Financial Solutions in the Adult Beverage Industry
What financial options do I have for my adult beverage company?
If you are trying to get your adult beverage company off the ground, you have the same financial resources available to you as other businesses. You can apply for a business loan or get the capital you need from investors.
Are banks loans available to distilleries and brewers?
Yes, but be aware that some banks find the adult beverage industry a risky investment. It takes time for you to produce your product and a lot can happen in the window before you start to earn money. Build a strong business plan to bring with you. But, don't let a "no" stop you from moving forward. There are other ways to get seed money.
How do I raise seed money for my distillery?
Seed money is tricky, but some angel investors are willing depending on your product. Businesses in the past have found success with crowd-funding. Crowd-funding, like Kickstarter for example, gives you the seed money you need. In exchange, your investors get something too. It could be the first bottle from your production or something else, but those terms need to be addressed before you can start the crowd-funding campaign.
What investment options are there for alcoholic beverages?
You can approach venture capitalists or angel investors for financial backing. Both have their pros and cons. Do your research to determine which one is right for your business.
What is an angel investor?
An angel investor is someone with a disposable income and an interest in your field. These types of investments have a lot of flexibility and generous contracts because it's usually between you and the investor. They have their limits. Most angel investors can’t contribute more than two hundred thousand dollars.
What is a venture capitalist?
If you need bigger backing to move your business forward venture capitalists can help. They can invest upwards of five million dollars. In exchange, they often ask for a seat at the table. The terms and conditions are structured and finite. But, they usually have experience in the industry and can provide guidance or make connections.
Business Planning for Alcoholic Beverages
What are the different types of liquor licenses?
All alcoholic beverages in the United States must obtain licenses. You can visit the Alcohol and Tobacco Tax and Trade Bureau (TTB) to start getting your permits online. Be intentional with your application. Each beer, wine, or spirit will require different paperwork.
Do I just have to apply for one permit?
No. Each state has its own laws about buying, selling, and producing alcohol. You'll first need to meet the federal regulations and then move to state. If you plan on distributing your beverage nationally, you'll need to meet the requirements for each state. You can get more information about licenses per state by visiting this website.
How do I get a permit to distribute alcohol?
Again, you'll need to contact the TTB to initiate the process. The process takes about six weeks. But, while you are waiting on the response, you can draft your letter of intent. The letter of intent is stating to the TTB that you and the supplier have made an agreement to partner in the alcohol distribution.
Start filling out the permit from the TTB
Get a copy of the letter of intent
Can I sell alcohol online?
The answer would depend on the state you live in. Some states have a lot of restrictions about selling alcohol online. If you want to learn more or to see if your state allows this, you can click here.
Will I have to pay taxes?
Yes. Alcoholic beverages are not exempt from paying taxes. If you plan to import, be prepared to pay additional duties relating to the country of origin. How much you pay depends on where you produce your beverage and where you might export. You can get an estimated guide on TTB's website.
Do I just have to work with TTB?
No. You will have to work with the FDA, your state legislator and potentially customs if you plan to import or export. We have a comprehensive guide about permits here.
Adult Beverage Mergers and Acquisitions
What is a merger?
A merger is when two companies, roughly the same size, move forward as one brand new single entity. This is called a "merger of equals." This deal means they are no longer separately owned and operated, they give up their stocks, and new shares are issued in their place.
What is an acquisition?
An acquisition is the process of one company absorbing another and establishing itself as the new owner. The purchased business ceases to exist from a legal standpoint and is unable to trade on the stock market while the buyer is still able to do so.
Are mergers and acquisitions the same thing?
No, mergers and acquisitions are not the same thing. But, they both have benefits to businesses on a financial and strategic level. While a merger and acquisition can look the same from the outside, the difference is in the contract details. In an acquisition, the company ceases to exist. In a merger, the owners can work out a deal to continue to operate together.
How long does a merger and acquisition take?
It's hard to quantify the time it would take to complete a merger or acquisition, but it could take at least six months to a year. The process is driven by legal documents and procedures to protect all parties involved in the transaction. Getting these documents rectified could take some time.
Do I need to hire a lawyer?
A lawyer will help you throughout the process, and you should absolutely hire one. We would also suggest working with a consulting agency. Someone like the Brindiamo Group who has experience assisting businesses with mergers and acquisitions across the globe can help you make informed decisions about the offer on the table.
What should I consider when buying or selling a distillery?
A lot of growth opportunities exist when you buy or sell a distillery. You want to consider either a stock sale or an asset sale. There are also regulations and due diligence to complete. You can read about them in our blog: Issues to Consider When Buying or Selling a Distillery.
Marketing and Branding Your Beverage
Why is branding your alcoholic beverage important?
It sets you apart from your competition. It's considered the face of your company and silently speaks on your behalf. If you come up with a unique marketing solution, it can help propel your beverage forward in a crowded sector.
What aspects of branding should I consider?
Everything about your brand should have thought behind it. This would include but not limited to:
Read more about How to Brand Your Beverage Company
How will marketing strategies improve my business?
A marketing strategy isn't too different than a business plan. The difference is the marketing strategy includes actionable steps to find success. In the marketing plan you should see:
Are there labeling restrictions for alcoholic beverages?
Yes. The Federal Alcohol Administration Act has a lot to say about label requirements for all alcoholic beverages with an ABV over 7%. It applies whether you are buying, selling, or producing on a national and international level. Anything that falls under 7% ABV, which would be either a wine or beer needs to provide the following information on the label:
A list of ingredients in descending order by weight. You will start with the largest volume.
The complete list of nutrition facts including but not limited to nutrients, vitamins, fat, sodium, sugar, cholesterol, dietary fiber, calories, and more.
The name of the product that is established by law. It must appear prominently on the front of the bottle, can, or label.
Net weight or quantity of contents.
The name and address of the manufacturer, packer, or distributor must be visible and easy to read.
Notification of major allergens such as wheat, milk, egg, and nuts.
The FDA regulates all wines and beers under 7% ABV.
What kind of production challenges can I expect bringing my beverage to market?
A few things can set you back. Always check the printing of labels before ordering. Your logo and information need to fit on the label itself and as well as the bottle.
Ordering standard bottles (stock molds) have advantages as the label sizes have been predetermined. However, you can expand upon your brand's personality by having custom bottles designed.
Finally, get the correct closure for the bottle. Again, a standard bottle will have a selection to choose from, but custom designs might change the diameter opening.
If you want more tips and suggestions click here.
What is liquid sourcing?
The distillation process takes time. For whiskey, it's a three-year minimum. Sourcing provides companies with the option of locating barrels of whiskey made by other distillers. From there, the business can decide if they want to package the liquid and sell it under their name or blend it with another liquid to create a unique blend. An example of sourced whiskey success is Kentucky Owl. They did not produce their own whiskey, but sourced barrels and successfully made a product.
What is barrel trading?
Barrel trading is an old school name for whiskey sourcing. The terms can be used interchangeably. It should be noted that liquid sourcing applies to whiskey.
How do you find suppliers?
Whiskey is having a moment, and the demand for sourcing has increased exponentially. It's hard to believe 10 to 15 year aged barrels exist, but they do. The best way to find these hidden gems is to create meaningful relationships. Hiring an agency like the Brindiamo Group can give you an advantage. Our team has worked for years in the adult beverage industry and has access to an unrivaled network of distillers and suppliers.
Is there a difference between bourbon and whiskey?
Absolutely. Whiskey is an umbrella term. Scotch and bourbons are types of whiskeys. Whiskey is distilled from a mash of fermented corn, barley, or rye or a combination of these grains. To be called a bourbon by law the mash mixture must contain 51% corn, distilled at 160 proof or less, and aged in new white oak barrels. It also has to be made in the U.S.A.
You can read about the different types in our blog: Different Types of Whiskey
Can I blend bourbon and whiskey together?
You might blend different whiskeys, Scotch, or bourbons. But, typically you don't blend a bourbon with a Scotch or a whiskey with a Bourbon. You would lose out on the trademark opportunities, and they would no longer be legally identified as a Scotch or bourbon.