Table of Contents Introduction ..................................................................... 1 9 Characteristics of Successful Spirit Brands .................. 2 5 Ways a Business Plan Can Help You Succeed .............. 4 How to Brand Your Beverage Company .......................... 7 Issues to Consider When Buing and Selling a Distillery .. 9 Conclusion ...................................................................... 12 Intro Alcoholic beverages is one of the largest revenue streams in the
U.S. beverage market, and takes up 60% of the total sales. Over
the years, the industry keeps growing, making it an attractive
option for investors and entrepreneurs alike who are looking for profitable financial avenues. Unlike other economic markets, the
adult beverage sector isn’t dominated by large corporations, it’s
fragmented with many smaller brands having equal footing in
such a competitive market. With opportunities set forth to allow
everyone a chance to succeed, it’s possible to carve out a posi-
tion for yourself. Starting any type of business can be challeng-
ing. You’ll need to understand the various nuances and com-
plexities of not only building a brand, but one that incorporates
alcoholic beverages.
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9 Characteristics of Successful Spirit Brands Starting a new venture is exciting, but often companies begin to overthink processes that are quite simple. It’s not necessary to reinvent the wheel in order to find success. In fact, the most profitable brands share similar characteristics.
1. Goal Oriented The most successful spirit brands don’t hope for the best, they make it happen. They provide ac- tionable steps to achieve their goals and revisit them to make sure they fit into the current direc- tion of the business.
2. Organized When a brand creates a clear structure of offerings, they set themselves up for success. This tiered system works well with the brand’s overall message and compliments their position in the market. A properly developed business plan helps to identify opportunities to improve organiza- tion.
3. Passionate Passion is necessary because it’s contagious. If leadership and management can exude the love they have for their brand, everyone who interacts with them can get on board with making their vision come true. This can trickle down to consumers, creating lifelong brand ambassadors.
4. Knowledgeable If you want to compete with the best spirit brands, you need to have a grasp of just who you are targeting. Successful companies have done their due diligence to obtain consumer demograph- ics like age, salary, interests, and hobbies. One of the most critical pieces of research is finding what medium to reach them best. You don’t want to shout your message into an empty hallway. When you identify your core consumer, you can tailor your voice and packaging to connect with them.
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5. Unique Finding your edge is the key to breaking through the market and becoming successful. You don’t necessarily have to come up with an entirely new beverage, but you do need to identify what is special about your product, whether it’s a new flavor, production method, ingredients, or aging techniques. Successful companies have a niche selling point.
6. Consistent Great brands have a consistent voice throughout their message, branding, and customer experi- ence. If you want to stay relevant in an ever-changing marketplace, you’ll want to avoid sending mixed messages that conflict with a consumer’s expectations. That being said, as a consumer grows, a great business will grow with them, evolving their branding to ward off competitors.
7. Committed to Improvement Success happens when you avoid complacency. Embracing the competition is challenging, but a good brand never stops evaluating their progress. Resting on your laurels isn’t an option. Pushing to ensure you have the best product, strategy, communication, and sales strategy reinforces the opportunity for a successful outcome.
8. Extroverted You might have the most fantastic product on the market, but if no one has heard of it, you won’t sell anything. The most successful brands are extroverts and are constantly conveying their brand’s mission, uniqueness, and where you can purchase their product. Many companies utilize social media as a platform for talking directly to their consumers.
9. Customer Focused You’ll only ever be as good as the people who are behind you. If you want to make an impact, you need to share your customer’s values, attitudes, and personality and make it resonate. Spirit brands who are pulling ahead in the market know how to win the hearts and minds of their con- sumers to create loyal customers.
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5 Ways a Business Plan Can Help You Succeed Now that we’ve identified successful attributes from other brands, it’s time to develop your in- dividual strategy. A comprehensive business plan will help you define profitability, prepare for opportunities, and attractively position yourself to potential lenders.
1. It helps to break down your business
into actionable goals. Before you start operating, you’ll need to know the logistics of how you will run your business. This step establishes the viability and ascertains the likelihood of success. You’ll want your busi- ness plan to highlight the kind of product you are crafting, and its unique position in the market. Think about who will purchase your product and be very specific about age, pay, job titles, loca- tion, and what other brands they are buying.
In your business plan, try to outline the price point and how you will distribute the product. It’s possible your distribution choice determines your price point because of the various costs in- volved. Other areas that need to be highlighted in your business plan are:
• Who is your competition?
• Do you have any regulatory considerations? • How much capital do you need? • How many employees do you need? • What is your projected monthly income?
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2. It gives you an edge when you negotiate with lenders or investors. Starting a business takes a lot of money to get off the ground. Most likely, you will meet with in- vestors or lenders to obtain the capital you need to start operating. An established business plan makes a significant impact when you are negotiating deals about money. Investors and lenders want to see a return on their investment, and well-researched information provides value to in- vestors and illustrates the level of risk they might be undertaking.
When you are selecting a lender or investor, try to find someone who is familiar with the spirits industry. They’ll have a comprehensive understanding of your business structure, plan, and un- dertaking. Additionally, they can help identify weaknesses in your plan and suggest alternatives to strengthen your proposal. This advice could save you a lot of time and money down the road.
3. It regulates expectations for cash flow.
Understanding the cash flow of your business allows you to respond quickly to market trends and other opportunities like your potential for growth. Your business plan is a living document that needs to be regularly updated to reflect changes and prepare you for the off chance you can’t meet the demand, or you have issues with your distribution channels not selling your prod- uct. You want to account for predictable contingencies, adequately funding critical investments that will help your business flourish.
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4. It works as your ultimate communications tool. You might have secured a lender or investor, but other third parties might need information about the business you are operating like customers, suppliers, attorneys, and distributors. A business plan communicates your company’s vision and future goals. Some companies choose to provide a condensed version through the development of a mission statement. It’s a concise way to articulate the most relevant information. The business plan is considered the blueprint for success, and you’ll want to highlight the scope of the business and identify specific strategies to ensure success.
5. It keeps you focused on future growth.
Ultimately, your business plan’s most valuable role is helping you achieve success. The only way to control the outcome of your business is to develop a strategic plan. These steps ensure you have a map toward success by putting the power back in your hands, so you can control your fu- ture. As mentioned previously, your business plan is a living document, and you should compare actual results to your projections, so you can adjust accordingly.
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How to Brand Your Beverage Company The adult beverage market has room for everyone, but you still need to know how to stand out. Unique branding increases value, delivers your message, and legitimizes your beverage company through the use of strong visual representation.
Why is Branding Important?
There are a multitude of reasons good branding contributes to the success of your spirit com- pany. It starts by connecting you and your consumer on a visual level. A well-designed logo will get you far. Just think about McDonald’s golden arches or Target’s bullseye. Good branding is the “face” of your company and a critical aspect of providing a powerful message. When done cor- rectly, the professional appearance builds credibility and separates you because you look pol- ished. Branding is a functional piece of marketing communication that gets your name in front of your consumers. At its core, it is the most basic form of advertising.
How to Start Branding Your Business
When it comes to branding your business you want to hire a reputable firm that can help you on your journey. Ideally, you’ll want to find one with experience working with other spirit brands. Many companies believe investing in professional design is costly, but hiring someone who hasn’t worked with spirits before might make some expensive mistakes regarding specific areas like labeling. Similarly, taking on this responsibility on your own could also set you back. If you think about the time and effort you might put into developing your branding only to abandon them later, you’ve used up valuable time that could have moved your business forward in other areas. If you want to get the best results and keep expenses down, choose a firm that has experience working with beverage companies.
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Do Each of Your Spirits Need Their Own Branding? The answer is both yes and no. It isn’t ideal to create separate logos and labels for each spirit you offer. Especially if you are new or are offering a new spirit, you want to keep the logo the same throughout the packaging so your consumers who bought and loved your bourbon know they might also enjoy your vodka. These two spirits aren’t located in the same area of a liquor store so keeping all of the brandings the same will help them easily identify your products. You should only consider different merchandise after you’ve established a solid reputation.
Branding with Form and Function
When designing your branding, you should consider the look in addition to the function. It’s ad- visable to consider stock bottles and labeling at the beginning because you can purchase stock quantities that help to keep costs down. Once you’ve made a substantial position in the market, you can look into investing in custom bottles that align with your message. In an article from Artisan Spirit, Josh Mayr from the Wishkah River Distillery said, “I’m looking to find more con- gruency in the type of glass we use. That would allow me to stack my orders in a manner where I’m getting discounts on volume across the spectrum of my products rather than by each single product. Glass is expensive.”
When buying glass, you get what you pay for, and it plays a large role in your packaging presentation. Plan carefully.
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Issues to Consider When Buying and Selling a Distillery The distillery business presents a lot of opportunities for successful investments. Several high-profit acquisitions happen every year, and the trend is expected to continue. Whether you are looking to buy or sell a spirit brand, there are a few things you need to know.
Structuring the Transaction
When it comes to selling a spirit brand, the owner has two options regarding the sale; they can participate in a sale of stock or a sale of assets. Both provide benefits and the choice of which one is better depends on what you want from the deal.
Stock Sale A stock sale revolves around the buyer stepping into the seller’s shoes and taking over complete responsibility for the business. This takeover includes the business entity such as the corporation, limited liability company, and partnership. Included in this action is the buyer acquiring assets and liabilities. In a stock sale, the seller gets to walk away from the deal clean and leaves behind everything involved with the company to the buyer.
Asset Sale The biggest difference between an asset sale and a stock sale is the amount of control the buy- er has. Both the buyer and the seller negotiate terms, deciding what or how much becomes the buyer’s responsibility and what stays the seller’s responsibility. It’s a division of assets. This type of deal takes a little longer because of the back and forth while negotiating. Many buyers need to make sure they are acquiring all the necessary components of the business to operate, such as obtaining the recipe, trademarks, and copyrights.
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Before honing in on the type of sale that looks most attractive, keep in mind each one brings about a list of tax compliances that may sway your decision. Generally speaking, stock deals are beneficial for the seller because they can take advantage of the lower capital gains tax rate on the money brought in from the transaction. However, buyers may lean toward an asset deal be- cause they get to take a step-up in taxes based on the purchased assets. The buyer can obtain tax savings through depreciation and amortization deductions.
Regulations Running a spirit brand comes with a lot of regulations, permits, licenses, and approvals on both state and federal levels. With such strict guidelines for a company to operate on a daily basis, it should come as a no surprise that buying and selling an alcohol company will come with just as many rules. A seller has to maintain federal permits to distill and trade their product. However, during a stock deal, the seller will not need to worry about limitations because they can continue production as usual. It’s the buyer who needs to consider the limited window of opportunity they have between closing the deal and filing amendments for the business to continue operation.
In contrast, during an asset sale, buyers must apply for a new Basic Permit and DSP Registration that usually comes with a wait time. Ideally, when acquiring new assets, you don’t want to shut down temporarily while waiting for permits. In most cases, during an asset deal a “Transition Ser- vices Agreement” is reached whereupon the seller agrees to continue working the distillery until the buyer secures all the necessary documentation.
Once you’ve considered the federal regulations, you then need to tackle the requirements need- ed to operate at a state level. Each state has its own set of rules, and some often align with feder- al laws. However, this isn’t always the case, and while ironing out the deal, you need to consider what setbacks might pop up while securing the transaction.
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Diligence When buying and selling a spirit brand, the buyer will want to do their due diligence and review all the assets and liabilities of a company to make sure they are getting the best deal. For the sell- er, it’s a great idea to beat the buyer to the punch and conduct an internal review. This can help prevent problems from arising down the road that might result in a price drop or stop the deal from moving forward. Things a seller could look for is:
• Making sure all state and federal taxes are paid in full. • Ensuring all of the business’s licenses are active and have not lapsed. • Identify all of the distillery’s licenses. • List all officers, directors, and owners
There is one aspect of selling a spirit brand that transcends all business deals, and it’s a contract review. Buyers in an asset sale, want to ensure they are not left with an “anti-assignment” clause that either prohibits the assignment of the contract without consent from the other party or prohibits transfer at all. When a seller is conducting their review of the business before a sale, they can get the ball rolling on receiving necessary consents or waivers to reduce the number of delays in the transaction.
Another clause that could trip up a smooth closer is the “change in control.” This clause impacts buyers and sellers in stock deals. Much like the anti-assignment, the change in control requires one or both parties in the contract to seek the other’s consent if they undergo a change in con- trol. Some stock deals, however, can be affected by verbiage in an anti-assignment clause and should look for language that defines “assignment” in a way that includes a change in control of the business.
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Conclusion The spirits market presents a lot of opportunities, but it can be challenging to stand out in a saturated market. Brands who have achieved success have done so by honing their unique selling points to position themselves favorably. If you are looking for ways to stand out, there are a few qualities that you need to adapt to set you apart from the rest.
At Brindiamo Group, we have a long resume of helping spirit brands find suc- cess through different facets like branding, acquisitions, and developing busi- ness plans. Contact us today to put our expertise and experience to work to make sure that you get the deal you deserve.
