Is a tasting room a must for your distillery?

[mattabv]

A question for all micro and artisan distillery owners. Is having a tasting room essential to your distillery and does having one make a real difference and why? would greatly appreciate your imput.

[Jason Parker]

Show me your business plan and I'll be able to answer that for you.

[mattabv]

let me restate my question. does anyone who has a tasting room feel they benefit enough to justify the cost related to having one and to those who don't do you feel it would be a justified expense. what are the pros and cons concerning a tasting room. thanks

[John McKee]

It depends on the legal circumstances of your tasting room regulations (different by state and locality) but for us, we feel the expenses of running our tasting room are justified in the brand recognition and limited offsite sales that we're allowed.

MT rules: 2oz sampled on premise and upto 1.75L off premise sales per person, per day.

Cheers.

[rumfarmer]

Here I think the tasting room is a must. Since we can do retail sales from distilleries in Hawaii, you really need to give samples if you want to sell. Avoiding the middle man and maintaining margin to me is critical in the start up phase. Why fight for shelf space if you can manage your entire operating costs by selling directly to the consumer. It doesn't hurt that we had something like 8 million visitors to Hawaii last year, either. I say let the distributors come to you after you've established a brand. Otherwise, you are hat in hand, and that is never a good position.

All that being said, I think we have 10 distillers in Hawaii, and all of them seem to do well. Only one has a tasting room right now. If all goes well, I will be the second depending on how quickly Ocean Vodka gets moving and whether or not Mr Flintstone found a cool space for himself yet. I am starting my business as a direct to consumer business which is backward from the way every other distiller here started. Only time will tell if my idea is correct. Production will commence this summer.

[paul@mbroland.com]

I think the best way to really think about a gift shop/tasting room is that it is like running a completely separate business in itself. When we opened it was me and only me and I'd bounce from the distillery (production) to the tasting room (retail) to my office (admin) like a pingpong ball. Even with two people it can get a little hectic on an easygoing monday or tuesday if you happen to get a rush of customers. If you're in a WELL-POPULATED and/or TOURISM-oriented area, say, I don't know... Hawaii??? Or maybe New Orleans or a city like Louisville where maybe people would look for distilleries are some other good examples. However, even if you're in the wrong part of town in what you think would be the right town (I've spoken to a few in that situation), it may be be worse than being 15 miles off the beaten path, it REALLY depends. I'd wager to say that 75% + of all of us smaller, mom & pop start-up craft distilleries would prefer to do most, if not all, of our business out of a gift shop/tasting room because working with distributors requires time, money and travel, whereas working on your site is a lot easier to control/train others to do. We're now in our fourth year of business, our gift shop really helps out a lot with regards to paying a lot of bills. However, it took 2+ years for that to happen. Furthermore, WHAT product(s) you make will obviously play a large part in driving sales. We have 12 products, and I think that helps increase sales in both volume and the market for our products. If you only make a vodka or a whiskey, you'll be limited to mainly that market and only those interested in those products will make a point to seek you out. I guess my final answer is if you do plan to run a gift shop/tasting room, don't expect it to pay for itself for a while, like a year or two while.

[grehorst]

Agree with many comments here- we've been selling out of a tasting room for a couple years now. We're located in an urban area and see on average 600 visitors a week. Besides selling bottles and cocktails we find this to be a great marketing opportunity- people coming to us, spending money and listening to us talk about our products- what could be better than that?. It's been great for cash flow... It is a whole different business with it's own challenges. I'm moderating a panel at the 2013 ADI Conference on this topic- if you're going to be in Denver plan to attend this.

[Quirk]

Thanks to everyone for these comments.

Guy, do you happen to know what percentage of those 600 people make a purchase?

Indiana just passed a law allowing us to sell from the distillery last week, and it's going to the Governor's desk soon. So we are revising our projections and plans a bit to account for tasting room sales.

[shgruen]

Agree with many comments here- we've been selling out of a tasting room for a couple years now. We're located in an urban area and see on average 600 visitors a week. Besides selling bottles and cocktails we find this to be a great marketing opportunity- people coming to us, spending money and listening to us talk about our products- what could be better than that?. It's been great for cash flow... It is a whole different business with it's own challenges. I'm moderating a panel at the 2013 ADI Conference on this topic- if you're going to be in Denver plan to attend this.

I think that a tasting room in any high walk traffic area is an advantage wauting to haoopen.

SHGRUEN

[FireRoot]

I am hoping to re-open this discussion.

Fist I will describe our current situation: We established our distillery with only a distribution model and have been distributing for a little under a year. We distill on our farm which is good for manufacturing, but our location sucks for a tasting room (hence the distribution model). Our sales are starting to gain a little momentum and we are currently only distributing in our state. We have no debt, which is a huge plus. However, sales are slower than we'd like and we're not making enough money to live on yet.

We are wondering if you think it's worth taking on investors/going into debt to build a tasting room in our nearest city? Do you think the marketing you gain from a tasting room is worth it, or does it really increase your sales that much?

We are afraid that without a tasting room our brand will get left in the dust with all these other distilleries popping up that have tasting rooms. Or if we distribute out of state or out of country then maybe a tasting room doesn't even matter. Any advise on the situation is greatly appreciated.

[Julius]

13 minutes ago, FireRoot said:

I am hoping to re-open this discussion.

Fist I will describe our current situation: We established our distillery with only a distribution model and have been distributing for a little under a year. We distill on our farm which is good for manufacturing, but our location sucks for a tasting room (hence the distribution model). Our sales are starting to gain a little momentum and we are currently only distributing in our state. We have no debt, which is a huge plus. However, sales are slower than we'd like and we're not making enough money to live on yet.

We are wondering if you think it's worth taking on investors/going into debt to build a tasting room in our nearest city? Do you think the marketing you gain from a tasting room is worth it, or does it really increase your sales that much?

We are afraid that without a tasting room our brand will get left in the dust with all these other distilleries popping up that have tasting rooms. Or if we distribute out of state or out of country then maybe a tasting room doesn't even matter. Any advise on the situation is greatly appreciated.

What would your budget be building a tasting room? Would that money be better spent furthering your on premise campaign? 

[FireRoot]

We would probably be looking at close to a $1 Million for a tasting room in town. We would have to distill on-sight, so it's basically building a second distillery. We could do fermentations, stripping runs, and storage at our current facility so we wouldn't need as much space in town. However, it would cost a lot of put in a distillery in a good location.

We can get a loan, but it would seem really sketchy to get a loan to further just the distribution marketing. A tasting room in a good location will definitely make sales, so it doesn't seem like as big of a risk. What are your thoughts?

[Thatch]

I assume you are growing your own raw ingredients.  If so, you have a great story to tell.  I would put your tasting room in a pole barn on your farm.  Before getting into the business I visited many distilleries.  Some were in very hard to get to places on single lane roads yet they had people coming and going the whole two hours that I visited.  The grain to glass idea is very interesting to a lot of folks.  Most of the tours I have been on had a Groupon that alerted me to the distillery.

[Jason Parker]

Hi there,

Here are the two important factors we used to consider where to locate our tasting room were:

1. Location
2. Laws

We've found that our tasting room, located in a heavily populated tourist location, has done wonders for our brand. It's not only a way to get hundreds of people a day (yes, a day) to learn about us, but also a showpiece location to bring bar staff and chain buyers to view our brand and taste our products. To help us prepare for distribution in other states we've tapped into the power of tourists visiting our tasting room. By giving them a great experience, we've turned many of those visitors into our brand ambassadors. We collect their information (on a mailing list sign-up sheet that includes their zip code) to stay in touch and decide where we have the most fans. And perhaps most importantly, our local distributor finds it convenient to bring potential customers by--from bars, restaurants, grocery stores, and liquor stores--to visit and learn about us. I suspect that if your tasting room is way out of town, you won't receive the same experience.

However, we had to invest significantly in locating our tasting room in a central and highly visible location (we have 10 million people per year pass in front of our location), and further invest in making our tasting room a beautiful destination that people want to recommend to their friends.

As John from Headframe stated earlier in this thread, your ability to sell bottles (as well as tee shirts, hats, glasses, chocolates, bitters, shrubs, and what ever else you can) and your ability to sell cocktails should be factored into what you can expect to take in. Done right, in the right location and with the right laws on your side, a tasting room can be your sole form of revenue (though if that successful, there's no reason is should be!)

Hope this helps,

[FireRoot]

Thanks for the input Jason! Our current location is slightly off the beaten path in Montana, so it's not worth doing the tasting room here. We have an orchard on-sight and distill everything from apples, so it works great for that, but we don't get the traffic. That is why we are looking into opening something in our nearest "city". However, the nearest city, "Missoula" only has 70,000 people and three distilleries. We still could get a lot more exposure and I really like some of the points you made like finding brand ambassadors. We found a location that has about 20,000 cars that drive by everyday. How many of those people do you think we could expect would come in to a tasting room?

[Jason Parker]

Hi FireRoot,

That's a pretty difficult question to answer. I'd suggest asking other businesses on that route how many folks they get. The branding, side of the street you're on, curb appeal of the building, and a bunch of magic you can only guess at seem to draw customers in. We pay for rack cards to be at all tourist locations, hold events for the hotel concierges, drop off "welcome" packets for folks moving into new apartments in our area, and put out sandwich boards on lots of street corners nearby.

But, if you could sell cocktails there, it really wouldn't take but a few dozen a day to make a healthy profit, I'd suspect. It just depends on what type of business you want to be in.

 

B

[Debbie@Active]

On 3/8/2019 at 11:49 AM, Julius said:

What would your budget be building a tasting room? Would that money be better spent furthering your on premise campaign? 

Jumping into the conversation a couple months late but I visited one of our clients on Treasure Island in San Francisco last Saturday and was pleasantly surprised. TreeCraft Distillery is very low key understated tasting experience. The island is (under construction) being bolstered as it is land fill that was built for the worlds fair in 1939. Now 1500 residential units and shops are planned, along with a ferry building facing the city with a million dollar view. Until the new fancy location is built TreeCraft has a very rustic setting to tour/taste and then select cocktails from their production line. They have beehives on top of their barn and collect the honey to make mead which is the starter to their vodka. The set up is pallets as tables and break down the set up each evening when they close. The afternoon I visited lots of people came with their dogs and chilled. Nate B. owner of TreeCraft uses Active's POS system to take names, send emails, get repeat business and now can ship within California so he is growing his business from the ground up. When TreeCraft moves into the new digs Nate and his crew will have a list of people to invite to the grand opening, offer special discounts to his club members and local fans and more. The expense of a tasting room is an investment into building your business more quickly with direct to consumer model in tandem with your wholesale model. Take a  look at TreeCraft Distillery https://www.treecraftdistillery.com/ and check out https://activ8commerce.com. 

[Local Goat]

In our case, Absolutely! Our Product is very small batch and craft and hard to mass produce. Selling in a touristy tasting room is very lucrative. No if you can only afford property in the boonies then maybe mass produced product and distribution is better. With a tasting room though comes all the headaches of employees and overhead.

[Patio29Dadio]

In our case we are doing the reverse... planning on all sales through the tasting room and staying away from long-term big distributor relationships until we develop our local and regional brand following.   You need to do a business plan with proforma financials that are projected out and include your assumptions.   The margins on onsite sales are worth exploring as an option, but you will then be looking at a much larger investment than for a farm distilling operation.

I think it is Tree House Brewing that is a mega-successful New England brewery on a farm and has people stacked for miles when they open to buy their beer.  As an alternative to building a new tasting room, consider what it would take and return to make your farm distillery a destination.   Where I live don't consider opening a distillery with a tasting room in any urban area without a $3M nest egg. 

My friend and distilling training class mate at Edwin Coe I think is doing a rural distillery tasting room and seems to be doing well.