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What To Look Out for When Starting a Drinks Business

Working in the alcohol industry might sound like a dream gig but few actually realise how many challenges have to be surmounted to get drinks to market.

Pick your poison. Be it whisky, vodka, gin or rum, everyone has that one favourite alcohol that they can’t do without. We tend to be picky about what brand of alcohol we drink, often rattling off random flavour notes about our chosen spirit and which part of the world they come from. But the business is much more than region-specific distillates, it is a multi-billion-dollar industry and, like every other industry, it faces its own set of challenges. And who better to give you the ins and outs of the business than the stewards of the craft that keep the business well-lubricated.

A person who understands the pain of building a brand name is André Levy, chairman of the Wild Geese Collection. As an Irish whisky, Wild Geese faces the arduous task of educating drinkers on its mere presence. Unlike Japanese whiskies that have recently been brought into the limelight, Irish whisky has always been overshadowed by its more popular cousins.

Smaller distilleries such as Wild Geese and Tuthilltown, which produces Hudson whiskey, face a whole different set of challenges from the big boys.

For years, whisky producers have propagated the idea that Scottish single malts are the only whiskies worth ingesting. But that is slowly changing as alternative whisky-producing regions start to take the limelight and consumers open their minds and palates to Scotch’s Irish and Japanese counterparts.

But that isn’t the only problem Wild Geese faces. Named after the term for expatriate Irishmen, Wild Geese whisky and its sister Untamed Vodka ran into problems in the US due to similarity in name to several other well-known brands in the market. Levy insists the fight over Wild Geese’s name isn’t the real reason why its gets in trouble with bigger brands. He explains: “Because we are known to be very creative and we operate in the premium sector, large spirit companies tend to pick on us because they hate that we do things things that they think they could and should have done themselves. We’re used to fighting these guys with our product and they are not happy with us.”

Building a brand name isn’t the only problem young brands face when starting out.

One distillery that has enjoyed success in recent years is Tuthilltown Spirits, which produces Hudson Whiskey. It was the first distillery in New York to make whisky since the prohibition and the first ever to make bourbon in the state. It set a precedent for distillation in New York state and after it set up shop, more than 60 different distilleries have followed suit. But when it first started, finding its footing in a new market wasn’t a walk in the park and its founder, Ralph Lorenzo, learnt the hard way about getting started in the industry when he decided to convert his farmland into a distillery.

In order to set up Tuthilltown Spirits and protect the brand from backlash in the community, Lorenzo had to lobby the governor to put in a new law that established a farm distillery licence. He says: “In New York state, farming is a right and you have a constitutional right to farm. At the time, distillation wasn’t considered farm use but if you had a winery licence, you could get a still and make brandy, which then categorises distilling as farm use. It took us three years of lobbying to have the law passed, but eventually we did it – we made distilling part of our constitutional right.”

It isn’t just the smaller guys who see challenges on the branding front. Talking about the challenges Champagne brands face in the market, Ruinart CEO Frederic Dufour says: “The number-one challenge for us is this: when people talk about our industry, they don’t talk about the brands. They talk about Champagne in general. In the leather industry, people talk about the brands such as Louis Vuitton and Hermés. With cognac, you talk about Hennessy and Martell. The challenge for us is when people talk about Champagne, they talk about Champagne in general and not the individual brand names. Because all Champagne is lumped together, it is harder for a brand to set itself apart from others in its category.”

And branding isn’t the only challenge for alcohol companies. People say that imitation is the sincerest form of flattery, but in the drinks business, imitation can be detrimental to sales. With successful branding often comes copycats. Take China, for example, with the recent spate of fake bottles hitting the market, several of the more distinguished brands have taken a hit. Some cognac and whisky brands have resorted to creating special caps that prevent their bottles from being refilled with lesser liquids, while other spirits have turned to seals of authenticity.

But although the industry faces so many challenges, the drinks business has in several regions been growing exponentially. China, for example, remains one of the key markets for many brands. Dourthe CEO Patrick Jestin says that even though fake wines have hit the market, China is still one of the biggest markets for the company. “In the short term, there are setbacks due to imitation wines but it remains the biggest market for Bordeaux wines. It has been so huge in such a small period of time, the market in China for Bordeaux wines has grown 20 times in a little more than 10 years. It’s ridiculous. China is the biggest export country for Bordeaux equal to the next two export regions, the US and the UK, combined.”

Dufour also echoed these sentiments. Although Champagne sales in its home market have been on the decline, Champagne sales outside of Europe have been steadily climbing.

So it isn’t all doom and gloom. Just like every other industry, the alcohol business has its ups and downs. So the next time you take a sip of your favourite drink, think of all that has gone into it. The Chinese have a proverb: When drinking water, think of its source.