Two presentations at ADI’s Hands-On Workshop in particular really opened my eyes: I talked about Kurt Charles’ presentation a little bit in my Alcohol Math post. The other presentation was by Scott Schiller of Thoroughbred Brands, who gave a brutally -honest, profanity-laden take on the spirits industry. I loved the delivery, and I think it’s great for young distillers to hear something other than an all-roses-and-cuddly-kittens and you’re-gonna-be-the-next-big-thing outlook. Here’s a hodge-podge of “things I learned” from Kurt and Scott’s presentations:
#1. Have an Ownable Position. One thing I heard loud-and-clear was that the industry (4500 brands already) is exploding with new brands (hundreds of new brands a year) and a saturation point has got to be pretty close. What’s going to make your brand stand out? It’s just not enough to have a really beautiful product, and your story has to be stronger than just “I have a passion for making great, hand-crafted products”. Your ownable position can’t be your price (won’t last), your still (no one will care after they’ve seen it for the first time) or your locale (there are too many “first distillery in X state” stories out there). Those aren’t ownable. Things that are ownable are unique bottles and packaging, unique flavors (if there are any left out there), a unique history or story (I’d even question if that’s ownable) and/or a cocktail that calls specifically for your product. As Scott pointed out, bubble gum vodka “tastes like sh*t” but it sells 100K cases a year because it’s unique and ownable. I don’t think new craft distillers need to take it to that extreme (i.e. take the ‘craft’ out of it), but the point is to be in tune with the industry and be more outward-facing in strategy and product development.
#2. Think Beyond the Walls of the Distillery. Scott’s advice was to plan to spend as much outside the distillery (packaging, naming, label/bottle design, marketing, free samples, market tests, bottle mock-ups) as you do inside the distillery (stills, equipment, rent, cost of goods, etc.). What that means is that starting a successful distillery could really cost $500K, not $250K.
#3. Brands are Built On-Premise. I heard this from Lee Paschelli and Valley Spirits as well: you need to build your brand in bars, restaurants, clubs, hotels, and/or catering companies before you can approach off-premise specialty retailers, supermarkets and liquor stores. If there’s no consumer demand on-premise, no off-premise retailer will want to carry your brand.
#4. Don’t Sell Out Your Production to Costco! You might think a young craft distillery would be overjoyed if a Costco or BevMo showed enough interest in their products to want to buy out their whole annual production, but you’d be dead wrong. If you commit everything to 1 customer, you give up the ability to spread your product around and to build your brand on-premise. And you’ll eventually become a low-margin producer for a company who will push you into private-label production at some point. You’re essentially screwed once the needle’s in the arm. Resist!!!
#5. Sell Locally First. Many states will allow you to sell locally to on- and off-premise accounts at first. You won’t be paying a cut to a distributor, but the trade-off will be a high delivery cost and time spent knocking on doors. But you need that local presence and proven success before you can branch out to other states.
#6. 4-Tier System? When you branch out to other states or locales, you’ll want to consider hiring a broker. A broker is essentially paid a commission by the distiller to motivate a distributor sales team who otherwise would rather focus on selling more of the big, power brands. The broker accompanies the distributor on sales calls and has existing relationships with bars, restaurants, etc. You’re essentially paying a broker to do the distributor’s job (lame!). So, as if a 3-tier system wasn’t complicated enough, now you have a broker taking 10-12% of the distiller’s F.O.B. price to help move product.
#7. Bring a Ringer. Can you get a rock-star mixologist to promote your brand and create some signature cocktails featuring your products? Can you create a buzz around your product within the bartending community? The goal is to educate and convert consumers so that they order a “call drink” (a Four Roses Manhattan or Bombay Sapphire Tonic) instead of a “well drink” (a Manhattan or a gin & tonic).
#8. Set Your Price to Last. Start at a premium price and positioning and use promotions when necessary to temporarily reduce your price. Conversely, if you start low, you can ever go up.
