Overview of Distilleries
A distillery is typically classified as an F-1 occupancy, see OSSC Section 306. This designation applies to craft distilleries where flammable liquids quantities are within allowed limits for F-1 classification without separation. At most basic level, you’re going to need a cooker, a fermenter, and a still. Breweries are Group F-2 comprising any low-hazard factory industrial building for beverages up to 16-percent alcohol content.
Distillery Business Basics
Distilleries offer tours and tastings, allowing visitors to learn about process and sample products. They are often associated with whiskey production, which is distilled spirit from fermented grain mash. However, they also produce other spirits like gin, vodka, and rum based on ingredients, process, and aging. Distilleries have existed for centuries, with history traced back to ancient civilizations.
Starting a Distillery Business
What is a distillery? A distillery produces distilled beverages like whiskey, gin, vodka, and rum. The distillation process concentrates alcohol and flavor compounds by heating fermented liquids like grain mash or molasses to boil off and collect alcohol vapor.
How do you start a distillery business? The first steps are:
- Develop a business plan outlining your target market, products and services, pricing, and financial forecasts.
- Establish your company’s legal structure, brand identity, and secure financing.
- Obtain necessary licenses and permits to produce distilled spirits.
- Source ingredients, rent or purchase production equipment and facilities.
- Market your products through distributors, retailers, your own tasting room and tours.
Running a Distillery
What is involved in running a distillery? Daily operations include overseeing ingredients and fermentation, operating the stills to produce spirits, managing inventory and supplies, bottling and labeling products, giving tours and tastings, marketing, distribution logistics, regulatory compliance, and general business administration.
A distillery also needs staff for distilling, maintenance, sales, bartending, and more. As the owner, your job involves everything from production management to financing and growth strategy. It takes passion, business savvy, regulatory knowledge, and attention to quality and customer experience.
Profitability and Barriers
How profitable can a distillery be? Distilleries can earn 30-45% gross profit margins from spirit sales. In the first years, a small distillery might sell 7,500 bottles and make $45,000 profit. As the brand grows, sales could increase to 15,000 bottles with $90,000 annual profit. Building a strong brand and distribution are key to profitability over time.
What are the barriers to starting a distillery? Major hurdles include high equipment costs, licensing complexity, marketing challenges competing against established brands, and managing cash flow during the initial years. However, the rising market for craft spirits provides opportunities if you have the dedication and business skills to succeed. With careful planning and execution, a distillery can be a fulfilling and financially viable pursuit.
Hazardous Area Classification
What is a hazardous area classification for a distillery? Distilleries are typically classified as F-1 occupancy buildings. This applies when flammable liquid quantities are within allowed limits, without separation requirements. Electrical classification defines hazardous areas near potential vapor release sources as Class 1 Division 2. This extends in a 5-foot radius sphere, up to 3 feet off the floor.
Understanding Hazardous Areas
What defines a hazardous area? Hazardous areas have the potential for fires or explosions due to flammable substances. Area classification identifies hazardous areas to ensure correct equipment selection and installation. The Class/Division system categorizes locations based on class. Zone systems are also used internationally. Explosion protection requires specialized equipment like intrinsically safe devices.
Hazardous substances include gases, vapors, liquids, and dusts. For example, methane, hydrogen, gasoline, and dust pose risks. Three components create explosion hazards: flammables, oxidizers, and ignition sources. Area classification reduces this risk through engineering analysis of substance quantities and release likelihood.
Hazardous area classifications help ensure worker and visitor safety. Distilleries in particular require them because of ethanol vapor. Compliance provides comfort that explosions will be prevented. But appropriate electrical equipment selection is also key, using ratings like explosion-proof, intrinsically safe, or increased safety.