A STORY OF TWO ROADS – PART 3

This is the third article in our series where we’ll cover the increasingly popular marketing-driven route to develop your spirits brand and bring it to market. This method saves a huge amount of regulatory and facility-focused time and resources, freeing up bandwidth and capital for you to focus on brand development, marketing, sales, distribution, and expansion. This method is far less expensive than developing your own distillery and will allow you to maintain control of your recipes and production by partnering with and outsourcing to an existing distillery. It’s important to note that the marketing-driven path is not mutually exclusive from setting up your own distillery in the long run.

READ A STORY OF TWO ROADS

PART 1 PART 2

Outsourcing isn’t without its challenges, though, as there may be production limitations, however, in many cases local regulations will still allow you to develop your own physical location and ultimately grow into your own distillery if you desire.

One of the first questions to ask is, what should you budget for when setting up a marketing-driven brand with outsourced production?

TIME

Selecting your distillery partner will be a critical component in saving you time to market. Outsourcing production allows for the acquisition of product exponentially faster than setting up your own facility and producing/ aging your own product. Many distillery startups have outsourced initially to get to market more quickly while they navigate permitting and other time intensive groundwork. If your long-term plan is to set up your own distillery, the marketing-driven route can provide a faster road to market and cash flow. There have never been more options to outsource production for craft distilleries, even for aged product. The demand for aged bourbon, however, has increased over the past few years, and back stocks are shrinking quickly, so establishing a reputable and dependable partner is critical to this path.

Developing your brand strategy and story is key no matter your route to market, and the marketing-driven route will allow you to focus more time and resources on the crucial questions. No matter how simple, your brand story must be focused and connect with your consumers. After all, this will become the backbone of all your outgoing communication and will directly affect your marketing strategy, including your packaging. Whether you work on this yourself or with a partner, we recommend allocating three to four months for this activity to fully vet the options and lay the proper blueprint for your brand. Allowing yourself time to focus on brand story development versus facility issues can be an advantage and a massive time saver when trying to get to market as quickly as possible.

Once your brand story is established, you will need to develop your brand name and brand identity — this consists of your logo, brand packaging, the overall look and feel of your brand, and its personality. For this process, we recommend allocating three to four months and an additional five to ten months for dry goods, government approvals, and bottling. It should be noted this timeline continues to extend based on the current state of the supply chain. For example, even stock glass bottles can have lead times upwards of 12 months from the time of order depending on the mold selected.

BUDGET

These costs can include business and financial plans, brand development, including name development, logo and packaging design, market testing, and legal fees. Depending on how much of this you can bootstrap, you should plan on anywhere from a minimum of $25,000 and upwards of $150,000 or more depending on your needs. Production costs vary greatly depending on the kind of product(s) you want to source but are far less expensive than the millions of dollars that permitting, construction, and development of your own distillery can cost.

PRODUCTION

Explore both local and regional distilleries, as well as larger rectifiers for production. Each has their strengths and weaknesses. Outsourced production opportunities will vary depending on the kind(s) of products you’d like to develop and whether the products need to be aged.

Custom recipe development can run anywhere from $3,000 and up depending on your specifications, whether it’s a white spirit or dark spirit, and the number of recipe variables you want to explore. Custom blending and finishing of spirits can run $5,000 and up for white spirits and anywhere from $5,000 to $20,000 for dark spirits, depending on how long it takes to finalize your desired flavor profile. A good target quantity for year-one launch is around 2,500 cases with the ability to scale quickly within that year to 5,000 cases of product. Pricing will vary greatly depending on quantity of product, timing, and the age of the product being sourced, but the results can be immediate and fast-track your brand to market even if your long-term goals are to distill your own product.

Develop a budget that considers not only your launch needs for the first year but also provides flexibility for expansion based on increased distribution so that you are not undercapitalized for expansion to support future demand.

Whether the capital is coming from your own pocket, a bank, or investors, a strong and well-thought-out business and marketing plan will be critical components to both your short- and long-term success. When developing your budget, consider any facility costs, licensing, legal advice, financial plans, brand development as well as market testing and ongoing costs such as sales support, brand ambassador costs, advertising, PR, social media and other promotion for your brand.

DISTRIBUTION & EXPANSION

Develop a well-thought-out strategy for sales. Can you sell directly to consumers? If so, how and where? Will you go the three-tier distribution route instead? Another important thing to consider is your product mix. Will you offer an aged product such as bourbon, or quick-turn unaged products such as vodka, gin, or RTD canned cocktails, or a mixture of both? How will this impact your outsourcing costs and marketing strategy?

No matter which path to market you choose, proper planning and budgeting helps avoid unexpected delays in timing and unplanned expenses. Ultimately, the decision is a personal one that should be based on your long-term vision, timing, and budget. Adventure awaits! Success doesn’t happen overnight, but well-laid plans will always be your best path to owning your own spirits brand.

David Schuemann is the owner and creative director of CF Napa Brand Design. For more info, visit www.cfnapa.com or call (707) 265-1891.

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