies of scale. Once you have your entire expensive brewery in place, make sure you protect it from theft or damage with specialist microbrewery insurance.
Ideally, anybody setting up a microbrewery will need to ensure that they can expand. It may be the furthest thing from your mind when you are striving to set up your brewery, but most microbreweries usually outgrow their original plant in a short while. Make sure that your premises have sufficient space to expand the brewery unless you are prepared to set up from scratch again.
Notably, a 2.5 bbl plant will function with as little as 250 sq. ft. for a 10 bbl plant you are looking at least 4 times this. Moving a brewery is expensive and very time consuming not to mention the interruption in beer production which will not go down well will your regular customers.
Know your legal obligations
It is always advisable to consult an experienced legal advisor when you’re making major decisions like this. Alcohol, generally, is filled with its own particulars when it comes to selling and you are expected to make sure you’re keeping everything fully legal. Here are just some of the legislation you will have to consider before setting up:
- Beer Duty applies to all commercially produced beer with strength of 1.2% or more, in order to sell it, you’ll need to register as a brewer with HRMC and get certified. Microbrewers can enjoy smaller rates thanks to the Small Breweries’ Relief scheme, so be sure to look into how you can benefit from this.
- A premises license will be required if you plan on selling your beer directly to the public as part of a tap room, and personal licenses will need to be held by the staff who will be serving it.
- Planning permission will be needed to start building a brewery; you can’t just install your brewing set up on any site.
Also note that you can stay on top of the legal and admin side of things, it may be worth your time to join an industry organisations, where you can enjoy insight, advice and experience from fellow brewers.
Include time for ‘slippage’
Even though everyone expects the process of getting a microbrewery off the ground to go smoothly, it is imperative to factor in a little bit of slippage. Perhaps planning permission to get your change of use to a B2 use class is delayed, or your grant application takes longer to approve than your thought. Consent to discharge from the environment agency will not be granted immediately.
Carry out a proper market analysis
You also have to understand your market and be aware of your competition. Brewing is more or less a friendly business to be involved in. There is a ‘band of brothers’ relationship between microbrewers and it is not uncommon for microbreweries to help each other out.
However, even with this cordial relationship with fellow brewers they are nonetheless your competition. Is your local market already saturated with other micros? If your business plan involves producing and selling mainly cask conditioned ales then remember that your market initially will largely be local.
You also have to ensure that there are enough pubs in your local area that will be prepared to take your beer. Begin your research early by talking to local publicans to see whether they are prepared to take your beer and at a reasonable price (depending on the area this could be anything from £65 -100+ per 72-pint cask.)
Also consider signing up and selling your beer through SIBA’s Beerflex scheme. Factor in creating your own tap room or leasing a pub. This route to market is going to be very important for your long-term profitability but in the early day’s double margins on your beer is going to be the difference between surviving and going under.
Have a long-term plan for your microbrewery
It is always advisable you start with a long-term vision for your brewery business. Is it that you want your brewery to be mainly a local cask ale producer? Do you want to be an export led beer brand? Are you happy with a lifestyle microbrewery producing small quantities for bottling and selling as craft beers at farmers markets.
Indeed, there are so many business models out there for microbreweries but have a plan. You also have to remain flexible and responsive to changes in the market place. All successful businesses exhibit the trait of a long term vision but with the ability to adapt and take opportunities along the way.
Consider carefully your packaging formats & route to market
Also put into consideration the full range of routes to your market for your beer and which ones are most appropriate for your microbrewery. The primary forms of packaging for your beer are: cask, bottled (filtered), bottle conditioned, can, keg. Each has potential attractions, drawbacks and cost implications so make sure you choose the right combination for your brewery and beer brand.
Understand your key financial metrics
Have it in mind that setting up a Microbrewery, even a small brewery, comes with certain key financial concepts that are paramount. You probably would be making money, but if you have no cash to pay your overheads you will very quickly be at the mercy of banks or creditors.
So ensure that you get paid promptly for your beer. Don’t let pubs or bars particularly ones you haven’t dealt with before run up long lines of credit or you may have a nasty shock down the line. Also, remember that turnover is vanity but profit is sanity. You may assume that you are selling lots of beer but if you are not making any or enough profit on each pint then it’s only a matter of time before your microbrewery goes bust.
Equip your brewery with a refractometer
It is always advisable that you get yourself a refractometer to measure the specific gravity of your beer. A good refractometer can be purchased for less than £100 and is useful for both commercial and home brewers. It is easier to use in a microbrewery setting than the traditional hydrometer even though you will need to use a conversion table to derive your specific gravity.
Get some experience & do a course
Setting up a new Microbrewery in the United Kingdom is a huge undertaking, especially if you have not brewed commercially before. If you have never worked in a brewery or had a direct experience, then it’s worth getting some experience of the industry by working alongside a brewer.
Aside from getting expert advice, do a course with experts who can take you through all the things you need to consider before taking the plunge. Brewing is a great industry to get involved in but make sure you go into it with your eyes wide open!
It can be difficult setting up your own microbrewery here in the UK, as competition is rife. Coupled with all the complications of the brewing process, don’t be held back by extortionate energy prices, or an unreliable supply.
Even with the highly competitive market, there is also a strong sense of community amongst brewers, who are ready to share and support each other. If you want to open a microbrewery you have to be patient, passionate, and persistent. Brewing can be an enjoyable and rewarding process, but it is also time consuming and involves a lot of heavy lifting and cleaning.