A feasibility study for a craft distillery

Start with the product and the time it takes

A craft distillery can sell different products on very different clocks. Gin and other unaged spirits can be sold within weeks of distilling. Whisky, brandy and aged rum need years in oak. Scotch whisky must age at least three years in oak by law. Rules for other spirits and countries differ.

So the first feasibility question is the product mix. A distillery that starts with gin and vodka while whisky ages needs less working capital than one that depends on whisky alone. Our course on craft distilling covers the production side.

The cash tied up in stock

Here is a hypothetical in neutral units. Suppose you spend 100 units a year making spirit and age it for three years. By the time the first year's spirit is ready, at the end of year four, you have spent about 400 units on production alone, before plant loan interest, with no whisky sales yet. That is the funding gap a feasibility study must close, either with equity, a loan that allows for it or earlier income from unaged products.

Evaporation adds to the picture. Spirit in oak loses volume every year. Scotland is often quoted at about 2 percent a year. Hot climates such as most of India lose more, so use a loss figure from your own climate and cask size, not the Scottish one.

Still, capacity and scale

Pick the still type to match the product: pot stills for flavoursome malt spirit and brandy, column stills for lighter spirits, or hybrids. Then size the production chain: mashing and fermentation (or fruit and molasses handling), the stills, a warehouse for casks and a bottling line.

Capacity is limited by the slowest stage. A still that can run twice a day is wasted if you have fermenters for one wash a day. See capacity planning in a project report.

Licences, site and safety

Distilling is more tightly regulated than brewing in most places. The route usually includes company set-up, premises approval, distillation and storage licences, excise registration and label approval. In India alcohol is a state subject, so licences, excise and some label rules differ from state to state and change. Confirm each step with the regulator or a licensing adviser.

Site and safety are not minor. High-strength spirit vapour is flammable, so the stillhouse needs proper ventilation, electrical rating and fire protection. A site that cannot be made safe at reasonable cost should fail the study.

Water and effluent need numbers as well. Distilling uses cooling water in the condensers and leaves behind spent wash, which has a high organic load and needs treatment or a lawful disposal route. Ask what the site can take before you fall in love with it.

Team and technical risk

Distilling is a craft with real failure modes: a bad cut, a poorly controlled fermentation, a cask that leaks. Name who will run the stills and how they learned. If you plan to hire, say who and when. Technical risk is easier to accept when the report names it and the mitigation, such as a trained distiller on a fixed contract, a commissioning period and early small batches.

Who buys and through what route?

Spirits move through different channels from beer: distributors, state retail systems, bars, duty-free, direct to consumer where allowed. Margins and permitted routes vary by state. Work from price lists and conversations, not from a hoped-for premium. A craft bottle priced three times the mass brand needs a reason the buyer accepts.

See writing the market section of a project report for how to build demand from your own evidence.

End with a decision

The study should recommend: proceed, proceed with a different product mix or stop. Show a model with at least a base and a downside case. Show the peak cash requirement, not just the final return. Investors weigh the peak, because that is when the project is most exposed. A hypothetical peak funding need of 450 units, of which the plant is 250, tells you that stock and running costs make up nearly half the requirement. We explain NPV and payback in NPV, IRR and payback. The same methods apply to a distillery.

Common questions

How long does it take to earn from whisky?

Ageing sets the minimum. Scotch whisky must mature at least three years. A distillery planning whisky needs to fund that wait or sell unaged products meanwhile.

Should a craft distillery start with gin?

It is a common choice because gin can be sold soon after distilling, which eases cash. Whether it suits you depends on your market and your plan.

Does a feasibility study replace a DPR?

No. It decides whether to proceed. A DPR then gives the detailed case to lenders and approving bodies.

Are distillery licences the same everywhere?

No. They differ by country and, in India, by state. They also change. Check with the regulator or a licensing adviser.