Philip Duff: How to start a craft liquor brand part 2

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In the second of five articles on starting craft liquor brands, Philip Duff  says it’s not hard to spot a gap in the market, but the real challenge is finding out if there is a market in the gap


A cunning craft spirit start-up like yours is looking, in the words of successful entrepreneur Richard Koch, to divide the market. On one side of the divide, all the existing brands; on the other side, yours.

It doesn’t matter how small your bit is – so long as you own it. They’re mass-market; you are craft. They’re standard; you are premium. They’re foreign; you are local. Or vice versa. You get the idea. It’s not hard to spot a gap in the market, but is there a market in the gap? Here’s where it gets fun. And terrifying.

It is very rare that a viable gap in the liquor market is identified, calibrated with credible data and written about before anyone else has seen and exploited it. Usually, one or more risk-happy entrepreneurs have to pave the way. Any who succeed attract the interest of the analysts and NPD departments of the big firms, who try to pretend they knew all along.

That’s not to say it never happens: Rabobank analyst Stephen Rannekleiv spotted a $1bn gap (in the US market alone) for nicer brandy in a report he published in March 2015. Barely two years later and the first American Brandy Summit has already been held and brands are plunging into this lucrative niche. What do we learn from Rannekleiv’s $1bn finding? One should keep up to date with the trade press, especially analysts’ reports which deal in food and beverage (and it might be an idea to bookmark Rannekleiv’s).

There are opportunities in every category of spirits. I believe there are opportunities even in the vodka category, which in terms of being overcrowded can best be described as ‘Tokyo Rush Hour Subway’.

It should be a category you know well, and one in which you are sure you can own the niche you plan to create for yourself.

Learn by example
Pete Nevenglosky, Nate Whitehouse, and Mark Christou created Avua Cachaça – a craft cachaça – because they couldn’t find one in the US and now, just a few years later, Avua is craft cachaça, at least for US-based mixology bars (who are themselves a niche, of course). There are other cachaças available in the US that are just as painstakingly made, but they don’t market themselves as craft with the same degree of focus and success that Avua does.

In the UK, Alex Kammerling created Kamm & Sons to be a British aperitif, a competitor to the likes of Campari. He owns that niche now, too. Others have entered, but he is so far ahead it would be financially unwise for them to try to surpass him. As long as sales of craft spirits and craft cocktails continue to grow – and they do, at 27% per year – Avua and Kamm’s sales will continue to increase.

Now, will Avua, or Kamm & Sons, or Old Duff Genever (ahem) become the next Smirnoff? Who knows? Least of all Smirnoff, who haven’t managed to create the next Smirnoff themselves, yet, either. But Smirnoff was a craft brand once, too, you know.

My advice? Choose a category of spirit which has a significant numbers of classic or modern-classic cocktails (and/or one or two mega-popular signature drinks, like the Caipirinha) that already contain said spirit. It should be a category which lacks whatever it is you are offering. What’s your niche?

Once seen as the exclusive territory of Italy, we are now seeing amaro from England, Ireland, America and even Australia. Ditto vermouth, of course. Gin was once seen as uniquely English, but that’s changed too – there are several Italian gins now, for instance. Aquavit, on the other hand, troubles me. I adore it, but there are no classic or modern-classic cocktails containing it, which means every bar that wants to sell it has to operate without the safety net of being able to put it in an existing classic or well-known cocktail. This isn’t to say we won’t see significant craft aquavit brands be successful, just that they’ll have to work harder for their success than start-ups in vodka, gin, whisk(e)y or rum, for example.

Theory over, now it’s time for the practical
Now you have an idea of your category, you must ask yourself this: who, exactly, is your customer? This is the single-most omitted question during NPD sessions. Ask 10 execs around an NPD table to describe their perfect ideal customers and you will get 10 significantly differing answers.

Irish Distillers, which is now the Irish whiskey arm of Pernod Ricard, used to have a great segmentation index describing in great detail its various whiskey brands’ ideal customers. A Powers drinker was a lawyer who lived in the ritzy Dublin suburb of Blackrock. Paddy drinkers were car mechanics from the far less salubrious Crumlin, and so forth.

You cannot spend too much time on this: it is vital. Do not fall into the trap of deliberately choosing a demographic so broad it is meaningless, like ‘Young adults and professionals aged 21-45 living in the city or suburbs, both married and single’. Establishing a very clear idea of who your ideal customer is right from the outset will make practically every customer-facing decision a thousand times easier, so you (as a company) will be able to move faster.

Now you know your category and your customer. It’s time to build your brand. If you haven’t had the benefit of a marketing education, read Marketing for Dummies or suchlike. It will teach you the five Ps. Broadly, your product is not just the physical, tangible bottle comprised of bottle, labels, liquid, closure, capsule, case, and case-divider, just as a table is not just the table itself, but also the space around the table. Elements of your brand are equally as important as liquid, bottle and label.

Five Ps
People. This wasn’t a P when I was learning marketing in the early 1990s, but it should have been.

You will need good chemistry with everyone, whether investor, partner, supplier, agency, employee, media or customer. Life is too short to do business with dicks. Chemistry doesn’t mean you have to be dear close friends with everyone, but you will need to be good at assessing people.

Some of the most apparently helpful, friendly people you’ll meet would rip out your eyes and sell them to a butcher the moment your back is turned, and some of the most grumpy, taciturn people you’ll meet are angels in disguise who will help you time after time, even when you haven’t deserved it. You will learn the difference either the easy way or the hard way, but the easy way is less expensive: observe people well, listen to them closely, and see to what extent they really do what they say.

Price. Your price is your brand, too. If your brand is genuinely higher quality than competitors, it’s easy to charge more than them, but difficult – and treacherous – to charge less, as it’s hard to efficiently explain to buyers how you can make and sell a better brand for less. Each price category is a separate niche, and you need to decide which one you can own.

Michel Roux brought Absolut from zero to 5m cases a year by deciding there were enough people who’d buy a vodka partly because it was more expensive than Stoli or Smirnoff – that was a niche he wound up owning. The 86 Co’s brands (Ford’s gin, Aylesbury Duck vodka, Tequila Cabeza and Cana Brava rum) are standard well brands, but they cost more than competing well brands. 86 Co, however, create enough perceived value for their bullseye customers (through an ergonomic, recyclable bartender-friendly bottle, transparent production credentials and extensive bartender-event sponsorship) that even though they are higher priced than competitors, they represent better value to bars that care about such things.

Place. Which is to say, where’s it sold? Something available exclusively at Harrod’s in London or The NoMad Hotel in New York is a very different product from the identical bottle for sale at Fat Dave’s Bait & Beer Shack in East Owl Tickle, Alberta. Pursue listings at the significant bars and liquor stores relentlessly, and while you should usually allow anyone to order, beware of having your brand in the ‘wrong’ place.

Your choice of importer and distributor will be important: which kinds of outlets do they specialise in? Charles Joly’s first distributor for his Crafthouse bottled cocktails range discouraged him from calling on Whole Foods in Chicago. He called on them nonetheless. Whole Foods is now Crafthouse’s single largest customer – and Crafthouse have a new distributor.

Promotion
. Promotion is every single thing you do to communicate with customers, be they buyers in bars and liquor stores, or end-consumers. It starts with your business phone number, website, Instagram, Twitter, Facebook & LinkedIn pages. It continues with any PR you or your agency do (including personal social media posts by you and your staff), any events you sponsor or organise.

And it encompasses any promotional items you have made, going right on down to the weight and texture of your business cards. Have a clear plan for the messages you want to send and the media outlets you want them to appear in. They must be congruent with your bullseye customer demographic. Like listings, pursue the ‘right’ kind of media attention with laser-like focus, and be polite – but don’t spend too much time – on everything else.

Product. There is a tangible product, after all. Custom bottle mould (from about $7,000 up) or standard ($0)? Paper label? Silkscreen? Paper quality? Closure (cork, to you and me)? Capsule (the plastic, paper or foil around the closure)? Don’t forget the case (needs to be printed), the case-dividers, and any gift packaging you want to make.

Don’t be intimidated by experts in any field, they need you to communicate effectively with them, so worry less about being polite and more about being clear.

Oh yes, and the liquid. It really does have to be good, but ‘good’ is extremely subjective. Don’t do too much qualitative research on the taste unless you have access to a proper tasting lab where everyone tastes in isolation, using the same WSET-like scale. In fact, regarding research, remember the wisdom of Henry Ford* on the topic:

‘If I’d asked people what they wanted, they’d have asked for faster horses.’

But do test your liquid in its classic and modern-classic cocktails. You’re taking a big risk if you have (for example) a gin that doesn’t really work in a martini or G&T, or a rum that doesn’t make a great Daiquiri.

If it’s a craft brand, it has to be made in an artisanal way. Full stop. Don’t try to rephrase, omit or hide anything about the ingredients or production that inconveniently isn’t craft – it never stays secret for long, and especially not in this day and age. Be aggressively transparent from the start, that way you control the conversation instead of, down the line, being accused of disingenuousness and having to go on the defensive. If you’re working with a contract distiller, be honest about it. If you buy in neutral alcohol instead of distilling it from scratch, ditto.

Phew! Now you have a category, a customer, a product, a brand and a plan for the five Ps. Next up: how do we get the product to market.

[email protected]


*It seems Ford never in fact said this but hey, we live in a post-truth society, so I’ll let it stand.

Missed the first article? Then catch up here

About Author

Philip Duff

A jet-set bartender, Irishman and spirits expert Philip Duff is one of the cocktail community's best-loved presenters & educators, a renowned expert on all distilled spirits (but especially gin & genever), and an in-demand on-trade & beverage consultant to drinks companies around the world. As well as teaching seminars, owning an award-winning craft-cocktail bar, serving as director of education for Tales of the Cocktail and appearing on TV & in publications as diverse as Esquire, Reuters, The New York Times, The Wall Street Journal, Food & Wine, Australian Bartender, Imbibe and Mixology, Philip's consulting firm Liquid Solutions helps drinks brands connect with the world of bars, everywhere. In 2008, Philip opened the Netherlands’ first speakeasy cocktail bar, door 74 in Amsterdam. door 74 has twice been nominated as one of the world's four best cocktail bars (2008 & 2009), won Best Cocktail Bar and (twice) Best Bartender (2009 & 2010) at the Venuez Dutch Bar Awards, has featured in World's 50 Best Bars. He has created acclaimed trade engagement programs such as the Bols Around The World and G'Vine Gin Connoisseur global bartending competitions, and has consulted for Diageo's World Class and Pernod-Ricard USA's BarSmarts programs. His very own brand, Old Duff Genever, will launch in New York in September 2017. When not writing, talking, drinking or getting in or out of aeroplanes, Philip lives with his family in New York.

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