Philip Duff: Reaching cruising altitude with your craft liquor brand

Drinks: Drinks
Other: Opinion

Your craft liquor brand has been launched, listed, written about and re-ordered. In fact, not to tempt fate, it even looks as if you might, one day, actually make a small profit. So how to go from there to making a large profit? To making, in the words of Richard Gere’s character in Pretty Woman, a really obscene amount of money?

hot air balloonWell, it’s about walking a tightrope every day. You have proved all the conventional wisdom wrong by launching a brand that, to some degree, is working. Congratulations. But that doesn’t mean all conventional wisdom is to be ignored.

You will need to work out when to be disruptive, and when to be conventional, and there isn’t really a playbook for that. Good luck.

One example will be that your edgy little brand will (we hope) grow to the point where you need to spend more and more time motivating sales staff and doing your dog-and-pony show at their sales meetings and less and less time personally glad-handing bartenders. This is the way of things.

Or you may be chugging along fine – but to make it to the next level you will need a serious injection of cash, so you’ll find yourself knee-deep in a Kickstarter, or shopping your firm to corporate finance types. Again, this is normal, if maybe dull. Desirable, even; most young brands never make it that far.

Keep close to your customers though, even as you grow. They will tell you what they want from you. If, for example, you have a mid-priced SKU and a premium one, the premium one is usually designed to make the mid-priced one look like even better value. But if customers buy your premium SKU in greater numbers than you’d anticipated, they are telling you something. Listen to them.

Famously, Chivas Regal whisky was experiencing a dip in sales in the 1970s and a team of handsomely rewarded consultants pored over the brand for months before delivering a simple recommendation: just raise the price so Chivas costs what people think it’s worth. Sales were slipping because its low price meant customers found it hard to believe Chivas was a true premium. Brand owner Seagram’s raised the price and Chivas never looked back.

Expansion geographically is seductive and like many seductions it often ends in tears for one or both parties. It is the cliché of small entrepreneurs that they open too many new markets too quickly, so they subsequently can’t support or activate the brand in all those markets, and the brand becomes less profitable or even loss-making in those cities, regions or states.

‘Own your own backyard’ doesn’t sound slick or sexy but it is the advice you need; sell every single bottle you possibly can in your home city or country before ever expanding. No-one will complain seriously if your brand is not available in their area, but allowing a brand to come into contact with customers without you having influence over the how and when and where (the general topic of my last four articles, in fact) can be deadly for your brand. Just 10 states in the US account for 91% of liquor sales; the owner of a large, well-known brand distributed in 42 US states confided in me recently that he was fairly sure the brand was only profitable in about four of them.

On a practical note, more territories means either hiring more staff (which hits your cashflow), or more hours of work for you, in which case you will be doing less of something else, and that something else might be something which is more profitable or better for the brand long-term. At every moment, with every decision, ask yourself: is this the best use of my time? Not everything that is important is urgent, and many things that are urgent aren’t important.

People will need ongoing reasons to buy your brand; you will have to stay active, top-of-mind. This can be everything from social-media advertisements, to PR-driven events like sponsoring a cocktail book launch or new-menu-party, to sponsoring or teaching seminars on your brand or category at bar shows like Imbibe Live or BCB. So long as the event or topic is reasonably close to the DNA of your brand, you have great latitude to do cool things, and planning and executing events and activations can be great fun, too – this IS the liquor industry, after all.

Planning a year’s worth of activities in advance will save you a lot of grey hairs and even more express-shipping costs. But, build in enough flexibility to be fast and opportunistic. When it began emerging earlier this year that the Trump staff had many links to Russia which they had concealed, Smirnoff vodka very quickly came out with humorous ads proclaiming how open Smirnoff was about its own Russian origins; this was a smart move by a mega-brand, all the more impressive as mega-brands rarely move so quickly and with such agility.

Exploit your small-company founder-operated advantage ruthlessly; it is all you have. Provided you aren’t too reckless or egregious, you can stretch the very legal boundaries of the liquor industry in your promotional efforts, because the regulatory authorities are big-game hunters and they aren’t after stripling brands like yours.

Perhaps the best-case scenario is that you can grow your brand to having respectable numbers – let’s say 40,000+ cases – without sacrificing your maverick start-up craft-brand credentials too much. Now you are in a position to be picked up by a big player, either in the form of an investment from a larger brand-owning company, or in the form of a partnership with a big distributor, which may involve that distributor acquiring some shares in your brand.

With them, your brand can be rolled out almost simultaneously to the whole country or the world, as Big Brand Company X or Big Distributing Firm Y have regiments standing by to flood that SKU through the many, many pipes of their distribution network, getting bottles onto shelves and into hands far faster than you could ever do before. It’s a good idea to keep up to date with who’s been acquiring whom and what kinds of deals are being done, so keep an eye on Imbibe and publications like that.

When the time comes, you will need to have some benchmarks of what has been paid for brands like yours, and be aware of the strategic asset your brand might represent to a portfolio which would value it beyond its annual sales. We are due some massive consolidation in liquor, you know; beer behemoth AB InBev controls some 27% of the global market for beer, but the biggest dog in the liquor world, Diageo, has but 7% of all liquor.

So, to sum up this article and the previous four?

Do your research, think big, act small, use your lack of size judo-like as an advantage instead of a disadvantage and ensure you win battles by choosing the battlefields they will be conducted on.

I’ll see you at the bar.

[email protected]

Missed the previous three articles? Then look no further…

Part I: Philip Duff: Why on earth do people start craft liquor brands?

Part II: Philip Duff: How to find a gap in the craft liquor market 

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

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