Insights & Trends
How to start a spirits business
Advice, guidance and tips about starting a spirits business.
At Distill Ventures, we use our five bricks tool to help startup distillers keep in mind the core elements they should focus on when growing their spirits business. These core elements are having a great product, being interesting and being able to sell profitably, supported by a strong understanding of business basics and the broader skills associated with being a great entrepreneur.
Develop a great product
Before starting a distillery business you – first and foremost – need a great product. For this, you’ll not only need to understand the basics of blending, you’ll also need to know where best to source the highest quality ingredients.
As well as ensuring that your product is great quality, you’ll also want to protect your brand. If you plan on trading in the EU, then you’ll need a Community Trade Mark (CTM) in place for your brand name, and a USA trademark if operating there. Registering your brand’s website URL and social media profiles is also useful early on. And don’t forget about registering key visuals – these assets are just as central part of your brand as your name. Our key tip here is to get advice from a specialist IP lawyer, rather than a general lawyer without this specialism.
Create an interesting brand
The spirits market can be very competitive, even for products that have yet to see a craft resurgence. Your brand also needs a sustainable value proposition in order to enable you to grow to global success. Central to this is “being interesting”; brands which manage to be constantly interesting is what makes brands successful. What makes your product unique and interesting needs to be communicated throughout all your branding. At Distill Ventures, we provide growing spirits brands with the resources they need to condense their brand’s story into a compelling message.
Focus on your supply chain
Most importantly, you’ll want a supplier in place who can meet your projected sales for the first couple of years. Ideally, though, you’ll need a supplier who can also scale as you do. A scalable supply solution is about having a supply chain which could cope with your order volume doubling every six months, for example, and could take you through to producing 20-30,000 nine-litre cases per year.
Hopefully you’ll have a strong product, interesting brand and have ironed out any issues with your supply chain. Now is the time to really focus on your COGs. COGs refer to your “cost of goods”; the amount it costs you to produce and pack a bottle, and ship it to your wholesaler or distributor. You’ll need these costs locked in for the first two years of production. In addition, you’ll want to be at 60% gross margin, with a plan in place to get to a margin above 60%. We’d suggest not starting production if your gross margin is not at least 50%.
In terms of pricing, the key tip is to remember that prices obey Newton’s Law – they only come down. Don’t assume that you can set your pricing now and raise it later. Ensure that price is aligned with product, proposition and volume expectations, as well as testing this pricing model in the market itself.