Location, Location, Location: Choosing the Perfect Distillery Site

Your distillery’s location will impact every aspect of your business for decades to come. Choose wisely, and you’ll have a foundation for sustainable growth, efficient operations, and strong community connections. Choose poorly, and you’ll face years of regulatory headaches, operational constraints, and missed opportunities.

“Location was the one decision I couldn’t afford to get wrong,” reflects Amanda Rodriguez, founder of Sunset Peak Distillery in Colorado. “I spent eight months evaluating sites, visiting 47 properties, and analyzing everything from zoning to water quality. That investment in due diligence saved me from what could have been a $500,000 mistake.”

Amanda’s methodical approach paid off. Her distillery now produces 5,000 cases annually in a facility perfectly suited for both current operations and planned expansion. But her story contrasts sharply with distilleries that rushed their location decisions and later faced costly relocations, zoning battles, or operational limitations.

Our analysis of 200+ craft distillery locations reveals that successful operations share common site characteristics, while failed or struggling distilleries often trace their problems back to poor location decisions. This guide will help you evaluate potential sites systematically and choose a location that supports your long-term success.

Why Location Can Make or Break Your Distillery

Your facility location affects every aspect of your business, from daily operations to long-term growth potential.

Operational Impact

Production Efficiency:

• Utility Availability: Adequate power, water, and gas for efficient operations
• Layout Flexibility: Space configuration that supports optimal workflow
• Expansion Capability: Room to grow without relocating
• Loading Access: Efficient receiving and shipping logistics

Cost Structure:

• Rent/Mortgage: 8-15% of revenue for most successful distilleries
• Utilities: $0.50-$2.00 per proof gallon depending on efficiency
• Labor Costs: Vary significantly by region and local market conditions
• Transportation: Proximity to suppliers and distribution networks

Regulatory Considerations

Zoning Compliance:

• Permitted Uses: Distillery operations explicitly allowed
• Special Permits: Additional approvals for tasting rooms or retail
• Future Flexibility: Zoning allows for planned expansions or changes
• Grandfathering Protection: Existing use rights if zoning changes

Building Codes:

• Fire Safety: Sprinkler systems, fire-rated construction, emergency exits
• Ventilation: Adequate air handling for alcohol vapors
• Structural Requirements: Floor loading for heavy equipment and storage
• Accessibility: ADA compliance for public areas

Market Access

Customer Accessibility:

• Tasting Room Traffic: Visibility and accessibility for visitors
• Tourism Integration: Proximity to other attractions or wine trails
• Parking Availability: Adequate parking for peak visitor periods
• Public Transportation: Access for employees and visitors

Distribution Efficiency:

• Highway Access: Easy access to major transportation routes
• Distributor Proximity: Reasonable distance to distribution partners
• Shipping Infrastructure: Access to freight carriers and logistics
• Market Proximity: Distance to primary sales territories

Zoning Requirements and Restrictions

Understanding zoning is critical to avoiding costly mistakes and ensuring long-term operational flexibility.

Industrial vs. Commercial Zoning

Industrial Zoning (Preferred for Most Operations):

• Light Industrial (I-1): Best for small to medium distilleries

  • Allows manufacturing and limited retail
  • Often permits tasting rooms with special permits
  • Good balance of operational flexibility and accessibility
  • Typically allows 24/7 operations

• Heavy Industrial (I-2): Suitable for large-scale operations

  • Permits intensive manufacturing operations
  • May restrict retail and public access
  • Often located away from residential areas
  • Lower land costs but limited customer access

Commercial Zoning (Limited Applications):

• Heavy Commercial (C-3, C-4): Sometimes allows distillery operations
  • Better customer accessibility
  • May restrict manufacturing intensity
  • Higher land costs in most markets
  • Potential conflicts with neighboring businesses

Agricultural Zoning (Specialty Applications):

• Agricultural/Rural: May allow farm distilleries
  • Often requires on-site agricultural production
  • Limited production volumes in some areas
  • Good for agritourism integration
  • May have restrictions on retail operations

Special Use Permits

Many locations require special permits even in properly zoned areas.

Common Special Permit Requirements:

• Conditional Use Permits: Additional approval for distillery operations
• Tasting Room Permits: Separate approval for on-site consumption
• Retail Permits: Authorization for bottle sales
• Event Permits: Approval for tours, tastings, and special events

Permit Application Process:

• Public Hearings: Community input on proposed operations
• Traffic Studies: Analysis of visitor and delivery traffic impact
• Parking Requirements: Adequate parking for employees and visitors
• Operating Conditions: Restrictions on hours, noise, or activities

Tasting Room Considerations

Tasting rooms significantly impact zoning and permit requirements.

Zoning Implications:

• Mixed Use Requirements: May require commercial zoning overlay
• Parking Calculations: Additional parking for tasting room visitors
• Fire Safety: Enhanced fire protection for public assembly
• Accessibility: Full ADA compliance for public areas

Operational Restrictions:

• Hours of Operation: Limited hours in some residential areas
• Alcohol Service: Restrictions on service types and quantities
• Food Service: Additional permits if serving food
• Entertainment: Permits for live music or events

Essential Infrastructure Requirements

Your facility must support both current operations and future growth.

Utilities and Power Requirements

Electrical Service:

• Minimum Capacity: 200-400 amps for small operations
• Growth Planning: 600-1000 amps for medium to large facilities
• Three-Phase Power: Required for most commercial equipment
• Backup Power: Consider generator capability for critical operations
• Cost Considerations: $5,000-$25,000 for electrical upgrades

Natural Gas Service:

• Heating Requirements: Boiler and building heating needs
• Process Heat: Steam generation for distillation
• Backup Systems: Propane capability for redundancy
• Capacity Planning: Size for peak demand plus growth
• Installation Costs: $2,000-$15,000 depending on distance to main

Water Quality and Quantity

Water is your most critical raw material and utility.

Quality Requirements:

• Source Water Testing: Comprehensive analysis of mineral content
• Treatment Needs: Filtration, softening, or purification systems
• Consistency: Stable water chemistry for product consistency
• Regulatory Compliance: Meet all drinking water standards
• Treatment Costs: $5,000-$50,000 for comprehensive systems

Quantity Needs:

• Production Water: 5-10 gallons per gallon of spirits produced
• Cooling Water: Additional 10-20 gallons per gallon for cooling
• Cleaning Water: Significant volumes for equipment cleaning
• Peak Demand: Size systems for maximum production days
• Conservation: Implement water recycling where possible

Water Source Options:

• Municipal Water: Reliable but may require treatment
• Well Water: Lower cost but quality varies significantly
• Surface Water: Requires extensive treatment and permits
• Blended Sources: Combination for optimal quality and cost

Waste Management Systems

Proper waste handling is essential for regulatory compliance.

Wastewater Management:

• Volume Planning: 8-15 gallons wastewater per gallon of spirits
• Treatment Requirements: May need pre-treatment before discharge
• Septic Systems: Adequate capacity for facility needs
• Municipal Sewer: Verify capacity and discharge permits
• Cost Factors: $10,000-$100,000 for treatment systems

Solid Waste Handling:

• Spent Grain: 15-20 pounds per gallon of spirits produced
• Packaging Waste: Bottles, boxes, and shipping materials
• General Waste: Office and facility waste streams
• Recycling Programs: Implement comprehensive recycling
• Disposal Costs: $200-$1,000 monthly depending on volume

Proximity Factors That Matter

Location relative to key stakeholders affects both costs and opportunities.

Raw Material Suppliers

Grain Suppliers:

• Local Sources: Reduce transportation costs and support local agriculture
• Quality Consistency: Reliable suppliers with consistent quality
• Delivery Logistics: Adequate access for grain delivery trucks
• Storage Requirements: On-site storage to reduce delivery frequency
• Cost Impact: Transportation can add $0.10-$0.50 per bushel

Other Suppliers:

• Yeast and Chemicals: Proximity to specialty suppliers
• Packaging Materials: Bottles, labels, and shipping supplies
• Equipment Service: Access to equipment maintenance and repair
• Emergency Supplies: Quick access to critical replacement parts

Distribution Networks

Distributor Access:

• Regional Distributors: Proximity to key distribution partners
• Shipping Costs: Transportation costs to major markets
• Delivery Frequency: Ability to make frequent smaller shipments
• Warehouse Access: Proximity to distributor warehouse facilities

Transportation Infrastructure:

• Highway Access: Direct access to interstate highways
• Rail Access: Potential for rail shipping of bulk materials
• Airport Proximity: Access for expedited shipping needs
• Port Access: International shipping capabilities if applicable

Customer Accessibility

Tasting Room Visitors:

• Tourist Areas: Proximity to existing tourist attractions
• Population Centers: Access to local customer base
• Visibility: Location visible from main roads or attractions
• Signage: Ability to install effective directional signage

Business Customers:

• Restaurant Districts: Proximity to potential restaurant customers
• Retail Concentrations: Access to liquor stores and specialty retailers
• Event Venues: Proximity to venues that might serve your products
• Corporate Customers: Access to businesses for corporate sales

Building Characteristics and Layout

The physical structure must support efficient operations and future growth.

Space Requirements by Production Scale

Micro-Distillery (500-2,000 cases annually):

• Total Space: 2,000-5,000 square feet
• Production Area: 800-2,000 sq ft (40%)
• Storage/Aging: 600-1,500 sq ft (30%)
• Packaging/Shipping: 300-750 sq ft (15%)
• Tasting Room: 200-500 sq ft (10%)
• Office/Support: 100-250 sq ft (5%)

Small Craft Distillery (2,000-10,000 cases annually):

• Total Space: 5,000-15,000 square feet
• Production Area: 2,000-6,000 sq ft (40%)
• Storage/Aging: 1,500-4,500 sq ft (30%)
• Packaging/Shipping: 750-2,250 sq ft (15%)
• Tasting Room: 500-1,500 sq ft (10%)
• Office/Support: 250-750 sq ft (5%)

Medium Distillery (10,000-50,000 cases annually):

• Total Space: 15,000-50,000 square feet
• Production Area: 6,000-20,000 sq ft (40%)
• Storage/Aging: 4,500-15,000 sq ft (30%)
• Packaging/Shipping: 2,250-7,500 sq ft (15%)
• Tasting Room: 1,500-5,000 sq ft (10%)
• Office/Support: 750-2,500 sq ft (5%)

Ceiling Height and Structural Needs

Minimum Height Requirements:

• Production Areas: 16-20 feet minimum for equipment clearance
• Storage Areas: 14-16 feet for efficient racking systems
• Packaging Areas: 12-14 feet for bottling line equipment
• Tasting Rooms: 10-12 feet for comfortable customer experience

Structural Considerations:

• Floor Loading: 150-250 PSF for equipment and storage areas
• Column Spacing: 30+ foot spans for flexible layout
• Crane Capability: Overhead lifting for equipment installation
• Vibration Control: Isolated foundations for sensitive equipment

Expansion Potential

Plan for growth from day one to avoid costly relocations.

Horizontal Expansion:

• Adjacent Space: Ability to lease or purchase adjoining areas
• Parking Expansion: Room for additional parking as business grows
• Outdoor Storage: Space for barrel storage or equipment staging
• Loading Dock Addition: Ability to add or expand shipping facilities

Vertical Expansion:

• Mezzanine Potential: Add office or storage space above production
• Equipment Stacking: Vertical space for multi-story equipment
• Barrel Racking: High-density storage systems
• Future Construction: Structural capability for additional floors

Operational Expansion:

• Production Scaling: Space for additional stills or fermentation
• Packaging Growth: Room for automated bottling and packaging
• Tasting Room Expansion: Ability to expand customer areas
• Event Space: Potential for large event hosting

State-by-State Location Considerations

Regulatory environment varies dramatically by state, affecting both costs and operational flexibility.

Most Distillery-Friendly States

Kentucky:

• Licensing Costs: $1,000-$3,000 total
• Regulatory Environment: Very supportive, streamlined processes
• Tax Benefits: Bourbon tourism incentives, favorable tax structure
• Distribution: Flexible distribution options
• Challenges: High competition, premium real estate costs in bourbon regions

Tennessee:

• Licensing Costs: $1,500-$4,000 total
• Regulatory Environment: Supportive with reasonable requirements
• Tax Benefits: No state income tax, tourism incentives
• Distribution: Good distribution flexibility
• Challenges: Limited to certain counties, tourism competition

Texas:

• Licensing Costs: $5,000-$15,000 total
• Regulatory Environment: Business-friendly with reasonable regulations
• Tax Benefits: No state income tax, economic development incentives
• Distribution: Flexible distribution and direct sales options
• Challenges: Complex county-by-county regulations

North Carolina:

• Licensing Costs: $2,000-$8,000 total
• Regulatory Environment: Supportive with streamlined processes
• Tax Benefits: Economic development incentives available
• Distribution: State-controlled distribution with direct sales allowed
• Challenges: ABC store distribution requirements

Colorado:

• Licensing Costs: $3,000-$10,000 total
• Regulatory Environment: Very supportive, innovative regulations
• Tax Benefits: Economic development programs available
• Distribution: Flexible distribution and direct sales options
• Challenges: High real estate costs in Denver area

Regulatory Variations

Licensing Complexity:

• Simple States: Single application process, reasonable timelines
• Complex States: Multiple agencies, lengthy approval processes
• Reciprocity: Some states recognize other states’ approvals
• Local Variations: County and city requirements vary significantly

Production Restrictions:

• Volume Limits: Some states limit production for certain license types
• Product Types: Restrictions on types of spirits that can be produced
• Aging Requirements: Minimum aging periods for certain products
• Sourcing Rules: Requirements for local ingredient sourcing

Tax Implications

State Excise Taxes:

• Low Tax States: $0.50-$2.00 per gallon
• Moderate Tax States: $2.00-$5.00 per gallon
• High Tax States: $5.00-$15.00+ per gallon
• Tax Credits: Some states offer production tax credits

Property Taxes:

• Assessment Methods: How distillery property and inventory are valued
• Exemptions: Potential exemptions for manufacturing equipment
• Aging Inventory: Tax treatment of spirits in aging process
• Economic Development: Potential abatements for new facilities

Financial Considerations

Location decisions have significant financial implications beyond rent or purchase price.

Lease vs. Purchase Analysis

Leasing Advantages:

• Lower Initial Investment: Preserve capital for equipment and operations
• Flexibility: Easier to relocate if business needs change
• Maintenance: Landlord responsible for major building maintenance
• Tax Benefits: Lease payments fully deductible as operating expense

Leasing Disadvantages:

• No Equity Building: Monthly payments don’t build ownership
• Rent Increases: Potential for significant rent escalations
• Limited Control: Restrictions on modifications and improvements
• Long-term Costs: Total lease costs often exceed purchase price

Purchase Advantages:

• Equity Building: Monthly payments build ownership value
• Control: Complete control over modifications and improvements
• Stability: Protection from rent increases and displacement
• Tax Benefits: Depreciation deductions and potential appreciation

Purchase Disadvantages:

• High Initial Investment: Significant down payment and closing costs
• Maintenance Responsibility: All building maintenance and repairs
• Reduced Flexibility: Harder to relocate if business needs change
• Market Risk: Property value fluctuations affect business value

Hidden Location Costs

Site Preparation:

• Environmental Assessment: $3,000-$15,000 for Phase I/II studies
• Soil Testing: $1,000-$5,000 for geotechnical analysis
• Survey Costs: $2,000-$8,000 for boundary and topographic surveys
• Demolition: $5,000-$50,000 for existing structure removal

Infrastructure Improvements:

• Utility Upgrades: $10,000-$100,000 for electrical, gas, water
• Road Improvements: $5,000-$25,000 for access road upgrades
• Parking Construction: $3,000-$8,000 per parking space
• Landscaping: $5,000-$25,000 for required landscaping

Regulatory Compliance:

• Permit Fees: $5,000-$25,000 for various permits and approvals
• Impact Fees: $2,000-$15,000 for traffic, sewer, or school impacts
• Legal Fees: $5,000-$20,000 for zoning and permit assistance
• Engineering Costs: $10,000-$50,000 for site and building design

Due Diligence Checklist

Systematic evaluation prevents costly mistakes and ensures informed decisions.

Legal and Regulatory Review

Zoning Verification:

• Confirm distillery operations are permitted use
• Verify tasting room and retail permissions
• Check for pending zoning changes
• Review conditional use permit requirements
• Confirm parking and signage allowances

Title and Legal Issues:

• Clear title with no liens or encumbrances
• Review deed restrictions and covenants
• Check for easements affecting property use
• Verify property boundaries and survey accuracy
• Confirm compliance with ADA requirements

Physical and Environmental Assessment

Building Condition:

• Structural integrity assessment
• Roof condition and age
• HVAC system capacity and condition
• Electrical system adequacy
• Plumbing and water system evaluation

Environmental Factors:

• Phase I environmental site assessment
• Soil and groundwater testing if needed
• Flood zone determination
• Wetlands delineation if applicable
• Hazardous materials assessment

Utility and Infrastructure Evaluation

Utility Adequacy:

• Electrical capacity and upgrade costs
• Natural gas availability and capacity
• Water quality testing and flow rates
• Sewer capacity and connection fees
• Internet and telecommunications availability

Transportation Access:

• Highway and road access adequacy
• Truck delivery access and turning radius
• Employee parking availability
• Customer parking and accessibility
• Public transportation access

Financial Analysis

Cost Projections:

• Total occupancy costs (rent/mortgage, utilities, insurance)
• Required improvements and modifications
• Permit and regulatory compliance costs
• Ongoing operational cost implications
• Expansion cost estimates

Market Analysis:

• Comparable lease rates or property values
• Market trends and future projections
• Competition analysis in area
• Customer demographics and accessibility
• Economic development trends

Your Location Selection Action Plan

Ready to find the perfect distillery location? Follow this systematic approach to make an informed decision.

Phase 1: Market and Requirements Analysis (Weeks 1-4)

1. Define Requirements: Determine space, zoning, and infrastructure needs
2. Market Research: Analyze target markets and regulatory environments
3. Budget Planning: Establish total budget including hidden costs
4. Professional Team: Assemble real estate agent, attorney, and consultants
5. Initial Screening: Identify potential markets and general areas

Phase 2: Site Identification and Screening (Weeks 5-12)

1. Property Search: Identify potential properties meeting basic criteria
2. Initial Evaluation: Screen properties for zoning and basic suitability
3. Site Visits: Visit promising properties and evaluate thoroughly
4. Preliminary Analysis: Assess top 3-5 properties in detail
5. Stakeholder Input: Get feedback from team members and advisors

Phase 3: Due Diligence and Analysis (Weeks 13-20)

1. Detailed Due Diligence: Complete comprehensive evaluation of top choices
2. Financial Analysis: Compare total costs and financial implications
3. Regulatory Review: Verify all permits and approvals are obtainable
4. Professional Inspections: Complete building and environmental assessments
5. Reference Checks: Contact other businesses in area for insights

Phase 4: Negotiation and Decision (Weeks 21-24)

1. Terms Negotiation: Negotiate lease or purchase terms
2. Contingency Planning: Include appropriate contingencies in agreements
3. Final Review: Complete final review with professional team
4. Decision Making: Make final location decision
5. Contract Execution: Execute lease or purchase agreement

Ready to find your perfect distillery location? Download our comprehensive Site Evaluation Toolkit - including location scoring worksheets, due diligence checklists, and financial analysis templates.

[Download Free Site Evaluation Toolkit](mailto:hello@craftpro.io?subject=Site Evaluation Toolkit Request)

Need help with location analysis and selection? [Schedule a consultation](mailto:hello@craftpro.io?subject=Location Consultation Request) with our distillery location specialists who have helped 50+ distilleries find their perfect sites.

CraftPro’s location consulting services include market analysis, site evaluation, regulatory review, and financial modeling. Our clients save an average of $75,000 in location-related costs and avoid costly mistakes through our systematic evaluation process.

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About the Author: This location guide was developed by the CraftPro team through analysis of 200+ distillery locations and consultation with commercial real estate specialists, zoning attorneys, and successful distillery owners. CraftPro is the leading distillery management software designed specifically for craft spirits producers.