In today's update, get a tour of Barrow's Intense's facility in Brooklyn, NY and chat with Josh and get the latest on their newest 50mL bottles, their 40% YoY growth and how you (yes, you investors!) can help.
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If you prefer to read, here's the full transcript of our conversation with Josh at Barrow's Intense:
Tell us about what's been going on. What's happened since the campaign closed?
So, we got a lot of good things going since the campaign closed. We started production of our 50 mL bottle.
You can see on the very bottom there we have a little custom embossing going on and it kind of mirrors our large bottle. Hopefully we'll have those from the manufacturer by the end of the summer and go through the bottling process and get approved by the EGGB and have in the marketplace for the fall.
What was the strategic decision around the small bottles, how do you see that helping you overall positioning the brand?
So, the small bottle is going to help us in a couple of different places. Our main strategy for it is to help in the off premise. In the liquor space there's on and off premise. On premises, your bars and restaurants, you're consuming alcohol on premise. Off premise is your retail, your liquor stores, you're consuming alcohol off the premises. You take a bottle and take it home with you. So in bars and restaurants we introduce the product to a bartender and they taste the product, put it on the menu and consumers can then experience our product that way. In a liquor store it's harder to get the consumer to experience the product because it's sitting on the shelf by itself. In some states, there are in store tastings where you're pouring for consumers, but it's expensive and the number of people you can touch in any one time is tricky. So they have what's called hitch hikers where the 50 mL bottle will hang off of a full sized bottle of another product. And so in our case, we would create cocktail cards with the 50 mL, and we might hang it off a bottle of Tio's and do an intense Mule. Or we hang it off of a bottle of Bulleit Bourbon and it would be the Bourbon Smash. So the consumer then takes that bottle, it's a free bonus for what they were buying anyway, and they bring that home. They see the recipe card, they get to experience the product by itself and the use case for it, and then they go back to the store and purchase the full sized bottle. The cost for acquisition on consumers is much, much lower than doing store tastings.
We're looking to put together displays for the retail counter where the mL can be bought by consumers. So people can look at it and they say, "Oh well, I don't know what ginger liquor is, so I'm not going to go and spend $32 on a full sized bottle, but for $2 or $2.50 I'll grab one of these little ones and I can play around with it and see what it's all about." In addition to which we're looking to put together displays with recipe cards, so we would have a recipe for each of the spirits and you can pick your 50 mL and a recipe card to go with it.
And then for on premise, there are two things. One, when we go into a bar and we introduce our product to the bar manager, the distributor rep brings a sample bottle with them and they pour for them, but then you know they're not doing their cocktail menu for another month. Well, most of the time those accounts aren't going to order a bottle, pay for something till they know how they're going to use it, and it's very expensive for us to leave a full sized bottle. So the rep can leave two or three minis behind, say, "Here, take these minis, do your cocktail creation around that." And so instead of it costing us $20 or $25 for the bottle, it's costing us $2 or $3.
So once again, it should help us in that regard. Then we've also been talking to some high end hotels about using the bottles around the idea of the digest tea. So you go to your boutique hotel, at the end of the evening you come home from your night out and you find two mini bottles along with some nice glasses and some ice and a little descriptor about how Barrow's Intense is wonderful as a digest tea, the four qualities about ginger that it's a natural antioxidant, it's a natural digest tea, immune booster and it's aphrodisiac.
Until we have the product it's not something we can implement. But we've had some positive feedback to that concept.
It sounds like you've got something that checks a whole bunch of boxes in terms of new customer acquisition both on the in premise side of the world and then on the off premise consumer side. There's a lot of different ways that it could work really well.
So the great thing about the money that we raised is what it allowed us to invest in those 50 mL's. With our current production process, we produce demand. So we're getting fresh ginger in every week, bottles in every month, our other raw goods in once a month, shipping out product once a month. We're not creating 20,000 cases of stuff and then shipping it out. So from a capital standpoint, the money that we need to invest in regular production is not significant. But to do the minis and to do a custom bottle and to get these produced externally because we don't have the equipment to do 50mL. 50 mL bottles is a lot tricker than the full size. We have to do it all at once, so we have to basically pay for 20,000 50 mL bottles upfront before they go out the door. So the money that we raised on Wefunder was really helpful in allowing us to be able to invest in that.
How has kind of the rest of the business been going both in terms of growth, revenues, kind of new locations? Why don't you talk us through some of those numbers and how it's been working?
So in the business there's two methods that you have. You have your shipments, that's what leaves the facility here and that's what you get paid on, that's what your revenue's based on, and then there's depletions. Because alcohol's a three tiered system, you have the supplier, you have the distributor and then you have your on and off prem, your retailers; we don't sell directly to retail. So, when we ship out of our facility it goes to our distributors, and then it can sit in the distributor's warehouse for months.
Because of that we won't have a shipment until they deplete their inventory. So what's more important to us is called depletions. Depletions are when those bottles leave the distributor's warehouse, which means they're going to a bar, restaurant, or a liquor store. And in general, that's a much more accurate number to forecast future growth. If we did 500 cases worth of depletions, you can assume that you're going to get at least 500 cases of shipments the following month because you need to refill that.
So we've had about 40% year over year depletion growth for this year, for the last six months. And our revenues are trailing that a little bit, and that is mainly due to the fact that we got behind on shipments a little bit. We actually burned down some of the inventory in the January timeframe because of the assumption that January was going to be slower than what it was and it turned out to be busier than it was.
So we're catching up. We expect for the year to be somewhere between 700,000 and $750,000 in revenue, so that's up. I think in the same percentage, 40% YoY growth in revenue, maybe even a little higher than that. I'm not sure of the exact numbers.
And what's the current split with on prem and off prem right now? Do you have a feel for that?
We're somewhere 80/20, 70/30 between on and off, so we're much more on premise focused.
You build your brand on premise, and so that's currently where we're at and for us that's a really healthy number because established brands generally see more 60/40 and depending on what type of brand it is 60/40 on off or in most cases they're actually 60% off prem. So what it means is that as we start to gain a foothold in the consumer awareness, we have a lot of room to grow on off prem.
And from a volume perspective, obviously this is going to be a very rough number, but when does that tipping point start to happen? When do you feel like that you have enough awareness in the market that people are actually going out and looking for you in the liquor store, versus first time exposure at an on premise facility?
That isn't a number I'm evaluating, to be honest, and it's probably different for different brands.
Because in the vodka states, your volumes are much higher per purchase, if you will. So we're in a cocktail with a restaurant in New York City and it's the number one account for WhistlePig in the country and we're in a cocktail with them. That's because they use eight times as much of WhistlePig in that cocktail as they use of our product. So our depletions for accounts is considerably different than a base spirit. So because of it that metric isn't something we've evaluated.
The metric that's important to me is when I get profitability. That's the number that I have my eye on very specifically and how do I get to that number, and then all the rest come from that.
So when you ran your campaign you guys were just rolling out this partnership with Benihana and how has that gone and kind of how much do you see these kind of larger type partnerships being key to your growth moving forward?
The partnership with Benihana has been going great. We also have Pappadeaux out in Texas. The Benihana one we're looking to do more with them, we're looking actually to have them cook with us, and the initial cocktail to get tested took us a year and a half. These partnerships take a long time. They do a lot of testing, it's very slow. So the cooking one will probably take a while as well, but if we can do that I think that'll be a huge thing for us. In the meantime, we're looking to leverage that with other ones, we're talking to folks at World of Beer, we're talking to other large chains and trying to get on their menus as well. And that's a real growth opportunity for us because with one sale, if you're in 60 locations or 70 locations for Benihana, you're in potentially hundreds of locations for other types of them. Then at the same time we're also doing smaller groups. So we just got contacted by a hotel management group out of California and they have 12 locations and they're developing 13 more, and so we're looking to get involved on small and large national and chain accounts. It's an excellent opportunity for us and it's definitely another way that we're growing the brand. And so for those a lot of times they do ask for marketing support up front and other things and so having resources to be able to put behind it is really helpful.
When you think about your focus, is it landing a couple of these larger accounts that'll be highly leverage? Or is it more broadly distributed leaning on your distributors to get a bunch of smaller accounts?
So I think that they're both really important and we're not focusing on one versus the other. I think what I've done personally is I've shifted some of my focus to the national and chain accounts, so I'm doing the sales into those and so my time is spent on larger things as opposed to one off bars and restaurants in places. I'm still doing marketing business.
One of the things that we've done is whenever I'm in a market we've reached out to our Wefunder community and invited them to come have cocktails with us. The thing that I've been a little disappointed about is we've had very few people take us up on that offer. So, we're going to be in Atlanta in August, we'll send out an email for our investors in Atlanta, come have a cocktail with us. Please come join us, it's super fun, just have cocktails, talk about the product and you get introduced to a new bar or restaurant in your town and learn a little bit more about what we're doing and we can learn a little bit about you.
We also did a mailer earlier this month to all of our investors who were below the $500 level because they are not receiving t-shirts and in it we sent them some stickers and some posters and some recipe cards and the information about their distributor in their state so that they can help spread the word about Barrow's Intense to their local bar and restaurant, their local liquor store and they can make sure to bring in the product. We did an analysis and if 10% of our investors brought in one new account and that one new account did a half a case a month in volume-
Is half a case a month average for you for smaller accounts?
Half a case a month would be a solid account. It's not a great account for us. Our usage per account ranges anywhere from a bottle every other month to eight cases in a month or more for some larger places that will have us on tap. So it really is all over the map. But on average, you know, an account doing half a case a month is a good account for us, it's a solid win and so over a whole bunch of people that average work for us, we estimated that will boost our sales like 10% year over year.
So 10% of your investors bringing in one account that does half a case per account would increase your revenue by 10% year over year?
Yes. From the end of 2016. So really what we sent out we really hope that our investors are going to take. And for them, they get to go and have a nice meal at a restaurant they already like and drink some Barrow's Intense, which is delicious and enjoy it. And at the same time it's helping them grow their investment. So it's a win-win for everybody and it's one of the reasons we wanted to partner with Wefunder so that we cannot just raise money, but also help build the brand through our investor network.
How would one of your investors get involved? What does that whole process look like if they wanted to participate?
So most people that I know have restaurants they go to fairly regularly. They probably know the management there, someone on staff. They'll create a personal connection at one or more restaurants in their neighborhood, in their town, wherever they are and/or their local liquor store, they'll know the owner of the local liquor store, they'll know the manager of the local liquor store.
Leveraging that relationship saying, "Hey, have you heard about Barrow's Intense? Look at all the cocktails that you can make with it." This is the distributor. Then if you need more help reach out to us, email us and then we can send in if we have our partner in your state, we can send them into that account and say, "Hey, you know, one of our investors recommended we come in and visit you," and then they can taste some of our products, and we can sample them and then help to get it on that cocktail menu. And then they know you're going to be coming into the restaurant looking for that, looking to order it. If it's appropriate restaurant where you can have it as a digest tea, say, "Hey, you know, can you bring in a bottle for me so when I come in I can have it at the end of my meal just over the rocks as a digest tea?" That's even just a start and then they'll start to see that as a use case and then you can start the conversation about how it can be used in cocktails and more. It's really a relationship business and so the more we can have our investors helping us create awareness of our product, the better.
What we found is distributors that we work with, they have thousands of products in their book. So for them, to spend time and energy introducing our product into the market is a really hard thing for us to do. It happens but it's limited and so the more people you have introducing our product the better. And once bartenders taste it, once anyone tastes it, people love the product. It's a delicious product, it sort of sells itself. So you don't have to do much more than introduce the concept and get them a taste of it, and then it should follow up to make sure that they actually bring it in so you can drink it. But it's not a hard sell, it's not something that they're going to look at and go, "Oh well we don't like this, there's no use for it."
When we send out the mailer we send our cocktail card, which has 40 classic cocktails on it, which shows all the different ways that you can use the products in cocktails. We also sent our sale card, which has the awards we've won and then using it as a digest tea and some basic cocktails is also there.
Speaking of awards, have there been any new competitions you guys have participated in, in the last six months, eight months?
No, there isn't. They're not inexpensive to enter. The average entry fee for the competitions is about $400, and from a marketing standpoint what we sort of felt is we did it when we first came out, we won a lot of great awards and we've proven that we're a high quality product, so at this point investing $400 in another gold medal isn't really going to move the needle at this point.
So we're looking to invest our money elsewhere.
Where would you say kind of like the biggest challenge for you guys right now that you're trying to figure out is?
I think it's just capitalizing, it's getting the word out. It's really about getting exposure and getting implementation. And on those national accounts, the limited resources in terms of chasing them. It takes a lot of time and effort to get those things to happen and we're competing against giant mega brands with whole departments of people who are selling these both. So I think that aspect is definitely a challenge.
What else is important we haven't covered?
For our investors down in Florida in the West Palm Beach area, we're actually doing a test. We have a start up called Air Tap, which is an app that allows for sampling of cocktails and you get free cocktails through it and we're one of their beta partners and we're super excited about it. It's definitely a much more effective way of reaching consumers and there's analytics around it and there's the ability to provide them with a coupon for off premise. So not only do we get them to experience the product in a bar or a restaurant, but then they can act on that by coupons they go to a local retailer. And they have a substantial investment behind them and if it works and is successful it's something we will probably roll out nationally.
And for those investors who invested more than $500 or more it took a long while for us to get responses from you, so that's why the t-shirts are delayed. We put out a final request if you haven't responded you're going to get a man's large whether you like it or not. So if you want something other than a men's large and you haven't responded to our request, please do so we know the proper size t-shirt to send you and then you should be expecting a t-shirt and a welcome kit with the cocktail cards and some other stuff shortly.
If you could just leave your investors with a short message, what would that be?
So, I want to thank all my Wefunder investors. Our Wefunder investors, you guys are great, we couldn't be doing this without you. Yes, please don't be shy, introduce your friends, introduce your local bars to our stuff. The more you promote us the more you promote your investment, so help us help you to make yourselves more money.
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