Expert: Eric Hofer - 5/1/2010

Question
Hi Eric,

I have eight years experience in the wine business, the first five in retail, the last three in sales with a medium sized fine wine distributor.  My market has two major wine and liquor companies and a plethora of smaller "niche" distributors, my company included.  I have noticed that there is not the same amount of smaller distributors on the beer distribution side.  Currently there are only two major beer distributors in the same market, with many more in metro New York.  My goal is to start a small craft beer distribution company in this market as there isn't as much competition in that category.

I know beer very well and there has been so much consolidation in my market that there is a demand for a smaller, nimbler wholesaler that can give attention to the small, craft brands the big boys do not.  I am located close to both the New York market and the Boston Market.  I have a warehouse space I think I could rent inexpensively and it is close to a major highway.  I understand all of the permits/licenses I will have to get.

My concerns are raising capital, finding brands, and creating/executing a business plan.  There are many brands that are not available in New York that there is a demand for and I believe I could pull some other brands from the larger distributors.  I am in the infancy of this project but I am set on making it a reality.  Do you have any advice?

Answer
Michael,

It's a long road (which I've traveled myself).

Capital is tough.  3rd party needs assurances while  "Friends and Family" has its share of "downsides."  You might be able to raise some credit from manufacturers, but that doesn't pay for space, staff, vehicles or anything else that needs money.

Definitely start small, with the best bets.  You might be able to "pre-sell" some product; and you provide the labor to start out.  You might be able to "piggy back" your operation as part of a larger group who have excess capacity and don't operate in your field.  You might be able to start using your existing "base" and add new lines.

As to finding brands...  That's a challenge.  The big companies tend to buy up the small ones quickly.  Those that continue to operate independently commit much of their volume to known outlets and channels.  Of course, somebody that would push these small brands to local markets would attain "hero" status easily.  I'd invest most of my time here, identifying the brands and where to place them.  If this looks like it's a mistaken idea, you'll know why there's nobody else doing this.  Those that you'll find will undoubtedly have already come across barriers that you should know about.

Once you've got this figured out, the rest of the business plan is a mixture of not forgetting things, modelling the market and costs, and getting the timing right.  Here I can be of more help (contact me on skype eric.hofer); and as to the distribution back office, again, there's a group I work with that offer a low cost, internet based back office system (see www.salesuite.net); it's paid for as a rental and it's designed to keep your distribution optimal as you grow.

Look forward to hearing more,

Eric