If you own a distillery, it’s likely to have been an all-encompassing few years of your life. They demand unrelenting attention from the moment the spirit flows from the still.
For generational makers, it’s often what your family is known for and the products are heavily tinged with the idea of heritage, nostalgia, duty and incredibly complex domestic dynamics.
Irrespective of where it started though, you’ve likely poured everything you have into growing it.
It’s why the idea of selling is a deeply personal and challenging decision. But it’s becoming an increasingly frequent one. And not for negative reasons either.
A new era for sales, mergers and acquisitions in craft distilling
Because so much of craft distilling around the world has been built in the past 20 years, low key ‘exits’ and handovers have not been that frequent. Alternating Premises (or Alternating Proprietorship) has been a gateway in and out for some in the USA, but that’s about it.
Looking ahead however, buying and selling entire businesses is likely to become common place.
It’s a must too. For craft distilling to be a long-term part of the global spirits industry, we’ll need businesses to be exchanged, bought, sold, revived and so on. What’s happened to date – where the successful have been snapped up by multinationals and investors in high profile deals, and failing operations sent to the liquidators – is not the sustainable future we are all headed towards.
The singular boom or bust model isn’t needed either.
Eventually, the market will stabilise and with it, a more pragmatic approach to entering and exiting will become the norm. It’s okay to not want global domination and to build, sustain and nurture a regional business that’s rooted in community and that yields good returns and a fulfilling life. Just like trusted garages, farms and so on, who incidentally have been swapping hands for decades now…
It’s easier to buy an existing (profitable) operation and develop it further than starting from scratch. Especially if you need to mature inventory.
So, how can you prepare to sell your craft distilling operation? The first is to prep yourself as it’s an emotional roller coaster. If you are in the process of selling or about to begin – you have to acknowledge that. Namely, as you’ll have to get over it.
Remember that selling your business doesn’t have to mean “selling out” or giving up. But motivations are key. And for this mini guide, that’s we’re going to start.
What are your motivations to sell?
Motivation must be one of the first things you fully engage with. You must fully understand your reasons for selling. Knowing your motivation will help set your goals and guide negotiations.
Most people’s motivations go beyond just making money.
For example, some want to remain involved. They might enjoy running the distillery but want to shed the responsibilities of ownership. Often, they sell the business but stay on as a key employee.
The opposite is also true. If you’re looking to retire, you’ll need a buyer who can take over quickly and provide you with the financial means to enjoy your retirement. Extended earn out terms are not exactly in your favour…
There’s another benefit to having personal clarity too, especially if you find yourself in the position of a reluctant seller and only doing it as there is seemingly no way forward.
Clearly identifying your reasons for selling your distillery can uncover alternative solutions to your challenges, allowing you to address underlying issues without necessarily selling the business. Here’s why:
Targeted problem solving
By understanding your true motivations, you can pinpoint specific issues that need addressing. For example, if financial strain is a key reason, there might be ways to improve cash flow, reduce costs, or find investors without selling.
Exploring retention strategies
If the emotional toll of ownership is identified as the primary concern, consider options like hiring a general manager or restructuring roles within the business. This can relieve you of day-to-day stress while allowing you to retain ownership.
Optimising business operations
Identifying the exact reasons for selling can highlight inefficiencies or areas for improvement within the business. Streamlining operations, enhancing marketing efforts, or diversifying product lines could resolve many issues, making selling unnecessary.
It might not be any of the three motivations mentioned here, but just by going through the process with some self-awareness – it allows you to explore these and other alternatives that might better align with your long-term goals and values.
If you felt like you must sell or close because you have no options – you may well emerge out of this far stronger than you thought.
For those approaching it with positivity
Let’s assume it’s not about you being reluctant however. There are hugely positive reasons for why you may want to pass your business over to someone else. Indeed, many of the success stories are anchored by this idea of tapping into something else.
For example, selling can be a strategic move to enable your distillery to grow beyond what you could achieve on your own. A new owner may have the resources, expertise, and networks to take the business to new heights.
Letting go of ownership can significantly reduce personal stress and financial burdens, allowing you to focus on the aspects of the business you love without the weight of full responsibility. This can lead to a better work-life balance and personal happiness.
Selling your distillery can also ensure its legacy and continuity. A new owner committed to the business’s vision and values can sustain and even enhance what you’ve built, preserving the brand and its reputation for future generations.
The key takeaway is that motivations matter. Why are you selling and what are you looking for?
The question then becomes about what are you selling
Motivations and needs aside, understanding what you’re selling and its market value is at the heart of all the numbers that need to be calculated.
The most pertinent of all is profitability.
If your distillery isn’t profitable, selling equipment and inventory might be more valuable than selling the business itself. There are specialist brokers to help too.
It will have a higher immediate value as tangible assets can often fetch a fair price on their own. Potential buyers might be more interested in purchasing specific equipment or stock rather than taking on the risks of an unprofitable business.
It’s also worth noting that selling a non-profitable business includes its liabilities, which can deter buyers. So, if you are not profitable – by selling off assets separately, you avoid passing on these financial burdens.
The alternative path for those in the red is building a viable case for future profitability.
If you want to sell the business as a whole, you need to provide a compelling reason why it’s not currently profitable and a clear plan to turn it around. Buyers need a solid justification and solution for the business’s lack of profitability.
Here’s how to build that case:
Identify the root causes. These could be specific areas where inefficiencies or high costs are dragging down profitability. It might be market lead, so you’ll need to explain any external factors, like market conditions or supply chain issues that are affecting your profitability.
Present a solution. Create a detailed plan showing how these issues can be resolved. This might include cost-cutting measures, operational improvements, or new marketing strategies. Provide realistic financial projections showing how the business can become profitable under new management.
Showcase potential and lean on ideas that could change things around. Highlight any untapped markets, new product lines, or expansion opportunities that could drive future profits. Emphasise the strengths of your distillery, such as brand recognition, loyal customer base, or unique products.
By either selling assets directly or providing a convincing plan for future profitability, you can attract buyers and maximise the value of your distillery.
Key other factors to consider
Business model: Are you a full-fledged distillery or a non-distiller producer? This will affect what you’re selling and its appeal to buyers. What are your supply agreements and the longevity of them? Etc.
Real estate: Do you own or lease your property? This impacts the value and risk profile of your business. Is that part of the deal or separate?
Human assets: Will key employees remain after the sale? This can increase the pool of potential buyers. But are you sure they will stay on and what is your continuity plan?
Revenue sources: Explain whether revenue comes from on-site sales or third-party distribution, as this affects how buyers view your business. Are you in wholesale channels, or do you operate predominantly DTC? (obviously dependent on your country’s laws)
Market conditions
Market conditions will impact your sale. Economic factors like rising interest rates can make buyers cautious. However, the craft spirits industry has matured, making it easier for buyers to evaluate distilleries with a longer term view.
Wider conditions aside – it’s possible that certain spirit categories have unfavourable conditions based around drinking trends. Gin in the UK in 2022/23 for example. Vodka makers in the early 2010’s another. Conversely – everyone is piling in on Tequila and No & Low in 2023/24.
This matters even though trends are temporary. And it matters as much as interest rates, loan variables and so on. Truth be told, many sell into unfavourable spirit category conditions and often, it’s the very reason why they are selling and why they not profitable any longer. Their sales have tanked.
So, if you are reading this and about to sell your distillery into strong headwinds (be it economic, or category driven), put several factors in place to make your business more attractive to potential buyers and to navigate the challenges.
The following are key strategies to consider and before you read them, acknowledge that it will take a good 18 months to implement them. Getting ready to sell isn’t a short term, quick fix – you are laying the groundwork for the buyer and therefore, it has to be done properly otherwise it’ll fail both in market and as a sale as they don’t believe the numbers or trust the projection.
Strengthen your financial health
Ensure all financial records are accurate, up-to-date, and well-organised. This includes profit and loss statements, balance sheets, and cash flow statements. Pay down as much debt as possible to present a healthier balance sheet and reduce the buyer’s perceived risk.
Consider retaining a minority stake in the business to share future upside and show confidence in the distillery’s potential.
Diversify revenue streams
If possible, diversify your revenue streams by exploring new sales channels such as online sales, partnerships with retailers, or international markets. They might not generate much to begin with, but you are looking for proof that there is potential, so small is fine. The fact that they and operational are there is what matters.
Look to innovate and introduce new products to show growth potential and attract a wider customer base.
Improve operational efficiency
Implement cost-saving measures to improve profitability. Time to get LEAN! This can involve renegotiating supplier contracts, reducing waste, or streamlining production processes. Invest in technology or processes that increase efficiency and reduce long-term costs.
Enhance marketability
Invest in a robust marketing strategy to boost brand visibility and customer loyalty. Effective marketing can make your business more attractive by showing growth potential. Engage with your customer base through social media, events, and promotions to maintain strong relationships and repeat sales. If you can’t afford to go all out for 18 months, do it for a year and then consolidate around the results the following year. You need to show positivity, cause and effect and that you believe in the vision and the plan.
Present a clear, realistic growth plan highlighting future opportunities and how the business can capitalise on them. Provide market research to support your growth projections and to show buyers the potential for expansion.
Seek professional advice
Work with experienced accountants, business brokers, and legal advisors who understand the current market conditions and can provide strategic advice.
Get a professional business valuation to understand the true worth of your distillery and to set a realistic asking price. Same goes with the spirits you sell and the brands you have. You might think they are amazing, but an expert might tell you there are a dozen just like it already out there… Don’t just assume that your brand identity has worth and is a valid multiplier. Often, it’s not the boost you think it is going to be.
Most of all – define and articulate your brand vision and mission
When selling your distillery, product differentiation is everything. Simply stating that your brand is small, local, craft, and made with passion won’t set you apart, as many brands make the same claims. Same goes for those awards – everyone’s won something.
All of those are lovely messages, but they are not a vision or a mission.
To attract buyers, you need to articulate what differentiates your business. If you can’t define these, it might explain why sales are lacking and why potential buyers aren’t knocking at your door.
Defining your brand vision and mission
Your brand vision is a future-oriented declaration of your distillery’s purpose and aspirations. It’s the long-term impact you aim to achieve in the market and the industry.
Clearly describe the future you see for your distillery.
Your mission statement is a concise explanation of your distillery’s purpose and the approach you take to achieve your vision. It outlines your core values, the unique qualities of your products, and the experience you offer to customers.
Define what makes your distillery unique and how you deliver value.
A valid example is this: “Our mission is to craft exceptional spirits using locally sourced ingredients, fostering community connections, and promoting environmental sustainability in every bottle.” Fine, but it’s not a unique mission statement. 3000 other distilleries could say that.
So, what can you say that they can’t? Focus on actual differentiation that real people can understand and see for themselves, not Chat GPT soundbites for what it “should” be.
Here’s ours as an example. The vision is ambitious and will take many years to achieve, if ever. That’s the point, vision statements should be long term. The day to day mission is simple – everyone can understand it. It’s not a word salad, it’s a focussed action.
Everglow Spirits vision:
To be the leading craft distilling platform that empowers distilleries and spirits brands to achieve excellence, helping shape the future of the spirits industry.
Everglow Spirits mission:
To deliver the most comprehensive and engaging drinks education platform that inspires and supports the pursuit of distilling knowledge and personal growth.
How to further set yourself apart
It’s all well and good to articulate specific values and commitments (e.g., sustainability, innovation, community engagement), as you are highlighting what makes your distillery different. But take it further. Showcase how your vision and mission translate into tangible benefits for consumers, such as unique flavour profiles, eco-friendly packaging, or community initiatives.
Saying it isn’t enough. Show it! In our case, we’ll be doing that via testimonials of the courses and what they have unlocked.
For you, you can provide concrete examples of how your vision and mission have shaped your business decisions and product development. This could include partnerships with local farmers, unique distillation techniques, or sustainability certifications. Etc.
Highlight measurable achievements that align with your brand’s vision and mission, such as growth in sales from your target demographic consumers or positive feedback from specific events.
Why this matters to buyers
A well-defined vision and mission foster brand loyalty, making your distillery more attractive to buyers looking for a brand with a strong, dedicated customer base.
Buyers are more likely to invest in a business with a clear direction and growth potential, driven by a compelling vision and mission. The narrative matters.
A clear vision and mission reduce uncertainty, showing buyers that the business has a solid foundation and a roadmap for future success. By standing out in a crowded market, your distillery becomes a more appealing acquisition target, as it has a distinctive identity that can be leveraged for growth.
When it comes to selling – if you fail to prepare, be prepared to fail
Selling your distillery is a complex and deeply personal decision that requires careful thought and preparation. Getting ready to sell and building up to the point where the person buying is set to go onto being successful and continue your legacy takes months, if not years to set up and hand over.
Think about that timeline if you are approaching a key milestone (retirement), or if you feel like distilling and craft distillery ownership might not be the long-term place for you.
By clearly understanding your motivations, you can better navigate the process and even uncover alternatives that might address underlying issues without needing to sell. Ego is your enemy, and you’ll need humility and self awareness is you want to have a successful exit and be compensated well for the work you’ve put in.
Ensuring your distillery is attractive to buyers involves more than just financial health; it requires a clear brand vision and mission that truly sets you apart in a crowded market.
Remember, simply claiming to be small, craft, and passionate isn’t enough. Articulate what makes your brand unique and demonstrate this through tangible examples and measurable achievements. This approach will not only attract potential buyers but also highlight the true value and potential of your business.
In an unfavourable market, strengthening financial health, diversifying revenue streams, improving operational efficiency, and seeking professional advice are key strategies to implement.
By presenting a well-rounded, appealing business, you increase your chances of a successful sale. Ultimately, the goal is to find a buyer who not only sees the value in what you’ve built but is also excited to take your distillery to new heights.
Selling isn’t about giving up; it’s about finding the right opportunity for both you and your business to thrive.
