According to data from Allied Market Research, the global alcoholic beverage market was valued at USD 1.439 billion in 2017 and is expected to reach USD 1.684 billion by 2025, with a CAGR of 2.0% in 2018 – 2025. The rapid growth of the global alcoholic beverage market comes from the development of the global young population, rising incomes and increasing consumer demand for premium products. Therefore, although there are already many brands of alcoholic beverages in the market with a large customer market share, the number of new businesses has not stopped increasing. In this article, we will provide some tips on how to start an alcoholic beverage company successfully.
Establishing an effective liquor business requires detailed preparation and investment
Alcoholic beverages are fermented from the sugars in fruits, berries, grains, and other ingredients such as vegetable waxes, tubers, honey, and milk. Alcoholic drinks can be distilled to reduce the original liquid to a much higher-alcoholic liquid. Beer is the most popular beverage on the list of drinks in the world, produced from malt. Beers range in alcohol from about 2 percent to about 8 percent. Meanwhile, wine is made by fermenting the juice of grapes or other fruits such as apples (cider), cherries, berries, or plums.
Tips for legal activities
Not only in the beverage sector, but all businesses need a license to operate. Particularly for alcoholic beverage businesses, a license to trade in controlled substances, such as alcohol, is essential and requires firms to comply strictly. Here are some legal issues companies should pay attention to in the new stage of formation and operation in the future.
Avoiding trademark infringement
Trademark infringement usually occurs under two circumstances:
- A business uses the name, logo or domain name of another business without permission.
- A business uses a name, logo, or domain so similar that it is likely to confuse consumers.
The number of beverage businesses on the market is enormous. Therefore, to avoid trademark infringement, your business needs to take a few steps:
- Researching: Before you decide on a name, logo or domain, make sure it’s not trademarked. Each country will have intellectual property authorities and patent offices. You can find information at these agencies. For example, in the US, businesses can search on the information system of the S. Patent and Trademark Office. Note that in addition to the exact names you want to use, you should also check for similar terms.
- Consulting with experts: Before applying for a trademark, you should consider hiring an attorney with trademark or copyright expertise. The cost of preparation will increase, but your company can avoid the risk of legal disputes later. You can also outsource a trusted trademark search company to choose the right brand name.
- Registering your trademark: This is one of the most critical steps before your business goes live. Not only can you avoid infringing other companies’ trademarks, but you can also protect your own business’s intellectual property. If you’ve established a unique and memorable logo, name or domain name, take steps to protect it by registering intellectual property rights.
Registering your business’ own trademark is one of the critical steps in the preparation process for a new alcoholic brand
Grasping local and national regulations
In addition, to avoid legal problems during operations, businesses also need to study state and local regulations on alcoholic beverages.
Around the world, several countries have enacted laws to control alcohol.
In Thailand, for example, businesses cannot directly or indirectly advertise the benefits of alcohol or promote alcohol consumption. In Thailand, alcohol is only sold from 11 a.m. to 2 p.m. and from 5 p.m. to 7 p.m. Outside of the above time, alcohol is only allowed to be sold at international airports and legally registered entertainment venues. Violations will be punished with a prison term of 6 months or 10,000 baht.
Or in Victoria, USA, businesses need to have a full license from the government to trade alcohol. If a minor is caught drinking alcohol in a public place, the authorities will notify the guardian and impose a fine. Previously, about a third of states in the United States imposed a monopoly on alcohol, while the remaining two-thirds established a private licensing system for alcohol sales. In the monopolistic states, the government regulates the sale and purchase of alcoholic beverages, and retailing of spirits through its stores. Most of these states have an “alcohol control” (ABC) office and operate liquor stores called ABC stores.
Ensuring transparent licenses and permits
Registration for an operating license is mandatory for any business, not just in the beverage industry. However, for companies just starting up, this issue should be a priority. The permitting process can take longer than you think. Therefore, many businesses face the situation that they do not have an official operating license when the management agency checks.
In the US, the process of applying for a federal license can take several months. The specific permits required will vary from business to business. However, for an alcoholic beverage producer, the documents and procedures for license registration will be much more complicated when the company needs to present details about the production process, product materials, and other issues related to excise tax.
Applying for a business license is the primary step in getting your business to operate legally.
Understanding franchise laws (in case you want to operate in a new country)
Franchising means allowing an individual or organization (referred to as the franchisor) to trade in goods or services according to the tried and tested business forms and methods of the franchisor in a particular area for a certain period, to receive a fee or a certain percentage of the revenue or profit.
And brand franchising is similar to franchising but explicitly uses the brand/name of a particular product or service to do business for a specific time with a few constraints. The brand franchising business model is increasingly popular and widespread in many fields such as restaurants, cafes, milk tea, fashion, spa, etc.
Franchise laws vary by country and locality, making it difficult for suppliers or manufacturers to terminate relationships with distributors. If your new business is doing business in franchising, you should research and learn thoroughly about the sequence and procedures for franchising. In addition, it is recommended to only work with reputable distributors in the market.
Tips for operations and corporation
You cannot start a successful beverage business without a detailed and sound plan. By acknowledging your business’s strengths and weaknesses, you can build and track how it performs and measure its goals.
Building a detailed business plan
To build a complete and detailed beverage business plan, you need to answer the following specific questions:
Quick Note: 7 easy steps to create a comprehensive beverage company business plan
- Where are you now?
First, you need to understand your business. Let’s determine the available potential of your business, and the advantages, and disadvantages when participating in the beverage market.
- What do you want?
You need to clearly define your business goals in terms of both content and time. For example, your business goal is to achieve $1 million in sales in the first year. Or the goal in the next five years of your business is to become the fruit juice business with the largest market share.
- How can you achieve this goal?
Next, you need to clearly outline the methods required to achieve the business’s goals. Product production, human resources, finance, marketing – communication strategies, etc. will be the tools to help your business achieve the final results.
The more detailed the plans you set out, the more convenient and smooth the future operation of the business will be.
Finding right production and logistics partners
Do not hesitate to contact contract manufacturers. Most beverage companies that are new to the market face specific barriers, especially in the production, distribution and advertising processes. New companies often have limited capital, communication methods are not really effective and are usually limited to small, grassroots campaigns. In addition, the opportunity to access fixed market segments and limited distribution further increase the obstacles.
Deciding to work with a manufacturer is one of the most critical decisions for a new company. This will significantly influence future decisions. With a poor manufacturing partner, your production can be disrupted by poorly maintained equipment or because the partner prioritizes a larger customer. While these issues don’t have a massive impact on a large, established company, they can make it difficult, even terminating a startup.
The strategic location of the manufacturer should be your primary concern. The manufacturer should be close to your target market because shipping costs can increase significantly if the manufacturer locates in your target area. In addition, you should also be interested in manufacturers that offer a wide range of products and services. In the future, as your company grows and expands its product line, your business needs packaging in different sizes and designs. A partner that can provide a wide range of products will help you minimize costs and facilitate future development.
Read more: Co-packer considerations: How to find the right one for your business
Seeking advices from other resources in the industry
Listening to the advice of industry leaders is essential, especially for those just starting to enter the market. Trade shows and exhibitions held at the local or national level are significant events where you can meet and chat with entrepreneurs and big names in the beverage industry. For specific products such as alcoholic beverages, businesses should attend press conferences and seminars on legal issues and state regulations on the alcoholic beverage business.
Conferences and events in the beverage industry can be a place where you can get helpful information and sharings from experts and leading businesses in the industry.
To sum up, the above article has shared some tips to build a successful alcoholic beverage business. Not only newbies but even businesses that already have a foothold in the market also face many barriers in trading this particular beverage product.
To help businesses overcome many difficulties when starting to build their beverage brand, Tan Do Beverage provides services like ODM (Beverage Original Design Manufacturing) and OEM (Original Equipment Manufacturer). With these services, you can get specific and detailed support from brainstorming alcoholic product concepts to manufacturing and launching products into the market.
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Tan Do is a global beverage ODM/OEM manufacturer and supplier located in Vietnam. Since 1996, we have built trust and credibility not only throughout Vietnam but also in many parts of the world. Leveraging state-of-the-art technology, we have crafted thousands of products that align with ISO, HACCP, HALAL, FDA, and many other standards.