When it comes to dealing with government regulation, liquor manufacturing catches most of the heat. We put together 5 tips for entrepreneurs looking into starting a craft distillery.
1. Money
Start-up cost is the first hurdle. While a craft distiller might be able to set up with a license, a still, and a building for less than a half million dollars, if the product requires aging, costs can run into the millions before any liquor is ready for sale. That being the case, craft distilleries need to make sure they’re distillery manufacturing software to track costs, grow the business, and increase efficiency.
2. Legal Hoops
Unless you want unfriendly faces wearing ATF jackets at your door, make sure you’re in compliance with local, state, and federal regulations—and there are a bunch ranging from what you can or can’t distill, when and where you can distill it, and when and how you can sell it. In other words, budget for an excellent attorney to keep track of all the legalities and great inventory management software to track your perfect product.
3. Time
Looking for a quick profit? Quick when it comes to distilleries is often measured in decades depending on your choice of booze. Cutting corners can mean a bad product and a bad rep. There are a couple ways to work around this. Setting up a tasting room allows you to sell small amounts of your product before you’re actually ready to market on a larger scale. If you think of it as a neighborhood tavern of sorts, you can also begin building and tracking a customer base this way. Even so, a tasting room is probably a few years down the road. Need faster cash? Distill something like vodka or gin - which don’t necessarily require aging - while you’re waiting on your whiskeys.
4. Taxes & Tariffs
Thanks to a big cut in the federal excise tax, craft distillers are able to put more money back into their business for things like…oh…employees and healthcare. But unless those 2017 cuts are renewed, they expire at the end of this year. Legislation has been reintroduced in Congress that could make the cuts permanent. For distilleries eyeing an overseas market, be aware that American alcohol products are one of the products being hit by retaliatory tariffs.
5. Marketing & Millennials
Craft distilleries have increased from a few hundred to about two thousand over the last decade. A significant challenge is making your product stand out from the crowd. So a marketing budget is a must. Currently Millennials make up a huge share of the target market. Experts say they are seeking locally sourced products and are increasingly turning to spirits over wine and beer. But they don’t appear to have a lot of brand loyalty and aren’t as wooed by advertising as older customers.
With the legal maze, marketing structures, and taxes distilleries have to navigate, the bottom line for any craft distiller is making sure you've got the right accounting, inventory management, and CRM software in place to keep you on track.
Written by Shawn Patrick