Some observers of the wine and food business have a glamorous notion of the spirits category. Low cost of raw materials. High profit margin. Very slick packaging. Late-night sexy mixologists slinging bottles behind the bar.
Then there's the reality. For a limoncello producer this week in a small town in Manchester, New Hampshire, the reality is peeling and juicing 110,000 lemons that he sourced from Sicily; tough sales calls in Cleveland where an Italian restaurant owner wouldn't meet with him because he "had underpants older than you are"; and new machinery that his team nicknamed Giuseppe.
So much for the glamour. It happens in the wine industry too, when harvesters approach their 967th row of grape vines to pick that season. It happens in the food industry, when cooks peel and slice their 127th onion of the night or servers dry and polish their 68th wine glass at the tail end of a shift.
There's a gap to bridge in every industry between perception and reality, but that bridge in the spirits industry can be particularly scenic. Here are three takeaways for entrepreneurs of every stripe:
1. Find the sweet spot of your buying power.
The brothers who co-own and manage Fabrizia Spirits, based in Salem, New Hampshire, are American and of Italian descent. Phil and Nick Mastroianni's ties to Italy are significant and emotional: three of their four grandparents are originally from Calabria, and family history may have helped their comfort levels but it was their buying power that enabled the newcomers to be taken seriously in their business negotiations.
That's where the 110,000 lemons comes in.
"We aren't a huge company but we aren't tiny either," Phil Mastroianni said. "We were the perfect size to be taken seriously." Today they are the best-selling limoncello regionally, including in Boston's North End, the fabled Italian neighborhood.
Identify your sweet spot for size, nicely between "too big to fail" and "just a hobby." At my company, Enolytics, our sweet spot hinged on early adopters: We defined our sweet spot to major data partners once we had enough early adopters on board, and we defined our sweet spot to clients once we'd completed enough proof-of-concept projects with early adopters who now owned a competitive edge.
2. Overcome under-capitalization.
When your business is under-capitalized from day one, as Fabrizia and many spirits companies are, the financial imperative emerges fast. "We had no choice, it was do or die," Mastroianni said.
The brothers employ a three-step process:
- Treat vendors just as well as customers. "We keep [vendors] honest by sharing price comparisons from time to time, but never leave over a few cents and on a qualitative side we always treat them like family. This alone can bump your 30-days terms to 60, and your credit limit just the same," Mastroianni said.
- Get comfortable with loans of every type, from the internet to friends. As the business grew, Fabrizia was able to "graduate to the bank which has been much more pleasant," Mastroianni said.
- Persevere, even when it's so hard it's, "Please make it stop" hard. They believed that they would eventually succeed, which was the only was possible to operate the business on their own terms.
I respect the Mastroianni brothers' determination to succeed without outside investment and I empathize with it as well. There will come a time when that outside investment makes sense for both of our businesses, but we aren't there yet.
In the meantime, going it alone is the long way around and, especially in a high VC-pressure environment, it's the decidedly unpopular choice. But we are both glad that it's the path we've chosen for now.
3. Build industry experience and expertise.
With more than ten years of wine writing experience under my belt, I was a known entity in the wine world before we launched Enolytics. That certainly helped when prospecting for new clients. Entering the alcoholic beverage industry as an outsider, however, puts an entrepreneur behind the eight ball, especially when you need to build distribution in other states, gain access to larger chain accounts, and book time with distributor sales teams.
Outsiders can hire brokers and sales consultants in order to tap into their network of relationships, or they can build their own relationships. The second option is less expensive but takes a lot more time. Mastroianni's advice is to just keep showing up.
Then, once the connection is made, follow through builds credibility even when (or especially if) that follow through is inconvenient, like driving 300 miles to shake a hand and then turn around. The bottom line, Mastroianni advises, is to make sure the people you meet know how much they mean to you and your business.