Do you have a passion for creating unique and delicious spirits, wines and other craft beverages? Are you looking to turn your dream of becoming an entrepreneur into reality? Starting a distillery in Australia can be an incredibly rewarding adventure, with the potential to build a profitable business that stands out in the highly competitive retail alcohol market.
Whether you’re looking to start producing quality whisky or cocktail mixes, launching and running your own distillery involves understanding local regulations, securing funding and sourcing suppliers of ingredients. While tapping into this industry can seem like a daunting task at first – fear not! With our comprehensive guide by your side, we will cover all the essential steps required to get started on your new venture.
Let’s get started!
The Basics
The very first thing you need to ask yourself is, “Why am I going to establish a distillery?” This may seem like a rather fundamental question, yet there is no incorrect response to this enquiry since there is none. Instead, your reasons for wanting to achieve this will play a role in determining how you will go about accomplishing it.
Do you aspire to become the next (insert name of a massive spirit company here), or are you more interested in developing a product that is exclusive and specialised? Is the sole purpose of this venture to make money, or are you willing to accept a smaller profit in exchange for maintaining your concept of how the product and/or production method ought to be?
The choices you select and the steps you take to turn your vision into a reality will be greatly influenced by the responses you provide to these inquiries. And do not be scared to make course corrections! Your plans have to be a live document that is based on the reality that you are currently experiencing. It is OK to adjust your plan in the event that anything does not work out as you had anticipated.
You may also want to enquire about the marketplace for the spirit(s) that I intend to produce in the near future. In what proportion of volume do I wish to participate in that industry? This connects up with the inquiry that was made earlier to establish the size of the facility as well as its manufacturing capability, so pay attention to both of those.
There are quite a plethora of excellent options available in the market that individuals are simply unaware of, and if you are attempting to be as big as (insert gigantic spirit brand here) with a spirit that has a market share of half of (insert gigantic spirit brand here), you have a lot of work to do in terms of client schooling and market building to achieve that goal.
Having said that, there is nothing incorrect with just being optimistic regarding the amount of growth that is possible for you. We would not have been beginning a firm and working hard to establish a reputation for ourselves if we didn’t have the drive and ambition to do so. The second question we need to ask ourselves will be easier if we have an idea of the size of the industry we’re aiming to corner.
Plan Your Business
What are the initial and ongoing expenses associated with starting a distillery?
The precise expense of establishing a distillery is variable and is dependent on the size of the distillery as well as the location of the distillery. However, it is possible to establish a modest distillery with an initial investment of approximately 30,000 dollars.
This involves shelling out approximately $5,000 for the first rent and necessary licencing fees, in addition to spending another $5,000 on gear like stills, fermenters, and mash tuns. Higher costs include approximately $9,000 for insurance and approximately $6,000 for the purchase of a vehicle that is sufficiently spacious to assist with the transportation of materials and the shipment of goods. Last but not least, you need to set aside between $4,000 and $5,000 in your budget to contribute to the salaries of a few workers.
What kinds of recurring costs does a distillery have to deal with?
Your ongoing costs will vary depending on various criteria, such as the location of your business, the number of staff you have, the quantity of monthly productivity, and so on. However, utilising the numbers mentioned previously, it’s possible that you’re shelling out $2,500 per month for your lease and $4,000 per month for the wages of your employees.
As a result, you may expect to spend more money every month on additional supplies as well as gasoline to carry those items, although the specific quantities may change from one month to the next.
Who exactly is the intended customer base?
Because of the three-tier system (which will be discussed further on), your most immediate clients are basically the liquor wholesalers, who will subsequently supply to retailers. This will be detailed further on. Since they are more inclined to specialise in (or simply choose to gamble on) liquor that was developed by a tiny distillery, your safest alternative for a distributor is typically a small or medium-range distributor.
What steps can you take to increase the profitability of your company?
Never give up on advertising your company, as your suppliers and distributors won’t do most (if any) of the work for you in that department. Instead, ensure that the internet advertising of your spirits is optimised for search engines like SEO, and make an attempt to fill your digital platforms with material that is actually amusing, interesting, and/or moving.
Do not overlook the importance of “pounding the pavement” and making an effort to personally communicate with a number of different distributors and merchants in addition to advertising your goods. In conclusion, you should always keep in mind that this is a long game: it could take some time to build a name and expand your earnings in a competitive market, but a truly distinctive item and advertising campaign can set you apart from your competitors and clearly define your identity.
How exactly can a distillery turn a profit?
At its most fundamental, a distillery generates revenue through the sale of alcoholic beverages that have been produced by the distiller. The majority of states, on the other hand, have a three-tier structure, which makes this process somewhat more complicated. According to this model, the distiller serves as the industry’s primary producer, selling their wares to distributors, who then sell them to retailers.
How much money are you allowed to charge your clients?
You are probably selling to distributors, and those distributors will then sell your product to retailers, as was described earlier. There is room for price differentiation depending on the type of alcoholic beverage being sold as well as the volume of the bottle. According to a generally accepted rule of thumb, you will earn 40-50% of the final selling value of something; for example, if your spirit is finally sold for $40, it is expected that you’ll get $18-$20 from the sale of it.
The Process of Obtaining a License to Produce and Sell Alcohol
One may argue that obtaining a licence to manufacture and sell alcohol in Australia has never been simpler than it is today. Support for craft distilleries and knowledge of their existence in Australia are currently at proportions unprecedented in the country’s history, which is fantastic news for individuals who are considering establishing their very own distillery.
Because there is a big demand in the marketplace for novel aromas that individual distillers can provide, now is an excellent moment to get into the field.
While it comes to having a great chance of succeeding when building a distillery in Australia, just now is a great moment, particularly if you tackle the enterprise with extensive planning and research before getting started.
What about launching a distillery instead of any other kind of new business? It’s possible that hearing that these two businesses share a lot of similarities will come as a surprise to you. Your distillery, just like any other potential nterprise, needs to have a well-thought-out business strategy as its starting point.
Depending of the kind of company you want to run, in order to properly establish your company name and obtain a tax identification number, you are need to comply with criteria that apply across a number of different industries. It is essential to be aware that businesses that fall under the category of “craft distillery” are subject to a slew of particular regulations concerning licencing, excise tax, and product labelling.
We hope that by the end of this piece, you will have a better understanding of the many kinds of licences that are going to be needed in order to run a distillery in Australia.
It is imperative that residents of Australia who are considering producing their own alcohol be aware that they will be required to pay tax on the alcohol that they create. In addition to this, a licence will be necessary for any person or business that want to engage in the distillation of alcoholic beverages. Don’t be concerned! The Australian Tax Office is responsible for issuing permits that are completely free of cost.
It is illegal to distil spirits in Australia unless you have a specific “excise production licence,” which can only be obtained through a lengthy and complicated process. This is the case regardless of whether the alcoholic beverage is being produced for “personal use” or for commercial sale. If you distil alcohol without a proper permit in the state that you are in, you might face a penalty of up to $85,000 or a prison term of up to two years in prison, based on which option you choose. Brandy, rum, gin, and whisky are some examples of distilled spirits.
Producing beer, cider, or wine for one’s own consumption doesn’t really violate any laws and doesn’t require a licence, in contrast to the manufacture and distillation of alcoholic beverages. This is a fun fact. But, unfortunately, this is also true about the taxes that you pay.
There are three primary licences that are necessary for each distillery, no regardless of its size. These include:
- Licensed Manufacturer License
- Storage License
- Movement License
Set Up Business Accounting
It is essential to keep track of all of your company’s many expenditures and income streams if you want to comprehend your company’s overall financial performance. In addition, maintaining accounts that are both precise and complete will significantly simplify the process of completing your annual tax return.
Get Business Insurance
Your company is has to be insured in order to lawfully and safely conduct business, just as it is essential to have licences and permits. This is the case regardless of the type of business your company runs. Therefore, the financial stability of your company will be safeguarded even if it sustains a loss that is covered by insurance, provided that the loss is covered by insurance.
There are a wide variety of insurance policies to choose from, and each one is designed to cover a certain category of business that is vulnerable to a particular group of threats. If you are unsure of the various types of risks that could strike your firm, you should begin with purchasing general liability insurance. Because the great majority of small businesses are required to have this kind of insurance, it is an excellent place for your company to get started.
How to Advertise and Sell a Distillery
As was just stated, it is beneficial to highlight the fact that this item is locally owned and produced within your marketing efforts. Some relatively small distilleries have developed unconventional marketing strategies, like having signed each bottle that they sell or producing spirits utilising locally collected components, which gives the impression that the production of these kinds of beverages was a labour of love performed in the distiller’s own backyard.
Because Millennials will make up the bulk of your target demographic for premium craft spirits, you must give serious consideration to conducting the majority of your marketing efforts online through platforms such as YouTube, social media, and a bespoke website.
This gives you the ability to post videos online that clarify the background of your corporation and your artistic direction (both of which are essential to making this feel more like a customer experience rather than merely a commercial transaction), in addition to giving you a chance to create community engagement through the use of online interaction.
You could also want to think about promoting in newspapers, depending on where you are and the specific demographic that lives there.
How To Make Customers Return
In addition to the marketing strategies described above (and in compliance with any applicable state rules), you might also consider providing locals with unique experiences, such as trips of your distillery and samples of your products.
Make an effort to cultivate long-term relationships with the local pubs and liquor stores and take part in marketing events organised by these establishments. Customers will automatically return if you provide them with a product of high quality at an affordable price, and if you ensure to offer a wide range of spirits throughout the years, they will continue to do so even after trying others.
Establish An Online Presence For Your Company
Even if the creation of a webpage is a step that must be taken, some individuals may believe that they are unable to complete the task because they do not have any prior experience working in the field of website construction.
Although it was feasible that this was a valid concern earlier, significant strides have been made in internet technologies over the past few years that have made the life of proprietors of small businesses significantly easier. These technological advancements have been made possible by the fact that the internet has become more widely used.
The following is a summary of the most important reasons why you should not put off creating your website:
- There is no longer an exception to the rule that respectable businesses now have their own websites. When it comes to placing your business online, factors such as the size of your organisation and the industry in which it competes are irrelevant considerations.
- Profiles on social media platforms, like Facebook pages and business accounts on LinkedIn, are not a suitable replacement for a webpage that you are in charge of managing and operating on behalf of your firm.
- Thanks to website builder services such as the one that GoDaddy provides, it is now a snap to create even the most simple of websites. You do not have to pay a web developer or designer to create a website for you if you want to create a website that you will be happy with; you can do it yourself.
Prepare the Telephone System for Your Company
One of the most efficient ways to protect the privacy of both your personal and professional lives is to provide your business a secondary phone line that you may use for personal calls. This is beneficial on its own, but it also makes it less difficult for potential customers to find you and get in touch with you. This increases the trustworthiness of your business and makes it easier for customers to automate portions of their interactions with it.
Additional Questions for You to Ponder and Answer
How am I supposed to get myself in the right frame of mind? Although this topic is a bit more in-depth than the two that came before it, its significance is not diminished in the least. Do you want to distil the liquid using a continuous system, a reflux column, or a typical pot still? There is a time and a place for every one of these systems, and every one of them is unique with their own set of advantages and disadvantages.
When compared to a continuous system or a reflux column, the quantity of work required to produce vodka using a pot still is exorbitantly more. Continuous systems and reflux columns are used instead.
On the contrary, according to my understanding, it is not possible to produce rum in the style of Jamaica using a taller reflux column. However, these are just some general pointers to keep in mind, and at the end of the day, the technologies are just instruments that you employ to manufacture your products, despite the fact that having great equipment might assist you in producing a quality spirit.
After you have decided how you will build your spirit, the next question you will need to ask yourself is, “How large of a system is absolutely necessary?” This is a really significant issue, and the solution to it might be trickier than you initially thought. If your system is too tiny, you will shortly surpass it and be forced to invest the same amount of cash again on a greater machine in order to keep up with the increasing demand. On the other hand, if you expand too quickly and to an excessive size, you run the risk of tying up your operational money in the gear.
You have to give space for your children’s feet to develop, but you can’t really buy a product that is so enormous that it surpasses the production requirements you have at the start. So this is a terrific approach to thinking about the process of determining the appropriate size of your gear.
In the event that you intend to sell an aged item, you will need to take into account the production chain as well. Since there is no way to manipulate time, it is in your best interest to continue putting away as many containers as you can. You will be required to fuel the machine in order to keep it operating, and all has to be working together to function at its optimum level. Don’t overlook the gear that is used for fermenting and maybe mashing.
You must consider whether the appearance, functionality or both should be the central objective of the gear you utilise now that you have determined the type of apparatus you intend to employ. For example, is this something that will only be used for manufacturing, in which case nobody will ever see it, or is this something that will serve as the focal point of tours and/or your sampling room?
This could have a considerable influence on the overall cost, but there is no solution that is applicable in every situation. Although industrial equipment that was not created with aesthetics in mind can be adapted to fit into the correct design concept, a system that is tastefully ornamented can be overly decorative for the environment it is in. To get the desired arrangement for your model, each component must function properly in conjunction with the others.
Last but not least, you need to question yourself whether you are going to construct a location all around equipment and procedure or whether you are going to try to fit the procedure into your existing area. In a manner analogous to the design considerations discussed previously, your working procedure must be compatible with the location you will be occupying.
It isn’t always feasible to construct a brand new structure to house your business, and there will be instances when the position that best meets your requirements is not the ideal spot for the implementation of your strategy. In the same vein as the enquiry on the motivation behind the establishment of your distillery, this can and certainly must be a dynamic strategy that you can modify according to the requirements of the situation.
