Philip Duff: Who can help you start your own craft liquor brand

Philip Duff

18 September 2017

In the third of five articles on starting craft liquor brandsPhilip Duff  tackles the issue of who you will need on this journey. 

Ideas, I feel, are worthless. Execution is all. In that vein, it will take a village to raise your brand from infant idea to adult execution. In the last article we mentioned the importance of people, but let’s run down the cast of characters, shall we?

The entrepreneur. That’s you, presumably. Let’s hope you already know yourself. But do you have partners? Investors? What are they looking to get out of this?

Is investing in your brand a bit of fun, and they don’t mind if they get their money back or not, or are they gambling their retirement fund on your ability to out-fox Diageo?

You may be able to get the brand up and running with your own money, but you will soon encounter the Contract Distilling Paradox: you have to pay the distillery right away when it produces your brand, but you won’t get paid by your distributor for as long as 100 days. Thus, frustratingly, the more you sell, the less cash you have.

After a couple of production cycles, you will be contemplating selling a kidney on Alibaba to fund the next production run. It is then that a predatory financier will typically swoop in and gobble up half the shares in your company in return for providing relatively minor cashflow.

To prevent this, make a five-year cashflow plan and plan to start raising money at least a year before you’ll need it. Crowdfunding is now a legitimate source of finance, and it has the inherent advantage of creating a 'tribe' of fans of your brand before it even launches.

Raise enough money, too – no-one has ever complained if money they invest is returned to them because the company didn’t need it, but it is disquieting when the supposedly professional company you invested in sheepishly comes back, à la Oliver Twist, to ask for a little more.

Speaking of getting more, you need to have an exit plan from day one – what does success look like? And failure? When is it time to admit defeat and close down the business? A so-called pre-autopsy is becoming standard practise for switched-on entrepreneurs; spend time planning all the things that could go wrong, so you aren’t too shell-shocked when any of them do, and you can hopefully duck, weave, pivot and survive.

Getting annoyed at sales staff who only respond to incentives is like getting angry at a shark for being a shark

The importer & distributor. These are the people who’ll move your brand from the distillery loading dock to the backbars and liquor store shelves of the world, as well as take care of a whole skipload of insanely dull yet very important back-office functions such as legal compliance, label approval, permits and sales reporting.

Respect them for what they can do, not for what they don’t. Distributors, and I say this lovingly, don’t build brands. Their speciality is moving boxes. It takes a great deal of work, time and expense to keep your brand top-of-mind with the sales staff of a large distributor. Hell, it takes a lot of effort just to remind them that yours is one of the brands they sell; they may sell hundreds. You cannot get annoyed at this. Getting annoyed at sales staff who only respond to incentives is like getting angry at a shark for being a shark.

Too big a distributor and your brand will get lost; too small, and they’ll love you and give you lots of attention, but there won’t be many feet on the street. You will need one kind of importer/distributor to get you started, and a very different one, later on, when the brand really takes off. Many new distribution companies have emerged focused on the craft spirits / cocktail bar segment, and most of the older firms have established luxury or craft divisions. Some craft brands use logistics platforms, which do everything an importer/distributor does, but who don’t have sales staff; bars order directly from the platform.

Considering craft brands have to be hand-sold, platforms like this are a viable alternative to signing on with a classic distributor for brands which the founder wants to initially grow in their home city.

Platforms result in lower costs for everyone involved, and since there are no sales reps to schmooze, you can devote more time to being your own sales rep.  I’m launching Old Duff genever with the leading logistics platform in the USA, MHW, a company based near New York.

The buyers. In the Western world, the off-trade accounts for the lion’s share of liquor sales. But off-trade buyers (that is, liquor store owners and managers) select brands to stock based on trends in the popular on-trade. So you need to be listed and visible in the best (for your brand) bars and restaurants.

Let’s assume you have no money to pay listing fees (a.k.a 'retros') or that as in the US, such practises are illegal. That’s not necessarily a disadvantage. Logically, paying for a listing makes bar staff automatically question the value of your brand; conversely, being listed out of love and affection carries enormous value. It is the difference between prostitution and true love.

Michael Vachon of the UK’s Maverick Drinks craft portfolio is vehemently anti-listing-fees (he has even had T-shirts made reading 'F* Retros'), and he offers to host free tasting events of their spirits for bars, tastings to which the bars can sell tickets to guests and thereby gain income often equivalent to the fee they would get for listing a big brand.

Have your hi-res photos, potted biographies, pithy soundbites and story hooks' all ready to go

Regardless, bartenders, bar owners and bar managers are very important. Cultivate them. Make friends. Be the guest they look forward to see walking through the door. Help them solve problems. Be grateful, be charming. Don’t be monomaniacal about your brand; drink others from time to time (not competitors, though!). Play the long game. And listen. Bartenders work at the coal face of liquor sales; they are an invaluable source of intelligence about what is being ordered, what isn’t, and why.

The media. We are all journalists now, curating our own endless broadcast through Instagram, Twitter and Facebook. The media landscape now includes hobbyists who nonetheless have six-figure followings. Real journalists and writers still exist too, and their world has changed; many now function additionally as consultants, speakers and de facto brand ambassadors.

Lines blurring has become standard: some bartenders are also photographers or writers and have massive social-media profiles. Have a clear view of who you want to write about your brand, where you want that writing to appear, and make yourself useful to those people. Have your hi-res photos, potted biographies, pithy soundbites and story hooks' all ready to go, all the time, and answer media enquiries same-day.

Never hesitate to send a bottle to a writer or meet them for a drink; if yours is a good story, they want to hear it – they are in the story business, after all – and you want them to help you tell your story to the world. Extend your charm and outreach to social media as well; that’s a platform that is free to use, but you should consciously invest time and money in communicating engagingly, which today includes having compelling visuals  video in addition to text.

The customers. Just as everyone has a plan until they are punched in the face, every brand has a plan until the first customer makes the first order. It is not enough to have a theoretical strategy to put the right product in the right place with the right bartender or writer recommending it; you need the right people drinking it in the real world, not on paper. Your target market. Work out why they are buying it, and – crucially – why they are re-ordering.

Buy them a drink; listen to their story. In this sense the customer really is right. If you hear the same comment about your brand once or twice, file it away; if you hear it 10 or 12 times, it's probably time for you to take action. Find out the words your target customers use to describe your brand to one of their friends – you may learn some surprising facts about how your brand is perceived. Pursue target customers relentlessly and build a tribe: first 10, then 20, then 50 then 100.

Your competitors. Observe them closely. The big ones have access to talent, data and tools beyond your wildest dreams – but the very fact of their extensive distribution and the long-standing fame of their brand is their Achilles heel, because you get to come in and play the 'scrappy underdog' card, and who doesn’t support the underdog?

You can learn a lot by observing the big firms; they plan far in advance, are meticulous about systems, put in the time to get to know the sales reps and sales managers, and usually don’t jump on every random opportunity for publicity or sales promotion; instead, they ask themselves 'Is this on-brand?'.

Try to look like a little brand externally and think like a big brand internally. Zig when others zag, too; every competitor will either be an example or a warning, and some of your most valuable lessons will be in what not to do.

Every good bar show now has seminars about starting, growing and even selling brands, with panellists from the world of finance and M&A; their advice is golden. Subscribe to industry publications like Imbibe to keep your finger on the pulse.

Now we have covered the why, the what and the who: next up, the how: how do you actually do this?

Missed one? Catch up on the rest of the series:
Philip Duff: Why on earth do people start craft liquor brands?
Philip Duff: Starting craft liquor brands part 2

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