Do you want to start distillery business?

Are you planning to open a distillery? Well, the total alcoholic beverage sales in the United States amounted to more than $200 billion in 2016, out of which one third was contributed by the sales of distilled beverages or liquors. Moreover, the average per capita consumption of spirits in the United States amounts to around 1.6 gallons, as of 2015. It is evident from these facts that distilled beverages industry has undoubtedly a lot of potential and such business, even on a smaller scale, can prove to be extremely profitable provided that you plan it efficiently.
Although this business will give you an extremely high return on investment yet its startup is associated with a couple of problems. You may either face difficulty in acquiring a license from your state or its planning at the initial stage. Both of these problems can be addressed only after developing a comprehensive business plan for your business. This business has got more constraints as compared to all other businesses, that is why you will need a well-structured business plan before starting this business or applying for its license from the state.
To help you avoid all the trouble of making a plan yourself, we are providing a business plan for a distilled beverages startup ‘DisTills’ which is soon going to be launched.

Executive Summary

2.1 The Business

Distills will be a licensed and insured distilled beverages manufacturer, located in the main commercial district of the Manhattan borough of the New York City. The company will be set up in an existing facility, previously used as a distillery, in the main industrial zone of the New York City. The company will also open a retail store in Manhattan.

2.2 Management

DisTills will be solely owned and operated by Hank Michael who has been associated with the liquor industry for more than 30 years. He has served in many leading liquor industries of the world and had been associated with ‘DIAGEO’ as the regional manager of the New York City for the last 7 years. Being an experienced person in this industry, Michael knows everything about how to open a distillery and has the right resources to start a distillery.

2.3 Customers

Initially, our target market will the residential community and the corporate sector residing in the Manhattan borough of the New York City. The community consists of financially established people. We will provide high-quality and natural distilled beverages to our customers such as whisky, vodka, gin, brandy, rum, tequila, and mezcal. All of our products and spirits will be manufactured by natural fermentation of grains, vegetables, and fruits, followed by careful distillation.

2.4 Target of the Company

Our primary target is to become the best spirits manufacturer in the New York City within next 5 years of our launch and to recover the initial investment within next 2 years of launch. Our secondary target is to achieve the net profit margin of $10k per month by the end of the first year, $15k per month by the end of the second year, and $25k per month by the end of the third year.
The company’s three-year performance, as forecasted by the experts, is given in the chart below:

Distillery Business Plan - 3 Years Profit Forecast

Company Summary

3.1 Company Owner

DisTills will be solely owned and operated by Hank Michael who has been associated with the liquor industry for more than 30 years. He has served in many leading liquor industries of the world and had been associated with ‘DIAGEO’ as the regional manager of the New York City for the last 7 years.

3.2 Why the Business is being started

Throughout his career, Michael did not feel happy about the currently used distillation processes of preparing liquor or distilled beverages. Current distillation methods result in the loss of the natural characteristics of the alcohols which are being distilled. He had always thought to bring back the traditional method of preparing liquor using as little machinery as possible, so as to produce healthy and natural liquor. That’s why he started this venture.

3.3 How the Business will be started

If you want to start your own distillery then we would recommend you to buy an existing distillation plant rather than installing a new plant by yourself. Procuring new distillation machines is the biggest expense while installing a new distillery so it will be better for you to acquire an existing distillery and use the surplus amount for covering other costs or expenses.
Considering the reason mentioned above, the company will procure a small distillery, named ‘GluCyn Distillery,’ which stopped operating three years ago and is located in the main industrial zone of the New York City. The company will also open a retail store in the main commercial district of the Manhattan borough of the New York City. Michael has forecasted following costs for expenses, assets, investment, and loans for the Start-up.

Distillery Business Plan - Startup Cost

The detailed start-up requirements, start-up funding, start-up expenses, total assets, total funding required, total liabilities, total planned investment, total capital and liabilities as forecasted by company’s analysts, is given below:

Start-up Expenses 
Legal$7,500
Stationery etc.$6,250
Brochures$6,875
Consultants$0
Insurance$3,750
Rent$22,500
Research and Development$3,750
Expensed Equipment$63,750
Signs$11,250
Building Materials$27,500
Building Labor$20,000
TOTAL START-UP EXPENSES$173,125
Start-up Assets$0
Cash Required$118,750
Start-up Inventory$5,625
Other Current Assets$22,500
Long-term Assets$175,000
TOTAL ASSETS$321,875
Total Requirements$495,000
START-UP FUNDING$0
START-UP FUNDING$173,125
Start-up Expenses to Fund$321,875
Start-up Assets to Fund$495,000
TOTAL FUNDING REQUIRED$0
Assets$203,125
Non-cash Assets from Start-up$118,750
Cash Requirements from Start-up$0
Additional Cash Raised$118,750
Cash Balance on Starting Date$321,875
TOTAL ASSETS$0
Liabilities and Capital$0
Liabilities$0
Current Borrowing$0
Long-term Liabilities$0
Accounts Payable (Outstanding Bills)$0
Other Current Liabilities (interest-free)$0
TOTAL LIABILITIES$0
Capital$0
Planned Investment$0
Investor 1$312,500
Investor 2$182,500
Other$0
Additional Investment Requirement$0
TOTAL PLANNED INVESTMENT$495,000
Loss at Start-up (Start-up Expenses)$173,125
TOTAL CAPITAL$321,875
TOTAL CAPITAL AND LIABILITIES$321,875
Total Funding$495,000

Services for customers

Before opening a distillery you must be clear about your products. It is an extremely important stage because all subsequent things depend on the types of products or services you will provide to your customers. That’s why it is advisable to work on it before you move on to start a distillery business.
DisTills will be a high-end spirit manufacturer which will involve itself in the commercial production of high-quality and natural distilled beverages. All of our products and spirits will be manufactured by natural fermentation of grains, vegetables, and fruits, followed by careful distillation. Initially, we will produce the following primary products:

  • Brandy – Our caramel colored brandies, 60% alcohol by volume and aged in wooden casks, will be produced by following high-quality measures of distillation of wine. We will produce Cognac as well as Armagnac brandy, both of which will be made special by our natural touch.
  • Vodka – We will produce various brands of vodka, all of which will be 40% alcohol by volume. Our vodka will be distilled from any sugar- or starch-rich plant matter and grains such as rye sorghum, corn, or wheat. We will also manufacture vodka from rice, sugar beets, potatoes, grapes, molasses, and soybeans.
  • Gin – We will commercially produce pot distilled gin, 70% alcohol by volume, by fermenting grain mash (malt wine) from barley or other grains, then redistilling it with flavoring botanicals to extract the aromatic compounds.
  • Rum – Our high-quality rum will be prepared by naturally fermenting and distilling sugarcane byproducts (molasses) or honey, or directly from sugarcane juice, followed by aging the distillate in oak barrels. We will produce light as well as dark rums.
  • Whisky – Our whisky will be naturally fermented from grain mesh (malted) including corn, barley, wheat, and rye, followed by aging in charred white oak wooden casks. We will produce various types of whiskies such as American, English, Finnish, German, Scotch, Canadian, and Welsh.
  • Tequila & Mezcal – Tequila will be manufactured from the blue agave plant, found primarily in the area surrounding the city of Tequila; while Mezcal will be made from any type of agave plant native to Mexico. Both of the products will be manufactured by natural processes while ensuring highest-quality.

Customers (residing in Manhattan only) can also make an online order for any of our beverages and get it delivered to his/her doorstep totally free of charge.

Marketing Analysis of distillery business

The most important component of an effective distillery business plan is its accurate marketing analysis that’s why Michael acquired the services of marketing experts to help him through this phase. It is only after this stage that a good business plan, distillery company’s business plan could have been developed. After analyzing the cost to start a distillery and identifying the trends of this business in the New York City, the marketing experts and analysts also helped him to select the best site for starting a distillery.
The success or failure of a business totally depends upon its marketing strategy which can only be developed on the basis of accurate marketing analysis. There are four main steps to carry out an accurate marketing analysis which are to identify the current market trends, identify your target audience and potential customers, set out the business targets to achieve, and finally set the prices of your products and services. Marketing analysis is extremely important because the planning of many subsequent components depends on it. Therefore, it must be considered before developing the craft distillery business plan. It must be carried out even if you are working on a smaller scale and developing a small distillery business plan.

5.1 Market Trends

Over the years, one of the most recent trends which have been recorded repeatedly is that large-scale distillers now prefer to create their own micro-distillery within their current operation for taking their business closer to locals in the target communities and for boosting their sales. Secondly, most distilleries keep trying out different flavors and distillery techniques which is the main reason behind the dynamicity of this industry. Lastly, distillers have now started to produce expensive distilled beverages for their high-end clients while also producing normal beverages for ordinary people, as a result of which the sales pattern of this industry is constantly increasing.
In the United States, the total sales from alcoholic beverages amounted to more than $200 billion in 2016, out of which nearly one third were contributed by distilled beverages or spirits. The total sales volume of distilled spirits amounted to more than 215 million 9-liter cases in 2015. Thereof, 169.8 million 9-liter cases were made in the off-premise sector and about 46.2 million 9-liter cases were generated on-premise. Within the sales of distilled beverages, vodka took the greatest share of volume sales, followed by whisky and rum, respectively. After identifying these market trends, it is clearly evident that this industry has a lot of potential and can be immensely profitable provided that you plan your business successfully.

5.2 Marketing Segmentation

Initially, our target market will the residential community and the corporate sector residing in the Manhattan borough of the New York City. The community consists of all types of people from varying backgrounds. As per the financial position, nearly half of the community has a monthly income ranging from $40k to $50k while nearly 10% people have incomes even around $100,000.
There are currently more than 738,000 households in Manhattan out of which 17.1% have children under the age of 18 living with them, 25.2% are married couples living together and 12.6% have a female householder with no husband present. 59.1% are non-families, out of which 48.0% of all households are made up of individuals and 10.9% have someone living alone who is 65 years of age or older.
Our marketing experts have identified the following type of target audience which can become the potential customers of our products.

Distillery Business Plan - Market Segmentation

The detailed marketing segmentation comprising of the company’s target audience is as follows:

5.1.1 Individual Buyers:

DisTills will open a small retail location in its initial phase, in the first year of its startup. The retail store will be located in the main commercial district of Manhattan. Through this retail location, we hope to target the individual buyers residing in the nearby areas. Nearly all of the community is financially established and can easily spend their money for buying our distilled beverages on a regular basis throughout the year.

5.1.2 Departmental Stores:

We will also supply our beverages to various other departmental stores and malls. These departmental stores will make up the bulk of company’s customers and more than half of our products will be sold to them. These stores will be needing our products on a regular basis throughout the year.

5.1.3 Restaurants and Hotels:

DisTills will also supply its products to various restaurants and hotels on a regular basis throughout the year. These restaurants will become our biggest consumer after the departmental stores.

5.1.4 Companies and Businesses:

Manhattan houses hundreds of thousands of businesses, including local, national and multinational businesses. These companies and businesses need distilled beverages for their company’s events, gatherings, and parties.

5.1.5 Clubs & Bars:

We will also supply our products to thousands of clubs and bars scattered throughout Manhattan.
The detailed market analysis of our potential customers is given in the following table:

Market Analysis       
YEAR 1YEAR 2YEAR 3YEAR 4YEAR 5
Potential CustomersGrowthCAGR
Individual Buyers17%2,534,4333,343,3441,536,5535,343,7456,524,54513.43%
Departmental Stores30%7,232,3348,432,3449,456,6659,985,54410,546,43210.00%
Restaurants and Hotels27%17,342,32218,243,45520,422,65523,482,86725,221,43315.32%
Companies and Businesses9%6,324,3337,432,6558,335,8779,322,87710,872,54315.00%
Clubs & Bars17%102331187712666138761454410.00%
Total100%30,909,22234,120,33138,227,86342,805,16446,654,9529.54%

5.2 Business Target

We aim to become the best distilled beverages manufacture in the New York City within next five years of our startup. Our main business targets to be achieved as milestones over the course of next three years are as follows:

  • To achieve the net profit margin of $10k per month by the end of the first year, $15k per month by the end of the second year, and $25k per month by the end of the third year
  • To balance the initial cost of the startup with earned profits by the end of the first year
  • To open up a second retail store by the end of three years in San Francisco, and a third store by the end of five years in Los Angeles

5.3 Product Pricing

Product and service pricing is one of the most important factors in deciding the strategy for any business. After considering the market demands, we have priced all our products in the similar ranges as of our competitors except for vodka whose price has been set 20% less so as to encourage sales. The reason behind our pricing policy is to achieve the minimum attractive rate of return which would not be possible in case of offering our services at lower or higher prices.

Strategy

After marketing analysis, sales strategy is the second most important component of the business plan so make sure to pay attention to it before making your own distillery business plan. Once you have identified the market trends, the market demand, and the potential customers of the startup, you must move on to developing an ingenious strategy for attracting your target customers toward yourself. Considering its importance, you must develop your sales strategy before you think about how to start a distillery.

6.1 Competitive Analysis

DisTills will have various competitors ranging from small distillers to multinational spirits manufacturers. Our competitors may have established businesses and low product prices but no one will surpass us when it comes to the quality of products. Our main competitive edge will be the ‘naturality’ of our products which is somewhat lacked by many liquor manufacturers. Secondly, we will provide a top-notch customer service where our every employee and salesperson will treat our customers with utmost respect so as to build a long-lasting relationship with them.

6.2 Sales Strategy

After carrying out a detailed analysis, our experts came up with the following brilliant ideas to advertise and sell ourselves.

  • We will ensure at least a 20% increase in website traffic each month and will ensure at least an 80% conversion rate, i.e. to turn 80% of our website visitors into our customers.
  • We will get featured in the local news or on a certain website by a popular blogger to increase our brand awareness in people.
  • We will advertise ourselves in magazines, newspapers, TV stations, and social media.
  • We will also offer discounts and gifts on our beverages present in several retail stores.

6.3 Sales Monthly

Distillery Business Plan - Sales Monthly

6.4 Sales Yearly

Distillery Business Plan - Sales Yearly

6.5 Sales Forecast

We believe that if people try our products, they will then use them for the rest of their lives thus the sales pattern will always increase with years. Our customers will be needing our products throughout the year. By analyzing our market segmentation strategy, our experts have forecasted the following sales on a yearly basis which are summarized in the column charts.

Distillery Business Plan - Unit Sales

The detailed information about sales forecast, total unit sales, total sales is given in the following table:

Sales Forecast   
Unit SalesYear 1Year 2Year 3
Brandy1,872,3302,360,3202,588,240
Vodka1,435,3201,250,4301,762,450
Gin539,3207702301,002,310
Rum265,450322,390393,320
Whisky802,370815,430823,540
Tequila & Mezcal134,240394,340842,230
TOTAL UNIT SALES5,049,0305,913,1407,412,090
Unit PricesYear 1Year 2Year 3
Brandy$1.40$1.50$1.60
Vodka$6.00$8.00$10.00
Gin$7.00$8.00$9.00
Rum$6.50$7.50$8.50
Whisky$14.00$12.00$10.00
Tequila & Mezcal$11.50$13.00$14.50
Sales
Brandy$21,480$27,400$33,320
Vodka$12,050$19,450$26,850
Gin$5,011$7,160$9,309
Rum$13,935$19,460$24,985
Whisky$6,235$7,230$8,225
Tequila & Mezcal$22,950$36,550$50,150
TOTAL SALES
Direct Unit CostsYear 1Year 2Year 3
Brandy$0.70$0.80$0.90
Vodka$0.40$0.45$0.50
Gin$0.30$0.35$0.40
Rum$3.00$3.50$4.00
Whisky$0.70$0.75$0.80
Tequila & Mezcal$3.00$3.50$4.00
Direct Cost of Sales
Milk containers$9,830$18,300$26,770
Butter packages$6,660$11,990$17,320
Cheese packages$1,790$3,500$5,210
Yogurt packages$1,940$6,760$11,580
Cream packages$2,770$6,920$11,070
Canned Beef$6,420$22,470$38,520
Subtotal Direct Cost of Sales$29,410$69,940$110,470

Personnel plan

The success of a company heavily depends on its staff, the number, and type of which should be determined in the initial stages. That’s why a detailed personnel plan is needed before you think about how to start your own distillery. The personnel plan of DisTills is as follows:

7.1 Company Staff

Michael will act as the Chief Executive Officer of the company. The company will initially hire following people:

  • 1 General Manager to manage the overall operations of the distillery
  • 2 Administrators / Accountants to maintain financial records
  • 2 Engineers responsible for operating and maintaining distillery
  • 4 Sales and Marketing Executives responsible for creating brand image and discovering new ventures
  • 20 Field Employees for operating distillery
  • 4 Drivers to transport products to various retail locations, hotels, and restaurants
  • 1 Store Manager to manage, operate and maintain the retail store

To ensure the best quality service, all employees will be selected through vigorous testing and will be trained for a month before starting their jobs.

7.2 Average Salary of Employees

The following table shows the forecasted data about employees and their salaries for next three years.

 Personnel Plan   
Year 1Year 2Year 3
General Dairy Farm Manager$75,000$85,000$95,000
Administrators / Accountants$43,000$51,000$59,000
Engineers$54,400$67,400$87,400
Sales and Marketing Executives$45,000$52,000$59,000
Field Employees$210,000$240,000$280,000
Drivers$30,000$33,000$38,000
Store Manager$10,000$12,000$15,000
Total Salaries$467,400$540,400$633,400

Financial Plan

Michael has developed the following financial plan with the help of financial experts, which outlines the financial development of DisTills over the next three years. The finance experts also helped him to figure out how much does it cost to start a distillery. Michael will solely finance the company and no equity funding or outside loan will be required unless the company expands faster than forecasted.

8.1 Important Assumptions

The company’s financial projections are forecasted on the basis of following assumptions. These assumptions are quite conservative and are also expected to show deviation but to a limited level such that the company’s major financial strategy will not be affected.

General Assumptions
Year 1Year 2Year 3
Plan Month123
Current Interest Rate10.00%11.00%12.00%
Long-term Interest Rate10.00%10.00%10.00%
Tax Rate26.42%27.76%28.12%
Other000

8.2 Brake-even Analysis

The following graph shows the company’s Brake-even Analysis.

Distillery Business Plan - Brake-even Analysis

The following table shows the company’s Brake-even Analysis.

 Brake-Even Analysis 
Monthly Units Break-even5530
Monthly Revenue Break-even$15,974
Assumptions:
Average Per-Unit Revenue$26.87
Average Per-Unit Variable Cost$0.89
Estimated Monthly Fixed Cost$19,641

8.3 Projected Profit and Loss

The following charts show the company’s expected Profit and Loss situation on the monthly and yearly basis.

8.3.1 Profit Monthly

Distillery Business Plan - PROFIT MONTHLY

8.3.2 Profit Yearly

Distillery Business Plan - PROFIT YEARLY

8.3.3 Gross Margin Monthly

Distillery Business Plan - GROSS MARGIN MONTHLY

8.3.4 Gross Margin Yearly

Distillery Business Plan - GROSS MARGIN YEARLY

8.4 Projected Cash Flow

The following column diagram shows the projected cash flow.

Distillery Business Plan - Projected Cash Flow Diagram

The following table shows detailed data about pro forma cash flow, subtotal cash from operations, subtotal cash received, sub-total spent on operations, subtotal cash spent.

 Pro Forma Cash Flow   
Cash ReceivedYear 1Year 2Year 3
Cash from Operations
Cash Sales$401,024$453,046$505,068
Cash from Receivables$70,923$80,610$90,297
SUBTOTAL CASH FROM OPERATIONS$471,943 $533,651 $595,359
Additional Cash Received
Sales Tax, VAT, HST/GST Received$0$0$0
New Current Borrowing$0$0$0
New Other Liabilities (interest-free)$0$0$0
New Long-term Liabilities$0$0$0
Sales of Other Current Assets$0$0$0
Sales of Long-term Assets$0$0$0
New Investment Received$0$0$0
SUBTOTAL CASH RECEIVED$471,943 $533,651 $595,359
ExpendituresYear 1Year 2Year 3
Expenditures from Operations
Cash Spending$216,457$242,204$267,951
Bill Payments$135,939$153,285$170,631
SUBTOTAL SPENT ON OPERATIONS$352,396 $395,489 $438,582
Additional Cash Spent
Sales Tax, VAT, HST/GST Paid Out$0$0$0
Principal Repayment of Current Borrowing$0$0$0
Other Liabilities Principal Repayment$0$0$0
Long-term Liabilities Principal Repayment$0$0$0
Purchase Other Current Assets$0$0$0
Purchase Long-term Assets$0$0$0
Dividends$0$0$0
SUBTOTAL CASH SPENT$352,396 $395,489 $438,582
Net Cash Flow$119,551$138,167$156,783
Cash Balance$218,523$252,381$286,239

8.5 Projected Balance Sheet

The following projected balance sheet shows data about total current assets, total long-term assets, total assets, subtotal current liabilities, total liabilities, total capital, total liabilities and capital.

 Pro Forma Balance Sheet   
AssetsYear 1Year 2Year 3
Current Assets
Cash$184,666$218,525$252,384
Accounts Receivable$12,613$14,493$16,373
Inventory$2,980$3,450$3,920
Other Current Assets$1,000$1,000$1,000
TOTAL CURRENT ASSETS$201,259 $237,468 $273,677
Long-term Assets
Long-term Assets$10,000$10,000$10,000
Accumulated Depreciation$12,420$14,490$16,560
TOTAL LONG-TERM ASSETS$980 $610 $240
TOTAL ASSETS$198,839 $232,978 $267,117
Liabilities and CapitalYear 1Year 2Year 3
Current Liabilities
Accounts Payable$9,482$10,792$12,102
Current Borrowing$0$0$0
Other Current Liabilities$0$0$0
SUBTOTAL CURRENT LIABILITIES$9,482 $10,792 $12,102
Long-term Liabilities$0$0$0
TOTAL LIABILITIES$9,482 $10,792 $12,102
Paid-in Capital$30,000$30,000$30,000
Retained Earnings$48,651$72,636$96,621
Earnings$100,709$119,555$138,401
TOTAL CAPITAL$189,360 $222,190 $255,020
TOTAL LIABILITIES AND CAPITAL$198,839 $232,978 $267,117
Net Worth$182,060$226,240$270,420

8.6 Business Ratios

The following table shows data about business ratios, ratio analysis, total assets, net worth.

 Ratio Analysis    
Year 1Year 2Year 3INDUSTRY PROFILE
Sales Growth4.35%30.82%63.29%4.00%
Percent of Total Assets
Accounts Receivable5.61%4.71%3.81%9.70%
Inventory1.85%1.82%1.79%9.80%
Other Current Assets1.75%2.02%2.29%27.40%
Total Current Assets138.53%150.99%163.45%54.60%
Long-term Assets-9.47%-21.01%-32.55%58.40%
TOTAL ASSETS100.00%100.00%100.00%100.00%
Current Liabilities4.68%3.04%2.76%27.30%
Long-term Liabilities0.00%0.00%0.00%25.80%
Total Liabilities4.68%3.04%2.76%54.10%
NET WORTH99.32%101.04%102.76%44.90%
Percent of Sales
Sales100.00%100.00%100.00%100.00%
Gross Margin94.18%93.85%93.52%0.00%
Selling, General & Administrative Expenses74.29%71.83%69.37%65.20%
Advertising Expenses2.06%1.11%0.28%1.40%
Profit Before Interest and Taxes26.47%29.30%32.13%2.86%
Main Ratios
Current25.8629.3932.921.63
Quick25.428.8832.360.84
Total Debt to Total Assets2.68%1.04%0.76%67.10%
Pre-tax Return on Net Worth66.83%71.26%75.69%4.40%
Pre-tax Return on Assets64.88%69.75%74.62%9.00%
Additional RatiosYear 1Year 2Year 3
Net Profit Margin19.20%21.16%23.12%N.A.
Return on Equity47.79%50.53%53.27%N.A.
Activity Ratios
Accounts Receivable Turnover4.564.564.56N.A.
Collection Days9299106N.A.
Inventory Turnover19.722.5525.4N.A.
Accounts Payable Turnover14.1714.6715.17N.A.
Payment Days272727N.A.
Total Asset Turnover1.841.551.26N.A.
Debt Ratios
Debt to Net Worth0-0.02-0.04N.A.
Current Liab. to Liab.111N.A.
Liquidity Ratios
Net Working Capital$120,943$140,664$160,385N.A.
Interest Coverage000N.A.
Additional Ratios
Assets to Sales0.450.480.51N.A.
Current Debt/Total Assets4%3%2%N.A.
Acid Test23.6627.0130.36N.A.
Sales/Net Worth1.681.290.9N.A.
Dividend Payout000N.A.