Drinks professionals working behind the bar are uniquely positioned to understand potential opportunities and product gaps in the spirits space. At this point in the craft spirits renaissance, several bartenders have gone on to start successful brands by capitalizing on such insights. SevenFifty Daily tapped three bartenders who’ve become brand entrepreneurs—Ryan Magarian, the cofounder of Aviation Gin (in Portland, Oregon; founded 2006); Stephen Berg, the cofounder of The Bitter Truth Bitters & Waters (in Germany; founded 2006); and Allen Katz, the cofounder of New York Distilling Company (in Brooklyn; founded 2011)—to investigate the challenges of such an endeavor.
But first, they offer a caveat: Don’t do it. Well, given all that they’ve been through, it’s more that these professionals say they might not do it again. Berg says he probably wouldn’t have launched a brand if he knew then what he knows now. “But hey,” he says, “if it were easy, everybody would do it.”
Magarian adds, “If I were giving myself advice today, I’d say don’t do it.” But at the time he started his brand, he says, “I was beautifully, delightfully naive.”
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If, however, you do want to continue down the path of the first-time brand creator, here’s some advice to consider.
The Brand Before the Brand
Magarian may have been naive, but after more than 15 years in the business of craft cocktails and spirits, he’s not anymore. Here’s his first piece of advice to bartenders: Establish yourself as a reliable professional and build your own personal brand. Magarian was a forerunner in promoting craft cocktails and spirits in 2003, and he was consulting for hotels, bars, and restaurants. As he describes it, “I had established uniquely broad connections throughout the industry.”
Those connections would lead him to the team at House Spirits Distillery in Portland who were creating a gin for a local restaurant. “I was just captivated by their thought process on that co-packaged product,” Magarian says. And the team became captivated with Magarian’s spirit-forward, pre-Prohibition perspective on mixing drinks. It was a mutually inspiring collaboration.
“I jumped in and added my own color to it,” says Magarian, “[and that] eventually became Aviation.” While he also added some cash toward a marketing budget, he says that capital isn’t always required for a partnership. “You don’t necessarily have to have money to do this,” he says. “You have to leverage your individual brand, your talent capital, and your relationship capital.”
Know What You Don’t Know
Whether talent and branding are things you can bring to the table, you also have to know what you don’t bring to the table. Katz, whose New York Distilling Company produces gins and whiskeys, knew that there were some things he needed to learn after visiting a number of distilleries. He opted to start his distillery from scratch rather than work with an existing distillery.
“I made a list of things I knew and was comfortable with,” Katz says, “and a secondary list of things I didn’t know and thought would be vital to opening a distillery.” Then he found mentors to help him along the way, such as Sean Harrison, the master distiller of Plymouth Gin in England, and the late Dave Pickerell, a sought-after distiller often called the pied piper of craft distillers.
Katz also knew that some things were better left to his partners, one of whom, Tom Potter, had cofounded the Brooklyn Brewery. Says Katz, “[Potter] has a profound expertise in building and strategic thinking around the beverage alcohol business, and building it from the ground up.”
I Want to See You Sweat (Equity)
Once you’ve found partners, established your brand, and taken inventory of what you know and don’t know, there’s the question of how those components translate into equity. That equity, or ownership of the company, is either in the form of capital or sweat—the amount of work you’re willing to do. In general, Magarian says, “Without money, you’re not going to have any majority control.”
Berg invested both capital and sweat. Though his initial investment of capital was low, the amount of effort and sacrifice was huge. “Initially,” he says, we invested 600 euros and a lot of unpaid hours—no pay for the first three years, [and] all incoming money was reinvested.”
Katz had to continue working while he grew his business, but he ultimately decided to bring on investors and developed a business plan. “It was only going to get off the ground if we could go out to investors and raise some capital,” he says. He developed three business plans: “Drag our hands against the floor and get it off the ground plan; midrange plan; and all glory, here’s everything we want, including build out and reserves [plan].” Ultimately, Katz would raise $1.8 million in several “tranches,” allowing him to build out the distillery with equipment and a bar and retain two years of operating expenses.
The “Wildest Adult Fantasy”
Given that all three bartenders say it’s ill-advised to start a liquor brand yet have made successes of their own brands, the question is, what does success actually look like? What is the payoff for your investment, whether that’s money or sweat?
It turns out that return on investment can be hard to quantify.
“You can try to project what your revenue’s going to be,” says Magarian, “and build a valuation of the opportunity based on five times the net revenue of the [production] of the first [and] second years, but in the end it’s whatever the market can bear. My Cal Ripken Jr. rookie card may be in the book for $275, but if nobody wants to pay more than $100 for it, it doesn’t really matter.”
Magarian received two payouts from his shares of Aviation, and that was enough to start his Portland restaurant, Oven and Shaker. He’s no longer an owner in the brand and focuses instead on his restaurant and consulting business.
Berg and his partner, Alexander Hauck, have kept their brand relevant for 13 years. He hopes that the “Bitter Truth will keep growing and secure its excellent reception in the trade and that we … don’t [make] too many mistakes along the way.”
Katz suggests that the sustainable growth you want out of your brand is in a “range of 11 to 19 percent growth per year.” But he also admits, “This would be my wildest adult fantasy come true. I don’t think about an endgame. I think about a sustainable business that can provide a livelihood.”
And although payouts can happen, for most bartenders who are passionate about a brand the most important payout is living their dream. Berg and Magarian’s warning about not starting a brand may be directed more toward those who want a get-rich-quick scheme.
“It’s really important that it’s not just a whim,” says Magarian. “Today’s bar landscape offers many opportunities for professional gratification. Start by identifying your own healthy desires and super powers, and then … aim at things that take advantage of that intersection of healthy desires and talent.”
If that’s a brand, Magarian seems to be implying, then go for it.
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Derek Brown is an expert on spirits and cocktails who is based in Washington, D.C. He is the author of Spirits, Sugar, Water, Bitters: How the Cocktail Conquered the World. Follow him on Twitter and Instagram @ideasimprove.