#17: How To Start A Craft Gin Business

Sam: Hello and welcome back to another episode of the lazy entrepreneur I’m your host Sam Priestley and as normal we’re joined by my lovely wife Emma Priestley
Emma: hello
S: today we’re gonna do another episode where I talk about a business I’ve started and talk you through what was involved in the setup maybe some of the mistakes we made and what could be done to improve it and today we’re going to be talking about our gin brand, Pipe House Gin which is our current business really and it’s one I did with Emma but it’s the first business we’ve done together so Emma should have some unique insights into how it’s gone and yeah we’re working on it at the moment but it has launched and it is doing quite well so we first came up with the idea in September 2017 we’ve always been well for a long time we’ve been interested in gin and we lived in in Spain for a little bit where at the time there kind of craft gin game was was a lot better then it was here in the UK they have gin bars everywhere and they do what we now take for granted which those lovely goblets with all the different botanicals in it
E: the garnishes
S: yeah the garnishes we saw that starting to come over to the UK and the gin craze starting to take off we also were interested in sort the gin said craze starting to take off and we thought we had a couple of USP’s that we could add sort of a unique angle to the business even though we didn’t really have any experience with making alcohol we thought that my sort of background in online marketing and in particular selling on Amazon through Amazon FBA meant we could kind of leverage that and sell our gin online quite successfully and we did some market research and it didn’t look particularly competitive and also we had an idea for a type of gin that we thought would uh would be good in the market was missing which was flavoured gin without the sweetness we kind of realized that we couldn’t compete with other gin producers and making the best classic London Dry Gin because the people doing that are the best in the game
E: yeah and have been doing it for 20 30 years
S: okay forever and and it’s a busy market like why would someone buy our one rather than that but we thought particularly from looking at the market research we saw there was a trend appearing that people wanted to flavor gin and the only flavored gin really on the market was very liquory type gin which is where you make a gin you get like a normal gin and then you add sweetness to it so you have like a rhubarb syrup or something and those types of gin were getting quite popular but I personally didn’t really like them because they they taste too sugary they’re very good for getting people into gin but they’re not what I’d call a classic gin so we had it that was my kind of concept that we wanted to make a variety a range of flavored gins which were kind of classy and low sugar and all of that without being sugary and sweet. the other reason I thought it was good ideas because the other trend taking off at a time which was the idea of flavored soft drinks that didn’t have added sugar and weren’t fizzy
E: yeah
S: so that’s what all came together that was the kind of consensus conception conception of the idea so there we were but at this point we still had no idea how to make gin we didn’t know where it was feasible we didn’t know what all the laws around it were
E: and we didn’t have any suppliers have any relationships with anyone that made gin or bottles or labels
S: or anyone’s sanity yeah
E: or any customers yeah
S: so we started from just an idea which is where any business first starts so the first step was then just do loads of research the initial research focused on how do you make gin like is this something we can actually do or is it is a like wine where it would take eight years to grow the grapes and cultivate it or whiskey where you want to bowel age it for 15 years that turns out gin isn’t like that. It could be made very quickly it’s what I describe it as a chef in the kitchen he goes out and he buys ingredients and he’s not necessarily growing those ingredients themselves but he’s combining them to make something really special at the end whereas wine a bit more like a farmer where the focus is on is on actually growing the grapes and having a really good taro and all that kind of stuff
E: yeah really good base product yeah
S: Gin is not quite like that which is good for this type of business we’re doing that especially good with the USP that we had
E: well yeah it’s a lot easier entry point from our point of view
S: so there’s a few different ways to make gin with different categories so the simplest one is we call bathtub gin or compound the gin she’s where you get like a neutral spirit such as vodka and you put in it your botanicals and you just kind of leave it to stew overnight or for a few days or a few weeks don’t know what recipe you’ve come up with yeah there’s a few quite popular gins on the market bathtub gin being one of them that follow that that recipe
E: and it makes a nice gin
S: it makes a nice gin, it’s easy to do it does it’s it’s
E: it’s not purist
S: it’s not purist and traditionally they’re often worse quality and I think that’s more to do with the ease of making it than a lot of people assume that because you call this a bathtub gin it’s not gonna be very nice that’s because most of all touch it isn’t very nice because it’s made by somebody doesn’t know what they’re doing. next step up is just distill gin that’s anyone where you take it’s a similar point to get your your base white spirit and then add your botanicals to that but this time you put it in a giant pot you kind of heat it up and it stews as it as it heats up the alcohol which has a lower boiling point of water will evaporate first and then you really condense that water down and you end up with a clear liquid which is your gin at the end at this point is very high percentage so you dilute it down with some pure water. now distilled gin you could also add flavorings after that and that is why a lot of what kind of the bigger name gins do well though it will be called distilled gin but the first process I’ll do really easily and then they’ll get just some cheap flavorings and they add afterwards particularly if you see if you see someone selling a bottle of gin for 20 pounds or 15 pounds they’ve cut corners somewhere and this is often one of the areas. the next step up is the London Dry Gin which is the type of gin that kind of the top craft gin makers are making and the only get between that and distilled gin is you’re not allowed to add anything after you’ve distilled the gin. everything has to be put in, the botanicals into the still so that’s the basics of how you make gin. next question was how do you make it legally yeah which is a very different question because you can’t just make it at home. you need certain licenses there’s a lot of legalities around the duty requirements and paying for the tax is basically on the alcohol. I’ve written a few blog posts on this the first blog post I worked if he just googled Sam Priestley starting a gin brand episode one I outline all the different kind of licenses are stuff that are required so I’ll just run through quickly what we needed here so at the very bottom end which you could do without really any license at all was you could find someone to make you gin for you
E: so professional distiller
S: a professional distiller or anyone who’s got a license already yep buy the gin off them with all the duty paid already so that some that means that you’re basically paying another ten pounds per bottle or eight pound something plus VAT take that and then you can then settle it, send it to a warehouse that has a license to store and sell alcohol and then sell it online and get them to deliver it. that doesn’t need any losses at all. the next step up which is up which is kind of the route we took which is to get a wholesalers license it’s called the alcohol wholesalers registration scheme and that meant that we can then sell to businesses and then we also got a personal licenses personal alcohol licenses which allowed us to sell at markets and to get 10 free events licenses. we still took the step of finding the distiller someone who had a distilling license who could make it for us paying all the duty up front so then we could get the gin but then we can now do wholesaling except the businesses we could sell it on our own website and stuff like that. again we couldn’t sell it directly on my website we couldn’t take it order on the website pick up the gin and put in a box and take it down to the post office we had to find a warehouse company of a film and company who had a premises license and on a type of alcohol license which allowed them to fulfill online orders basically which allowed them to sell gin from that premises so that was kind of the steps we needed and that’s not too complicated we had the alcohol seller’s registration scheme it was free to sign up to they paid us a visit and went for our business plan with us
E: yeah which was very scary at the time but actually going through it was fine
S: it was fine and we were much more prepared then they expected and I’ve got yeah examples of the business plan we used on the website which you can just copy if you want it’s all quite straightforward. they mainly wanted to see that our supply chain was in tact and that we had a we were making sure that every point the correct alcohol duty was being paid and there was no chance to kind of illegal alcohol to be slipped into it
E: yeah so we just did a due diligence document for that which again I’ve got examples of on the website and then with the personal license you had to do go into a test which was like a half-day affair so I think cost 70 or 80 pounds
E: yeah so yeah it was a course like a half-day course with us a PowerPoint and someone explaining the different rules and things that have gone wrong and then there was a multiple-choice test at the end that was all very straightforward
S: And that was it, they each took about a month or two to sort out but that’s alright because it took us a lot longer than we thought it would take to do the whole process yeah as we said we started in September 2017 and we sold our first bottle of gin in June 2018 so we got the legal way we’re gonna do it we had our idea of how we were gonna make it. the next steps were to but because of those legal requirements we needed to find a contract distillery who we could basically give our recipe to and they would then make the gin for us and sort on that side and we also needed warehouses for fulfillment partners who could store it Amazon FBA is an example of that so we had to sign it up to that basically get approved by them to sell alcohol which was a bit of a pain not because it was difficult but because it just took a long time to get through to anyone who had the power to
E: Yeah the backend system of Amazon wasn’t working very well
S: yeah
E: but yeah we needed we needed a warehouse fulfillment option for trade didn’t we
S: we needed it for trade and we needed it for our website yeah so you then contacted as many different fulfilment companies in the country as you could do they have the licenses, what are all their fees yeah
E: how much they were charged to pick a pack how much they would charge storage monthly fees etcetera etcetera
S: yeah and then you did the same thing with the distillers you made lists of as many distilleries in the country as you could find and you contacted all of them yeah again asking you know we had set requirements we wanted to do small batch yeah so we’re looking for under a thousand bottles ago
E: yeah which is quite difficult
S: which is quite difficult and we wanted us like help with recipe formulations so we wanted we didn’t want to just white label a gin they were already selling we wanted to make our own which again was another difficulty. eventually we narrowed it down to a few options, eventually chose one who we went to visit and same with the fulfillment warehouses we narrowed it down to a few eventually found one who we liked the sound of we liked talking to him and they had a good price structure
E: yeah
S: so with creating the recipe what we did we started by doing some compounding of gin ourselves so this is a bit difficult because the you’re not allowed to by law do anything to alcohol that changes its nature changes what it is which is quite a gray area. like does that mean you can’t make cocktails because that changes them if even if you’re doing in your own house for your own consumption. it definitely means you can’t make cocktails and sell them on the street but doesn’t mean you can’t make a punch that you serve at a party so I kind of took that to mean that we could for our own consumption and using kind of all alcohol paid duty paid alcohol and that kind of stuff do some recipe testing ourselves at home which is what we did we tried all the different ideas of flavours that we had until we narrowed it down to a few different flavours which then we went and we spent some time with our distiller trying out these recipes we’d come up with on their bigger equipment and working with him to work out how to change the concept that we kind of done in our kitchen that we could scale and do big batches of yeah that’s something which I’m sure a lot of other distillers could help you with and it was quite it’s quite a fun process as well isn’t it trying different things and yeah we’ve learned a lot about gin in the last year. so now we effectively had the point we had our recipe we had our supply chain pretty much set up the next step was branding. branding is what took us a long time we wanted to work out you know what size bottles we wanted what shape we wanted what was our look and feel of the label, what was the brand name we were gonna have was our website going to look like once, what was the kind of Instagram theme, and all that kind of stuff
E: but more importantly, the main strategy for us at this time was that we wanted the branding to be really strong so that customers who hadn’t tried our gin would be comfortable to purchase our gin online yeah so we wanted to stand out want you to be really clear what the flavors were and what the gin was gonna taste like but we wanted to look good we wanted people to buy our gin because and they wanted to keep it on their shelf and show off to their friends
S: yeah definitely I always thought that it has to look good in the thumbnail. If you’re scrolling through amazon it has to jump out at you, and that’s something that I think we achieved but I think we need to up our game on the photography side a bit. I haven’t spoken to you about this yet but I we should redo our Amazon listings with different photographs. But with our branding we had a few different ideas stuff from which to target one of which was local we thought that it would be a good route for us to sell initially would be would be to local because that would give us another USP we could say to him not only are we flavor without the sweetness but also local when talking to bars and stuff, what was our mass appeal, we wanted it to be easy to understand not use too much terminology obvious what it is online when you’re looking online which we’ve kind of spoken about. we wanted it to be low sugar. We wanted it to be clear that they weren’t gonna get it wasn’t going to be another rhubarb gin that they were given it wasn’t gonna be really sweet syrupy I want to make it obvious what the flavors were. I wanted to make it look unique and we wanted it to be very high-end and high-end was important because we were gonna have to charge quite a lot of money for it because every step in the supply chain cost quite a lot so we’ve already spoken about how much alcohol Duty is that’s already 10 pounds gone then you’ve got to pay for the bottle we’ve gonna pay for the label you’ve got to pay for the actual gin that goes into it you’ve got to get a call you’ve got to get the heat-seal on that you then gotta get the box it goes in you then need to have another box that your groups of six will go in. you’ve then got to pay someone to put that all together you then have to ship that from there to your warehouse then at the warehouse you gotta pay someone to store it there then when you get an order you have to pay them to package it and put a label on it then you’ve got to pay a delivery company to go deliver it and then you’ve got to pay whatever platform you got to sell from with us Amazon or whatever a fee for that. Then you’ve got to pay your payment provider your bank a little fee and whatever you’re selling it for there, and then you have to deal with returns breakages, that kind of thing. when it comes down to it gin, craft gin is expensive for a reason no-one’s really making that much of a margin out of it. it’s just an expensive business and so but the consumer is used to being able to go to Tesco’s and buy a 20-pound bottle of gin generic gin yeah that and we’re basically charging double that yeah very close to double that so you had to look high-end had to look craft. so we did that we spent quite a lot of time thinking about the branding and we tried a few different we called out a few different design agencies who developed gins that we liked the quote we got back were pretty horrendous yeah I don’t remember it was about 60 70 thousand pounds eighty thousand pounds just for the design yeah eventually we went through designing it ourselves and then hiring a professional to kind of like tweak it so we can run the concept and then we hired a professional to turn that concept into into a label and to our logo and to our branding and we found that on 99designs which is a website where you can hire freelance designers and instead of costing us tens of thousand pounds it cost us a few hundred
E: yeah but one of our directors is a graphic designer and she was able to work very closely with this outsourced designer
S: yeah yeah so she took the lead on that she was an art teacher in a previous life and now works with us and we came up with a name. the name took us a while we ended up we narrowed it down to two names one was Wheelbarrow Gin which we thought would conjure up this idea of local flavored we can have like a rustic wheelbarrow with the botanical earth the actual flavors are in the gin growing out of it. had some ideas there and then on the other side we had the name Pipehouse and the pipe house was the first drinking establishment in Tunbridge Wells we quite like the name – Katie or the art teacher it looked right how it was written down and that would be a very different brand that would be very minimalist we our logo would be a house made out of pipes I quite liked it because I like linking imagery to names you want you want kind of a dual reason for them to remember it and if I called it Priestley Gin they have to remember priestly yeah whereas calling it Pipehouse with a picture of a house made out of pipes was quite straightforward and there’s some stuff to do pipes again kind of copper pipes with the you know the still exactly so there was some stuff we could do there. i thought about it I did a poll on the blog we came up basically decided the pipehouse was the way to go. and that’s the brand we still have today, pipehouse gin and it’s available on our website pipehousegin.com or Amazon if you fancy buying some. Our first flavor was earl grey and cucumber we’re just about to launch another one, pink grapefruit and thyme and it did really well. so we spent ages we had to find a company to make our bottles for us we had to find another company to do the labels we then have to make sure the supply chain would work together and that whole process ended up taking quite a long time so we got our first batch our first 250 bottles done in the beginning of June and then in June we had our launch party we had a load of markets that we did we did a big push where we spoke to loads of bars and stuff like that we had did a big press push who invited loads of photographers and local newspaper editors and stuff like that to our launch event and we basically tried to hit the local area with a bit of an explosion and the plan was we would get those initial interest and then we drive them online so they buy online and then that would drive our rankings and our reviews on Amazon which would then lead to kind of national sales. it didn’t quite work out like that. we were behind schedule and we actually had no stock online ready to be bought. we only had the stuff that was in our garage ready to be sold in the markets but didn’t really matter because we sold out pretty quickly. we sold almost 500 bottles 400 and something bottles in that first month.
E: yeah it was amazing
S: pretty amazing yeah
E: Who knew people in Tunbridge Wells liked Gin.
S: yeah and it’s just been going on like that. we’d been doing more markets we’ve been working on new flavors we’ve been working on online we’ve been working on new products other things we can do but that’s kind of it. that’s how you start a brand of gin so let’s go back through it quite briefly there’s all the resources on on my website you go to sam priestley dot com to find out and I blogged about this as we were doing it so you actually get better idea reading that about what the thought process was because we’re looking back now with rose tinted glasses there were loads of issues we ran into and he can see the frustration at some of my post cuz I start off expecting it only take like three months when it actually takes nine months to create, you can see how I was getting a bit antsy but yeah so the process was you know work out how to make gin, come up with a USP you don’t just make it any other type of gin you need to have something different something unique a reason why people will buy it. sort out the legals. on the website i’ve got all the different legal stuff you need and some different options you can take there. once you got an idea of that you can then start looking for partners to work with are you going to be making your own gin at home which you want to sell in which case you need very different, there’s a lot more red tape you need to get through if you’re going to work with a distillery you know start contacting them and talk to local people. think about how you’re going to sell it. Are you just going to be doing markets local to business in which case maybe just using your garage is fine if you’re thinking about online or delivery trade orders yourself then you’re probably going to need some sort of warehouse and fulfillment solution there. and that’s kind of it anything add Emma
E: well i mean there’s just so many different things you can talk about the gin like that from a marketing point of view
S: we talked about quite a bit about marketing on a blog posts there’s one podcast called how to get customers for your business which i recommend listening to we get quite a depth into marketing on that. There’s loads of stuff that went wrong with the gin like we forgot to get boxes to put it in
E: yeah
S: That was one of the things we messed up on and then when we did get boxes our gin didn’t fit in it. like they were rubbing against each other. our first batch of labels went wrong and we had about a third of the gin we couldn’t sell
E: yeah because the labels weren’t loading properly
S: We still have a few bottles that we’ve been serving for gin and tonics or at a slight discount to people who don’t mind about
E: yeah it hasn’t been a complete waste
S: but when we got back with our box we went to pick up all the boxes of gin and took two cars to fill it up we drove it back got to the garage started opening them up getting each bottle out and then I remember the first box we opened all six bottles were like unsellable. I like almost cried.
E: Oh yeah you and Katie did didn’t you
S: I was not happy but we got around there we ended up sorting that out with the labels and now our labels are all fine and you can dip them in water and rub them with a fan and they’re fine we had loads of problems like that. one other problem we had recently is delivering crates of gin to businesses the delivery companies seem to just chuck them around they’re labeled as fragile glass inside and these are quite really premium bottle
E: yeah it’s very thick
S: but yeah we still managed to get bottles broken and if one bottle breaks inside a box or six that’s all the six like unsellable at that point so we’ve been having those issues there’s loads of little things that I it’s always harder than you think it’s gonna be but like none of the problems are ones we can’t solve and we managed to get over all of them and another nice thing about starting a business quite cheaply like our original plan was only spend ten thousand pounds on it, we ended up spending twelve thousand for that first batch and then as that was selling well we spent another four thousand pounds in so bringing investment to 16 thousand you know to basically pay for that gin up front and that meant that we never had that much on the line if we went out and got a loan for a hundred thousand pounds and we’ve gone with a distillery who had a minimum order of five thousand bottles and then a third of those bottles have been unsellable it would have been painful for us because like what do you then? so starting small definitely helped and is definitely something I’d recommend and it wasn’t that difficult of a business if you listen to one of the other episodes is on how to start a coffee shop. as businesses go, the coffee shop was a million times harder in terms of all the stuff that was required to do it.
E: well the nice thing about having a gin business is it’s very social
S: yeah so it’s a fun business
E: meeting the customers whether that’s a b2c or b2b like a bar restaurant it’s an easy conversation it’s fun and it’s quite an easy sell. lots of people like gin and if they don’t like drinking it themselves they’re happy to buy it as a present for someone
S: it’s worth saying we did come up with our our flavor is unique and has done very well at competitions and at blind taste testing in our first yeah we came second in an international competition for best flavor gin in the world which is ridiculous considering we’d only just launched and so we were selling something unique that no one had tried before which is a much easier settle than saying have this London Dry what makes it different? and having to come up the story behind that and you can do say Chapel Down. Chapel Down they are a vineyard they’re so ingenious doing well their storyline is is made by the first cutter their Bacchus grapes because that’s the stuff that they can’t use for the wine they were then distill into a into a vodka basically which they then uses the base for their gin that’s their story but they do a classic london dry and it’s selling well they’re doing really well because of that story behind it. Another company that is using waste for their their base alcohol is kind of the older stuff which farms were going to throw out that they couldn’t sell they’ll take it all distill it up turn it into a pure spirit turned that into gin at the end of it so there is a lot you could do with gin there’s also lots you can do with the flavors Earl Grey and cucumber that’s an unusual flavor you know something other people haven’t done before so there’s a lot you can do or you can do something different you can do a flavored vodka you could do a vodka that is made in quite a similar ways you can do something non-alcoholic something that is quite popular at the moment I think yeah it’s a good business to be doing. I don’t know whether my business is getting better in the idea for them or if we’re just getting better at side businesses because this one is going quite well and I’m pretty pleased with it yeah and all that night I say good night.