BIG WHISKEY CRAFT BOURBON WHAT I LE ARNED TR AVELING FROM
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For more than 35 years I created products, brands, and marketing for some of the most prestigious whiskies in the world — The Macallan, Highland Park, Johnnie Walker. When I co-founded a craft distillery I thought it was going to be easy. What I’ve learned is that I was wrong. It’s hard. It’s really hard. This two-part series outlines my 10 biggest lessons traveling from big whiskey to a craft distillery.
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LESSON SIX
Create Profitability Through a Diversity of Profit Streams
When I really understood the math of the three-tier system, it was clear that it wasn’t going to deliver the kind of profitability that I felt my team deserved given how hard we work. To grow our profitability I borrowed from the playbook of big whiskey. In Scotland they make big profits from single malts; however 80 percent of their volume comes from blended whisky that they mostly purchase, blend, and package. In the U.S., Sazerac makes some of the most expensive bourbons in the world. At the same time, over 80 percent of their volume is in low-priced Canadian and U.S. whiskey. In both cases the profit per bottle is low on the 80 percent; however, it covers overheads and makes the big profits on the 20 percent possible. In our case we had a high-volume Noble Oak collaboration and a small three-tier business. What was missing was a high margin/high profit business. The idea was a simple one — custom 120
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bourbon. It was not a new idea. In fact it was the way bourbon was sold when it was born in the 1800s. You would take your clay jug to a barrel blender or whiskey merchant to get it filled to your personal tastes. To make custom bourbon work we identified what we called “Death Threats” — TTB, State of Ohio, three tier, customization system, bottling speed, and costs. Then, step by step we problem solved and created reliable systems for quickly and profitably delivering custom bourbon a bottle at a time. Custom bourbon has changed our math model. Today, 70 percent of our profits are from custom bourbon bottles for on-trade and consumers and our revenue per person for those visiting our distillery has doubled. Again, just like with big whiskey, our other profit streams pay the overhead and custom bourbon delivers profits. My advice is to diversify your income streams. For us it’s custom bourbon. For you it might be focusing on very old whiskey, prestige contract brands, making a deep commitment to high-value experiences, or even VIP curated brands.
WRITTEN BY DOUG HALL
LESSON SEVEN
Confront Reality — The Three-Tier System Doesn’t Care about You
When sales managers work on big whiskey brands, your sales are important to your distributors, on-premise, off-premise, control states, etc. As a craft distillery, you just don’t matter to their business. Don’t take it personally. The percentage of new products from big whiskey brands that ever reach 20,000 physical cases in a year is in the very low single digits. Add in low capitalization and lack of resources for craft and the number is even lower. It’s no wonder your phone calls and emails go unanswered and support for your brand is minimal to non-existent. Whining about the situation will not change it. Frankly, it’s likely you are getting your “fair share” of their time based on your sales volume. To address this we do three things: 1) Give three tier meaningfully unique offerings; 2) Don’t whine; and 3) Be the easiest to sell. Again, as detailed in Part 1 of this series, having a meaningfully unique product is the first key to success. When you offer something that no one else offers, at a fair price, you win. When you offer the same old same old bourbon in another fancy, expensive bottle, you lose. Whining to managers about your lack of support does not help. The next time they have some resources to focus on craft brands, it’s human nature that whiners’ brands will get less support. Our team focuses on developing events, promotions, and limited editions that are “no brainers” for buyers to buy. When you give a distributor sales person something that is an obvious “wow,” they are more likely to support it as it will be an easier sell to their customers. For example, we recently created a simple demo for our Dexter Three Wood Bourbon using pieces of wood to show the difference in the grain of new oak versus 200-year-old oak along with the layers of flavor from adding maple and cherry wood. It brings to life our “wow” difference and is meaningful and fun to share. W W W . ARTISANSPIRITMAG . C O M
