Ash & Elm Cider Co.

Rooted in Tradition. Crafted for Today.

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Distribution, Part I

Folks that come into the cidery usually have a set of questions they progress through when they’re here:

  1. How long have you guys been open? (6 months)
  2. What did this building used to be? (A pharmacy. A meeting place for the Oddfellows. A strip club).
  3. Where else can we get your cider? (Nowhere. Yet…)

That third question always leads to more questions. The answer is – of course – more complicated than it seems. Here’s our attempt to explain the situation, in a two-part blog! Today is Part 1, which outlines the difference between self-distribution and working with a distributor.

First of all, the USA’s alcohol system is a ‘three tier system’, thanks, of course, to laws set up after the disaster that was Prohibition (where most weird alcohol laws come from). For more information about this system and its history, check out this great article over on Serious Eats.

  • Tier one is the manufacturer of the product – these are your breweries, wineries, distilleries, and cideries. Us!
  • Tier two is a distributor. These are companies that buy product from manufacturers at wholesale prices, and then sell them to retailers. In Indiana, we have Monarch Beverage, Cavalier, Zink, etc. who play this secondary role.
  • The third tier is then the retailer. This is where you as customers can come to get a drink. Think bars, restaurants, liquor stores, grocery stores, etc.

Every state has different liquor laws. In Indiana, micro-breweries can cut out the distribution tier up to a point (based on volume). If you’re familiar with Indiana alcohol laws, last year, Sun King Brewing Co. fought to raise the limit so that microbreweries can self-distribute a greater volume of beer before having to work with a distributor. So, microbreweries can self-distribute, and while most of them start with self-distribution, many of them decide to sign on with a distributor well before they hit the self-distribution ceiling in Indiana. There are some great reasons for that:

Why You Would Self-Distribute

Self-distribution sounds like a great deal, especially at the start. You can hop in the car, put a keg or two of your product in the back seat, drive to a bar, say, “Hey, want this?”, and if the answer is yes, you can pick up a check and leave the beer. Bam, you’re on tap at a local restaurant and are already growing the market for your product. You get to collect the retail price for your beer and take it home to the bank. As a startup, that extra profit can help you expand a lot faster than selling at the wholesale rate. Also, in brand new businesses, one or two people could probably handle all the distribution needs.

Bottom Line: Quick way to reach more customers, higher profit margin for the business.

Why You Would Work with a Distributor

Eventually, if things go well, you’ll need quite a team to keep up with the demand for your products. A fleet of vehicles, someone on staff who visits accounts with the sole purpose of cleaning draft lines, sales people to bring in new business and keep current customers happy, and multiple delivery drivers, not to mention someone to handle all of the logistics that come along with so many moving parts. A distributor would handle all of that for you in exchange for a portion of your profits. They will also likely expand your footprint because they have a wider reach and access to more varied accounts because of the multiple different brands they represent.  

Bottom Line: At a certain point, most breweries will end up working with a distributor because the extra reach will make up for the chunk of profits and the staffing needed to support self-distribution.

So, Back to Us…

              We tricked you – none of these laws actually apply to us because we aren’t a micro-brewery! Our legal classification is a Farm Winery, and in Indiana, Farm Wineries aren’t allowed to self-distribute at all. This explains why you can’t find our ciders on tap at bars and restaurants yet.

              Since we opened, we’ve known that we’d need a distributor to grow. We’ve met with many, sussed them out (this is an important partnership, after all), and negotiated contracts. As of TODAY, we have finally signed the all-important paperwork, which means that the time for us to start popping up around the city is near. Like…a few days away!

Next week, we’ll post a blog about what YOU as a cider fan can do to help us grow our business.

Thanks for coming along on this wild ride with us!

From 'Opening' to 'Open'

Guys, we did it! We opened a cidery and it only took us 2.5 years!

Now that we’re open, our focus has changed from fundraising, seeking legal counsel, location hunting, permitting, and general contracting to managing daily operations. These are the things we’re focusing our energy on these days:

1.       Staffing. Up until May of this year, we were a pretty lean operation of me (Andrea) keeping everything moving and Aaron helping out with production and overall business decisions on nights and weekends. In May we hired our first employee, Joseph, as an Assistant Cider Maker. He put in long hours leading up to our opening to make sure we had cider ready, kegs were cleaned of all the little tiny rust spots that settled in from unloading them in the rain and not wiping them off (my bad), and improving the efficiency of the production process. Then we hired Melissa to run our tasting room and kitchen, who helped create our menu, made sure we had everything we needed to run a retail storefront, and taught me about standard serving practices. Finally, we hired Wes to make sure every customer is treated well in the tasting room and to turn visitors into regulars.

My job has changed from creating job descriptions and making hiring decisions to worrying about whether our employees like their jobs, are getting enough hours, and are as excited about the future of Ash & Elm as we are. For the record, I’m pretty sure we lucked out with each of them, but I still spend a lot of time thinking about how to make sure they are all getting out of Ash & Elm what they hoped to when they signed on to this crazy ride.

The whole team! From left to right: Joseph, Wes, Aaron, Andrea, and Melissa

The whole team! From left to right: Joseph, Wes, Aaron, Andrea, and Melissa

2.       Distribution. A lot of folks have asked when they can get our cider from bars and restaurants. Of course, there’s a short and a long answer. The short: ‘Soon, hopefully!’ The long: The state alcohol permit we need to make and sell cider (a Farm Winery permit, for those interested) doesn’t allow self-distribution. Which means I could have bars and restaurants with checks in hand waiting to put our cider on tap, but legally I can’t sell it to them. Instead, I have to sell the cider to a distributor, who would then sell it to the bar.

Fun fact! Our tasting room is on the ground floor of a three story building, and our Farm Winery permit only covers the first floor. If one of the businesses operating on the top two floors wanted cider, we would have to sell it to a distributor, who would then have to drive 10 miles away to their warehouse, who would then have to load it back up and bring it back to our building to sell to the top floor. Silly laws.

We have had meetings with multiple distributors, and our goal is to have that relationship lined up and going by the end of summer. Hang tight, we’ll get there, and we’ll make sure you all know about it!

3.       Getting the word out. Our tasting room has been open for three weeks now. A lot of my focus is shifting to marketing, sales, and promotions. In the short term, that will happen via events in the tasting room and participation in festivals throughout the city. Longer term, that means pounding the pavement to get bars and restaurants to buy into our product (see #2 on why that hasn’t happened yet). New menu options, seasonal ciders, consistency, and sponsorships/partnerships are always on my mind as avenues to explore as we grow our business.

Our first big event is Ciderside Chats! Head over to the event page by clicking on the photo.

Our first big event is Ciderside Chats! Head over to the event page by clicking on the photo.

4.       Data Crunching. If you know Aaron and me, you know that we both LOOOOOVVVEEE data and Excel. Fun fact #2! Aaron is an electrical engineer, and I have a Master’s in Public Health with a concentration in epidemiology, so using data to predict the future gets us more excited than it really should. Anyway, now that we actually have tasting room sales and numbers, we can start crunching data. How much on average does a person spend in the tasting room? How many ounces of cider does the average customer drink, and how much does that increase if the customer also orders food? Which ciders are selling the best, and given sales in our first month, can we predict what our annual sales might be? When does it make sense to add another employee?

Truly, it is so nice to be open after such a long time. Transitioning from ‘starting’ to ‘managing’ has been invigorating. Thanks for joining us for the start-up phase of the business, and I hope you continue to enjoy the ride!

Everything is Happening!

It’s about time for an update on our progress, wouldn’t you say? I’ve been meaning to write a blog about what we’re working on for a while now, but so much happens in a day that that update is old news after just a few hours. But you know what, the people deserve to know! So, here’s an update on a few key areas:

1.       Construction – We are majorly, deeply in the thick of construction on our production facility right now. Concrete floors are being excavated, re-poured, grinded (ground?), and epoxied. Internal walls are getting put up and wired so we can have an office, kitchen, and bathrooms. Electrical work is being patched in so that we can run great big machines and tiny little laptops. And, we’re digging a moat around our building, too, just for kicks (just kidding, that's electrical work too).

You're looking at what will be two bathrooms, a lab, a commercial kitchen, and a walk-in cooler.

You're looking at what will be two bathrooms, a lab, a commercial kitchen, and a walk-in cooler.

Still to come on the construction side of things is the tasting room next door, which will get moving as soon as the production space is finished.

2.       Production – All of our permits have been granted, and we’re starting our first test batches of cider in the space. We started with a small batch (330 gallons) of our flagship Semi-Sweet cider to make sure everything runs smoothly before we size up.  As of this morning, things are fermenting away and creating a nice apple-y smell underneath the drywall dust and dirt smell.

Aaron pitching the yeast in our test batch. 

Aaron pitching the yeast in our test batch. 

We also have some nice heirloom apple juice bubbling away that we’ll age and release sometime in the fall, and some juice from our friends at Tuttle Orchards in Greenfield as part of our local orchard partner lineup. Altogether we have about 415 gallons of cider in process right now.

3.       Marketing – In addition to the brass-tacks of getting our production going and construction managed, we’re trying to spread the word that we’re coming for Indy in a matter of months. We’ve had a bit of media buzz already, which we really appreciate! The Indianapolis Star featured us as a business to watch in 2016, and Indianapolis Monthly had a nice little article about us too! We love that the word is getting out there and would love YOU, our FANS to continue that good work. Retweet us on Twitter, come to events we’re pouring at (Indy Pies and Pints and Corks and Forks are your next opportunities!), like us on Facebook, and gather up your cider-drinking pals and let them know that we’re on our way!

4.       Grand Opening – So…we’ve keyed in on a date for our GRAND OPENING! Of course, we can’t share it with you yet because it’s just a little bit too touch-and-go with construction at the moment, but know that we’re planning a killer party, at least four cider flavors, giveaways, and tasty food. Go ahead and black out your calendar for May, because it’s probably going to be sometime in that month, and if we’re all lucky, you’ll be able to drink some of our cider on tap at your favorite downtown bars and restaurants well before that.

Stay tuned! Like I mentioned, as soon as I post this, something will change, but we're circling the end of our 'startup' phase and moving toward our 'operational' phase really soon. Cheers!

Starting a Business = Being a Circus Performer

You know the guy at the circus who somehow manages to spin multiple different plates on his fingers, nose, kneecap, and elbow all at the same time? That might be the best metaphor for small business startups that I can imagine. I’ve realized that, though my previous jobs have been in some ways multi-faceted, the scope of those job descriptions are nowhere near as varied as what we’re dealing with now as we get our business off the ground. Luckily, I spent two years in clown college, so everything is going okay. Here are our current spinning plates (cue Radiohead soundtrack):

The Law – Not a plate you want to drop. Federally speaking, we finally received our Federal Alcohol Permit from the TTB at the beginning of December. That was an awesome day, and I think we celebrated by sending a series of emoji-laden texts back and forth for several hours. Our state Alcohol and Tobacco Commission permit is under review at the moment, and once we receive that, we can actually produce and sell cider legally! As soon as that paper comes back, we start our first large(r)-scale test batch on-site.

The Finances – Closing on loans, securing the last bit of private investor money, making sure our budget is on track, trying to anticipate money-pits in advance…fincances are another set of plates that can’t be dropped. The reality is that there are probably about 20 finance plates going at once, and we already know some will drop, but which ones, and when, and can we maybe catch them before they hit the ground? This keeps me up at night.

The Product – The product keeps Aaron up at night. We have our suppliers, we know what equipment we’re going to use, we have great recipes that we’ve made dozens of times on a small scale, but will it all come together when we’re using new equipment in a new environment? We’ve had great reception when we’ve shared our ciders at events over the last year, but everyone loves free alcohol! Will people actually leave their house, drive to our tasting room or to a bar with dozens of beverage options, choose ours, and pay for it?

The Facility – Some pieces of equipment have a six-month lead time. Others you can go buy at Lowes. The rest fall somewhere in the middle. We don’t need all of our equipment to get started, but will need it eventually, so when should we order it, and in what order? Plus, the building is under construction. What if the tanks we ordered in July ship before the new concrete floor has been poured? Where will we put them? Does it really matter if our cinder-block walls are cleaned and painted? Does it $4,000 matter? Should the ADA bathroom go here or there? What grade of insulation do we need, and what grit of epoxy should we put on the floor? Stainless steel floor drains, right? How do we get a sign on the door? Should we get barstools with backs or without? And where will we put the purse hooks (purse hooks matter a lot to women at bars)?! Honestly I could go on forever with the kinds of minute decisions that need to be made Every. Single. Day. I have a whole new respect for anyone who opens a brick and mortar anything.

The Nameless Plate – “I KNOW I’M FORGETTING SOMETHING HUGE BUT WHAT IS IT?!” – me, almost every minute of every day.

So there’s a bit of insight into our lives at the moment. It sounds fear-laden, but it isn’t. It’s invigorating, with a tiny bit of fear and a pretty large dash of manic energy mixed in. And neither of us could be happier.

PS, I didn’t actually go to clown college.

How do you Finance a Craft Cidery?

Finances are a tricky thing. Talking about money is generally considered poor manners, and asking other people to give you money is straight uncomfortable, but if you want to start a business, you’re going to need some cash. There are a few ways to finance your business, including funding it yourself, bringing in investors, or taking out loans, and there are plusses and minuses to each option. Here’s a brief rundown of our thoughts and experiences with each of them.

Self-Funded - If you fund a business yourself, you have to either be wealthy, or you have to start on a small scale. This is especially true in the brewing/fermenting industry. While it’s possible to start on a shoe-string budget, you’d still need upwards of a couple hundred thousand dollars to be on the safe side. The amount of capital equipment you need to get started is expensive, and for the permitting process to even begin, you have to have a signed lease, meaning fronting at least 6 months of rent before you can make your first sale (unless you have a real estate agent who makes some good negotiations on your behalf). If you can manage to fund your business yourself, your growth can only occur by reinvesting your profits into the business. But one of the down sides of starting small is that you can only sell what you can make, and with small equipment, you probably won’t be able to make enough to grow quickly.

Pros: You own 100% of the business, and it’s a much less risky venture than the other options – in some ways! It might not feel less risky to put your life savings into a business, but at least if things go south, no creditors will come looking for you.

Cons: You’ll only be able to start as big as you can afford, and in this industry, that won’t be very big. Growth will be slow and there’s no room for error.

Investor-Funded – If you can’t finance the whole thing yourself, another option is to bring in investors who get a percentage of ownership of your business for the funds they give you. If you’re well-connected to people with both wealth and an entrepreneurial spirit, raising your funds this way can be relatively quick. If you aren’t, it may take a while to reach your target. Luckily, with the rise of successful craft breweries in Indianapolis, investors around here are familiar with the model and in some cases, are itching to get involved.

Pros: You’ll have more funds to get started, and it takes money to make money. You may also benefit from the networks of business contacts, accounting, legal services, etc. your investors bring to the table. In some cases, they can even act as a board of advisors.

Cons: You own less of your company, and someday when you hit it big, you only get a percentage of your earnings. If you don’t maintain majority ownership you could also run into conflict, or in the worst case, be cut out of the management of your company by the other owners.

Debt-Funded – Getting a loan to start your business is a feasible way to raise money, but in today’s climate, small-business loans are fewer and farther between than they have been in the past. Plus, with debt comes interest and repayment terms. One the plus side, the equipment needed for your business has a great re-sale value, which makes a loan a lot less risky from a bank’s perspective. If things go bad and you have to go out of business, you can sell all of your equipment for close to what you paid for it and may be able to walk away cleanly.

Pros: You don’t give away any equity in your business when you take out a loan, so you still own 100%. Banks can also be good partners for the future of your business, so establishing this relationship will help when you want to fund future expansion or get a line of credit opened.

Cons: Making debt repayments early-on, especially as you’re just getting started, can be a tough pill to swallow if you aren’t meeting your sales projections, and defaulting on a loan is scary business.

So what are we doing? Well…all three of course! We put a chunk of our own savings into the business to get things off the ground at the very beginning. We were able to cover the costs of hiring a graphic designer, a legal team, some expanded equipment for testing our recipes, and a fair amount of research and development (traveling to visit cideries and attend conferences). We have some investors on board who believe in our business and also see an opportunity to get a good return on their investment. Finally, we are working with lenders who think we’ll be a good addition to their portfolio.

We’re about 85% of the way funded now, which is happening at just the right time to take this show on the road.

The business side of small business ownership may not be as fascinating to everyone else as it is to us, but we’ve found it to be a constant and rewarding learning experience. If you enjoy learning about business startups, here are a few of the resources we've found valuable:

  •  StartUp Podcast -  This podcast follows the ups and downs of starting a business.
  • SCORE - A branch of the Small Business Association pairs retired former business executives with new business owners. Our SCORE mentor has been a huge help to us.
  • Indy Chamber - The Indianapolis chapter of the Chamber of Commerce provides business support as well as networking opportunities with other business owners in the city. 

Here’s to getting fully-funded in the near future and to entrepreneurship!

We Have a Space!

If you’re connected with us on Facebook or Twitter, you may have heard snippets of these updates already, but we wanted to give you a more thorough status update on Ash & Elm. So much of our progress occurs behind the scenes and isn’t necessarily that interesting (submitting multiple tax documents, anyone?), but today, we have some big progress updates to share.

We have a location! I (Andrea) quit my job a year ago because I thought we’d find a location within three months and then get going, but finding our location turned out to be one of the most frustrating parts of our fledgling business to date. We looked many places, talked to many realtors, community development organizations, architects, and business owners, but finally found a spot that is better than we imagined. It’s on the Near-Eastside of Indianapolis, which is where we live and has always been our ideal scenario (Aaron’s commute will someday be a 15 minute walk, as opposed to his 1 hour commute that he’s been doing for TEN YEARS now). We have more space than we need for now, and a beautiful historic building to have a stellar tasting room in.  Lastly, we get to be a part of revitalizing an up-and-coming neighborhood, which is something we care a lot about.

Future tasting room greatness to happen here.

Future tasting room greatness to happen here.

We got the attention of the Indianapolis Business Journal in their Property Lines Roundup, which was exciting, and we had a successful rezoning hearing, getting approval to sell alcohol, food, and have a parking lot. Those in the know about city planning know this was a big hurdle, and kudos go to our landlord and his real estate agent for leading the rezoning charge successfully.

A Word on Alcohol Laws As I’m sure most of you know, starting a business includes a lot of paperwork. especially a business that sells alcohol. We’ve mentioned before that we needed to submit our Federal Tobacco and Trade Bureau (TTB) application, which takes about 3.5 months to process. We got that taken care of exactly two and a half months ago, so we’re hopeful we’ll be approved by the TTB sometime in November.

After that, it’s time to file our State application to the Alcohol and Trade Commission (ATC), which will take about three weeks to be approved. That means, in our ideal scenario, we could be licensed to sell our product by the first of the year. Wow! If you know either of us, you’ll know that – of course – we already have the ATC permit application completed and are just waiting to send it in the second we hear that our TTB permit is approved. We should be able to hit the ground running as soon as we get ourselves legal.

So…when are you opening?  GREAT QUESTION! I wish we knew the answer. If everything goes smoothly, March. If it doesn’t, which is more likely, sometime before June. The best way to stay up to date on our progress is to like us on Facebook or follow us on Twitter, or drive by our location at 2112 E. Washington St and poke your head in the door. :)

We appreciate all of the interest and excitement we’ve been getting from you all, and are excited to share a cider together soon.

What's the Hold Up?

 Things have been a little quiet around here lately. Every time we talk to friends and family who are interested in our business, they ask us what we’re doing all the time. It’s a good question. Here’s what we’re working on, and what we need to get done before we can open.

Priority Number 1 – Location

We’ve been looking for a location pretty much non-stop since November. It’s hard to find a space that’s perfect. We've fallen in love with locations only to find out they won't work over and over again. Often, we feel like we’re on a never-ending episode of HGTV's “House Hunters”.

<Insert narrator’s voice>

“Aaron and Andrea have been looking for a location for their new cidery. Location #1 is on an accessible road with downtown views, plenty of space, and falls well below their budget, but can they handle a building that’s needs so much work? Location #2 offers room to expand in a convenient location in an up-and-coming neighborhood. But the lack of a private entrance and signage opportunities could cost them. Location #3 has everything they’re looking for – rustic character, functional space, and a busy street, but it’s a short-sale. Are they willing to risk their business future by letting the other locations go in their pursuit of this risky venture? Stay tuned to find out!”

<Fade to black>

It would be funnier if it weren’t so accurate.

So anyway, the location is a big issue. We think we’re close to having our location figured out and a lease signed, but until the paperwork has been finalized, we can’t move forward in any of the other areas.

Priority Number 2 – Permitting

Once we have a lease signed, we’ll be allowed to apply for our Federal Tobacco and Trade Bureau (TTB) permit. The application is comprehensive, and once it’s been submitted, it takes roughly 110 days (that’s 3.5 months!) to get our permit granted. Only after we have the TTB permit can we file for our state alcohol permit, and then after we’ve received that, we can apply for our city permit. All in all, the permitting process will take about 6 months if things go smoothly, and remember, we can’t start that process until the lease is signed.

Priority Number 3 – Build Out

Another item dependent on the lease. Once we have a lease and have our permit applications going through the Federal rigmarole, it’ll be time to start building out the space. Some of it will be un-sexy build-out, like getting the HVAC systems up and running, the plumbing and electrical requirements covered, etc. After that, the fun stuff will start and the cidery will really start to take shape. It’s hard to estimate how long this will take because we don’t have access to the building yet to see just what all needs to get done, but it will take at least several months to go from beginning construction to being able to open our doors to customers.

In the Meantime…

So a lot of the above issues are outside of our control. But, we’re still making gobs of cider and would love to share it with anyone who is interested! If you have an event coming up or if you’d like to throw a cider party at your house or business, send us an email and we can talk! So far we’ve provided cider to a nonprofit fundraiser, a wedding, and a medical office grand opening gala.

We also continue to make connections and contacts with people in the industry in Indianapolis so that we’ll be able to hit the ground running when we open.

So if you’re anxiously awaiting updates on our progress, please know that we’re awaiting those updates right along there with you, and probably more anxiously. :) 

Thanks for hanging in there with us and we’ll see you soon!

Copyright Ash & Elm Cider Co.