In 2014 Philip McDaniel opened the doors to the St. Augustine Distillery in the Nation’s Oldest City. Now McDaniel is taking some time to sit down with Park Street University and talk about his experience as a brand owner and how building strong relationships with customers helped St. Augustine pivot during the pandemic.
Tell us about St. Augustine Distillery.
Philip McDaniel: First of all, thanks so much for hosting us today. We are a destination distillery located in the Nation’s Oldest City, St. Augustine, Florida. We started our project in 2010 and opened our doors in early 2014. We are, as much as we can be, a grain to glass production facility.
Our mission is to innovate and make the best possible in Florida using local and regional agriculture. We are first and foremost a bourbon company, but we do make other spirits from Florida Agriculture. We make, what we believe to be, the first super-premium craft bourbon distilled, aged and bottled in Florida with the first barrels being laid down in 2013.
What sets your brand apart?
PM: I would say three things set us apart….
First, we were so very lucky to have Dave Pickerell, who many in our industry call the “Father of Craft Spirit Movement”, serve as our guide and mentor when we started up 11 years ago. We worked with Dave from 2011 – 2014 to design, build and open our production facility. Dave introduced us to Brendan Wheatley, our first head distiller, and also trained our current distilling team of Lucas Smith and Daniel Joslin, who are making amazing spirits. So Dave really has his fingerprints all over our business and our bourbons. We will be forever grateful for his counsel, friendship, and wisdom. Dave was truly one of a kind.
Second, we host more visitors to our facility than most craft and big brand distilleries, averaging 165,000 visitors annually since opening in 2014. This year, we will celebrate our one-millionth visitor. Our free tours and tastings allow guests to experience, many for the first time, the entire process of making whiskey: From grain to barrel to bottle to cocktail. It’s a unique tour experience and has become a “must do” when visitors come to town. Our tour is our marketing and what creates hundreds of new customers for us, each and every day.
Third, we believe the regionality, environment and climate of Florida is helping us make a totally different style bourbon; in fact, flavors and spirit profiles that have never been made before. As a result, our bourbons have strong appeal, particularly to fans who want to experience new styles and add new bottles to their home collections.
Does your business have any causes it support?
PM: We have three local non-profits with whom we partner and support. The first is St. Johns County Habitat for Humanity. This year, we will build our fifth Habitat Home since our partnership began in 2016. We’re honored to work with such a great organization that does so much good for the community. We provide the funding for the materials to build each house and our staff volunteers the 250 hours required to build a home. In addition, we have collaborated with local partners including the St. Augustine Amphitheater, The Jacksonville USBG Chapter and others to help build these homes.
Speaking of music, we also are a proud sponsor of the St. Augustine Amphitheater, our local performing arts venue. It’s currently ranked by Pollstar Magazine as the #2 Amphitheater in the United States, behind Red Rocks. We also are a presenting sponsor for the Amp’s signature event Sing Out Loud Festival. It’s three weekends of (mostly) free live music presented throughout multiple venues in downtown St. Augustine.
Another wonderful non-profit we support is the Lincolnville Museum & Cultural Center. We have a long, untold history of African-American heritage in St. Augustine. The museum (and out distillery) is located in the historic Lincolnville neighborhood. Our home, the Historic FP&L Ice Plant, is a contributing building to the neighborhood which is on National Register of Historic Places. We support those to help them operate a beautiful, important museum and present much of the (bittersweet) history that’s here.
What’s the one lesson you learned during the pandemic that will stick with you?
PM: Be flexible and be ready to pivot quickly. Like so many craft distilleries around the country, we suddenly had to close our tasting room and our primary source of revenue stopped. As a result, we had to find a way to keep the lights on and make payroll every Friday. With high demand and market shortages for hand sanitizer, we saw a need and opportunity to make, market and sell it. If we had not been willing to change and adapt, it would have been a very different year for us financially.
I think the other thing that we learned is the importance of communicating and staying in close contact with our customers – the foundation of our business. I think we have close to 45,000 followers on both Facebook and Instagram and about twice that number who subscribe to our newsletters. We spent quite a bit of time during 2020 staying in touch with these folks. They had all taken a tour and were interested to know what was happening at the distillery and in particular our staff, many whom they met.
What’s your best finance tip for brand owners?
PM: Don’t underprice your products. Many craft brands come to market and say, “Hey, we make great stuff. Let’s go head-to-head with Bacardi, Old Forrester and Tito’s (or whatever categories they are making). They try to match their prices and they end up having have a really difficult time. Here’s why: Craft producers can’t scale to manufacture, market and retail at the same level (i.e. quality, price and marketing support) as big brands can. They end up breaking even (at best) or more likely lose money. Many have or will go under. It costs a small producer anywhere from three to eight times to make a spirit that big brands make in their large format (commercial scale) production. So don’t be shy to charge a premium for your products.
The other thing – particularly when you are getting started – is to sell your product as often as you can, as profitably as you can at your tasting room. I know it sounds obvious, but a lot of newbies in the craft space go in with no understanding of the tremendous marketing costs and sales support involved with building their brand. So, in order to generate the support dollars you’ll be expected to provide to your distributor, retail and on premise partners, sell as much as you can from your tasting room and reinvest those dollars to support the growth of your wholesale business. Otherwise, you need a huge war-chest to build your brand. It’s kind of like the old joke: How do you make a small fortune in the craft distilling industry? Start with a big one.
What’s been your most successful strategy for pitching a new retailer?
PM: Go in with the idea of building a relationship with your customers. Get to know them and listen to their needs. I’ll give you one example. A few years back, we were talking with a store manager of a particular retail chain about what was selling well in their stores and what they would like to see more of. “Limited issue, high-end, delicious whiskey with a great story”. After a year of R&D, we made something that we thought might work for them. We presented it and they took it. So really understanding what they’re looking and being flexible to meet those needs is critical.
What are the resources you can’t run your business without?
PM: Glass! Right now we’re having a difficult time with our glass supply. For the last seven year, we’ve used two basic bottle designs for our entire line of spirits. Due to the many impacts of COVID, our (domestic) vendor of glass wound up moving their plant to India. Supply has been spotty at best. We have had to switch to clear, classic wine bottles for a few SKUs and now are hoping the vendor will come through over in the next 90 days. It’s really frustrating.
Do you have a go-to business or leadership book you recommend?
PM: I am currently re-reading a book called “The Power of Focus”. It’s more of a personal growth than business book but it’s great. In our industry, it’s easy to spread yourself thin and lose sight of what’s most important, both personally and professionally. I’m quite enjoying this because it is taking me through a series of exercises that make me look at how I’m managing time and priorities in all segments. Now more than ever, we need balance!
If you were starting a new venture today, what’s the first thing you would do?
PM: 1) Research federal and state laws to understanding how the 3-tier alcohol market space operates. 2) Do your homework to understand your products and production costs, your customers, and how the product will get to them, hopefully at a profit.
Once we got up and running, we realized there were a lot of unexpected barriers to market, and we still face many of them today. Today’s biggest and most talked about issue for spirit suppliers is the DtC (Direct-to-consumer) issue. We went in and thought, “Well, the winery down the street can sell their products in all these cool, money-making ways. We will, too.” Finding out state laws apply differently to different kinds of alcohol was a shock. We later discovered that as a spirit maker, we were prohibited from nearly every single liberty that Florida wineries have enjoyed for decades. Although there has been some good progress in Florida this last legislative session, there are still several inequities that need to change, including DtC.
And then the second thing I would say is: Do what you love, be passionate about what you make and enjoy the people you work with. Ours is an exciting and incredible industry; one that is filled with an incredible network of individuals and innovators. And it’s only going to get better!