May 8, 2019
Your Innovation Podcast. This is the 29th episode of the Driving Eureka! Podcast. This is a 3-part series in the first episode Doug and I will discuss the importance of mission and vision, setting boundaries and other relevant topics (Blue Card).
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We discuss the Blue Card information in this episode. To get the Blue Card and information in how to fill out the Blue Card. Click here.
The Driving Eureka! Podcast - Find Filter and Fast Track Big Ideas to Innovate!
Episode 29 -31: How to Get Into the Whisk(e)y Business
Two Types in Whisk(e)y Business: Marketing vs. Extreme Craft
Where Do We Start?
Mission Vision Aim
By What Method?
Actions to for Creating the Blue Card
Tripp's Why Do I Want to Do This
Options to Begin for Spirits Business
Options to Start
Find Your Own Path
Understand Your Laws
Tripp: [00:00:01] Welcome to the Driving Eureka! podcast. We share ideas and advice for helping you find filter and. fast track. big ideas.
Tripp: [00:00:14] Hi I'm Tripp Babbitt advisor to global organizations on the Deming philosophy and host of the Deming Institute podcast and I'm Doug Hall inventor speaker teacher and whisk(e)y maker.
Doug: [00:00:27] I'm also the founder of the Eureka ranch and author of the Driving Eureka! book.
Tripp: [00:00:33] This is Episode 29 of the Driving Eureka! podcast and we're going to do a couple of special episodes where we're going to basically apply some of the things that we've been talking about the last 28 episodes of Doug has been talking about his distillery and I don't have millions of dollars to spend in order to build my own whisk(e)y company but I think some of the things he's been talking about makes sense to me that it's kind of financially makes it more financially capable for someone like me to get into this business and I want to learn. How do you do it. And so the next three episodes we're gonna kind of walk through how to do it. And from my standpoint I'd love to do it. It's something that I've been talking to my family about so it's personally I've been talking to friends of mine about investing in it as well as family and investing in it and I at least my belief is is that the system that Doug is set up here is something that makes it. Available to people who don't have the millions of dollars to start their own whisk(e)y business.
Tripp: [00:01:46] So with that Doug you know as we talk we've talked on and off on the phone. We've texted each other of text the drinks I make on Friday night. Those types of things I don't have. I mean I've gone through the innovation engineering system but I haven't got applied it to building a product for myself. So I think this is a great opportunity to make this real. And as I started into it I started to realize I got lots of questions and so I wrote up a few questions. But you know I think the basic question is how do we go from zero to selling something.
Doug: [00:02:26] Well yeah I mean yeah and it's a common and it's a great question and I was I was excited to see your text message because it was like yes yes we might add to the craft movement because I will tell you it is a I just had my board meeting yesterday.
Doug: [00:02:46] I have quarterly board meetings because I brought in investors and I'll just tell you in advance it's a stupid amount of work but you have to do and it's mind numbing the paperwork you have to do with the government it is just mind numbing.
Doug: [00:03:04] But at the same time you know I then sat the investors down and I said Here you want to see our new luxury product.
Doug: [00:03:10] And you know that we've been crafting. And the lead investor took a sip and his eyes got big and he's guy. Oh my he's Oh my. That is amazing. And you know what Tripp all of the other stuff done matter don't matter. It's so cool to make your own thing you know and and it's really cool when you can make great products.
Doug: [00:03:38] Okay. And we're going to have as we talk over the next couple episodes we're gonna keep talking about that because the thing that really drives my energy and real craft companies.
Doug: [00:03:49] Okay so you got people out there that are kind of marketing driven craft people. They're into just the branding and the bling and and the flip it and and it's it's a business. It just happens to be whisk(e)y or broadcast Jane or whatever it is. But it's just a business. And then you got people that are craft who who really love the product. Okay. And that are into it. Now some of those are too extreme. Okay. They're what we call Copperheads. You know they like to play with their copper stills and screw with it. And and and there's no commercial sense what we're going to talk about for the next two weeks is how to be craft yet commercial.
Doug: [00:04:29] In other words which is sustainable.
Tripp: [00:04:32] OK.
Doug: [00:04:32] You know because those craft those real comprehends the true craft guys a bunch of them are starting to go out of business too. Recently I just got calls on people selling off their stuff. They're done they've gone bankrupt. And so we don't want to be 100 percent Kraft and we don't want to be 100 percent commercial.
Doug: [00:04:49] We want to be a healthy blend with the DNA of it is craft. And so you have pride you know real pride in your work of what you're doing and the products that you're offering and you're bringing joy to customers.
Doug: [00:05:04] But at the same time we're confronting the realities and the thing. I mean you can at least make a living on the thing. It's sustainable. You're not worrying about how are you gonna pay the bills.
Tripp: [00:05:14] Got it.
Doug: [00:05:16] So that's that's what this conversation is gonna be out which which by the way contradicts. There are courses online there are places you can take and some of them they tend to be one of or are those extremes. They tend to be into the way deep down into the craft and the grains and the mash bills and that or they're way off into the branding stuff.
Doug: [00:05:38] I'm going to try to walk you down through the middle which is where I find success but the energy for this comes from a product that comes from the product and and then it comes and then it comes into the branding and the packaging and in the service as to how you how you do it.
Doug: [00:05:56] And that's basically the DNA of how we're going to do it which to me makes for a successful thing. So it is a it is an adventure. It's the dream of every baby boomer. Okay. And millennial and and Gen Xers is. We just did a study. Eighty five percent of young people said they would love to have a business of their own. And if I asked Would you like it to be a brewery and distillery.
Tripp: [00:06:20] Yeah. It goes off the scale right. Well that makes perfect sense.
Tripp: [00:06:27] And you know I think one other thing that we probably want to tell our audience to as we go through this these these principles apply universally even though this may be more looking at just the you know making a Spirits Distillery we're walking them through in essence the innovation engineering system.
Doug: [00:06:47] That's right. And it's how start a business that's how I start every business that I do. It's the principles are exactly the same. The steps are exactly the same.
[00:06:56] The details are a little different but it's a good lesson and in some ways it's good. Even if you're not doing a distillery. This is almost even more valuable because then you're you know you're you're not caught up in your own head. Oh but my thing can't be this thing or that thing that you're just listening to the story and you get the beautiful thing it's a podcasting listen to it again and again.
Tripp: [00:07:19] There you go.
Doug: [00:07:19] Yes. If you can't sleep.
Tripp: [00:07:21] And we'll probably do a content upgrade so people will get off give them kind of the steps to go through something they can download too. Sure sure. OK. All right. So where do we begin.
Doug: [00:07:33] Well the starting place of all of these things is you got to set in and you can use a lot of different words for this. You've got to set your vision your mission your purpose your aim. I mean you know in the corporate world they've got all these triangular values and all of this junk what we call it is.
Doug: [00:07:57] We call it the Blue Card is what we call it an innovation engineering and it's in it's it's just a piece of paper that's blue that that has that sets out the mission the boundaries and and the why we're gonna do this thing because if you don't have grounding in. Why. You're about to embark on this. Then you can get confused. And so we're gonna setup the narrative as to why this is something you do. What we're trying to do there we're gonna set the boundaries both strategically we we want to do this we don't want to be these kind of things because we got to decide what we don't want to be and then we're also going to define that the tactical boundaries. OK you know you can make a decision you can do what we're about to talk about spending fifty million three to five million or a half made. OK. That's a choice that that's a choice you've got to make. And depending upon which you pick you're gonna be in one one level or the next.
Doug: [00:09:00] And so you know real boundaries on that are really helpful. And then we're going to set some areas that we're gonna go do some exploration which will be that the rest of the stuff that will start with. OK.
Tripp: [00:09:12] All right. And just out of curiosity Doug as you've done these over the years I don't think many people actually start with the things that you talk about. They're usually either have you know just go and build a product or they are talking about you know vision those types of things. What are they missing. Why why would they start. Why would you start with let's say the Blue Card and the you know the narrative and kind of the strategic mission and the boundaries and things like that as opposed to just going and doing something.
Doug: [00:09:43] Yeah well you're right. What they'll start with is the it of but not the why they're doing me it. OK. And so the result is they then fall in love with it. And when it doesn't work they're stuck with it.
[00:09:57] So instead what I want you to start with is the why you're doing it what's your purpose why are we doing these things and what's our in bounds and what's out of bounds. OK I want you to start with those things and then start to work on the ETS and those it's you can then do 20 or 30 and you can change the idea the ideas change. I mean in my board meeting one of the board members said so I get it. You know he said so we've changed where we're going. Based on what we've learned and and we're a different company than what we are. Because we're pivoting now it's it's not a big pivot but there's a pivot that's happening. And I said you're absolutely right he says. But the mission is the same. I say yes the missions exactly the same. He says I get it. He says this is awesome you know because we can keep changing the products the products will change. They're consumers changing there's different things that are happening out there. But the mission should stay because that's the thing that is your source of energy. That's what gets you up in the morning because you say this is gonna be cool to go do this.
Tripp: [00:10:59] Yeah. You know. As you say that gave back to mind that as you're filling out the blue card that it's not as inflexible as an it is. So that you can update it and change it over time.
Tripp: [00:11:15] Right. I mean it's right. As you learn your blue card may change that to some degree because you've learned. Oh well that that really doesn't work and so you continue down there as opposed to if you build a product as you said you're kind of stuck with it.
Doug: [00:11:30] That's right. That's right. It's going to. Yeah. The Blue Card will still change. It will adapt but it's gonna give you a foundation that when you're pounding your head against the wall you're okay. Why am I doing this. Okay I get it. Yeah. Let's go back to this. I wanted freedom. I want freedom from the corporate rat race. I wanted to create something for my family. You know I I wanted to make a difference in this part of the community. There's a there's an area of town that's you know a distillery helps revive a community space. Yeah. And I mean breweries and distilleries are what coffee house is worse. Sometime ago you know they've start to form a place. I mean in the early clearly they those taverns were the places and and so your purpose for doing this is something that you have to think about but it has to be authentic but it can't be is. I want to do this to make a billion dollars. If you if your purpose is to make a billion dollars you will fail. It's just the way it is. If your purpose is to make a difference in the world whether in a community where it's hyper local or in a space or with the type of product or in our case it the technology then then you could end up making a lot of money. But it's the mission of the business that results in money not money being the purpose of the business if that makes any sense. It is. I'm not against making a lot of money. That's right. Right. Great idea. But it's the outcome. Money is the outcome. It can't be the purpose of you. And so the trouble with corporations about this is our goal is to make an ROI of 700 and a billion percent with 18 trillion dollars in profits. That is our strategic goal. I go That's not a goal that's an outcome. By what method are we going to do this. And that's what we're talking about here.
Tripp: [00:13:29] Ok. And so I think you've stated this before in some of the previous podcast episodes where you've talked about you know you've got to be passionate about what you're doing or the sustainability isn't there.
Doug: [00:13:44] Intrinsic motivation intrinsic motivation intrinsic motivation has to come from within. Ok. It has to come from within.
Tripp: [00:13:50] All right. So help me through this. What. Where am I starting.
Doug: [00:13:54] Well the first thing you got to start with is you've got to start about. And and this is going to mess up some people's heads. OK. So so just bear with me here for a second. When it comes to setting this mission and boundaries of what we're going to do. It's an iterative process so you may turn around and so you're going to.
Doug: [00:14:19] It's like playing whack a mole. Remember that carnival game Whack a Mole logo. And then you're gonna start one you're gonna start on the boundary. Then you got to set that boundary and you got to go away to meet with that boundary. I can't do that mission. Okay. Okay. Yeah. Okay so but with that boundary that mission is gonna be lame I don't care anymore. Okay so I'm gonna do it again.
Doug: [00:14:37] Okay so it's a it's a juggling of these things. The first thing I would do is I would take a piece of paper and write. Why do I want to do this. And fill up two pages just keep writing. Why do I want to do this. Why do I want to have a distillery. What is it that I'm looking to have. Why do I want to bother. Why do I want to commit my life. And a lot of energy. Why would this be what you can also do is write and so write two pages to fill two pages typed or handwritten. You could also turn around and write. OK. The distilleries there. Why are you happy that you did it.
Doug: [00:15:16] Why are you so happy of what you've done. And related to that is. What is your life like now that you have the distillery. Give me a day in the life. What I'm trying to do is to project you forward. So that you can see your future.
Doug: [00:15:38] Because as soon as you can I use those words a lot. Somebody was poking at me the other time you say. You keep saying I can't see it and I don't get what you say. I said it's in my head the minute I can visualize that thing it happens. But if I can't visualize what it is we're going to then I kind of wander in the wilderness. When I can really visualize it then when somebody says do you want to do this. I got no. You know I can say no. And and you know we can see stuff. Let me let me give me an example. A subject we're gonna talk about cannabis because you can't talk about distilleries today or alcohol without talking about cannabis because this is a storm coming and I and I respect anybody's personal policies on this or they've got family issues or they get what it is lot of complexity in this but the fact of the matter is is the legalization of cannabis whether it's CBD the non psychoactive or THC are coming in they're going to have an influence on alcohol sales. It's just going to happen and concurrent with that there is a rising tide of young people reducing their alcohol consumption. And and in some cases moving to CBD. THC in some cases not. I don't care your policies. This is a reality that's going to happen. I had a very clear vision that we were gonna be a whisk(e)y company. We were going to just do whisk(e)y. We have a patent that covers CBD THC. And when I did investors I said that's out of bounds.
Doug: [00:17:27] But we have the asset. So I'm just gonna go sell the asset. At my meeting yesterday I said I've changed my mind. Experiments that we were doing in Canada Colorado and different places where it is legal. I'm now seeing a pathway I can see a way for us to do something here. And so that is now in bounds instead of out of bounds. And I let them know because it had been out of bounds. And but new information. Part of it is a lot of information because I've been doing a project for a big multinational that has me looking at cannabis for them because they want to look at it but they don't want to be seen looking at it. You know one of those kind of things about black ops job and and so I've gotten access to scientists and doctors and I've been doing a you know an objective review and the combination of that review plus some experiments that I've we've had I've changed my mind. And so that used to be out of bounds but now it's in bounds. And and so but you've got to set those. It was not like maybe I said it at the start. It was out of bounds. Now it's coming inbound. So after you've got down what you doing and why you're doing it I want you to next start with these boundaries. What things are inbounds. What things are out of bounds so strategically I don't want to do this. Make a list of the things you don't want to do.
Doug: [00:18:50] I don't want to be a multinational you know low cost spirits company. I'm not going to compete with the you know the Jim Beams of the world. That's not what I mean to be. And don't just say we can be a craft can be the people love and we're beautiful and we're wonderful. No no. What do you not want to be.
Doug: [00:19:10] You know. And and then define what you don't want to be and then define it like in our case here. We defined early on we said we are going to be whisk(e)y. We're not going to be rum. We're not going to be brandy. We're not going to be tequila. We're not going to be gin. We're not going to be vodka. We're gonna be whisk(e)y.
Doug: [00:19:33] Now. We did that in part because we had I had done some work and I had found that for the same cost to make a rum I can make a whisk(e)y with our technology. But for the whisk(e)y I get ten dollars more a bottle than I can get for the rum and I'm not justifying it's just the way the consumers are. And so it made a difference. And so I set those boundaries. But even when I set them I said we're gonna be whisk(e)y whisk(e)y whisk(e)y because that's the hard thing to do. It's the king of spirits. By far I mean it's 50 percent of brown goods. So you've got whisk(e)y and then add together rum Brandy tequila etc..
Doug: [00:20:20] It's 50 percent is whisk(e)y which is Spirit made from grain. Again we've said this before Brandy spirit 40 percent alcohol. Spirit made from fruit. Rum is from sugar or a sugar cane No tequila from a Garvey. It's from whatever source of grain they had or are sugars basically that they had in the region. So we were going to be whisk(e)y but I said even when I said that I said we're going to be whisk(e)y first. In fact I put in the name that we do business as Brain Brew Custom Whisk(e)y. SOMEBODY SAID WOULD YOU DO ME Rama I said Did you see my name. I said it's whisk(e)y. Now that said I've also said that there will be a day. Where we will probably go into those other spirits. But first we're gonna make whisk(e)y work and we're gonna stay because you know we just I just set the boundaries.
Doug: [00:21:12] I just thought the this and I just decided that I could just as easy as that all spheres. But for me the magic was making it happen in whisk(e)y because that was so much harder and that excited me.
Tripp: [00:21:22] Okay so So with regards to my looking at this are you going to try and steer me a certain direction that makes sense because you know I remember and one of the previous episodes you said you know you may want to start with gin and vodka because it's easier to make that while you're working on your whisk(e)y. Is that kind of the mindset I should have as I go into it or first off.
Doug: [00:21:47] Let me ask you this why do you want to do this.
Tripp: [00:21:48] Ok that's a fair question. Yeah. No I think well one you got me excited about it. And then I started you know the self don't. OK. Well well no. I mean I am a long time wine drinker. I mean that's been my go to thing I love you know cabernet is you know from you know inexpensive too expensive and then as we you know I've had whisk(e)y off and on over the years and scotch you know Scotch whisky and good ones and you know there is a difference you know as far as the taste goes I don't know all the nuances or I didn't know all the nuances. And then as we started talking I was like you know this is a whole thing and this is you know and I'd like the taste sealed from a craft standpoint. It kind of made sense. I started to look at and you're probably gonna ding me on this you know from a monetary standpoint but just looking at it saying jeez you know Doug created something here that's got got early entry. But I also I guess then started to say OK well why asking the question you just asked why what's the sustainability of it. You know from my mindset and that is well there's I get a couple of things. One is learning how to do do this learning is a big thing for me. That's not when I say that I don't mean it lightly like I just like learning. I do like learning it's like part of me. And then the second thing is you know I have a son that's in the craft brewing business and a daughter that's graduating from college and it seems like a great way to kind of pull a family together and I've got relatives that live within three miles of me in every direction. And I thinking Boy this would be really cool to have something for the family. Now whether that's good enough you know as you're listening to it I don't know. But those are the kind of the reasons that it's attractive to me there.
Doug: [00:23:48] That is exactly perfect because what's perfect is what you want to do is is that that you have that now the question is is time to play this out. And see you know realistically is there a reasonable business that fulfills the needs of what you want to go do. You know but you start with the why you going do it. So then the boundaries and some you may not know it's OK to put a question mark to say I think this but I'm not sure. All I care about is zat you be honest with yourself. I mean let's just start from product. Would you get excited having vodka and gin. Or do you really want to be whisk(e)y brown spirits.
Tripp: [00:24:38] I mean. Yes and no. I mean from a standpoint of if the gin and vodka provide me a path to getting to whisk(e)y. In other words it's part of the learning or it's it's an easier path to get some learning from in order to get to the whisk(e)y. That then that makes perfect sense to me. I do drink gin I don't drink as much vodka but I can tell you people my family do. I'm more interested in the whisk(e)y and I can tell you that my son is my daughter not so much.
Tripp: [00:25:15] So there's you know you've got different people involved so as I look at the boundaries you know associated with the the pipe I I'm pretty open with that. For me it would be the whisk(e)y that I would focus in on.
Doug: [00:25:31] K but if I go back to your narrative of why you're doing this for the family then it would seem like vodka and gin would be would be important to have there.
Tripp: [00:25:40] Probably yes.
Doug: [00:25:41] You know because of the family dimensions and while you may be more focused on the whisk(e)y side. Mm hmm. Okay. So you said a bunch of things. So let me just give you just a quick blurb to subscribe. Doing vodka and gin so you can get to whisk(e)y I think is fool's gold for most people. I think that's a thing that a lot of Distillers say and I don't I think it's a giant sucking sound of their life and energy force and they don't love it they hate it they're doing it because they do it and they can't do it well and it just doesn't work. I just I don't think that's a pathway that gets you there. The world does not need more vodka as the world does not need more gins. Now I'm going to put an asterisk beside that OK. The world does not need vodkas and gins. There are not that many people that drink gin and gin is a juniper forward spirit.
Doug: [00:26:28] Ok now there is another thing. Called a botanical vodka. Which would be a you know the flavors like of gin but without Juniper being the primary taste OK. And I think there's a great opportunity for botanical. Vodkas. Which is basically quote gin but not because it's not because all at all gin is vodka with juniper.
Doug: [00:27:00] Okay that's it. It's Juniper flavored vodka that's gin and sugar. They usually put one or two percent sugar in it. That's what genius and so the number of people that like a juniper forward drink is is small.
Doug: [00:27:16] I mean reality but I think it's a fool's gold now but doing it for the family. That changes that conversation because now making a vodka the people can make into cocktails that they can have. Making a gin for those who like their gin and tonics or botanical vodkas. So to have where you can have a lot of creativity. I mean this like opens up the creative juices because different botanicals you can use you can make amazing different botanical vodkas.
Doug: [00:27:47] Now you've got a real creative place that you can play then you can do stuff which is wonderful. You know as a place to play but going down the route that you're going to make it from that and get to the other. I just I mean people do this and you can taste their stuff. It just isn't that.
Doug: [00:28:08] It just isn't that. And so. So that would be fine with me that that would be fine with me as a pathway to getting there because that's that's what you're going to need is that direction. OK. So we can do gin and vodka or botanicals. OK. So that sets us up that there's different ways to do that. And so there's a consequence to that to both of those. So let me just give you some of those.
Doug: [00:28:35] Options because that also then leads to a question that you have to confront at the front which is what number of zeros you're going to have in your fund raising.
Doug: [00:28:45] Ok you know how much cash you're gonna do and you got to confront this cash issue at the front okay. You just gotta set this number and you know how many zeros are you gonna do. And yes you could do this for very tiny zeros. There is a pathway to doing this whereby you you basically just become a rectifier.
Doug: [00:29:07] You have no distillery. You're basically you have no facility. You basically buy stuff in from us or others is sometimes even bottled and you basically then just sell it to people and you can do that for a couple zero you know for five zeros in five decimal places.
Doug: [00:29:29] Fifty thousand dollars. Hundred thousand dollars. You could do that. And there are people we've got a couple people coming to us now want to start a brand and then they say I want you to make 500 cases of this and I'll and I'll go sell it.
Doug: [00:29:39] And that's a pathway that's a pathway to do it. The next pathway is that you're going to have a facility and you're going to serve consumers that from your tasting room restaurant depends on the laws of the state and you're gonna be distributed in the local market. Not in the state but in the local market. And in the context of doing that you've got a couple options. One option you have is you can get what's called an iStill which we've talked about which I think is the best. And they have a wonderful class that you can go to. You don't have to have bought it. In fact people go to the class usually first and going to one of their courses is is really really recommended and they'll show you how the whole thing works. And they even have recipes to get you started quickly. And in particular they can get you started with vodka and gin. Now you can make vodka a couple of ways. You can do it from a mash from the Greens or you can buy what's called neutral green spirit and G.S. and Reid is still it a bunch of times to purify it and clean it up to make it even better. You can also when you're distilling that you can throw botanicals in and basically make either gins or herbal spirits basically flavored favorite vodka and and you don't need a very big one and they're not that expensive. I mean twenty thousand dollars thirty thousand dollars fifty thousand. I mean depending upon the size I mean I'll be down to ten thousand dollars for a little tiny one and you can start doing now you can't do this.
Doug: [00:31:21] We're not allowed in the US to become a moonshiners. Unlike beer where you can do that which is a problematic so you have to do it at a facility that's licensed to do that but so you have to decide are you gonna start all the way from grain.
Doug: [00:31:36] Which is a lot more expensive a lot more learning curve where you're going to start from Spirit that your read is still into basically your finishing process. Versus from the green. And that's a choice that you have to make. And really that has to come from. I really want to do it or I've got a partner that really wants to do that. You've got to decide. Because that's a different place of where you're going to spend your time. You can't do it all. You can't do it all.
Tripp: [00:32:03] So. So is there a pathway then Doug looking at this kind of first go down this road which is kind of what I would call I guess outsourcing people. You make it I'll sell it type of thing versus the building a facility. Is there a pathway from you make it then then go to a facility is that is that one that makes more sense.
Doug: [00:32:27] It is. It is. Yes it is. And people do that. If it was me. I would. I would think long and hard about what I was doing to be a craft place that has a facility. You need to have some level of DNA that you're doing the stuff. Now that can range from. I bring it in and I do the finishing which adds the real flavor to it. Which is fine. That's fine. History's made most people are like that. I mean most of your big whisk(e)y brands are actually bought from MGP in Indiana and they do the finishing. I mean that's what most of the big brands are. You know the big names that you see I'm not going to stick and throw stones at them which you can look online you can find out all at once. The big big names they don't even make those products and that's fine. But they do the finishing and the blending to make the taste that you get and that's the value add that they provide the artistry is there. You can go to the point of buying finished product that's to your specifications so you designed it and then you had somebody contract make it. That's fine.
Doug: [00:33:38] You can turn around and take the grain that you buy to do it or you can be like Jarrett my partner in Canada who's I mean if you want to say true craft people say well if you're buying in the spirit you know a true craft. Well Jared I will tell you you're not true craft unless you grew the corn.
Doug: [00:33:54] He said I grow the corn. He says buying corn from a big industrial corporation that doesn't sound very craft to me. Now he's being severe here.
Doug: [00:34:03] You know on this so. These are all fine and consumers are fine with all of these and I don't have a political position on this. To me the return on energy from my life. I'm not interested in growing corn. Okay. I'm not interested in running mash tanks you know to me where the value is added is in the flavor in the finishing and that process the maturation the the aging know whether it's our accelerated aging or however you're doing it putting together the mash bills. I mean to me that's where the artistry is. You know the chef doesn't grow you know the cattle you know but there's still an artist. They buy beef and then they do their artistry to it. So the question is you know are you gonna be a farm or are you gonna be a chef. And to me the chef is what appeals to me. But that's up to each person. That's up to each person.
Tripp: [00:35:10] Yeah. Part of me to turn it says I mean I guess what was in my head.
Tripp: [00:35:15] Doug was you know you and I kind of outsource it at the beginning trying you know learn to get a sense of kind of how you put it together how I get something that that taste you know something worth selling I guess. You know you you're talking about souvenirs you know at the beginning in the last episode but going from kind of you know help help help along come up with something like you have your you're tall stacks and your Keelboat in your deck hand and all those things but come up with something similar to that. And then as I get volume and learning then move start to move and maybe take on some of that stuff you know. And then now we're talking about a facility you know in an iStill and things of that sort. Is that. Is that a desert. Is that a worthwhile path. Do you see or do I have to make that decision right. Right at the beginning that I need.
Doug: [00:36:14] Well I would make a decision. But then be open as you get through the rest of it to see if you want to change it. Okay. So but the answer is yes. That's a fine process okay. Yeah that's it. Yeah. Jared and I in Canada are about to do the Nellie banks and the Marco Polo. OK. We're gonna do two products that are exactly that. I mean and here's a guy who grows his own corn and he's doing it and and he's doing it in part because we can do it quickly and he wants to have the fun on that side because right now his time is sucked up so much on the other side that it's hard to do that. And so you know he's gonna both you know he's got the farm to glass the true farm to glass and at the same time he's going to have stuff that we're making for him in Cincinnati. So which is fine that OK.
Tripp: [00:37:03] Well I know you've got knowledge and you've got 30 years and it. From my standpoint it makes sense to kind of work with you come up with something you know. You make the initial and then at some point decide OK we'll get enough volume here or we want to kick you out of here or whatever comes first I guess and then start into. OK what do I need from a facility standpoint. It just seems like it makes more sense because now I've got traction with a product and now that I've got traction with the product I would think going to investors would be easier and maybe I'm completely wrong.
Doug: [00:37:45] Okay we're jumping ahead but yes. OK. But but I'm just gonna I want to recognize though that there are some people for you. That's what's right for you. And that's awesome.
Tripp: [00:37:56] OK.
Doug: [00:37:56] But there are other people who that's not what they want to do. They want to get the iStill. They want to play with botanicals. They want to do it themselves. You know it because that's where they find joy. And I'm good with that too. OK. You know it really it just depends on It's each person's perspective as to what they want to do.
Tripp: [00:38:15] By the way I did. I and I was looking at the iSstills. I think the smallest one is somehow a new product they have is like the Mini was like 3000 euros which I think would be like a four thousand dollars.
Doug: [00:38:26] That's right so that we would have one of those.
Tripp: [00:38:29] Okay. All right. So what else do I need to talk about. It looks like I'm gonna have homework here.
Doug: [00:38:34] Okay so this is this is got you started. OK so so now you've got this thing and the last thing I want you to think about. So money wise then you're gonna be a lot less money.
Doug: [00:38:46] You know. You know the simple math is if you want to start a distillery with traditional aging stills you need three million dollars minimum. That that's jacks or better to open. You got to have three million dollars and don't tell me you'll do it otherwise because it's not going to happen. I mean we can show you the spreadsheet the cash flow needs.
Tripp: [00:39:05] Know what. And I want to interject this because when I went back and I listened to one of the episodes you had talked about and I was reading and one of the things that said was Well you could go in to a someone who's making whisk(e)y and you could you know get a combination of their already aged whisk(e)y type of thing but I think you made a comment and. And one of the two previous episodes about that's not a good idea. Usually the product that comes out of it is bad.
Doug: [00:39:35] Well it's really tough to age whisk(e)y and get it great. I mean the people that are doing this have huge warehouses which have all different temperature ranges all kinds of different barrels and they've got this huge pallet to do from and you put away you know 10 barrels 20 barrels a 100 barrels. You just don't have it's like you don't have colors in your coloring box to play with. And you have to get amazingly lucky because there's so many things that can go wrong. So it can be extremely challenging extremely challenging to do that. So. So the last thing I want you to think about on the scope is I want you to focus on. Are we going to be retail focused. Are we going to be venue focused. Are we going to be hyper local. Are we gonna be statewide national international. And that may change as you learn more. But you've got to set some dimensions associated with that as to what you're gonna do. The classic rule of thumb to be successful in this is the advice that is pretty much the standard industry standard from people who have walked this path is do your town first get successful in your town and then either decide that you're going to stay there and have a nice business.
Doug: [00:40:52] Or then go do another town where you aren't a local legend. And prove that you can make your brands work in that other town and and when you've proven that you can work in a place where you're not. Don't have the value of being a local company. That's when you've really shown that you have something you can go across the state the nation or the world.
Tripp: [00:41:17] Ok. And when you say do your town what's with fall falls under that umbrella.
Doug: [00:41:25] Selling the bars. Having it at retail. You know doing that that local town.
Tripp: [00:41:32] Ok. And if they're retail I don't know. And I'm not too familiar with all the liquor stores.
Tripp: [00:41:39] I know some of them are probably locally owned. Some of them are Indiana wide. Some of them are nationwide type types of facilities. If I'm selling into you know a liquor store liquor stores does that automatically. I mean do people go into the headquarters of a liquor store and say I only want to sell it in these three stores. Yeah it sure is Indiana.
Doug: [00:42:03] So. So it really it depends. So you got to go figure out your state laws. This varies in some cases like you know Ohio is a craft guy I can sell direct and direct delivery even though the state owns all liquor stores all liquor store all liquor and all stores in Ohio is owned by the state of Ohio. They are agents when you see one that has a name other than state of Ohio. It is a agent for the state of Ohio. OK. And so it's all thrown through the state but they allow craft guys to sell direct. So what we can sell direct and deliver. But even so the state still takes their piece of it. And so in some cases you have to have a distributor deliver the product but you're still going to end up having to sell it. I mean they'll list it and they'll have it. But the reality is that you're going to have to be pounding the pavement there. And so you've got to check through your local laws in your state or country. I mean this place around the world as to what those rules are you know up in up in Canada if you're at a craft person and you're under a certain volume you get really advantageous math on the margins that you make. You just do much better than others because of that. And so you really need to check that that local math as to what the laws are and where.
Tripp: [00:43:27] How do I do that.
Doug: [00:43:29] This Google thing. It's pretty good.
Tripp: [00:43:30] Well no I get that but I mean even I will when I Google.
Doug: [00:43:35] Well I would just love the state liquor laws how to start a distillery in Indiana and start start some of those things. OK. I mean that's where you're going to.
Doug: [00:43:46] Here I'll look it up distillery. Rules in Indiana.
Doug: [00:43:59] More state. So you've just had a change in the laws. Good or bad. Oh good. Then change regularly. You can search small distilleries serve samples a tasting room sell bottles of spirits directly to the consumer.
Doug: [00:44:16] Sample tourist pour them a cocktail. Oh you have to wait three years before becoming eligible. You have to hold a regular distillery permit for three years before to qualify. That weight will now decreased 18 months. So you gonna have to get into these things to find out what the rules are on how this is done. OK so it's coming it's coming. And by the way to get a federal permits going to take it twelve months anyways. If you had a facility. So this is something we got an IV. You can do it yourself by digging through stuff. There are also alcohol attorney attorneys who specialize in alcohol permits and stuff who you know for an hour or two with them they could they can walk you through the maze. There's also probably a distillers guild in Indiana.
Tripp: [00:45:05] There is.
Doug: [00:45:07] And so one of those people would be happy to help you too I'm sure.
Tripp: [00:45:10] So are you saying I can't sell anything for 12 month.
Doug: [00:45:15] Depends on the laws. You'd have to check this out. But it could very well be the case. OK. That could be the case.
Tripp: [00:45:22] All right. So even if you're doing it I guess I don't understand how that works. You know if I had you know putting them together I couldn't be selling them here and Indiana.
Doug: [00:45:33] Depends on that. Yeah there may be a permit that you can but you've got to. That's you've got to figure out OK.
Doug: [00:45:40] Generally you're still going to need a DSP distilled spirits producer plant from the federal government and then a local but there may be a state way that you can do it as more of it is importer instead of a producer. You may be able to do it that way too. So yeah I'm not a lawyer nor do I play one on TV so this is now and you can't. Our rule number one is don't put Doug in jail so do not mess with this. You not winging it on this. This is not something you wing the federal and state governments have in intensity of enforcement on this because it's taxes.
Tripp: [00:46:20] Ok.
Doug: [00:46:22] And so they're very intense on it. So you gotta figure out what those rules are.
Tripp: [00:46:26] Ok. So these are some of the hurdles of things that I'm going to have to figure out right. OK. All right. Doug we've gone through quite a bit today. We're Forty four minutes into it.
Tripp: [00:46:37] What can we look forward forward to in the next episode of this.
Doug: [00:46:42] So so Tripp. I know there's people out there they're getting frustrated because they're like wait and all they're talking about is my mission and why I'm doing this. My scope I just want to get onto it. Well let me just tell you folks you've got to have a foundation before you can build the house and the time you spend thinking about that mission at the front is invaluable. So in the next episode we're gonna talk about developing your storyline and this is the craft storyline of your brand your product. Kind of what this business is gonna be. We're talking about making a functional prototype and looks like prototypes and trying to get some data on it and doing some initial math for your business model. Just some rough math. And then in the third episode here we're going to start to deal with the nitty gritty. We're going to start to deal with the investment decision the investor plan writing your investor distillery game plan selling investors selling investors and getting the permits and building that the store.