By: Kris Bohm, Owner of Distillery Now Consulting
When it comes to starting a distillery or a brewery it takes money to make it happen. In most cases it can literally take millions. The cost of the equipment is a big chunk of the cost required to start up a beverage alcohol business. Most folks who start a business will buy all new equipment. An alternative to the high price tag and long lead times of new equipment is to buy used equipment. When it comes to buying used equipment there can be many hidden costs and problems that come with what outwardly appears to be an excellent deal. By seeking to understand the hidden costs and potential problems that come with used equipment you may just uncover the perfect opportunity to land a deal on the equipment you need to start your business. Our aim is to help you avoid falling into the proverbial used equipment money pit. Let’s look through key considerations of buying used equipment and explore its potential.
There are many reasons for wanting to buy used equipment instead of new equipment for a brewery or distillery. Lead time is a strong factor that drives folks to look at used equipment. In 2022 there have been massive disruptions to supply chains across many industries. Beverage manufacturing equipment is certainly one of them. For many manufacturers of equipment they now have lead times of well over a year. That means from the time you put a deposit on equipment to that equipment being delivered will almost certainly be beyond 12 months.
The opportunity to buy used equipment and take possession of it quickly has become an attractive option as a result. The downside here is that used equipment is in high demand these days and as a result the price on used equipment has gone up.
There are many factors to consider when looking at used equipment. Age and condition are the two that are most important. As equipment gets older it can sometimes become hard to source replacement and repair parts. In some instances replacement parts do not exist and will need to be manufactured or redesigned which can be costly. The key here is to be diligent. Take some time to talk with the manufacturer and ask if they are available and willing to continue to support the equipment they built. Here is an example of a situation where this occurred.
There was an equipment manufacturer (who will not be named) but we will call them Acme in this example. Acme Company built equipment that looked great but their engineering and quality of manufacturing was shoddy. Acme went out of business only several years after opening due to lawsuits from equipment buyers. A person new to the industry bought some equipment from Acme second hand that was still in crates unused. The buyer quickly bought the new and unused equipment from a 3rd party seller at what appeared to be a good price but did not do any research. Acme is no longer in business, and buying replacement parts for the equipment is impossible. When the time came to assemble and start the equipment there were many missing parts. To make it worse the equipment needed major repairs just to function as parts of the equipment were not operable. For the folks who bought this equipment, they had to spend lots of money and time to have custom work done just to make the equipment function. The repairs and replacement parts were so costly that the buyer would have spent less money on new equipment from a reputable manufacturer.
If the equipment comes with automation and controls the age of the equipment is critical to consider. Some older equipment does not age well and can in fact be more outdated than an 8 track cassette player. This is not to say that old controls or automation will not work, but there is a strong chance they can break and become unrepairable. If the used equipment is decommissioned and sitting in a warehouse it may not be possible to test the controls. If the controls cannot be repaired they may likely need to be replaced. The cost of replacement can eat up the money saved from buying used in the first place. Furthermore the cost of parts on older controls can sometimes be astronomical. The best way to test this before buying it is to buy equipment that is currently operational and can be tested.
An important consideration is the cost of relocation. The cost of taking possession of the used equipment can vary hugely from one opportunity to the next. In most cases the equipment can be removed quickly and cleanly in the hands of skilled tradesmen. Most of the time there is room to disassemble and remove the equipment and also a door that allows for easy removal. In some instances this is not that case. There are some facilities that are literally built up around the equipment. In most cases continuous column stills in distilleries are installed via crane. In these cases removal of the equipment can be quite costly and require extensive building demolition and heavy equipment to carefully extract the equipment from a building. In one instance we saw a distillery in which the column for vodka distillation was encased in a metal and glass shaft. To remove the column required extensive demolition and a crane to extract the column from the building. After reviewing a plan and considering the value of the column we found that the cost of removal and relocation was going to negate any savings from the lower cost of the used equipment. This instance was one in which the buyer backed out of the purchase after investigating the cost of relocating the equipment.
A common question asked by those buying used equipment is why are they selling it. The owner of the equipment can be selling it for a multitude of reasons, and it is an excellent question to ask. It is common for a business to outgrow its equipment capacity and sell its equipment to make room for larger equipment. Sometimes a business is closing permanently and is selling its equipment to liquidate the business. New entrants to the industry often ask how it works to buy used equipment. The transaction of buying used equipment is straightforward. The seller of the equipment and the potential buyer connect and work to meet an agreed upon price and terms on purchasing the equipment. The agreement will often include a written contract that stipulates what equipment is being sold, how much time is there for the equipment to be removed, timeframe for deposit and payments, details on process of decommissioning and costs associated. If the buyer of the equipment is unsure of how to approach this process it is wise to hire a group or consultant to assist with this process. Typically a 3rd party will handle the disassembly, crating and relocation of the equipment. The process of decommissioning and relocation definitely has a cost so it is important to consider this in the overall cost of purchase.
There are many factors to be considered here before buying used equipment. Although there are stories of bad deals, there are many more stories of success. In some instances, we have seen and helped folks save tons of money through buying used equipment. We hope you will give careful consideration when buying used equipment. If you are unsure whether or not to buy used equipment, it is best to bring in a professional to aid in your assessment of a potential purchase.