The beverage alcohol industry and spirits market face challenges in 2025—from market saturation and rising launch costs to talent retention crises and investor skepticism. At Bar Convent Brooklyn this summer, leading industry experts tackled these critical issues head-on, sharing hard-won insights that separate successful brands from the countless casualties littering the competitive landscape.
How to Find White Space in the Crowded Alcohol Market
This essential Bar Convent Brooklyn session from Maria Pearman, CPA, Partner at GHJ, reveals proven strategies for identifying white space in the alcohol market. Pearman discusses the opportunities for launching successful alcohol brands despite industry challenges.
Velocity Over Volume: The Investor’s Guide to Alcohol Brand KPIs
Connor McKenna, VP of Portfolio Management at Pronghorn, reveals key alcohol brand financial KPIs that investors truly care about—and how to fix the “leaky bucket” draining your brand’s cash flow. Learn how to transform from a passion project into a scalable, investment-ready business.
The Keys to Building a Beverage Alcohol Team That Lasts
Allison Langhoff, Co-Founder, A&J Partners, uncovers the keys to building a beverage alcohol team that lasts and the staggering hidden cost of 50% annual employee turnover in the alcohol industry. Learn how to transform your hiring, onboarding, and training processes to boost productivity by 50% and retain your most valuable asset: your people.
What It Really Costs to Launch a Spirits Brand in 2025
Brian Rosen, CEO of InvestBev Group, delivers a wake-up call for beverage entrepreneurs about the costs of launching a spirits brand. With 50+ years of family industry experience, Rosen breaks down why $1M is the new baseline for success—and how to survive the brutal distribution shakeout, consumer apathy, and capital drought of 2025.
How to Find White Space in the Crowded Alcohol Market Transcript
Maria Pearman (0:03)
Hi everybody. My name is Maria Pearman. I’m a CPA based in Los Angeles, and I run a food and beverage practice for a CPA firm here in LA. When I work with clients, I serve as a contract CFO, with a particular expertise in beverage alcohol. We’ve talked a lot about the negative things going on in the industry, but I believe — and know — that there is still white space where you can win today. It takes ingenuity, it takes creativity, and more than anything, you have to find a unique selling proposition now more than ever before. So we’re going to talk about how to find that white space — the places where you can still win in the market — and I’ll give you some tools to work through that process.
I’m going to skip this slide because we’ve already covered the current state of the market in the previous session and probably in every other session you’ve attended today.
Maria Pearman (0:59)
White space is where you have to compete. As has been said, people are still drinking — you just have to figure out where the untapped needs are. White space lives at the intersection of three things: an unserved consumer need, an unmet usage occasion, and an unmet channel or format mismatch. When you can identify a place in the market where all three of those come together, that’s where you’ll have your greatest strength. You can succeed with just one or two of these, but if you can hit all three simultaneously, that’s your biggest opportunity for business and product strategy success.
When you’re brainstorming — when you’re trying to figure out what product idea is going to resonate and find its own unique lane — I suggest a matrix format. Here’s the approach:
Start with an idea of your consumers. Follow that by thinking about the occasions they might have. And then think beyond the liquid — what format best suits that occasion? Format meaning primarily your pack type.
If you look at the rows of the matrix, these are personas of drinkers. The most important thing to note is that these are not traditional demographic segments — not age categories, not household income ranges. It’s all about the values of these people. You need to connect on a values level to really win their hearts and minds. Start with personas, not demographics.
Once you have your personas, build out the columns — these are occasions. Walk yourself through how these people operate day-to-day. Today’s consumer has very different occasions than previous generations did, and each generation goes through its own evolution. And then, for each occasion, think through the format that might best serve it.
I’m not going to read through every cell because you’ll have access to these slides — but the concept is what I want to leave you with. This is a tool and a methodology for ideating something new in the marketplace and vetting out where the consumer’s untapped needs actually are. Once you’ve done that, you can start putting together the financial vetting for your product idea.
Maria Pearman (3:53)
Here are a few white space angles I think have real potential right now. Low-ABV options. A mixed pack of alcoholic and non-alcoholic — I’ve always thought a 14-pack with, say, five days of NA and two days of alcoholic would be brilliant; I’m not sure why nobody has done that yet. Cocktail kits. And partnerships with lifestyle brands — I can’t emphasize this one enough. Partnering your brand with an allied brand in another category — clothing, health and beauty, any other consumable — anything that connects at a psychographic level with your consumer and can form a brand alliance that strengthens your overall offering.
Once you’ve ideated your concept, and once you’ve got a few viable options, you run them through financial filters.
The first filter: choose something with a low capital investment. Capex — capital expenditure — is the upfront money you have to spend. The goal here is to minimize cash outlay. Often the best way to do this is by partnering with a co-manufacturer, which enables rapid scaling. One of the biggest opportunities brands miss is converting every possible expense into a variable cost rather than a fixed overhead. The more you can keep costs variable — spending only when you’re actually making product — the healthier your cash flow will be.
The second filter: set a gross margin target. Aim for a SKU-level gross margin of 50% or more if at all possible.
The third filter: velocity. I know we keep hammering this point, but focus on products with high velocity — meaning strong reorder rates. In your trial runs, try to get a quick read on how the market is responding. Test fast, and then double down on the ones that get reordered. That’s what wins in the long run.
The fourth filter: choose a business model with a modest working capital need. Working capital is like the fuel in your tank — it’s the money you need for day-to-day operations: purchasing inventory, paying accounts payable, covering payroll and rent. You want a model that keeps your working capital requirement as low as possible while still staying in a healthy position.
Maria Pearman (7:07)
Build with a co-packer. As we discussed, this keeps costs variable rather than fixed, which is much better for cash flow — you’re paying on a per-unit basis. Yes, you’ll pay more per unit working with a co-packer, but that’s where you need to start until you reach meaningful scale.
Collaborate with influencers and lifestyle brands. You’re trying to connect psychologically with your buyer, and you can genuinely draft off affiliated brands even if they’re not in the same product category.
Sample aggressively. Take every opportunity to sample — it gives you invaluable direct feedback from consumers.
Get initial traction through direct-to-consumer or specialty retail. These channels give you quick feedback and immediate sales. Even if your proof of concept is small, start small and build from there.
Trend-chasing with a low reorder rate. It’s smart to test quickly and be aware of trends, but you have to learn quickly too. If you’re not getting the velocity, pivot and try something else.
High capex investment before proven velocity. Just prove it out with your co-packer first.
Assuming a strong brand will offset weak margins. You have to attach real margin to everything you sell. Believing you can get there purely through volume is a fool’s errand.
Building a brand without distributor buy-in. If you’re going to work with a distributor, you need to be aligned. Your distributor is your number one customer — treat them accordingly.
Building SKU depth before velocity. Don’t rush into brand extensions or stacking up SKUs. Start with one, build it deep, prove it, then expand. Getting one SKU right is far more valuable than capturing shelf space you can’t defend.
Maria Pearman (10:03)
Start with unmet consumer needs — not your passion project. I talk to so many founders who are deeply passionate about their idea and convinced they’ve got the best product in the world. That passion doesn’t matter unless it lines up with what’s missing from the consumer’s experience.
Validate ideas before investing significantly. Test quickly, learn quickly, and don’t throw meaningful resources at something that isn’t showing you results.
Build gross margin into your strategy from the start. Attach gross margin to every product you sell.
Fund traction, not concept. Have proof of concept and results before you go out for funding.
I’ve gone through this quickly, but I’m happy to talk with anyone after the session. Hopefully that gave you some food for thought.
Velocity Over Volume: The Investor’s Guide to Alcohol Brand KPIs Transcript
Connor McKenna (0:04)
Thank you all for having me. I’ve watched maybe 200 Park Street University videos on YouTube over the years, so standing up here today is a nice little thrill. I appreciate the opportunity. I’m Connor McKenna — I work with Pronghorn Investment Management. We have a broader organizational mandate to build a scalable template for diversifying any industry, starting with spirits. One half of our organization focuses on finding the right talent, making sure they’re trained, successful, and retained once in role. The other half — where I sit — is essentially a venture capital fund. We invest in spirit brands, providing not just capital but network and know-how to help brands navigate the three-tier system and accelerate their growth, specializing in that journey from zero to 25,000 nine-liter cases.
I’m here to talk about probably the most boring subject on today’s agenda: strict financial KPIs that tell you the actual health of your business. I’m sure Brian will be nodding along with some of these, because what I’m going to cover matters to us as investors — but more importantly, it should matter to you as founders.
This industry is full of clichés: “brands are built in the on-premise,” “you don’t drink stories,” and so on. One of my favorites is that your cash and your accounts are like a leaky bucket. No matter how much fundraising you do or how brilliant your sales and marketing are, if you don’t have an efficient cash flow cycle and aren’t building long-lasting relationships with accounts, you’ll fill that bucket, coast for six months, add a bunch of new accounts, run some great campaigns — and then wonder why you don’t have cash for samplings and why accounts aren’t reordering.
Connor McKenna (1:43)
These are the KPIs that will help you identify where those leaks are, patch them up, and build a sustainable brand that can withstand the headwinds we’re all facing in the industry right now.
Here’s the agenda: we’re going to cover the cash flow cycle for shipments, the overall cash conversion cycle, the strategic levers you can pull within that cycle, and then we’re going to hammer velocity once again — hopefully with some real examples of how to actually drive velocity in the market.
Bear with me on the basics here. Let’s say we’re starting a brand tomorrow — I’ll use big, round numbers. We buy our raw materials and create our inventory. That’s our first vendor. Sometime in the next 30 days, we pay them — let’s call it $100. That’s the first time cash leaves the business. We then take that inventory and try to sell it to a distributor, get our first purchase order — incredibly exciting, but no cash attached to it yet. You now have inventory sitting with your distributor. As Brian was saying, you’ve now got the job of getting that product into accounts. But first, you need to collect the cash — and getting products into accounts and pulling them through requires everything we’ve been talking about: sales reps, marketing expenses, sampling events, all of it.
Quick quiz, because markup and margin often get confused: if we bought $100 worth of product and sold it for $150, what’s our markup? 50%. What’s our margin? 33%. In many industries, 33% sounds great. In spirits, which is very capital-intensive, you really want to be above 50%. These are the calculations you need to know — they determine how much you can offer in incentives, how much you can negotiate supplier terms, and ultimately your gross margin figure is the foundation of all of it.
Connor McKenna (3:56)
Maria literally wrote the book on distillery finance, so I feel a little like an imposter up here — I’m sure she’ll correct me where I go wrong. But there are three core components to the cash conversion cycle. First, selling inventory: how many days of inventory do you have sitting on your balance sheet? Second, collecting cash from your sales: how many days does it actually take to get cash from your distributor? Third, paying your bills: how often are you paying your vendors — marketing agencies, co-packers, manufacturers, and so on?
The calculations are fairly straightforward. I’ll speed through in the interest of time, but the core goal is to arrive at a number of days for each component. How many days of inventory are on your balance sheet? How many days of outstanding sales are you looking to collect? How many days on average does it take you to pay your bills? And critically — Maria would remind me of this — you’re comparing balance sheet items with income statement items, so it’s essential that you’re looking at comparable time periods, working with a great bookkeeper, and reviewing these outputs on your financial dashboards at least monthly.
What’s the overall goal? Make this number — the total days in the cycle — as small as possible. Tariffs are complicating this right now; a lot of our founders are being forced to buy 12 months of inventory because they can’t predict where costs are going. But ideally, you don’t want cash tied up in sitting inventory. And if your distributor owes you $1,000 that you need for sampling and activations, you either need that in your pocket or you need to co-invest alongside them. As an early-stage brand, you can’t realistically walk into a distributor and demand net-60 terms when they’re giving everyone else 30 days. The only way to get leverage in that conversation is to become a more meaningful contributor to their P&L.
Connor McKenna (6:33)
This is honestly where we spend a huge amount of time. We just completed our annual operating plan process with all of our portfolio companies.
On payables — there’s not much you can do. You’re typically working with large distributors and large co-packers whose terms are their terms.
What you can control is demand planning. How much demand do you think you and your sales team can generate in the market over the next six months? Use that to determine how much inventory you actually need on your balance sheet. The risks here are real — tariffs, force majeure events, going out of stock. Running out of stock can be a death knell for a brand. You don’t want to do all that marketing work and then have your distributor calling to say, “It’s actually selling great — when’s the next order? Three months from now?” That kills momentum. So while I’m speaking out of both sides of my mouth here, demand planning is absolutely critical.
Keep your cash conversion cycle as short as possible. Cash is king, full stop. Mistakes — letting that cycle stretch out — force you into credit card debt, lines of credit, or factoring your receivables, all of which reduce the cash you’re actually keeping.
Connor McKenna (7:52)
A simple flow of inventory through the system — everyone should be familiar with this. You’ll get the slides afterward. From an investor’s perspective, this is how we recommend you set up your chart of accounts when presenting to investors and advisors.
Let’s focus on the commercial side, and I’ll use Guinness as an example to bring it to life.
Points of distribution (PODs): a single SKU in a single account equals one POD. If you’re a tequila brand with a Blanco, Reposado, and Añejo and a store carries all three, you have three PODs. If you’re Guinness with one SKU, you have one POD.
Retention rate: how many accounts reorder year after year. The benchmark to aim for is at least 50%. If you’re opening 1,000 new accounts in 2025 but only 400 are still with you in 2026, your sales team is running up an insurmountable hill. You have to build lasting relationships and drive that reorder rate.
Velocity: which brings me to Guinness — a great example, and one close to my heart being fairly Irish. I can guarantee that every bar in New York will have a keg of Guinness on St. Patrick’s Day. Their retention rate is off the charts — 95%-plus. Unless a bar closes, it’s ordering Guinness every year. But what happens two weeks after St. Patrick’s Day? The sun starts to shine, people stop drinking stout. Their monthly reorder rate looks very different. Would you still take that business model? Probably — but the Guinness sales team has this unique challenge: how do you create demand and consumption occasions beyond that one day? How do you leverage that retention rate and customer relationship to drive consistent throughput? That is exactly the kind of question you as founders need to be thinking through as your product flows through the system.
Connor McKenna (9:51)
As Brian said — the old model of relying on your distributor and sales teams to do this for you is challenged right now. So staying focused on these KPIs: how are you building lasting relationships? You shouldn’t care about the first order — you should care about the fourth. As an investor, I care about the fifth, sixth, seventh order. Show that you know exactly which accounts you do well in, which channels work for you, how to sell in, and how to market your brand once it’s on shelf or behind the bar.
Velocity over volume, every time. I’d rather see 1,000 cases in one market than 5,000 cases in 10 markets. The more concentrated your efforts, the more you’ll learn about what works for your brand — and the better positioned you’ll be to scale that playbook.
Thank you so much.
The Keys to Building a Beverage Alcohol Team That Lasts Transcript
Allison Langhoff (0:03)
I am the co-founder of A&J Partners, a strategic marketing, branding, and sales organization. We mainly focus on the optimization of people and budgets. I want to shift some of the conversation away from the brands themselves and back toward the people who are actually pushing all of those brands forward. We do marketing, branding, and all of that — but your people really are the most important and most expensive asset in the business. I know we all think it’s our products, and to some degree it is. But we have a complicated path to purchase and a complicated path to market, which means that when we’re hiring and developing our teams, we need to take real care and invest extra time. I think in alcohol beverage, we haven’t been doing that as well as we can. So let’s dig into some of the processes that aren’t being accounted for when we’re hiring and developing teams — and let’s look at what those gaps are actually costing us.
Annual turnover in our industry for hourly employees is 50% — which is enormous. Only a fraction of employees who are onboarded into our businesses feel that the onboarding and training process was done well. And replacement costs for employees are enormous, with no reliable tracking system for them. When you hire a full-time employee and that person turns over, it typically costs you at least 50 to 200% more than their original salary — in lost productivity, time rehiring, retraining, and redeveloping.
The good news is that organizations with a standard onboarding practice experience about a 50% increase in productivity. That’s a very accessible way to change the narrative in our industry. New hires, as everyone knows, typically perform at a fraction of their capacity in the first month or two — and in a complicated three-tier path-to-market like ours, especially for people coming from outside the industry, it can take six to nine months to really get up to speed.
We also have a bit of a failure around career growth in our industry. Succession planning is difficult in family-owned companies, and leapfrogging into executive-level positions can be very hard. The net-net: turnover is expensive. I’m an optimizer by nature, so I always look for hidden dollars we’re losing — and this is one of the biggest.
Allison Langhoff (3:08)
The first thing I’d recommend is building an attrition tracking system. I come from a long history of running retail teams on the east and west coasts, and I was a training manager for a long time. I also ran the media team at Wine Enthusiast magazine for about two decades. In those roles, we had an attrition model where we actually tracked every turnover — and I highly recommend putting something like this in place, even if you have a small team. It allows you to see clearly how much money you’re losing in productivity, salary, and time as a result of turnover.
So what are the solutions beyond just tracking attrition?
We need to start from the very beginning — before we even begin hiring. That means assigning clear roles, writing clear job descriptions, setting expectations for each role, and defining what success looks like for the people we’re bringing into our businesses.
I’m a contractor, not an agency, so I do project-based work. I’ve been on a long-term contract with Gallo, among other companies. I create extremely detailed scopes of work — and I’ve started doing this myself because I’ve had so many companies that don’t know how to create one. That means outlining exact deliverables, the teams involved, the time frames, and really drilling down into everything that role or engagement will entail.
From there, create a structured interview process. I’ve seen the “one interview” approach, and I’ve seen the “27-interview” approach. What we actually need is structure — the more structure you build into the process, the more aligned a candidate will be with your company’s vision and goals. For contractors like me, this becomes a detailed proposal that expands on the scope of work. For hiring, it means interviewing multiple candidates, comparing them against each other, and making a considered decision.
Allison Langhoff (5:55)
So what do we do once we’ve hired people? How do we optimize them so they can optimize the brands and the business? A few things:
Reporting structure. I’ve seen terrible reporting structures in companies of all sizes. We need to clean this up. People need a clear, templated path to see their future within the company.
Comprehensive onboarding. When I started in alcohol beverage, there was no onboarding plan, no training — literally nothing. It was sink or swim. I’m sure we’ve all seen that in various companies over the years. We need to create more formal training programs, with regular check-ins and feedback loops so we can identify gaps and address them.
I personally believe training should be ongoing for a full year — for every new hire, regardless of how long they’ve been in the industry. Your company has a different culture than wherever they came from, and getting people genuinely engaged in that culture will only help your company, help them reach their goals, and put your energy back into the people running your brands. It’s a significant investment, yes — but it’s one that pays off.
Establishing a clear path for growth and development. This is probably my biggest one. I’m not seeing clear promotional pathways for teams in our industry. The ladder truncates somewhere, and then we lose the thread on what we’re doing with certain people. This applies to companies of all sizes, and I think we need to define that growth path even before we get to the interview process.
Allison Langhoff (7:58)
One more thing, for those of you who aren’t in charge of hiring or training but are simply in a role yourself: if you feel like you need more training, I challenge you to manage up. I know that’s not the ideal solution — but I came into alcohol beverage without any training, and I went to all of my direct reports and essentially said: I want to learn how to do harvest, I want to meet with the distillers, I want to go to the tastings, send me everywhere. And I think, perhaps surprisingly, our industry is very welcoming to that. Everyone wants to help everyone in this industry. So, as an employee, I challenge you to take that initiative and train yourself up wherever you can.
Once you’ve got these templates in place — if you already have a systematic hiring, onboarding, and training approach — great. Refine it. Take it up a notch. The structure, in the long run, saves you money by preventing attrition. It helps your people advance. And this is what the industry needs: more executive-level leaders who are thinking bigger and want to move the industry forward.
Setting clear goals keeps your eye on employee growth and company growth — and most importantly, your profitability. It all affects your bottom line. I really believe that people are the crux of this. When you invest in your people, they take care of your brand, they make the right calls on the path to purchase, and they stay. Look at the tech industry — everyone is constantly learning, constantly taking courses. If we do that collectively in alcohol beverage, whether you’re one brand, Diageo, Gallo, an investment company, or anything in between, the return is real.
Allison Langhoff (9:39)
I want to leave on a positive note. I’d really like us to reframe how we think about hiring. We’re not just filling a position — we’re making an investment in company growth and in the people in this industry. I think we need to change some of our terminology around that.
I follow a lot of people and listen to a lot of leadership content, and I really admire Richard Branson for this reason: his entire focus is on his people. His philosophy is: train people well enough so they can leave — and treat them well enough so they don’t want to.
That’s what I’ll leave you with. Thank you all.
What It Really Costs to Launch a Spirits Brand in 2025 Transcript
Brian Rosen (0:04)
There’s all sorts of change afoot in the brand world. What I’m going to try to talk to you about is how to navigate through it — how to stay positive. Not positive in a spiritual sense, but positive in the sense that this has happened before in this industry. I know it seems very real and very now: every headline is about declining drinkers, the rise of non-alc, the rise of CBD and THC, the lack of bank funding, the lack of investors. It’s a hard business. But you’re in this room because you love this industry — we’re all here because we love it. So the fact that it’s hard doesn’t mean it’s impossible. It just means it’s hard.
If you don’t have a million dollars, it’s a hard business to start. That is a fact. It’s a huge number. For a little levity — let’s talk about what else costs a million dollars. A brownstone just up the road in Park Slope. A Bugatti, ten or twenty years ago. Something totally unnecessary, for sure. My divorce from my first wife also cost a million dollars. And launching a beverage brand. You might think to yourself, “I can do this for $100,000 — $200,000, $300,000.” Here’s the reality: you can do it for $300,000. Okay? But you’ve got to have salespeople, depletion allowance, store activations, and pull-through — events, bars, all of those things. A million dollars is what it costs for a successful brand launch that actually gets traction. It’s not the first sale that matters, or the second — it’s the third sale that’s how brands begin to develop. All in, that bucket is roughly a million dollars. Now you know that, and you’re still in the room — so let’s talk about how we get through it.
Brian Rosen (1:55)
Let me acknowledge the state of play before I go positive. Tighter wallets — we all know it, we all feel it. Downtrading. The products getting hurt most are the generic, undifferentiated ones — the standard beers, the stuff with nothing unique about it. Those are the brands that are going to suffer. And changing habits: I’m a middle-aged guy, and I drink less than I did just five years ago. My demographic — 45 to 55 — is, as a whole, drinking less, smoking more weed, taking more gummies, doing more “better for you,” and zebra drinking. This big demographic is turning away from liquor. That’s what’s happening in the market right now.
The distribution landscape is consolidating fast. When I grew up in this business — and my family has been in liquor since 1933, when we got the first liquor license in Chicago after Prohibition — there were 30 or 40 distributors in Chicago, the second-biggest market in the country. Now there are three. Three. And yet the number of alcohol and tobacco license applications last year was 8% greater than the year before. More and more brands are coming to market, and fewer and fewer distributors are there to receive and sell them. This is a huge headwind. You can’t open a new distributor — that’s not really a thing. So how do great brands make it to the shelf? How do they get into on-premise and off-premise? What does it all cost, and how do you afford it?
Brian Rosen (3:34)
Anyone remember 2020? RNDC, Southern, and Breakthru all moved to online ordering for stores. That allowed them to fire their salespeople and push everyone to digital ordering. Very profitable. Off-premise was on fire; on-premise was closed but off-premise was buying twice as much. It was a great time for distributors. When COVID ended, RNDC was the slowest to hire back their sales teams — so the big brands didn’t get the attention they wanted, said “forget it,” and started pulling out. That’s the shakeout you’re seeing now.
This isn’t just an RNDC story — this is a major industry shakeout. My guidance: have your plan front and center and know exactly what it is. Because the brands that are leaving RNDC are going to be fighting for shelf space at Southern, Breakthru, or somewhere else. It’s a real estate game. Those brands have to go somewhere, or they die — and when someone’s backed into a corner, they’ll scratch their way out. Something to think about from a Plan B perspective.
And if you don’t already know this, you’re behind: you’ve got to sell your own stuff. Go to bars. Buy your product off the shelf yourself. You are not in the liquor business — you are in the real estate business. You own real estate on a shelf. You’ve got to keep it, fight for it, and defend it. If you’re developing a cold drink for the cooler, that’s the most valuable real estate in an off-premise store. If you’ve got an RTD or a beer, and you don’t defend that space, Bud, Miller, Molson, or Coors will come after your spot — and you don’t have the capital to fight that battle. Always think in terms of real estate, because that’s where it’s at in the adult beverage business. Consolidation means more of the burden falls on you.
Brian Rosen (7:40)
But here’s the positive. It’s still the best industry in the world. It still has a 6% growth rate year over year. Yes, there was a COVID bump that has since normalized — but it’s still trending up and to the right in terms of consumption. People are spending more in stores. More license applications went into the government in Q1 and Q2 of 2025 than in the same period the year before. More people are trying to make spirits. More people want to get into this industry. As the old saying goes: “Reports of my death have been greatly exaggerated.” The industry is resilient — it has been resilient, and it has grown up and to the right since 1933, the year Prohibition ended.
The key question is: how do you afford to stay in it, and what do you do to preserve the capital you have?
Know your margins. Know the difference between gross margin and profit margin — they are completely different things. When I was at PricewaterhouseCoopers working with the big players — Pernod Ricard, Diageo, Constellation, Molson Coors, AB InBev — people would come into the room to present a business plan for growth without knowing the difference between gross margin and profit margin. You have to know your numbers. Especially if you’re sitting in front of someone like us at InvestBev and you want to sell your business or raise equity — if you don’t know your numbers, you’re bounced out of the room very quickly.
Brian Rosen (7:40)
Have a pricing strategy. Know who your competition is, and go after them. The consumer doesn’t know your brand until you tell them it exists. And here’s something that might be a little hard to hear: no one cares about your brand. You care about your brand, I care about your brand, everyone in this room cares about your brand, Park Street cares about your brand — but the average consumer in this country knows 11 brands. That’s it. 11 brands. Think about that. There are 4,000 brown spirits alone, and consumers know 11 brands — the usuals: Tito’s, Bombay Sapphire, Hendrick’s, Kendall-Jackson Chardonnay. You have to make them aware that your brand exists.
There has never been a better time to build loyal fans. Social media is your marketing department, sitting right in your pocket. Take advantage of it and prioritize ruthlessly.
Double down on the SKUs that work. Cut the ones that don’t. You don’t need 11 flavors — no one wants 11 flavors. The reason flavor extensions came into being, like Pinnacle Vodka for instance, was as a real estate play: 11 flavors of Pinnacle means two and a half feet of shelf space that someone else doesn’t have. But if you’re light on capital, forget it. Focus on what works and double down on it.
Brian Rosen (9:09)
Here’s my overall take: this is actually the best time to be in this business. The undercapitalized are leaving, which clears the field. There are more legal-age drinkers than ever before. And this generation of drinkers is more open to experimenting and trying new things — they are not brand loyal the way previous generations were. My grandfather drank Coors from birth to death. The people turning 21 today will drink what makes them feel good and what they feel good about. So there is hope for us all.
Some of what I’ve covered here are just a few talking points on how to run your brand through challenging times. Make your banker your best friend — take them to a game. Make sure your capital is secure. The rest is pretty easy to figure out from there. Thank you.
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