In America we love growth. We love multiples. We love sequels. No one needed a Rocky VI. We did not need a Disneyland in Paris. We did not need ALL the flavors of Pinnacle Vodka because no one is craving whip cream flavored vodka.
When a brand comes to BevStrat, whether it be wine, beer or spirit, we need to really look at that question. Brands fall into a few main categories.
- Looking to grow to increase sales to increase cash flow
- Looking to grow because out of town demand is equal to in-town demand.
- Looking to grow because growth is sexy.
Point 1 – Growth for cash flow is a slippery slope. It costs money to grow and brand owners are notoriously short of cash. Banking on increased sales that come with a wider footprint but discounting the cost of a wider footprint will 100% place your brand on the short list of failure more quickly than anything else. Once you begin growth you need to stockpile at least 2 years projected revenue to support your growth and marketing. #truth
Point 2 – There is a phrase we use at BevStrat called epicenter selling. It means that your brand is the strongest at the center of your production location. That can be your distillery, winery or brewery. As soon as you leave that epicenter, your niche and appeal will diminish. We have clients on the East Coast that think it is sexy to be sold in Los Angeles. That is true, it is sexy there, but the reality is that your appeal as an East Coast winery or distillery has little appeal in Santa Monica, CA. With that move to the West Coast your brand is now in some other brands epicenter. You will be unhappily greeted with cross country sales numbers if you do not know this going in. Be a brand sold on its quality and merit and not on its location and local following. #truth
Point 3 – Growth is not sexy, it is hard work, and we see it all the time. We see brands that hire us and want to be in any of the states we operate in. We are thankful for the clients, but sometimes, many times, we turn away clients because growth for growths sake is not recommended. There are many factors that need to be considered like, money, marketing, distribution, warehousing, compliance, sales forces, work withs, ride withs, travel, building a brand without a local presence and many additional factors that will put pressure on the home base of the brand and the base brand cash flow.
There is no objection that having a large brand is cool and sexy. It is wonderful to say, “I am sold in 10 states,” but the reality is, being in 10 states is not selling in 10 states. Growth requires strategy, timing, plenty or resources, plenty of cash, and most importantly patience. Small and profitable is better than large and broke. The road is littered with over expanded brands that are struggling and because of this growth becomes required instead of desired. No one needs Rocky VI.