How to Bring an Alcoholic Beverage to Market
Ralph Erenzo was desperate to find a use for his land in the Hudson Valley in New York after some townspeople objected to his plans for a "climbing ranch." He learned about a change to New York law that created a new class of distillers. Prior to 2003, the only option was a $50,000-a-year industrial distilling license. The new class, designed to give farmers another outlet for their harvest, dropped down to $650. Tuthilltown Spirits was born.
Erenzo and his partner Brian Lee taught themselves to make alcohol by trial and error. Erenzo sold their batches of corn whiskey out of his car, convincing bartenders one-by-one to carry the brand.
Now, the Hudson Valley spirit sells for about $50 for 375 ml, and is carried in some of the nation's top restaurants including Blue Hill and Per Se, and the company continues to release new products, including rye, rum and vodka.
But for every success story like Tuthilltown Spirits, many entrepreneurs try to bring a new spirit, wine or beer to market and fail. How can you make sure that your drink will get behind bars and on liquor-store shelves?
Bringing an Alcoholic Beverage to Market: Find Your Niche
One common pitfall in the wine industry is the traveler who visits another country, enjoys an outstanding bottle of wine and wonders why it isn't sold in the United States. That's what Chris Haroza, the U.S. sales manager for Terra Andina, a line of Chilean wines, called the "I'd buy it" mentality.
"Wine doesn't always taste as good at home as it does on vacation. Or maybe it's just as good as ever, but if its priced at a point that between your markup, your wholesaler's markup, and the retailer's, is that $5 bottle of wine still going to be as good at $18?" Haroza says.
That noted, opportunity does arise occasionally. When Arik Torren and his business partner Amy Hardy were traveling through Oaxaca, Mexico, and met Enrique Jimenez, who came from a family of mezcaleros and wanted to produce a mezcal that was made without the influence of smoke and a wood-burning oven, they knew they had found something unique for the U.S. market.
"There's a huge amount of optimism for me because there is such a real opportunity for growth," says Torren of Fidencio Mezcal, which is now sold in several states as the company gets ready to introduce new varieties to the United States. "As more people know about mezcal more people are drinking and buying mezcal, I'm here. I like the idea of coming in bootstrapping, small, artisanal, and working with a less-known type of product.
Having a unique history or production method will help set your product apart. Scott Goldman started importing Combier after discovering while he was a professional ice hockey player in France. Combier created the original recipe for triple sec in 1834—and still uses the same methods. Goldman says the advantage of marketing Combier is that all bartenders are familiar with triple sec and how to use it—think margaritas—and his brand also has a rich history.
"Bartenders are the gatekeepers to consumers," Goldman says. "They like to be learn about products and Combier has a unique story and they have really embraced it."
Gable Erenzo, whose father, Ralph Erenzo, was one of the founders of Tuthilltown Spirits, says that being the first whiskey produced in New York state after prohibition, as well as a product made from locally sourced ingredients, was a huge selling point with chefs and bartenders.
"There are ways to differentiate your brand," he says. "The liquid in the bottle is important, but the brand you build up around it and the story you tell is really important."
Bringing an Alcoholic Beverage to Market: Understand the System
Following the repeal of prohibition, most states adopted a three-tier system for selling alcohol: the producer or importer sells to distributors, who then sell to retailers. The idea behind it was that it would be easier to collect the bulk of excise taxes at the distribution level with a limited number of wholesalers.
The structure of the three-tier model varies state-to-state, and sometimes even by particular counties. Some states, such as Pennsylvania and Utah, control both the distribution and sales of alcohol.
Getting your product onto shelves often requires passing the first checkpoint—getting carried by a distributor.
"I wish I had a secret answer to get a wholesaler to say yes to your product," Haroza says. "It's a competitive world out there and with wholesale, there's a real bottleneck. They don't need to take any product that comes along and can afford to be really particular."
Liquor stores will frequently carry products from multiple distributors, but bars and restaurants will often work with only one or two. Andrew Auwerda, with Philadelphia Distilling, a craft distiller that manufactures Bluecoat Gin, Penn 1681 Vodka, and Vieux Carre Absinthe, explains that the advantage of working with a large distributor is that it makes it easier for bars to order your product rather than setting up a separate invoice with a new company. However, small distributors might give your product more time and attention.
Auwerda says that as his brand garners recognition through the media and winning tasting competitions—like being voted "Best Gin" at the San Francisco World Spirits Competition—distributors will be more receptive and even approach his company.
Bringing an Alcoholic Beverage to Market: Importing
When importing a product from abroad, many brands will employ a third-party service provider. Companies such as MHW and U.S. Wine Imports take care of things like import logistics and making sure you have the proper federal label approval and permits.
"While it costs some money, at a certain volume, it saves a lot of time," Haroza says. "For us being a starting brand over the last few years, it's allowed us to focus much more on sales and marketing and not getting bogged down on getting wine into the country."
Otherwise, the Alcohol Tobacco Tax and Trade Bureau offers resources online about how to obtain a license to import, and offers seminars throughout the year in different cities.
When deciding on a price point when you are importing a product, be sure to keep exchange rates in mind.
"Once you set prices, you are not advised to raise them, especially for a long period after you start," says Rita Jammet, who imports a line of champagnes for the La Caravelle brand.
Jammet points out that until you're up and running and have established sales patterns, hitting the right mark for inventory can be tricky.
"When you decide to import, it takes a few weeks. If you are out of stock and you can't deliver to one of your clients, another brand might come in and you might lose that opportunity," Jammet says. "If you bring in too much merchandise you sit with that inventory that doesn't move, and pay storage."
Dig Deeper: He Started Importing , and Made a Billion
Bringing an Alcoholic Beverage to Market: Look at the Long Term
Steve Luttmann worked for several years at Diageo and Moët Hennessy before striking out on his own to import Leblon Cachaca from Brazil. He says those interested in the alcohol business can't go in with a speculative mindset or think that they will get rich quickly and get out.
"It's a marathon and not a sprint. It takes a good seven years to get a brand foundation and even longer to firmly establish a brand franchise," Luttmann says.
Auwerda says that reaching customers through social media, distillery tours, or meeting them at events can be the first step.
"If you have a great spirit then they might buy a second bottle. But you probably have to sell them the fifth before they get brand-loyal," Auwerda says. "It's very grass-rootsy. One customer at a time. But then the potential is that person buys one bottle every two weeks for the rest of their life."