When I founded and operated a contract craft brewing company in New York City back in the 90s and early 2000s, the challenges were many, but it was the most fun I ever had “working”. The beginning was exhilarating, as a lot of people I talked to bought into the concept. Once we were capitalized and licensed with a production agreement, we could begin brewing.
My first shock was when I missed a step in the compliance process. The message was clear… “You can’t ship the first case of beer until you have this permit.” I learned then that it is good to be on friendly terms with the TTB and state regulators, after which, begging can be an effective strategy for speeding up the approval process.
Choosing the right wholesaler comes down to the three or four people in the house who will actually care about your business. You need to separate the happy talk from the truly passionate distributors. There is no broad pattern for identifying the right distributor — it is a market-by-market decision and lot of due diligence is required. But it needs to be planned out with a strategy to have a coherent distributor network in case you ever want to sell your business.
Next comes your target list — the 10-20 on-premise “validator” accounts that will establish your credentials and provide the platform to grow. These guys are your best friends in business and those relationships need to be nurtured. Your brand must be a consumer and waitstaff favorite so the sell through is consistently strong and it spreads from there.
Off-premise, shelf position matters. Decide who you want to be near and communicate very clearly why that is important. A few small local chains can help a lot and chain buyers are actually human beings who would like to see you succeed. They certainly don’t want their competitor to have success with your brand if they turned it down.
Learn how to negotiate pricing. I do this for a lot of my clients because it is complicated and it is a negotiation. The wholesalers do it all the time so they are good at it. If you understand how wholesalers think you can gain some extra margin to reinvest into the business. Reach out for help from your peers if you need it.
Above all, know your consumers. They will determine your success. To attract a passionate following, the branding has to resonate with the consumers. A good independent marketing agency will work almost for free to be able to work on a craft beer project. It turns on their staff and looks good on the client list. Use this to your advantage. It is as true as ever that for the consumer, the beer they hold in their hand is a statement they are making about themselves, like the clothes they wear or the car (of bicycle) they drive. Your brand needs to be a “badge” proudly worn.
This is the best business in the world. You get to drink beer and call it work. But in the end it is a business where cash flow, revenue and a strong balance sheet are required. Then if all goes well you may have the option to exit someday and take home a big check that will provide the seed for your next venture. Or you might do this for the rest of your working life. Either way, stay aggressive and watch your cash!
Brewers Advisory Group is a consulting group that specializes in helping craft brewers build value in their businesses. We have walked in your shoes. We’re here to help.
Contact Mike Mitaro [email protected] www.brewersadvisorygroup.com.
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