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tzimis

Subbing out production

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Im thinking of starting out with a very small distillery due to the failure rates I've seen. If my recipe works out and the product takes off. Could I theoretically sub out the production without risking that the recipe falls into the wrong hands?

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seen quite a few folks fail as they started small and were unable to grow quickly enough to keep up with growing demand. 

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to answer the question through. yes you could start small but, if you cant built a business plan that accounts for enough capital outlay to produce enough product to be profitable, then you may not have a very good plan.

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It would really be up to the distillery that would be doing all your work. I say go for it. I started out super small.

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Why not just skip the small distillery setup phase and immediately move into sub-contracted production?  This way, you focus on selling and building brand, and not plumbing and building code.  If the brand takes off, and you can produce cheaper than your sub-contractor, then build a distillery to suit the demand.  To me, this feels like a good way to both mitigate risk, as well as to conserve and invest capital where it will make the most difference (sales and advertising, not stills and construction).

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I have to agree with Silk City.  Unless you want to sell out of your DSP and do tourism, I wouldn't bother starting with the production facility.  There are so many DSP in the US right now that I am sure you can find one that will make the product you want, or even let you do it on their equipment, that I don't think it is worth the investment and starting small.  

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tzimis,  A lot of my customers started out small and have done really well, but they either kept their day job or had other sources of income.  1 distillery purchased a 50 gallon still then 2 years later purchased a 150 and then last your they purchased a 500 gallon Pro Series and a low pressure steam boiler.  I have had several other customers do basically the same thing.  Most of them started out with 45 or 50 gallon stills.  Some of my customers who did this own winery's or breweries.  If you need someone to custom distill for you call Rusty at Davis Valley Winery and Distillery.  His info is below.  He mainly does custom distilling for other distilleries and he does really well at that.  Also keep in mind that if you are not going to keep your day job or if you don't have another source of income, you should start with at least a 300 gallon still.  If you have another source of income and want to grow into the business, you can start with whatever size you like.  With the changes in the TTB rules, we are going to see a lot more nano distilleries starting out with 20 gallon 45 gallon 100 gallon and 150 gallon stills and I think that is a good thing.  We have jacketed stills from 6 gallon to 2500 gallon and we are glad to help you get started.  paul@distillery-equipment.com 417-778-6100

http://distillery-equipment.com

 

Rusty Cox

1167 Davis Valley Road

Rural Retreat VA 24368

Cell: 757-593-1055

Email: davisvalleywinery@hotmail.com

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You never mentioned where your located. It would probably be helpful to contract semi locally at least.  Make it easier to oversee production and quality. 

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One other way to start small but plan for growth is doing the production yourself, find a botteling plant and get pricing from them (but don't use 'em yet!), and buy the bare minimum botteling equipment. This way you can start cheaply, if business picks up speed you distill many times a week and outsource the botteling while waiting for your bigger still to arrive...

This is exactly what I'm doing, space is limited but once I grow I move out the empty and filled bottles and boxes and will have no problem installing a 500 gallon or bigger still which makes one hell of a lot of gin per day... If I outgrow that there's enough money to buy a bigger building without getting a mortgage :lol:

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16 hours ago, tzimis said:

Could I theoretically sub out the production without risking that the recipe falls into the wrong hands?

To that question, the answer is no. Nefarious people are going to do nefarious things. There will always be risk. Whether it's someone stealing a recipe or someone imitating it there will always be a risk that someone has something almost exactly like yours. You can though check out the background of the company/people and contact any customers they have. 

And honestly the harder part of the business is not the product, it's marketing and getting people to buy your product. There's plenty of rebubblers that don't care about the product and only care about selling. Just because a couple of your buddies like what you make doesn't mean you'll be a success and just because they hate it doesn't mean you'll fail either. 

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Wow! Some great responses so far. Thank you.

Someone asked. I'm located in a suburb of NYC. This will be a second business for me. My current business allows for some free time.

  I do like the idea of subletting the production.  I've used 5 and 10 year non-competition contracts before in the passed. Are producer's in the distillation business using similar contracts?

O' can one even become a distillery without a still?

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Rusty is a great guy and very trustworthy and honest.  Custom distilling is what he mainly does.  I sold him a full set of 300 gallon equipment 7 years ago then around 4 years ago I sold him a full set of 800 gallon equipment.  Rusty has distilled for some of the reality TV shows and he would never give out or steal a recipe.  I stake my reputation on the fact that Rusty will treat you right and honor any agreement that you make with him.  Give him a call and go down and visit his distillery.  He and I also offer a 1 on 1 distillery workshop for $300.00 per day.  If you take the work shop and then buy at least $10,000.00 of equipment from me then I will reimburse you for the workshop. 

Also I offer a 1 on 1 workshop at a distillery in NJ which is much closer to you.  This distiller runs one of my 100 gallon pro series stills and his spirits have won a lot of awards, however I'm not sure if he would be interested in Custom distilling.  Chris's contact info is below.  

EMAIL

lastshotdistillery@gmail.com

PHONE

(315) 554-8241

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2 hours ago, Southernhighlander said:

Rusty is a great guy and very trustworthy and honest.  Custom distilling is what he mainly does.  I sold him a full set of 300 gallon equipment 7 years ago then around 4 years ago I sold him a full set of 800 gallon equipment.  Rusty has distilled for some of the reality TV shows and he would never give out or steal a recipe.  I stake my reputation on the fact that Rusty will treat you right and honor any agreement that you make with him.  Give him a call and go down and visit his distillery.  He and I also offer a 1 on 1 distillery workshop for $300.00 per day.  If you take the work shop and then buy at least $10,000.00 of equipment from me then I will reimburse you for the workshop. 

Also I offer a 1 on 1 workshop at a distillery in NJ which is much closer to you.  This distiller runs one of my 100 gallon pro series stills and his spirits have won a lot of awards, however I'm not sure if he would be interested in Custom distilling.  Chris's contact info is below.  

EMAIL

lastshotdistillery@gmail.com

PHONE

(315) 554-8241

I appreciate the resource and the info you provided. Im not sure which way I want to go. But, I've been eyeing your equipment 😉

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I agree with a number of the replies as it relates to the risk factors in starting out. After years in the business and consulting involvement with a several distilleries as well as ownership, I have to to believe that most people are safer beginning with an independent bottling--that is having your brand built and onto market without the risk of building your own distillery. If you can make a go of the sales part then use the brand you've got out there to help fund and support a distillery build. Companies like mine ,Well Aged Whiskey Company (.com) allow you to contract your bottling/aging/procurement etc and help you start up the business without the excessive cash outlay. This is an option I think all newbies should explore in order to protect their financial futures. You can be as active or passive in this part of the process as you like while getting your sales/distribution up where it needs to be to survive and succeed. Please give me a call or take a look at the details on our website. 610.326.8151 

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Give Dustin a call at Citrus Distillers.  Contract bottling/distilling is his main forte.  He can do pretty much anything and has some great connections.  And his phone number is pretty awesome as well!

Dustin Skartved

www.citrusdistillers.com

1-855-POT-MASH

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tzimis, we are also in the process of opening a DSP. Our plan is somewhat of a hybrid of the two. We are starting out with a small still in our facility. The still will be used as a testing still and as the centerpiece of our distillery. We have also entered into an agreement with another local distillery to use their 1,000 gallon still for production. We will distill 100% of our product ourselves, but have the help and experience of the established distillery. Our thought is by this method we will be able to spend the majority of our budget on marketing and sales and hopefully create the distribution prior to the massive spend for equipment. 

I am happy to discuss offline and share ideas with each other since we geographically are so far apart if you are concerned about how we found the distillery we trust to run our recipes. I am located St. Louis and have found an incredible source "partner" in Stumpy's Spirits on this forum as our co-packer. The biggest plus for us is we have met many times face to face since we are both local. I highly suggest keeping it as local as you can while you start out. 

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On 1/23/2018 at 10:10 AM, Southernhighlander said:

 With the changes in the TTB rules, we are going to see a lot more nano distilleries starting out with 20 gallon 45 gallon 100 gallon and 150 gallon stills and I think that is a good thing. 

curious which rules changes you are referring to?

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We started in the business by focusing on our product quality and brand building, using other companies’ excess capacity, and getting called all sorts of names by the “real distillers” some of whom are still in business. 

We are proud to work with new brands, and we don’t believe that craft is a zero sum game.  I still believe that we started the right way by using other people’s investments to get on the shelf with our brands. 

Below is one of my posts from another topic, but I think it sums up our view of your questions. 

Begin quote———

If you’re on the forums looking for equipment for your new DSP, the reality is that you are probably about 1 year away from actually making any spirits.  To go on the market with an aged product, you are still two to four years away even if everything works perfectly the day you open (it always does right?).

Now, you could try to purchase some “quick aged” or commodity bourbon and pass it off as your own “blend” for a few years, but consumers are getting more savvy about this practice every day. Also, the quick aged really hasn’t gone beyond the “pencil shaving” stage  

What if you could make your own spirits in our facility under a production contract, gain valuable production experience, and put the product into your own custom cooperage with your logo on it?

When you open your DSP, your barrels get transferred into your bond and you’ll have saved one to three years of delay in getting your business off the ground.  You can even test mashbills and cuts to eliminate lost batches when you move into your new facility.

Send me a message and I’ll help you explore the only real way to start your craft brand and retain the authenticity consumers demand for top shelf spirits. 

DB9EA098-CD28-45F9-9DF4-49800B89866A.jpeg

 

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On 2/2/2018 at 11:33 AM, Still_Holler said:

curious which rules changes you are referring to?

The lowering of the excise tax for one which I imagine lowers the bond for nano distilleries, also the aging period exemption should help.   One things for certain, my orders for smaller equipment have increased dramatically since the tax bill passed.  Actually my orders for big stills have increased as well but not as much as the 20 gallon to 150 gallon equipment.

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The only viable start really small option I saw was the one I am pursuing.   Like you I am close to NYC (relatively), so I focus my efforts on farmers markets sales.

It opens the p and l to success on the small scale, and allows a chance to build capital to grow as funds allow.   if operations are covered via retail sales, any small distribution you get is all money in hand.

 

of course to do that you really do have to be small.   I have a 100 gallon still in a 450 square foot building.   I have a self built mash ton and chiller.  I can only ferment three batches a week, one spirit run. I cook corn in the still    I put in about 50 hrs a week to make that work.  Its tight,  and its a pain.   And there are all kinds of inefficiencies in time due to my low investment.   But my rent I super super low, and I am well under 100k invested start to now.   Not bad since I sold my first cases last weekend.  

I wouldn't start a different way given my unique  situation, but starting small leads to all kinds of headaches and time sinks.  so, you really really gotta love making it, and then you also need to love trucking your butt to the city every week and giving the elevator speech hundreds of times a day with the same enthusiasm to people who may or may not dig what you are doing.  it also helps if your spouse is awesome, cause you are gonna need some help with logistics and paperwork at a minimum, and you cant afford to pay anyone.

also note that my farmers market requires me not only to distill it myself, I also have to be the one that mills it, AND grows it just to be eligible to sell it there.  so yeah, its a lot.

 

 

 

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