Starting Your Own Liquor Brand – Many entrepreneurs have dreamed of owning their own alcoholic beverage brand. Maybe you love vodka, want to invent the next tequila, or your passion is the brown stuff, whiskey!
If you’ve ever wanted to know what it takes and how to get started, here are some great tips on where to start! If you need more help after reading the basics, feel free to contact Johnson Street Partners, where we help build brands for the next generation!
Starting Your Own Liquor Brand
If you’re new to the industry, it may come as a surprise that you don’t need to own or operate an actual distillery to create and own a brand. In fact, before the craft revolution, there were hundreds of brands of whiskey on the shelf, produced by just a handful of distilleries. As with many other industries, production facilities are expensive to build, and not everyone with a great marketing idea for a brand wants to be responsible for building their own facility.
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Of course, as we’ve seen with wineries and breweries, consumers love products made in their home markets. Craft distilleries have followed suit and started popping up over the past 15 years, and there are now nearly 2,000 distilleries across the country. The American Distilling Institute keeps an updated list of all the craft distilleries here if you want to take a look.
What are your options and what business model makes sense for you? Considerable capital is needed to build your own building. It depends on the size of your production, the location of the distillery, and a number of other factors, but regardless, it will cost at least $1 million for even a relatively small operation. Many new craft operations spend more than $10 million to build a facility with a restaurant, bar and enough production capacity to grow the brand sufficiently.
Alternatively, you can outsource production and focus on marketing and sales. The advantage of this approach is that your production volume is added to an existing facility, creating greater economies of scale.
Now it seems that whiskey and distilling in general are in plentiful supply thanks to the craft boom and larger distilleries increasing capacity. Many new craft distilleries will continue to open in the coming years, and there’s always room for a unique product or something local to a specific geographic area. However, you could partner with a local distillery to create your new product, as they could probably use the business! That way, you can use your hard-earned (or saved) money to market your new brand instead of buying equipment.
Steps To Starting Your Own Whiskey Brand
This is one of the most difficult steps, especially with all the new products on the shelves these days. However, if you don’t have a unique idea, why should consumers buy your brand? Do market research and find out the size of your total market. A good first step is to check the Financial Information on the Distilled Spirits Council website. Here you can find trend information on the main categories of alcoholic beverages in recent decades. Many developers of new brands believe that the liquid inside the bottle must be different from everything else already sold. A little secret in the industry is that many of the products you buy are actually very similar.
So if the liquid is so similar, how can you create a unique concept? Well, there are many pieces to the puzzle, including brand, target consumer and retail price, and packaging design. It is the highlight of the whole product that makes it unique, as well as the quality of the liquid inside!
There are opportunities for success in all areas of product development. Whiskey has several ways to distinguish it from the actual liquid. The most obvious is to choose different grains, distill differently or use an alternative barrel. But what if you outsource production to another distillery like the one above? It’s time to get creative and work with cask finishing, proof (the amount of alcohol in the product), blending, and other tactics that can be done after distillation and cask. If you get involved in the process early enough, you can still influence the choice of grain and barrel.
Packaging is one of the best ways to differentiate your product on the shelf. Creating a custom bottle is considered expensive for many in the industry, but now there are some very creative solutions. Whether you use custom or stock bottles, there are many ways to stand out. The industry has come a long way from traditional cork and paper labels. It is important to find experts in good time to help with packaging design. They’re not always what you think, so be careful about jumping straight into a marketing company without understanding your options.
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This phase continues and is constantly revised until you bring your product to market. You need to ensure that the margins are sufficient to support an adequate marketing and sales budget. Many people entering the market do not understand how much money it takes to build a new brand and all the costs that go with it. If your margins are too small, you will never have a chance to succeed.
The starting point for the development of product economics is to determine your selling price from the shelf. This is the price at which you sell to the consumer at the retailer. Some brand owners make the mistake of setting this price by working bottom-up from the price of the product rather than considering what the market can accept. Appropriate competitive research is required as well as confirmation of a realistic comparison of your product. Can you charge a premium for local, better quality, nicer packaging or even a better story?
Depending on your business model, the majority of your sales will likely come through the traditional retail channel. In the United States, the industry operates on a three-tier system. This system, established after federal prohibition, requires manufacturers to sell to distributors, who then sell to retailers. In most countries, distributors also sell directly to bars and restaurants. In other bars and restaurants, you must buy from merchants who have a special permit. When considering your company’s finances, remember that a manufacturer’s gross margin is calculated based on the price they sell to the distributor, which is much lower than what you might see on the retailer’s shelf.
You have other business expenses that are not necessarily related to the product. Many of these are fixed costs and should be factored into the larger funding model. Outside of product costs, the largest spending category is usually marketing and sales expenses. This price depends on your overall business plan, how you go to market, and the geography you decide to launch on day one. In general, the more you can afford to spend on marketing, the faster your brand will grow, assuming you use it wisely.
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This is the fun part! You probably didn’t get this far without thinking about your brand. The name is of course very important, and finding a name to protect takes time. It is often best to seek legal advice at this stage, so contacting a trademark attorney may be the right way to go. You want to have a list of a few names you like and maybe even a slogan. A trademark attorney can perform a basic search for a minimal fee to ensure your name is available.
This takes time because often many of the names you like are already registered. Trademarks are not common to all products, but use a class system. Each category covers specific products. Visit the USPTO website for more information on the class system. Whiskey and other distilled spirits fall under class 033, but it’s good to look for a few other overlapping classes. Industry experts and attorneys can further help you with this part of branding.
In addition to the name, you naturally want to design the logo and the general look and feel of the brand. Many startups initially work with a marketing agency. While these agencies are sometimes great, starting them up can become an unnecessary expense. Depending on your budget, there are several options for completing this part. Today, there are websites like 99designs that can help run contests to create a “brand in a box.” Even packaging companies can help do this type of work for you. Finding good guidelines for this part of the process is important because making major brand changes is difficult and expensive.
The main suppliers of our industry are grain, liquid, barrel, packaging, co-packers and logistics companies. You can find good industry magazines, online lists and trade associations
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