Starting a Gin Brand Episode 1: Doing The Research

I want to start a brand of gin. I want to do it cheaply (ideally for around £10k or less) and make lots of money from it. Easy huh? And I am going to write about it in real-time so you can follow along and see it succeed, fail or just meh.

Edit: Episode 2 is out now! and now episode 3 and episode 4 and episode 5. And you can buy the gin on Amazon!!

I started the project two weeks ago, and in this post I am going to cover what has been done so far:

• Working out how to make gin.
• Researching the laws around making and selling gin.
• Reaching out to distilleries and fulfilment companies.
• Doing some market research.

But first, why do I think this is a good idea? For one, I like gin. But I also think that there is a good opportunity at the moment to create a gin that is primarily aimed at the online market. The world has changed and online is taking over. And the alcohol market has been slow to catch up. Can I remove all the current layers of distribution and resellers to make a good quality gin at an affordable price with good profit margins? I think so.

Plus I have been very successful in my table tennis business. Which although the product is very different to booze, it still follows a pretty similar business model. A small team selling exclusively online by building a brand using online marketing techniques.

And if that isn’t good enough, here are some other reasons:

• There is no expiry date. Stock can sit around for months with no issues.
• You only need one product. Unlike clothing where you have to have many designs and styles, once you get a good gin that is it.
• A customer can purchase many bottles from you over the years. Unlike table tennis bats where they generally just buy one.
• It will be very easy to get initial reviews and sell some to friends and family. Who doesn’t like gin?

I will be doing this business with my wife Emma, a self-employed marketing consultant, and our friend Katie, a self-employed artist.

How Do You Make Make Gin?

Although I love gin, I don’t actually know that much about it. So my first step was to do some research.

The first thing I learned was that the requirements to call a spirit ‘gin’ is very low. The predominant flavour needs to be juniper and in the EU the alcohol content needs to be above 37.5% (40% in USA). But that’s really it. What regulates gin further is how it is described. You can’t just call any old gin ‘London gin’, it needs to be prepared in a certain way. There are three main types on the market:

• London Gin is the most stringent and can use the terms: gin, distilled, London. The gin can be made anywhere (not just in London) but needs to distilled from ethanol in a traditional still in the presence of all the botanicals. It cannot be coloured or sweetened and no extra ingredients can be added after distilling.
• Distilled Gin can use the terms gin and distilled. The gin also needs to be distilled from ethanol in a traditional still in the presence of juniper berries. But extra flavours or colouring can be added afterwards.
• Cold-compounded Gin is the easiest and least stringent type that can still be called gin (but not distilled or London). It must be juniper flavoured and can be made simply by adding flavourings to a neutral spirit.

London Gin is the most stringent, but that doesn’t always mean it is the best or most popular. You will get charged more for a Hendrik’s and tonic than a Gordon’s and tonic, but Hendrick’s is just a distilled gin and Gordon’s is a London gin. In fact, one of the most popular modern gins at the moment is Bathtub Gin. Called that because another word for cold-compounded gin is bathtub gin, a throw-back to prohibition in America when gin would be made in a bathtub by mixing vodka with juniper berries.

Below are three very popular gins from each category.

So the upshot of all this is that as long as we make a gin that tastes really good, the exact production method doesn’t matter to us. Which is great, because if push comes to shove and we can’t find a way to get it distilled I can always make it in the garage by mixing the botanicals with vodka, perhaps even using a bathtub.

The Legalities

The most daunting part of this project is dealing with all the legal red tape around it. It is pretty confusing and makes it all rather complicated.

I think that I have finally found a way through all the conflicting and irrelevant laws. Below I have outlined three different routes I could take. The highlighted one is what I am going to work towards, but I will start with the first (and easiest).

I could have missed something out completely here. If you want to follow in my footsteps, please do your own research!

There is another option, and that is to get the gin made abroad and imported into the UK. I am not going to go into that but if it interests you check out this post on a vodka brand that did just that.

Once again, please take all the above with a pinch of salt! We are at the very early stages of developing this brand and could easily have missed something with the above research.

Contacting Distilleries & Fulfilment Partners

You may have noticed from the above table that I have no desire to store and fulfil orders myself. I want the business to be completely scalable, with the same amount of work needed to sell 10 bottles a week as 100.

I go a lot more into the logistics of setting up an outsourced business in this post. But for the purposes of this article understand that I need two important pieces to slot together.

1. A supplier who will make the gin.
2. A fulfilment company who will store the gin and send it out to the customer when an order is placed. They need to be able to automatically tie-in to our Shopify and Amazon store.

Once we find them, the other suppliers should all come together quite easily.

Contacting Distilleries

To begin with, we Googled ‘contract distilling’ to find companies who specialise in making gin for external companies. Most didn’t bother responding, and those that did were pretty negative:

Dear Sam,

 

I do not think our service will be suitable for you. UK Duty alone based on our minimun bottling run of 18,000 bottles can be as much as £145k (based on 70cl and 50% abv).

18,000 minimum bottle run! We were thinking more like 500…

After this we started just emailing normal distillers and explicitly saying we were looking for somewhere who could do an initial batch of between 200-500 bottles.

So far we have emailed about 40 different places. Of which we are starting to get back some quotes that are a bit more reasonable. By my next post we should have narrowed down to a few places.

We are also getting a better idea of price.

• Duty costs £27.66 per litre of pure alcohol. So if we are making a 40% abv gin then it will cost us £7.75 per bottle.
• The bottle, cork and label shouldn’t cost us more than £1.5 a bottle.
• The gin itself can cost anything from £3-£15 a bottle.

For now, I am going to run with a rough costing of £15 per bottle all-in.

Contacting Fulfilment Partners

From the above table you can see that if we take the easiest route, our fulfilment partner will need at least a premises license. And ideally, we want them also to be an excise bonded warehouse. This limits our options quite a lot. So far we have received quotes back from about 6 different warehouses, some of which are excise bonded and some which aren’t.

The prices range a lot and often include all sorts of things! Generally, we are looking at:

• Pick & Pack  – The price for someone in the warehouse to pick the item out and stick it in the post.
• Delivery Cost – Most warehouses will use a delivery company like UPS or to deliver the item. That is a cost on top.
• Monthly Storage Cost – Priced by the amount of space we take up.
• Monthly Admin Fee

I am hoping to spend something like 10p a month per bottle. £3 for pick & pack. And £4 for delivery.

Meaning a fulfilment cost of roughly £7.5 a bottle. 

That means if we are selling on our own website with free delivery. We will need to be selling for more than £22.5 to make a profit.

Note: Those are very rough and worse case prices. With scale and some negotiation, we should get it much cheaper. But it is always best to work off the worse case because we do not know what missing costs there are that I have forgotten or ignored. 

So can we still make a profit at that level? Let’s find out.

Market Research

For getting an idea of what is selling and for how much I use a market research tool called Jungle Scout. I love this tool and have spoken about it quite a lot in other posts, such as this one.

It is an in-depth search tool that scours the Amazon backend. It then cross-references with each listing with it’s own data to work out how much your competitors are selling a month. It costs $69 a month (for the web app version with niche-hunter I am using below). You can use it for a bit during your research phase and then cancel after month one.

It covers just Amazon, but as Amazon is going to be one of my primary sales channels that is important.

You see all those green monkeys and high opportunity scores? That means that jungle scout thinks gin is a good product to go into. High demand without much competition.

As an example of my research process let’s go a bit deeper into one of those keywords, ‘Gin Strawberry’.

We can see that quite a lot of people are searching for “Gin Strawberry”, but when we open it up there aren’t actually that many strawberry gins on the market – a potential market perhaps? We can also see from the graph that search volume has been steadily growing over the last couple of years.

I spend quite a bit of time researching and a few things really stuck out:

• The gin’s with the highest monthly revenue are selling for between £29 and £35 a bottle. There is profit margin to be made there.
• 40 of the gins are earning over £10k per month in revenue. Just on Amazon.
• A lot of the gins are 50cl rather than the usual 70cl – and still selling for over £30. If we could do a 50cl bottle as well that would bring all our costs right down.
• Flavoured gins seem to be the most popular. “Rhubarb”, “Ginger”, “Raspberry”, “Plum” are all selling well.

What Next?

Phew. Ok that was fun. I love this initial stage of starting a business. Over the next few weeks we will be:

• Visiting a few of the more promising sounding distilleries.
• Choosing some initial flavours and gin compositions. Plus making some of our own.
• Designing some prototype labelling and branding – including coming up with a name!
• Firming up our costings.
• Speaking to a small gin company who is interested in selling their business.
• Tasting a lot more gin…!

EDIT: Episode 2 is out now!