Date of Award

5-2020

Document Type

Thesis

Degree Name

Master of Science in Engineering Management (MSEM)

Department

Engineering Management

Abstract

This integrated project investigates entry into the growing distillery market. The specific entry point will be a craft distillery focusing on the artisanal production of rum in Houston, Texas and the surrounding regions. A flexible design of a distillation process implementing a hybrid pot still with a total capital investment of $391,000 was generated. A business model incorporating this process design develops the consumer basis, value proposition, key activities, and cost structure of the artisanal distillery. Following the proposed business model incorporating the maximization of initial cash flow, the resulting NPV at a discount rate of 10% after 10 years is -$129,000 with an IRR of 4.28%. In addition, the payback period was determined to be 10 years and the return on investment was calculated as 13.4%. Based on the proposed design and business plan, the following can be a feasible startup to pursue with improvement to the cost and revenue structure of the business. The marketing and business plans highlight the artisanal branding of the product and process and allow for successful cash flow after the first two years. However, a larger positive cash flow will be required to increase the profitability of the financial venture. This can be achieved through decreasing operation labor and overhead costs, decreasing the cost of the initial investment, and achieving higher process yields. Following this business model, while investigating these financial changes can improve the profitability of the startup distillery. With the incorporation of variability in the production process, there is significant room for future growth. As the business grows, improving the financial modeling of the business will also aid in assessing the profitability based on real data. In the future, the business plan will be implemented along with the product branding tactics to start up the distillery in the Houston area.

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