By Richard Horwell, Brand Relations
Every time I walk into a bar, someone, usually the bar tender, will tell me about his great idea for creating a new drink. And the first thing I will ask is: “How deep are your pockets?”
Here are some of my tips for navigating what is an extremely difficult, fast paced, often fickle and hugely expensive path.
Innovate, innovate, innovate, don’t imitate
If you don’t do your research, you will fail. It’s as simple as that. In the past few years, there has been a flurry of would-be drinks manufacturers – in 2019 alone, 90 new gin distilleries opened in the UK.
Just because your family and friends think something is a great idea, that is not enough – not only will you fail but you could find yourself saying goodbye to any investment you have secured, as well as your own life savings. It is staggering how many people who are hugely successful in their jobs and might have made loads of money in their chosen field, decide to try their hand at something they know nothing about, inevitably they fall at the first hurdle.
I can’t stress enough how important it is to check out the market before parting with any money. Is your idea unique? Is there a need for it? If it isn’t unique, why would you expect to knock a competitor off the shelf to make way for your product? It’s not going to happen. You need to stand out from the crowd. The alcohol industry is dominated by a few big players who have vast teams, research facilities, influential connections, and the very deep pockets to fund it all. Most new alcohol brands don’t see any return on investment in the first 3-5 years – are you prepared for this journey?
Ask yourself if your product is the one your target audience will cross the road for, and don’t just limit your research to the UK: you need to think global. Any similar, well-established brands overseas will easily be able to blow you out of the water. Learn from mistakes as well as successes. If you know why something didn’t work, it might help you to avoid making the same mistake again.
Be Smart and be Transparent
At the moment, only soft drinks, by law, have to declare the ingredients on their drinks. It’s laughable that there is no information on alcoholic drinks. But it will come, and soon. Transparency is the way forward and the last thing you want is to have to change all your labelling, incurring further costs – do it from the start. Get the recipe right from the outset, list the ingredients and it will save a fortune in the long run, but beware as there are a LOT of calories and sugar in just the alcohol, before you add anything else.
The current voluntary system has seen a few scrupulous drinks manufacturers include QR codes which do list the ingredients in their products, but why should consumers have to rely on these few honest brands? The chances are, the ones who have signed up to this are using good ingredients, but the ones with high sugar and other not so healthy ingredients will ignore it. The trend is for lower alcohol rather than high, plus there is the added issue of duty payable, so the higher the alcohol content the higher the costs, and the greater the retail price.
But times are changing. Yes, we are all becoming more health conscious, but alcohol isn’t going away, we are a nation of drinkers. However, consumers don’t want to spend all week looking after themselves and taking care over what they put in their bodies only to undo all that good work with a few drinks on a Friday night. I believe that alcohol is a massive contributor to obesity in this country. And while no-one in their right mind would ever suggest that alcohol was healthy—neither is Coca Cola and that has to list its ingredients—so it would be wise to understand that people are reading labels more. Tapping into the healthy market is the way forward. Many well established and historically successful brands will suffer hugely when the time comes to make ingredients available to the public – stay ahead of the curve and don’t use cheap ingredients now for a quick win. We have already had a sugar tax and there is plenty of undeclared sugar in alcoholic drinks, so when you are launching your brand, look towards the future, not the past. It’s only a matter of time.
Don’t Expect to Sell to Hospitality
Anyone who thinks they can sell direct to hospitality and make money is deluded. You will not make any money. They can do it cheaper and better themselves plus this area is dominated by the big brands that pay a fortune to be there. If you do for some reason decide on the on-trade route, be prepared for long hours, cold calling into venues yourself, walking for miles with a heavy bag on the vague chance you’ll get to speak with someone. Stick to retail. It’s more honest. You still have a lot of hard work ahead of you, but by far the best way to build your brand is in retail.
But don’t think you are going to set the world on fire with one idea. One drink is not a brand. You need at least another two or three ideas to take up space on the shelf. Consumers need to be able to see you and that won’t happen if you are tucked in between a whole load of other brands that dominate. If anyone came to me with an idea for one drink, I would send them away to think up some more.
Dig Deep
Creating an alcoholic drink is likely to cost around £50k at the very least. You also have to have enough funds for HMRC to believe in you. If you plan to start trading in alcohol you need to be approved by AWRS (Alcohol Wholesalers Registration Scheme). You cannot sell alcohol in the UK without this registration and if you look like a tin-pot business they won’t give you the time of day.
The soft drinks industry doesn’t have this issue, there is no-one looking over their shoulder looking for paid duty. The best way to save on costs is to seek out a bonded co-packer and a bonded warehouse that has experience in the alcohol industry as this will save an average of 20 per cent wastage lost in production. No-one wants to be paying duty on a drink that’s gone down the drain.
Get Rich Quick?
Not likely. Expect to be in it for the long run. Launching a product in the drinks industry is a long, slow journey. It is always the dream of a new brand to have an instant success, and there has been a lot of innovation over the past ten years where some small brands have indeed been snapped up by the big players. But while it can happen, it is rare, as most brands don’t stand out enough to make a real difference. It took me several years to get traction with my alcohol brand, without any income, but in the long run I sold it to a very wealthy Dutchman, making it all worthwhile.
What’s in a Name?
Make sure the name you choose is relevant to your product, something memorable and simple is what you should be looking for and be careful about choosing anything that might be attractive to children with alcohol related products, or the Portman Group, established in 1989 to encourage responsible drinking, will hit you with a ton of bricks.
With ninety per cent of the first sale dependent on branding it’s important to give your brand name some serious thought. And bear in mind, just because something makes your friends laugh doesn’t mean it is going to work. It has to be relevant. Research what the key attractions are to your target audience. Calories are high on the list of importance for consumers now so one good way of cutting down on sugar is to be a skinny version. Sustainability of packaging, brand provenance and a ‘background’ story are all important to the launch of a successful alcohol brand.
Don’t Give it Away
It’s tempting to give away samples to entice people to stock and buy your product but there are sound reasons not to do this. You will still be paying tax to HMRC on anything you don’t sell so you are instantly making a loss and you definitely can’t give out samples on the street because of the chances of it falling into the hands of children. There is also a tendency for people to say they like anything that they are given free of charge but when you ask them to put their hands in their pockets that’s usually a different matter. People are going to be far more critical of something they have to pay for, and you will find with focus groups that after half-an-hour they will say anything just to go home. Better to come up with a strong marketing plan that centres around knowing your audience.
Don’t Give Up
Only one in ten new alcohol drinks business ventures will survive beyond two years. Chances of success are slim. But do your research, refine your product, and prepare yourself for a long, bumpy ride and you may just make it into that winning ten per cent.
ABOUT THE AUTHOR
Richard Horwell is the owner of Brand Relations, a specialist food and drink marketing and
branding company based in London. Over the last 14 years, Brand Relations has been
behind the launch and development of over 100 brands in the UK. Richard has also built up
and sold companies of his own in the Food and Beverage sector. He has over 30 years’
experience in marketing FMCG brands around the world, having lived and worked in the UK,
USA, Australia and the Middle East.
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