As bourbon has grown into a national and global phenomenon in recent years, the number of distilleries, brands, and investors have grown exponentially, as well. Kentucky’s bourbon success alone currently totals more than $285 million in local and state tax revenue, so it’s no wonder 10 states now outnumber the Commonwealth’s distillery operations to try and catch the momentum some are calling “the amber wave.”
However, entering the bourbon world – or liquor business in general – as a new brand, distillery, owner, or investor is anything but straightforward. With laws and regulations in place that govern the alcohol industry, not to mention high costs and high stakes, this business is not for the faint of heart.
So, what exactly do you need to jump-in or buy-in to the industry? Here are three things you must have if you want to start, own, or invest in a brand:
- Realistic Expectations
- Knowledge of the Three-Tier System
- A Network Within the Industry
From start-ups to seasoned spirit brands, Brindiamo Group works hard to secure successful outcomes for your business. Contact us today.
Realistic Expectations
First and foremost, entering the liquor industry requires having realistic expectations. This can range from realistic expectations about costs to the time it takes to see a return on investment.
In Australia, for example, a fraudulent deal – the biggest in the country’s history – promised small investors who purchased barrels of whiskey a considerable return on their investment within as little as four years. (A promise, of course, that was too good to be true.) Which brings up a similar point: Risk and the possibility of loss are other factors to keep front-of-mind in this business. Not every investment yields a return.
In a nutshell, a new liquor brand or distillery will take considerable start-up costs, time, and patience. Expecting any less will only guarantee one thing – disappointment.
Knowledge of the Three-Tier System
Another reality of this business is this: Anyone entering the liquor business without a solid understanding of the three-tier system will feel as if they are drinking from a firehose.
The three-tier system involves regulations around three separate entities: producers, wholesalers, and retailers. No one entity can be involved in more than one tier (under most state laws), and each is licensed separately. While this structure of checks and balances is intended to provide diverse options to consumers, encourage competition among brands, and ensure easy tracking for tax purposes, the three-tier system is complicated to navigate.
Brindiamo Group has a deep understanding and knowledge of the three-tier system. Serving manufacturers, wholesalers, and retailers alike, the Brindiamo team not only understands the ins-and-outs of the system, we also have a good grasp on what sells (and what doesn’t). This is why we offer consulting for everything from designing a bottle and crafting a new brand story to making introductions with the right investors.
A Network Within the Industry
This brings us to our final words of wisdom. While you don’t need a background in bourbon to enter the business, what you do need is relationships. With the liquor industry’s high stakes, as well as its scams, the business plan that will serve you best is this: Building trust with others in the industry.
Consider the following questions concerning relationships and partnerships that could cost you dearly if you don’t have trust:
- Have you considered from whom you will source your product?
- Who will you trust with the valuation of your brand or product?
- Do you have an effective exit strategy in-place when you sell/merge/buy a company?
- Are you looking for an investor/investment that is a good fit?
At Brindiamo Group, we are constantly cultivating and maintaining our relationships within the industry, and with proven success. We also work on both sides of the fence, for brands and manufacturers as well as buyers and investors.
Contact our expert team today and benefit from our decades of founding, building, buying, and selling spirit companies.