Expert: Eric Hofer - 8/20/2010

Question
Eric, i am in the process of developing a ready-to-drink cocktail made with distilled spirits. This is an innovative product and is much different than any others that are currently available. My question to you is, how should i go about locating and acquiring distributors for my product? What is the mark-up from producer to distributor, and then from distributor to retailer? Also, with taxes on distilled spirits being so high, do you even think it is financial feasible to launch a new RTD being a new startup with limited capitol? Thanks so much and look forward to your response!

Answer
There's a huge amount of risk with something like this.  If the idea is great, then the majors will imitate you quickly as it's a simple "line extension" leveraging the name of the trademark(s); if it's a flop, you lose your capital.

Considering your options, it boils down to your "go to market" or "market vector"?  If it for sale in bars, then would you be competing with bartenders?  Is it competing with "chiller" type products like those done by Bacardi?  If the drink is served cold, are you going to assist with equipment?  Or hope to cannibalize somebody else's equipment?  And if you have to go that route and want to be sure you have equipment in place, aside from funding 500 USD fridges, how are you going to place your asset in what is likely to be an already congested outlet?

The alcohol industry is flush with money; newcomers usually don't have the pockets to compete.  Those that do succeed tend to hail from the less serviced, edges of the market and work their way in.  Can you launch your innovation like this?  

If there's a way that you can "protect" your idea, approach a major.  Or, that you consider a specialist avenue, like weddings/catering who could benefit from a novel product.