Introduction

[Slickvegas]

Hi. My name is Alan Hughes of Red Shoes Distillery. I am currently working on establishing an artisan distillery here in hot, sunny Las Vegas, Nevada. Business plan is complete, the branding is almost complete and I'm currently on the hunt for a location followed by finalization of any required funding and a distribution partner. I am concentrating on vodka, vodka and vodka (OK maybe gin and whiskey a bit later). It's been a challenge in Vegas since there is no current business category for a distillery in Nevada but I've now found it's possible to open a distillery even through I get classified as heavy industrial, meaning there are limits on what I can and can't do until laws get changed in 2011. I see two major challenges to making this work: a) a decent distribution partner who's not out to rape and pillage me, and how to do this on a shoestring budget of costs to offset the horrendous taxes that have to be paid at the fed and state level (which under my business plan seem to be costing me around 27% of my manufacturing price). There sure isn't a level playing field to the craft breweries in trying to operate a small scale operation. I've been reading your blogs with interest but so far there seems to be a lack of lobbying to create a more conducive climate for artisan distillers however I will keep reading.

So challenges exist in every facet of life but I need to mitigate as much risk as possible so that you don't see me posting in about a year that I have equipment to sell.

Keep up the posts. I find them helpful, enlightening, depressing, humorous and ...well you get the picture.

Cheers

Alan

[Scott @ Twenty2Vodka]

Hey Alan,

Welcome to the world of legal distilling. There's lots of work ahead, but it will be rewarding. 2 things jumped out at me from your intro, that i wanted to share my experiences with.

1.) I think your tax allocation is too low. I'd be happy to only let go of only 27% to the fed and state. Have you accounted for all types of taxes? Excise is just 1 of many. I just made my federal and state payroll tax deposits today and i'm still wrenched over from the complimentary sock in the gut it likes to deliver.... remember too that you are not just expected to pay, but to track and report how much you owe too, something that could consume a ton of time too.

2.) Don't expect to find a distribution "partner" until you have product that's already in the hands of people who are looking to reorder it. Typical distirbuters/brokers are too busy being pampered by the big players to take a risk on a vodka that hasn't been created yet. Expect to be out in the field, shaking the hands, and taking the initial orders for at least 6 months before any distributor will agree to even discuss taking you onboard. And their fee will be steep, but the accounts and doors they get you into will more than pay for their cut.

best of luck

-Scott

[fotoski]

Dear Alan,

Congratulations and good luck. As far as distributors are concerned, they are what they are, but they don't take the money out of your pocket. They buy the product from you. You determine your price at which they buy the spirits. They do the numbers to see what price they will have to sell it for and what retailers will then turn around to sell it for. Then the distributors make a simple decision: if they are better off paying for their Jaguars by selling your spirits or or a Pernod Ricard product. Your main problem in LV will be that the big casinos are bought and paid for by the large corporate producers who are fighting to keep each other out of the establishments they control. I would not want to standing so close when elephants fight.

Brokers are another story, because you are paying money for them. But hopefully you have a deal that means if they are making money, you are making more. It hurts to write the check, but it hurts more to not make the sales.

I just thought I would toss out a crazy cost-saving production/marketing idea: I have seen pictures of solar powered stills which are a series of mirrors around a glass pot. You are in one of the few cities where charging one of these things could be practical. It probably couldn't handle more than 5% of the production of a profitable distillery, but it provides a great story to tell retailers and a good excuse for people to tour your distillery and buy t-shirts, which aren't taxed as heavily as spirits, and to create a unique top-shelf product.

Cheers,

Drew