16 replies to this topic

[Max Action]

Still working on the business plan, and (no surprise) sales forecasts seem to be the most elusive variable.  I'm curious what a reasonable target would be for market penetration in a hometown where residents might feel some loyalty to the local distillery.  Would a target of 2% of local sales be realistic for a specific product type of good quality?

[ibgeekn]

Far easier to put it into how many cases you can move a month. Store managers and bar owners can tell you that off their head, but asking percentage isn't that easy. You don't really care about what percentage just starting out, it's how many cases can you produce and sell. Tell an investor you expect 2% market share and they'll simply ask how many cases does that figure out to be.

[Charles@AEppelTreow]

Another reason a simple percentage might not be useful is that it's likely to be quite small.  When I was doing some background research in 2004, I found that Wisconsin wineries, all 28+, together amounted to 3% of the volume sold in the state.  And more half of that was a single winery.  The small figure didn't stop any of us from starting. Indeed, there are now about 40.  

At the time, local distilleries would have amounted to 0%. There weren't any.

[rich phillips]

ibgeekn, on 24 November 2010 - 09:56 AM, said:

Far easier to put it into how many cases you can move a month. Store managers and bar owners can tell you that off their head, but asking percentage isn't that easy. You don't really care about what percentage just starting out, it's how many cases can you produce and sell. Tell an investor you expect 2% market share and they'll simply ask how many cases does that figure out to be.

I agree with this. We looked at how many bottles it would take to break even and what we thought the market would bear.
Sales forecasting is always going to be like looking into a crystal ball

[Beauport Bob]

Are you working in reverse? A percentage of local sales? You would need case sales number anyway to figure % of local sales. In my opinion, a more interesting number would be a volume of sales produced and as % of your sales towards local. Local is too variable. ie: would you rather have .02 of say, Lake George, NY, or .02 of New York City?
Happy Thanksgiving to all.

[Max Action]

Thanks for the replies.  I'm not working backwards.  Calculating a break-even point and the number of cases I'd like to sell is easy enough.  I'm simply trying to determine "what the market would bear," as rich phillips put it.

I know the size of my local market, and have decent per-capita liquor consumption data.  I'm simply wondering what percent of that consumption would be a realistic goal to capture.  Is it realistic to aim to sell 1 in 50 of the cases bought locally?

[delaware_phoenix]

Again, how local is local and how big is the local market?

For me, NY is my local market. They buy most of what I make, and by that I mean that some of their customers are out of state or they sell online to out of state customers. So in some sense 100% of my sales are "local". If by local I mean the 3 or 4 stores in the Western Catskills that carry my products, now we're talking a much smaller number.

So of it may depend on your product(s). Common products such as whiskey, gin etc may well be all consumed fairly locally. If you make a unique liqueur, you might need a broader sales area (regionally).

We can't answer these questions for you, and yes, there's quite a bit of uncertainty. But that's the nature of the business.

[Max Action]

I'm sorry if my question was confusing.  I didn't mean to ask people to predict what portion of my sales would be local.  I'm just curious about what level of interest people see in local customers.

When I'm at the store choosing a micro brew, I'm disproportionately going to reach for the local brand because of a hometown loyalty.  I'm simply trying quantify that local sales effect.

[delaware_phoenix]

There's definitely interest in locally made products. Whether people are able to afford them given our costs and overhead compared to the majors is another matter.

Definitely make up little shelf tags that say "Locally Made". Advertise locally made. Advertise Made in Our State. Otherwise, you're just another bottle on the shelf.

[cowdery]

In various markets around the U.S., I have been impressed by how much willingness there is on the part of consumers to support a local spirits producer.

[Max Action]

If you all don't mind, I'd like to revive this thread.  I'm not comfortable asking individual distillers how many cases they're selling.  However, if you're willing to share your sales volume and how it compares to the size of your market, I'd be happy to hear it.  Feel free to send me a private message.

Besides that, how about a hypothetical example?  Suppose Anytown Distillery is planning a new vodka distillery in Anytown, USA, population 100,000.  According to the state liquor authorities, Anytown is a thirsty city and consumes 30,000 cases of vodka each year.  What would be a reasonable goal for a number of cases that the distillery should aim to sell in its hometown annually?

[Rickdiculous]

Max,
As someone going through this right now, I would go and ask your local liquor guys.  I went to all the big sellers and asked them how the other local distilleries (my market has five) were fairing at their pricepoints and what they thought the market would bare.  I also, asked them about how I could position myself.  Would I be able to make a model like tuthilltown work (selling 350ml bottles for $44.95) or my local competitors (who are selling around $37.50 a 750ml)?  Every market is different and you can't get a reasonable guess from someone else's market.  The real question you should ask is "What is my goal for this distillery?"  Do you want to make $50k a year or $100K?  How many people will you need to get that accomplished?  How much material? etc and then calculate how much of the market at what price point you need to grab that.  Set that percentage as what you will capture and then put forth a marketing plan which sees achieving that goal as a real possibility.

[Scott @ Twenty2Vodka]

if anyone is actually willing to share their sales volume, why not share it publically?  I'd love to see it too...though how would I know if you were telling me the acutal numbers, or a complete lie...?

@Max Action, Are you still in startup planing stages?   is this info 2 years later holding you back from starting?  We did a lot of homework before hand too, preparing pays off.  How close are you to getting off the ground?

[Max Action]

Scott @ Twenty2Vodka, on 11 April 2012 - 07:05 PM, said:

@Max Action, Are you still in startup planing stages?   is this info 2 years later holding you back from starting?  We did a lot of homework before hand too, preparing pays off.  How close are you to getting off the ground?

Nothing is preventing us at this point, as we are in too deep to back out now.  But we're still constantly tweaking our numbers.  Calculating break even points and revenue per case is easy enough, but establishing sales goals for a particular territory is tougher.  I just thought it would be nice to have an example of someone else's success.  "If XYZ was able to sell that much in their town, maybe we should aim to sell proportionally the same amount in our town"

I do have some ballpark ideas already, based on data I've been able to gather here and there, and making extrapolations based population sizes and consumption rates.  But the more data the better...

[Michael B]

Care to share those ballpark ideas?

[Halfdave]

I guess the question is, how do you forecast sales?

[palousespirits]

In my research in the Pacific Northwest I read that Woodinville Whiskey Co. and Dry Fly produced right about 11k cases each of their products in 2011.  A bit of that is going into aging, but it shows their production levels that they expect to be able to sell.