Many people today want to start and manage their own liquor business. Some just love vodka or are looking to come up with the next big thing in the gin market, while others just have a passion for the business. Regardless of what your motivations are, starting a liquor brand can be very exciting and lucrative.
According to industry reports, there is no limit to how much you can generate with a liquor brand. Note that the stronger your business skills, the more income you are likely to generate. In addition, with businesses and processes changing daily, there will always be demand for new features, products, and concepts for your business.
Unlike many other businesses, it can be relatively quick to start making sales and generating revenue with a liquor brand. Note also that there are strict rules and regulations with starting a liquor brand, and you will be expected to comply with these regulations or face massive legal repercussions.
Steps to Start your Liquor Brand Successfully
Starting a liquor brand can genuinely be straightforward; however, there are numerous steps to take before you can consider launching your new brand. This may include sourcing and developing the product, obtaining the proper federal and state licenses, putting a distribution model in place, and organizing your back-office administrative functions. Read on to understand more about these processes.
Table of Content
- Select Your Business Model
- Register Your Business and Acquire Permits
- Find your Suppliers
- Develop a Unique Concept
- Understand the Numbers
- Build a Solid Marketing Plan
- Find the Right Distributors
- Create a Brand Presentation Deck
- Reach Out to These Distributors
- Attend a Face To face Meeting
- Continue Marketing Your Brand
Select Your Business Model
The first step in starting your liquor brand is to decide the products you want to make and how you intend to make them. Building production facilities can be quite costly and not everyone who has a viable vision for a liquor brand can afford to build one or even want to own their own.
To build your own facility, you will need substantial capital and this cost will most often depend on the size of your production, where your distillery is located, and many other critical factors. You will expect to spend at least $1M even for a relatively small operation.
You can also decide to outsource the production to someone else and focus your energy on marketing and selling. Reports have it that the number of new craft distilleries in the US has continued to grow, and now numbers more than 2,000. Owing to that, you can align with one of your local distilleries to start making your new product, as they likely can use the business.
Register Your Business and Acquire Permits
Right before you sign an agreement with a distillery, you must structure your company legally and obtain all necessary licenses. Whether you form an LLC, S corp., or choose another corporate structure, you must try to protect yourself and your partners from personal liability.
Have it in mind that the costs of forming a corporate entity will vary from state to state, however, consider working with an attorney to draft documents, like an operating agreement for your LLC. Also, consider registering your trademarks before you start working on your brand strategy.
It is not ideal to spend thousands of dollars on a designer for your labels and marketing materials only to find out that another brand holds the trademark for the name you’ve picked. Also, acquire the necessary federal and state licenses you need to sell your liquor.
Find your Suppliers
When starting a liquor brand, note that your basic suppliers will include companies that provide grain, liquid, barrels, packaging, co-packers, and logistics companies. You can find these suppliers via some good industry magazines, online lists, and trade organizations.
If you are a new entrant in this line of business, you need to convince suppliers to work with you. When choosing suppliers, you must keep several things in mind. For one, you will want a supplier that is the right fit size for your new brand.
More established suppliers may not be willing to take on a new startup, but it is still advisable you reach out to them. Also, strive to build long-term relationships with suppliers. Establishing long-term relationships can help in bumpy times like when pricing is wavering. Once you have tested and selected each of your suppliers, ask for samples, pricing, and lead-time on all goods.
Develop a Unique Concept
This is one of the most challenging aspects of starting a liquor brand, especially with a vast range of new products on the shelf these days. Note that customers won’t even consider your brand if you are not bringing something tangible to the market.
Ensure you carry out extensive research to understand the size of your total market. Truth be told, many of the products in this industry are very similar. In every stage of product development, there are opportunities to stand out.
While you can choose to pick different grains, you can also decide to distill differently, or even use an alternative barrel. If you intend to outsource production to another distillery, you can get innovative and work with barrel finishes or other tactics that can be done after distillation and barreling are complete.
Packaging and branding are another very powerful way to make your product stand out on the shelf. Whether you use custom or stock bottles, there are numerous ways to stand out in the market. You can also choose to leverage the knowledge of industry experts to come up with an attractive packaging design.
Understand the Numbers
To be able to achieve success in this business, you should ensure that your margins are sufficient enough to support an ample marketing and sales budget. A good number of new entrants into this business fail to understand how much money it takes to build a new brand and all the costs involved.
One of the very first things you have to do is to determine your shelf sales price. But to ensure you make the right decision, carry out proper competition research. Liquor brands in the United States are known to operate under a three-tier system. This system, which was put in place after prohibition by the federal government, mandates producers to sell to distributors who then sell to retailers.
In most places, distributors also sell directly to bars and restaurants. When considering the financials of your business, remember that a producer’s gross margin is calculated based on the price they sell to a distributor which is less than what you may see on the retailer’s shelf.
Build a Solid Marketing Plan
You need to understand that the success of your brand is tied to your market competence and your ability to get customers to purchase your Liquor. There are indeed numerous ways to market your liquor brand. You can choose to partner with a celebrity, leverage traditional advertising, or even choose to focus primarily on social media.
However, it is recommended you use multiple tactics to reach your audience or even leverage experts who understand the rules of engagement when it comes to marketing liquor brands. Note that one of the most common advertising tactics for businesses in this industry is customer sampling, either at retailers or at bars and restaurants. You should also consider leveraging other outdoor options like billboards or murals.
Coupled with advertising, a significant budget should be in place for commercial spending. Have it in mind that your distributors have numerous products to focus on and it falls on you to encourage them to sell your product during certain times of the year. You can do this via programming and special pricing incentives offered to retailers for ordering more of your product.
Steps to Sell Your Liquor Brand to Bars, Stores, and Pubs
Aside from the fact that liquor brands in the US are expected to work with a distributor who has a special license, have it in mind that how you distribute your product will often depend on how you chose to distill it. If you have your own distillery, some states will allow you to self-distribute, however, most liquor brands prefer to leverage the expertise of a third-party wholesaler, a strategy known as the “three-tier system” in alcohol beverage rules.
Find the Right Distributors
As a new liquor brand, you have to understand that this is a tiered space. You will have to convince distributors (Tier 2) in each market to carry your brand because only they can ensure that bars, stores, and pubs (Tier 3) stock your products for the end-user to enjoy. Truth be told, distributors will most often focus a fair amount of their review and analysis on how you plan to build a market for your brand.
Create a Brand Presentation Deck
This is one of the first steps to consider when looking for result-oriented distributors. This will have to be about 10 pages or less. There are no basic rules on how to create a brand presentation deck, only that it is not expected to be too long.
Don’t forget that distributors tend to receive lots of pitches for consideration, therefore ensure that each page contains very interesting and valuable insight and knowledge to the conversation. Have it in mind that your objective here is to introduce them to your brand, make them know what is unique about your liquor brand, and let them see what sets your brand apart, and how you intend to raise brand awareness of your products.
Reach Out to These Distributors
This is where you decide how to get your presentation and pitch in front of the right person. You have to understand that every distribution house has its own standard protocol for taking in new brands. Ensure you first invest time into researching their websites. You should also consider sending a sample to the distributor as well.
If you choose to email your presentation deck ahead of time, just request a street address and contact so you can forward a sample for their team to test. You must make a solid first impression as these guys are making a decision that will impact the market’s ability to enjoy your hard work!
Attend a Face To face Meeting
If everything goes well, you will probably get a reply and follow up on how to meet face-to-face. Have it in mind that this is the goal of the presentation and sample kit – to get that meeting. This is an opportunity to present your brand in more detail and perhaps enjoy some tasting, if not already done.
It is also a good opportunity to convince the distributor, therefore ensure that your personality and passion are on full display. You will also want to discuss pricing, but before that, ensure you know your costs and prices at all levels. Ensure you understand the state excise tax implications to your FOB prices – or perhaps your delivered prices.
Continue Marketing Your Brand
You have to understand that your marketing plan is to let the public know about your existence. To attain success, your marketing plan must cover a few key components. For one, it has to explicitly articulate your brand and brand attributes.
Note that as long you understand what you stand for and your brand personality, you can easily shift gears into identifying your target market and core influencers within that market. This is very necessary since you get to bring them to life as part of your study to understand them.
In this line of business, distributors play a very crucial role to ensure that your product leaves the production facility and arrives at stores, bars, and pubs.
Note that everything you do is a step in the long process of building a remarkable liquor brand and business. After you must have created one or two great relationships with distributors, let that be the model for how you will approach other markets, and feel free to leverage those success stories to build and expand.