Creating a Cider Business Plan

For this episode I jump into the details of the market research we had to do before starting the business AND walk through how we answered all of those business plan questions in order to build the foundation for our cider company. Let’s go!

MUSICAL INTERLUDE

Jenn - Hello! Welcome to Courage and Other C Words! I’m your host Jenn Root Martell and we are now on to episode 3! I’d like to take a quick moment to thank those who have taken a chance and listened to the podcast so far. I have loved your emails, and your notes of support and encouragement have really been heartening. As a totally new project, I was so excited to see this get off the ground and the fact that you all are enjoying what I have to say and identifying with it is making this all worth it in just such a short amount of time. You all are awesome and thank you so much!

So last time we talked I gave you some background on who I am and why Alex and I decided to jump into the commercial cider world. And, wanting to make cider was of course the easy part. The ideas usually are. It’s implementing them that’s a whole other story. 

For that reason I have enlisted Alex’s help with this episode. Hello darling!

Alex - Hello!

Jenn - How are you doing?

Alex - Thanks for having me. 

Jenn - This is, after all, your story as well, and building out that initial business plan was definitely a joint effort. You also have been listening to me non-stop for the last two episodes so I thought a change of cadence could be nice. So I’m glad you’re with me here today. 

Alex - You’re welcome.

Also in exciting news - for a while there the pod studio was actually exiled to the other room so that I could practice recording because Alex is working from home during COVID. But for today I have been reinstated at my original place - across from Alex at the dining room table. And by dining room I mean more the empty space between the kitchen and the couch. Because it’s the Bay Area and most of us live in super small apartments cause no one can actually afford to own a house here. But we make the best of it. 

For this episode our c word is creation - Creating a business, creating a vision and a plan for that business. I thought it might be helpful to dive into the details of what a basic business plan looks like but specifically, how we personally answered those early foundational questions when starting South City Ciderworks. This could also be helpful, I’m thinking, if you yourself are looking to start a business, but also knowing how a company approaches these different questions tells a lot about how they want to position their both products and their company’s culture moving forward. It can be very enlightening. While researching for this episode I even pulled up a bunch of drafts of our initial business plans. Which I do have to say, I haven’t honestly looked at in several years. Most of it seemed to be pretty on point while other parts were sort of hilarious in the expectations we had for not only the growth of the company and people’s roles. It was great reading. But business plans in general should be working documents - those are documents that are revised and looked at, and adapted to changing climates. I would have to give us a B+/C+ in that area, considering.

So while we were home during the summer of 2013, brainstorming company names and logos as I have already talked about, we were also looking closer at the cider market in San Francisco Bay. Because why would you go through all the trouble to create this awesome product if there isn’t anyone around who would buy it? So that really important question should be your first question - Was there even a market for cider in the Bay? That was something we had to answer. 

So, we jumped into research:

We looked at the shelves mainly - There were a handful of ciders at our local grocery stores. This was not only the brands that we would potentially be competing against but this informed us as to what kind of ciders were out there already and what was selling. 

Of course the main one - Angry Orchard of course was the big seller at that time. Still is.  It really re-introduced cider into the US market. Obviously Sam Adams has a killer distribution network so obviously it was everywhere very quickly.Crispin at the time had just been acquired but still had production in California. In Auburn, right outside the Bay Area. So we still considered it sort of local at the time. The big beer companies had rolled out Smith & Forge was one of them and Johnny Appleseed was one of them. Anything they could do to capture some of that Angry Orchard market share. Oh yes, and Stella has also launched its own brand - Stella Cidre. And as for more local companies - ACE, you’ve probably heard of, that was out of Sebastopol, still is out of Sebastopol, has a wide spectrum of ciders Two Rivers was making cider out of SacramentoTilted Shed and Devoto were more orchard-based ciders out of Sonoma County

So that was just to name a few, do you remember any other ones or anything else in particular about the market at that time? 

Alex - Yeah, I remember looking at markets actually outside of our area. So, looking back at the East Coast and kind of all over the place. I remember spending time looking at Downeast (Boston), Reverend Nats in Oregon or 2 Towns up in Oregon, Bold Rock back in Virginia, Vander Mill in Michigan, Austin Eastciders in, well, Austin, Texas. Because I think for me it was like -  I wanted to see their brand, I wanted to see what their packaging looked like, wanted to understand how they grew. So I was looking at their blogs or finding any articles or pictures of inside to see what tanks and stuff they had to really understand what their market looked like. I think you would find similar markets, or their markets would be similar to the Bay Area.

Jenn - Yeah, sure. Good point. It was actually a great trip down memory lane of the ones who were actually around when we were getting started. A lot of those local cidermakers are now very dear friends.  The community in Northern California is still relatively small even five years later. We support each other and kind of lean on each other when we need to. So that’s really great that all of those ciders are pretty much still around.  

Next, we noticed that there was a lack of cider, Alex was talking about packaging, there was a lack of cider in smaller, accessible packaging. Specifically cider in cans. I didn’t always want the huge wine 750ml bottle of cider since I was usually the only one drinking it. I wanted a 12oz can, in my hand, that I could pop a cider while everyone else was sitting around popping their cans of beer. The craft beer market seemed, at that point, to slowly be moving in that direction, and we liked the idea of a 100% recyclable packaging that we could take wherever we wanted to go. Glass is just not as accessible. 

And then from looking into the potential competition and the state of packaged ciders around the Bay, we basically concluded that there were a few really great ciders out there, but also kind of A LOT of nonsense. We realized that a cider that was approachable, lower alcohol, and focused and did justice to the apple was something that could have a place on those shelves and be super competitive in this market. 

Alex, you’re much more the data/big-picture half of this partnership. It seems like stats on the US market as a whole, not just in the Bay, was also enlightening. Could you touch on that real quick?

Alex - Yeah sure. Again that’s where I looked at two different aspects. So one - I looked at brands that were canning beer. So, you know, Oskar Blues was one of the first ones who said “We’re just going to put our stuff in cans and that’s it”. Cause that really drove saying, OK, can this work in other verticals? Can this work with other products? Right? And the answer is obviously yes.

But the second part I looked at was the cider date. So - Neilson does a bunch of reporting on on- and off-premise for places like grocery stores to understand what’s the sell through-put, what’s moving. You know, back in the day it was beer, wine, FMBs which are flavored malt beverages, and cider. This was before the whole seltzer craze, so, that has its own category now. I mean if you looked at the numbers from Neilson, 2012 saw a massive growth of cider. A lot of that was because of Angry Orchard. You know, Angry Orchard was owned by Boston Beer, AKA Sam Adams, and they really hit the market hard. There are a lot of stories out there about them forcing their customer base to take Angry Orchard if they wanted to keep Sam Adams on. So that was 2012, they grew, they hit the market hard. And then 2013 through 2015 all the small players started to take advantage and grow with that. So if you look at cider in 2012 it was 0.27% of the beer market which now we’re looking at a 1+% so there is certainly room for growth and the craft cider portion of that continues to grow at 20+% a year. So definitely had the weight behind it to say that this  was a market that was going to continue and continue to grow and continue to focus more on craft than the big guys. 

Jenn: So yeah, at the time it seemed like both locally and nationally that there was a viable market an approachable, accessible cider. It needed to be easy drinking, crisp, and refreshing. And most importantly - it needed to be in cans. Smaller cans - 12oz cans. Just keep it simple! Be true to the apple. No nonsense. It didn’t seem that hard. 

This became the driving mission for me - to build a company that would make a cider that I wanted to drink. That was mission critical.  So when we asked ourselves the next most important question - who was going to drink our cider? Looking at who was our target audience? It was super easy - because it was ME! And it was you too.

It was young professionals in their mid 20s to mid-40sThere was disposable incomeWho enjoyed supporting localWanted a cider that could be enjoyed throughout the day without getting a raging headache from all the sugarThey wanted a cider that could be taken anywhere. Which was mainly wherever we could take our dog so that he could burn off some energy - need to be able to go to the beach, on hiking trails, camping. Places where glass should not be going And priced at a point that wouldn’t totally break the bank But also on the pricing side as well, because there is a disposable income there - the target audience understands and appreciates craft and is therefore comfortable to spending a little more at the store knowing that they’re getting a really quality product

That was the person we were selling to. 

And when looking for your target audience it also helps to look at the larger market trends that might be a benefit for your product. And for us at the time, and I think it still holds true, there were actually a few that cider fit really well into:

For one - it’s Gluten Free - That was a huge thing for me personally. I was definitely gluten free at the time. And if made the right way all cider is, is fermentable apple juice.  It’s innately gluten free. So this bodes well for cider as a gluten free alternative to beer. It also works with the paleo diet for whatever that’s worth. I know that’s big with a lot of people. It’s mainly Vegan, for the most part at least  - Sometimes there are some filtration processes that use crushed shellfish. And sometimes there are clarifying enzymes that can use gelatin. But if it’s made basically and made well, then most ciders are vegan. We actually, all of our ciders are definitely vegan save one - which is our Spring seasonal Spider Bites and that’s because we use honey to balance out our lavender infusion and that brings a nice sweeter finish to the cider. Third trend that is still going really strong, especially now in the age of COVID, is the Support Local movement - And this has also helped boost the visibility of small brands like ours. Especially among young professionals, there is this focus on buying locally produced products and supporting those businesses in your neighborhood or town. Mentioning that we’re locally owned and operated is usually the first thing that comes out of my mouth during sales calls, even now. So even five years later I’m still using that has a huge selling point for our ciders. Cause we do really try to focus our sales around the Bay by going very very deep instead of very very broad with our distribution. Really supporting that local movement, we do it as well on our end and I think that has boded really well for selling out cider in the Bay.   

From there, we needed a mission statement. Every business needs a mission statement:

In the market there were already cidermakers who could make those specialty ciders with unique flavor combinations or the use of rare apples. Those ciders you want to take to a party so that everyone can sample them. We wanted to make the cider that you always have in your fridge for a sunny afternoon or after a rough day at work. We wanted to make a cider that made people fall in love with the category and was also a cider that could easily be found where our audience lived. 

Our organizational mission became - To make hard cider that is easy to find, easy to drink, and easy to remember. Simply Head South! (Yes of course… I had to put the south in there) Critical

But as we were building out this founding mission, I noticed that there was something missing. Being part of nonprofits for most of my career, being overworked and underpaid was only acceptable because I believe so much in the cause of that organization. Not having a social mission for my own company seemed very out of character. On top of that, yes money is great and you of course want to make money in the business you build, but that shouldn’t be the only thing driving you. Dedication to the quality of the product was also important but I just felt like we were still a missing piece. 

This is when I remembered Ben & Jerry’s ice cream. Who doesn’t love Ben & Jerry’s? On top of making amazing desert, Ben & Jerry’s is committed to fundraising and supporting local charities and nonprofits - building out a more meaningful mission, with more potential impact beyond the yummy products they create. It is something that is very important and critical for them. And that was my AH HA moment. Another one. Another AH HA moment - We needed to do something like that which is why we also have a social mission that we built the company on. 

The one I wrote five years ago was - To collaborate within the workplace, the community, the region, and the industry to support education, innovation, and growth. And that is very grant speak-y of me to have written. But, basically we built it out even more to focus on giving back to three nonprofits in which we believed strongly. These nonprofits would receive a portion of our revenue every year as a way for us to give back to our community and also engage with it. And that is how we actually implemented that very wordy social mission that we, that I put together. 

The first nonprofit partner will be absolutely no surprise to those of you who know us - the Peninsula Humane Society and SPCA. Our dog Brooks was a rescue when we lived in Virginia and the work that this organization does for the area’s homeless animals and their extensive wildlife rehab program is incredible. The second was also an easy decision for us - I have had several dear family members struggle with addictions and we know that addiction can be a root cause of homelessness. For this reason, we decided to partner with Samaritan House. They provide an incredible suite of support services for the homeless and vulnerable populations in San Mateo county. They also manage a shelter by, right over by San Francisco International airport that is the only one in the county that will take those who are currently inebriated and provide them temporary shelter. That really hit home for me on a personal level and for us on so many levels. 

That was the second one that we decided on and Alex, I think you found the third one? 

Alex - Yeah, 1% for the Planet. So they were founded in 2002 by Yvon Chouinard (sorry I’m going to mess up his name), basically the guy who founded Patagonia the brand and a guy by the name of Craig Matthews. So they built it as a beacon for organizations to give back to the planet. Any company that joins the organization pledges 1% of sales. Now that’s not profits, that’s actual sales. So whether you’re profitable or not you’re still giving 1% of sales back to the organization or organizations that support that cause. So basically they have to be a member listed under the 1%. And throughout the year you basically have to give back or at the end of the year write a check for the remaining amount. I don’t remember when I first heard of 1% for the Planet but I know reading some of Yvon’s books and digging in there I felt kind of a need that we had to do that

Those were our three core partners that we decided to support and we also try to support local fundraising efforts as much as we can and have tried to keep that a priority over the years. Because being part of the community is such a big deal for us, and with not having a taproom, that was at least one way we could reach out and engage with our audience and potential new customers, where they are. 

Moving on with business plan questions - The next one I would say is Internal organization of your business is also critical. Everyone involved should have a clear role in the company and see how they fit into the larger vision of the business. Alex and I were obviously already invested at this point. The original idea was that Alex with all his sales background would be the point for selling the cider into the market and I would focus on making it. However, all that would definitely  change when he returned from a work trip back to Virginia and had caught up with one of our friends there, Greg Ruth.

Alex - Yeah, so I remember when I went we met with some friends at a bar on a Friday night and he came out and ordered a cider. And at that point we hadn’t told anybody that we were heading down this journey or venture on making cider. So I thought that was interesting and then met him actually the next day, we were going to meet a bunch of friends at a bar to watch some football and he and I both got there early. He ordered a cider again, and I ordered one as well. Think they were both Angry Orchard. Yeah he was kind of fed up with his job and looking to leave and said to me “I think I’m just going to quit and move to Scotland and become a distiller’s apprentice” and I held up my hand and say “Don’t go just yet”. In passing he was really interested in what we were doing and changing up that career path. So, it was 10 months later, in October 2014 he packed up from the East Coast, moved across the country, moved in with us and helped to launch the business. 

Jenn: That was great. Greg was an old friend. Looking back at some of those business plan drafts it was clear that I was tasking myself with managing the finances, as far as roles go. Alex was going to oversee brand and logo development and public relations, and Greg would focus on sales and also find events that would be good for marketing. There was also talk, I didn’t realize this until I read it, but there was also talk of getting an office manager at some point which looking back is now hilarious. Because there is no way we could have afforded that. But I appreciated where we were going with it as far as growth.  Also looking through all the tasks that had been delegated, there was one thing that really stood out as being absent. That was PRODUCTION. I don’t know if you remember. I can’t remember what those initial conversations looked like, if we had decided that all of us would do production so it didn’t need to be put in the business plan?

Alex: That’s right. I think that’s what it was. 

Jenn: I think that must have been it? I don’t know. But, needless to say, this was not a perfect document. By a long shot. Though those distribution of tasks turned out to be pretty accurate. Some things were a little different - we didn’t get Alex as often as we wanted because he had to do to his 9-5 to keep the lights on which we were all very appreciative of. Greg and I split up production as needed, and I also jumped into doing sales, which I wasn’t originally going to do. I took over San Mateo county and South Bay while Greg then covered SF and Oakland. We knew for a while it would be just the three of us until we could afford to bring on more help. I’m not sure that was the best idea but it made the most sense at the time and with the budget restrictions that we had. 

So once you get all those roles delegated, a marketing and sales plan is usually the next on the business plan list. I don’t go into too much detail here as I think sales in general is its own monster and deserves its own episode. But we knew starting out that we wouldn’t have a budget for extensive marketing materials, or promotional ads, and or for wide ranging advertising outreach. Since we didn’t have a taproom as we’ve mentioned, our sales strategy had to be what’s called push strategy. We didn’t have a place to pull people into to try out our cider, so we had to go to them. And so, I think, we’ve already talked a couple of times on this episode of going to our audience and making sure our cider was available where they lived. It was sort of the same as that with marketing and sales. With no taproom we turned our sales plan to use the Bay Area as our tasting room, focusing on several different avenues for getting the word out about our cider.

For one - it’s boots on the ground, it’s knocking on doors, Yelp reviewing places around the Bay. And then focusing our efforts on potential customers who aligned with our vision of quality and supporting local. You can usually see that just based on the other alcohol offerings they have on their menu. That really creates an amazing foundation for lasting partnerships. And then, like I talked about with what’s saving during COVID in that first episode is off-premise partnerships. And many of these stores were our first customers and they are still going strong and still supporting us and it’s been amazing. Their focus on quality local products was right inline with what we were selling and it was and still is a mutually advantageous relationship. Focusing on getting our cider on shelves was definitely a priority, and still is. Whether people are buying your product or not, seeing the label on the shelves is priceless marketing and increases the reach of your brand beyond the bar. Just because there becomes a brand recognition. Off-premise accounts also contributed to that founding mission of having our cider as accessible as possible. And getting it to people where they lived and where they shopped.Thirdly, I would say events. Now we all love a good beer festival. Being able to try as many beers as quickly possible in the span of several hours. These types of events are relatively easy to participate in and do provide a really great opportunity for brand visibility with your target audience. Obviously it’s beer drinkers, it’s the people we think would really enjoy our cider. I guess it’s kind of a moot point at this point because of COVID. Not sure what these will look like in a post-COVID world but at least for us, events really helped get us and our cider out in front of more people, more than we could have done through individual knocking on door efforts.

The last piece of the business plan puzzle was always, and still is, a massive headache for me - and that is financing. It is also one of the most important aspects of starting any business, of course. How the heck are you going to fund it. Now there are several ways to go about getting a product-based company started. For cider there are three really distinct ways:

You can build it yourself - build out your own cidery - which requires substantial upfront capital investment in both equipment and in inventoryYou can get your cider custom crushed - which is the fancy wine term for contracting someone else to make your cider while you focus on building  the brand and businessYou can also work with a winery who has that wine license to do what is called an alternating proprietorship where you share the space and the equipment. You make your own cider and build your business that way. But definitely not as much of a capital investment in the beginning. 

All of these have their own pros and cons. We honestly didn’t even think of asking someone else to make our cider. We jumped into the process of building out a cidery. I think, looking back, that was still the best decision because you can control so much more when you do build it yourself. I know this also, as far as financing goes, is more of Alex’s wheelhouse, and has been for the past five years. So, I’m going to give that to you if you could take that away as far as the other ways we were thinking of getting money in those early days. 

Alex: Yeah, I mean, living in the Bay Area you always think there’s always easy money - investment, VC, or angel investing, or any of those things. And for us that’s not really the route we wanted to take early on. I think we were more committed to do this ourselves, upfront. And then once things got rolling and we felt comfortable that the business had some legs to grow then we did do a family and friends investment round. But that wasn’t until 3+ years into the business. 

So yeah, you know, I think budget priorities when you’re looking at starting a company or building out a location to do something it’s first step - to find a location, to find a landlord that’s willing to work with you and rent you a space. Figure out how much it’s going to cost to build out and then double your estimate. And then figure out what you’re going to do about equipment - whether you buy it straight out, or whether you do a lease on it, or whether you do straight up loans on it. So there are a lot of elements to think through on that and that’s all stuff that we decided really to personally finance. We found a great spot to rent. Found a landlord that was willing to work with us. They did the build out with us and then we bought all our equipment on the first step of that journey. 

Jenn: Looking back - bootstrapping the cidery has been a source of pride for both of us. This was something we built ourselves. 

Alex: I’d say pride and a little bit of pain. 

Jenn: Sure

Alex: Because if we had had more money or gone out for money earlier we would have made different decisions and you know, I don’t know if it would have changed where we are today, how big or how small. Certainly things are - hindsight is 2020, right?

Jenn: Sure. Of course, it could have potentially altered that trajectory but you know, some things… 

Alex: Sloped floors… Squeegees work. 

Jenn: We can do a build out episode 

Alex: There you go. 

Jenn: And we can talk about that later.

And there you have it! The founding planning steps and principles for South City Ciderworks. For any business it is critical to assess the potential market and competition, target audience, and potentially advantageous market trends, gotta develop a mission statement, determine the internal organization and roles of all your team members, build out a marketing and sales plan, and figure out how you’re going to pay for all of it. Lots to think about but this exercise is the most important aspect of the business as it lays the foundation for the product and culture you want to create, and the ways you plan to grow your business. Also don’t do what we did and write your business plan and then promptly forget about it. This really should be, and I cannot reiterate this enough, this should be a working document and a continual exercise is revising, fine-tuning, and adapting. We’ve done a lot of adapting over the years but I’d think working off of this document would have possibly saved some of that headache. In any case, having those founding documents to reference is also an excellent chance to look back at how far you’ve come and how much you’ve done. At least it was for this episode. It was very enjoyable actually. So that’s all I’ve got. Thank you Alex

Alex: You’re welcome

Jenn: For your feedback. It was lovely having you.

So do you have any concerns as you’re building out your business plan? Any crazy business ideas you’d love to get off the ground? Send me your story at info@othercwords.com. I’d love to hear about it!

Next episode I’m going to change course slightly to cover the fact that cider is not beer, there is also no such thing as cider beer, and cider is not brewed, it’s fermented. So join me! I will be bringing on our awesome production manager, Alisha Blue, to talk with us as well. She has been with us for just over a year and comes with a rich background of brewing, alongside what she’s learned about cider. We are going to break down the key differences between beer and cider, the production processes that go into making them, the key ingredients, and also some similarities that they do have. 

In the meantime, please subscribe, rate, and review to help out this young podcast! 5 stars goes a long long way and I so appreciate your support. For more information about me and this podcast visit us online at othercwords.com. I’ll talk to you soon! Thanks for listening!