microshiner

If you've read my other post on value propositions then you'll know that I don't believe micro-distilleries can compete with commodity products, nor should. My opinion is that over time automation will reduce the marginal cost of producing beverage alcohol at scale to such a point that it will be impossible for micro-distillers to be competitive on price, which is the only concern for the cohort of drinkers who account for the vast majority of sales by volume. Craft and commodity are diverging at a rapid rate, and there will be very little middle ground. But what I am more getting at is, whether they intend it or not, craft distillers are a part of a global movement toward decentralization. It is a massive redistribution of capital and production capacity, and it has only just begun. That is what is driving this thing, and those who have gotten into this thinking they are going to build a brand, scale, and exit are in for a surprise. It will work for a little while, but not for long. As commodity brands continue to lose customers even as they acquire the biggest, most successful 'craft emeritus' (as ADI calls them) brands, they will quickly wise up. The future of the beverage conglomerates in the craft market lies in what Jeremy Rifkin calls 'performance contracts' not in the acquisition and ownership of actual operating distilleries. So plan accordingly. Remain a rebel. Set a ceiling. Stay the course. Your business and your community will be better for it.

The thing about craft isn’t the craft. Everyone practices craft, whether you’re a grandmother making quilts for the church bazaar or you’re a sewing blankets in a factory in Vietnam. No, the thing about this phenomena we call ‘craft’ is that it’s an entirely new way of doing business. It’s a melding of the best practices of the Old World with the technological advancements of the New. There is a reason I chose the name MicroShiner. It was because, like the moonshiners, whose moniker is believed to have been derived from the early English term "moonrakers" and resulted from the clandestine nature of illegal Appalachian spirit makers, this new breed of distillers were fucking rebels. This was the new Whiskey Insurrection, except that, instead of simply resisting a tax, these cats were wresting an entire industry back from those who had stolen it. They weren’t going to be satisfied hiding up some holler, or in their basement, sneaking out to sell a jug here and there or giving it away to their friends as Christmas gifts. No. They were about changing the paradigm. Regardless of the prefix - whether “moon” or “micro” - they were definitely shiners, and I thought they were badass. But now it seems, sort of like its contemporary, the blockchain, that has, remarkably, grown up alongside it, this rebellion has been appropriated. Like the original Whiskey Rebellion, the real basis for this one has been re-authored, twisted to some other intent, and threatens to be given over entirely by the very same people who initiated it. What I’m talking about is acquisition and the reconsolidation - worse yet, recentralization - of the production capacity that was distributed across the landscape by the craft movement. It’s a travesty, and I don’t care whether you’re a consumer, producer, distributor, or investor, you should have no part in it. Here’s the thing folks. If it can be centralized, it can be automated, and should. Don’t get me wrong, I have nothing against passable drink at near zero marginal cost. But it has nothing to do with craft. Craft production provides intangibles that almost cannot be quantified and certainly cannot be understated. Read Small is Beautiful by E.F. Schumacher and you’ll understand what I mean. And go ahead, send me your Hayek and Ayn Rand. But I’ve already read them too. They both agree. I understand that you don’t care about economics. You just want to make, or enjoy, a good drink. Maybe you want to escape from the 9 to 5 and do something with your hands. Leave me out of this, you might say. No problem, you and I are on the same page already. Perhaps you’re an investor, who got into this to get some ROI on your money. Really? That’s pretty last century, but okay. I hope you also bought some Bitcoin and shares of MGP. You might want to exit those now, too. See the thing is, an independently owned distillery, appropriately scaled to meet the needs of a specific population, is not the same thing as a brand. And the demand for the thing I just described will always be there. The other thing, its a fancy label on some commodity whiskey. But you knew that. It’s why you got into craft in the first place. The genie is out of the bottle people. Leave the past where it belongs. We are never going back.

We are super excited to announce the launch of our latest channel for content marketing, the audio podcast version of our 360 video YouTube webcast - Life, Distilled. Podcasts are huge right now, and there are few better places for connecting with millennial audiences. With the Life, Distilled podcast we have created a platform for introducing this important population to craft spirits and the small batch lifestyle, tapping into their desire to find and connect with brands that share their values. Please give it a listen, share it on social media, and let us know what you think. On iTunes: https://itunes.apple.com/us/podcast/life-distilled/id1312985660 On Stitcher: https://www.stitcher.com/podcast/microshiner/life-distilled/e/52215718?autoplay=true If you're interested in seeing (and hearing) your business and products discussed and promoted on the show, drop us a line at growth@microshiner.com Cheers, and thanks for listening!

Just so you know, I started a new thread for this discussion.

@Southernhighlander - absolutely. In select markets - or as you said, at the micro level - this is very feasible, and I wholly support and encourage this model. My statement was, again as you graciously point out, directed at the macro. However, any craft distillery regardless of business model, unless it is to scale and exit, will benefit from communicating to the craft consumer that they are craft.

There seems to be a lot of opinion around this, so we thought we would open ourselves to your abuse. Perhaps this way our other posts can be consider on their own merit. Fire away.

@Glenlyon - this comment speaks to the conversation at hand We feel it is important to approach this from the consumer's perspective. If I am a 'craft' consumer, if I subscribe to a 'craft' lifestyle, define and consider myself in that light, and I am at the liquor store, what am I looking for? The purpose of our post here is to try to point out that your customer base already exists. They just don't know that you do, and they most certainly don't know that you are the 'craft' option they are in search of. We are very confident that a craft cohort exists. Beyond our own research, we don't have to look beyond the specialty coffee and craft beer examples to substantiate this. It seems, however, that there is a misconception that these are separate cohorts, delineated by category. They are not. They are the same. The people who drink specialty coffee are the same people who drink craft beer. And they are the same people, predominately, that are, or want to be, the craft spirit customer base. The trouble is, you are not as accessible as beer or coffee, and therefore you must market. Craft beer and coffee's market inroads were built off grassroots, cash flow models - they became sustainable, even profitable, selling out the front door, then moved into distribution. Spirits are not consumed, let alone financed, in the same way, so we must utilize different methods in their marketing. But the facts remain: the craft consumer exists, is ~25% of the total market, and has not been educated adequately enough (i.e. marketed to) to know what his or her spirit option is.

Just so the point of this thread isn't lost - craft doesn't serve 20% of the US population, it serves 3.8%. How best to capture the other 16.2% (we believe it is 21.2%) that are potential craft customers is what we are discussing. Our position is that content marketing that communicates the value proposition of craft over that of conglomerate is the most effective and efficient method to do that. We provide a platform for content marketing. If you don't ascribe to the values of our platform, we recommend that you align yourself with one that aligns with your values and the value proposition of your brand. CRAFT by Under My Host and The Alchemist (if you are in BC) are two great options.

Yeah @Silk City Distillers, @Glenlyon and I sort of hijacked the thread. Apologies for that. To your point, we are talking about the same thing. Beyond the price point of inflection, it all depends on your value proposition, those values you evoke in the mind of the consumer, which is subjective. As you state, whether your locality has any bearing on your price point is strictly a matter of economics. We could do the math, but essentially it correlates to the cost of oil and how far you are from source and market, and there is a hard point in that equation at which sourcing from and serving the local market yields diminishing returns. This is again where that subjective value proposition enters in. I love what you are saying about experience, and about offering a physical experience and sense of community. Your conversation around this speaks to my other favorite talking point in craft, which is the matter of appropriate scale. What I am really working to say is, micro producers can compete with commodity products on the shelf and particular on premise, at least in that 25% cohort who cares about something other than price, if the consumer knows the keyword and your product contains it. But you have to actively promote the lifestyle and culture that is associated with this keyword, own it and make it known. I hear what you're saying about Mila Kunis, but I disagree on two points. One, I don't believe the people influenced by the Wild Turkey/Matthew McConaughey ad are in the 25% that is in your customer base. Two, the craft producers have a lot more money, collectively, to spend on effectively marketing an authentic craft meme then they think they do. And my argument is that doing this - marketing the craft lifestyle and your association with it - will make any and all of you realize a lot more growth then marketing your individual brands in a sea of cheaper and more readily recognizable options ever will.

@Glenlyon - thank you very much for your kind words! We really enjoyed making it, and we aim to again. To be honest, it wasn't really the printing so much as it was the lack of advertisers. Our model was designed such that subscriptions covered print costs and provided for profit, but production had to be supported by ads and sponsored content. We found selling subscriptions to be relatively easy - it was getting micro-producers to support the platform that proved exceedingly difficult. At MicroShiner, we have made a commitment to only promote small, independent businesses. To us, it undermines what we are trying to do in creating a content marketing platform for the craft movement to promote anything but craft products. Which means we depend upon other businesses in the craft ecosystem to help us grow. It goes to our point about the craft value proposition that we posted above. From a marketing perspective, craft spirits are better served to consider themselves in the craft horizontal than the spirits vertical. Making craft approachable - nicely styled, with a gentle insight - is what MicroShiner is here to do.

@Glenlyon - we had to take a step back from making the magazine and put it on the back burner to simmer but - yes, that MicroShiner.

The alcohol beverage market is a closed system. In the US what this means is that that ~136.8 million people account for the ~211.6 billion dollars in alcoholic beverage sales each year. It is important to note that this number of drinkers has remained essentially unchanged for over 40 years, despite an onslaught of alcohol advertising. What that means if you are an alcohol beverage producer is this - you are stealing your customers from somewhere. The question is where. Now here, there are a number of options. If you are producer in a certain category, perhaps you are winning over some drinkers from another category - say beer to wine, or vodka to gin. But the switch we are most interested in is this one - commodity to craft. Surprising as this may seem to some, the person who determines what somebody is going to buy isn’t the guy who made it, or some marketing exec, or social media influencer, brand ambassador, bartender or distributor. The person who determines what alcoholic beverage they are going to ask for is, guess what, the consumer. So, in a closed system where success is measured by winning a consumer from someone else’s product over to your own, it comes down to one thing. The value proposition. One such value proposition is simple and straightforward - price. The top 10% of drinkers, or 14 million people, account for almost 75% of all alcohol consumption. They only care about one thing, and that is cost. If you are a craft producer, forget these people. They are not your customers. That leaves you 25% of the drinkers to fight over. Right now, craft spirits account for 3.8% of market. That means there are 21.2% more commodity drinkers available for you to win over to craft. In that conversation, what is your value proposition? If it’s that you make great spirits, then you are missing the point. All your competitors make great spirits, even the commodity ones. Especially the commodity ones. They make better spirits and a larger variety of expressions too. You can’t win anyone over with that value proposition, because they can make them cheaper too. Your value proposition is that you are craft. And micro. And local. These are all qualifiers that set you apart. They are conditional terms a consumer can use when asking for a product, and they simply cannot be met by a commodity brand. If we can get 1% more people asking for craft at the bar, restaurant, and liquor store, that is 1% more sales for every craft producer in the market. How do we do that? Through content marketing that communicates the value proposition of craft.