How to Start a Liquor Brand in 14 Steps (In-Depth Guide)

Updated: January 24, 2024

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The liquor industry in the United States is booming, with total retail sales reaching $204 billion in 2024. As consumer interest in craft spirits and unique cocktail experiences grows, there’s ample room in the market for new entrants with creative brand stories and quality products.

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Bringing a new liquor brand to life requires significant upfront planning and investment. From navigating complex regulatory frameworks to designing bottles and labels that stand out, many crucial decisions must be made long before the first case ships.

This guide will walk you through how to start a liquor brand. Topics include licenses needed to enter the alcohol beverage industry, market research, competitive analysis, customer focus, and more.

1. Conduct Liquor Brand Market Research

Market research is a necessity for entrepreneurs looking to start their own liquor brand. It offers insight into the costs of running an alcoholic beverage company, trends in services and products, and local alcoholic beverage competitors. All these details are important for your business plan.

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Some details you’ll learn through market research on alcoholic beverages include:

  • Diversification of the market creates openings for new craft liquor brands in multiple spirit types. However, competition is heating up.
  • Retail shelf space hasn’t expanded at the same pace, meaning new brands must aggressively court retailers and consumers to gain traction.
  • The fastest way for startups to build awareness and trial is through on-premise sales at bars, restaurants, and hospitality venues.
  • On-premise sales only account for 10% of total US spirits volume, yet this channel is vital for validating quality and brand appeal before approaching liquor stores or national distributors.
  • Dedicated customer research should guide critical upfront decisions around positioning, flavor profiles, pricing, and target retail environments.
  • Surveying prospective consumers through blind tastings and preference testing provides unbiased feedback on a potential product’s differentiation and appeal.

Trade interviews with bartenders, brand ambassadors, and beverage directors generate insider intelligence on new opportunities to shine.

2. Analyze the Competition

Vetting the competitive landscape is crucial when assessing the viability of a new liquor brand concept. The first step is identifying direct competition, brands playing in the same spirit type, price point range, and target consumer segments.

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Some ways to get to know about other alcohol brands as you start your own distillery include:

  • For pricing intelligence and growth trends across spirits categories, online tools like NielsenIQ Provide granular brand performance data.
  • Industry reports from IWSR and Statista detail category volumes, brand share trends, and innovation opportunities.
  • Once competitive sets are constructed, qualitative reviews from retail buyers, bartenders, and consumers reveal brand positioning and product perceptions.
  • Trade interviews and blind tastings pinpoint strengths, weaknesses, and unmet needs.
  • Google searches highlight the digital presence and marketing of established brands through initiatives like SEO, social media, and influencer campaigns.
  • Competitor label and packaging analysis uncover common visual identities tied to certain spirit types that should be considered when designing standout branding.
  • Shelf placement tests at local stores assess how easy it is for new brands to gain visibility and trial. Competitive distribution checks expose potential white space regions where demand exceeds supply.

By benchmarking sales velocities, awareness, sentiment, and availability against category leaders, gaps in the competitive armor become clear. The goal is to identify an unoccupied niche in terms of brand image, flavor profile, price point, or target geography that a new liquor startup can step into and own from day one.

3. Costs to Start a Liquor Brand Business

Starting your distillery means encountering costs, both to initiate your brand and to keep it going. Let’s break down some of the expenses you’ll encounter developing alcohol brands.

Start-up Costs

Bringing a new liquor brand to market requires extensive upfront planning and capital investment before seeing any sales revenue. Between licensing, ingredient sourcing, branding assets, and awareness-building efforts, first-year costs often land between $250,000 to $500,000.

  • Product Research & Development – $15,000-$30,000 R&D of ingredients, distilling methods, aging, and blending.
  • Federal and State Licensing – $5,000 Selling and distributing alcohol across the United States requires state licenses for each market targeted, at roughly $2,500 per state.
  • Ingredient Sourcing – $15,000 Liquor brands must source grains, botanicals, barrels, bottles, and other inputs in bulk ahead of production runs.
  • Branding & Marketing Assets – $15,000-$30,000 Bottle and closure molds cost $10,000 each.
  • Website Development – $15,000 An e-commerce-enabled website with SEO fundamentals built-in is essential for early brand awareness and direct sales to consumers ahead of retail distribution.
  • Brochures & Sales Materials – $5,000 Professionally designed sell sheets, brochures, and distributor information packs are expected by gatekeeper retail buyers.
  • Insurance Liabilities – $7,500 General business insurance plus $1 million+ liquor liability coverage is non-negotiable in the spirits industry.
  • Early Inventory Production – $30,000 Whether launching with co-packing or contract distilling partners, minimum order quantities of 1,000 cases are required.
  • Warehousing & Storage – $5/case per month. While aging stock for eventual distribution, offsite storage fees add up. Expect to warehouse at least 1,500 cases.
  • Sampling & Trial Marketing – $20,000 Influencing local trade buyers and consumers to try a new brand takes significant promotion through free drinks, discounts, and experiential events.

Ongoing Costs

Once a brand moves from startup mode to ongoing operations, the above represent mostly fixed asset investments unlikely to require additional infusions of capital.

The two primary drivers of recurring monthly expenses are:

  1. Variable Production Costs: Determined by sales volumes, cost per bottle ranges $10-20 with economies of scale
  2. Distribution and Sales: Distributors average 15%-25% of wholesale revenue, promotional spending also continues

Thus prepared entrepreneurs can realistically budget $350,000-$550,000 for launch through the critical first 12-18 months of liquor brand building. Only with rigorous financial planning and stage-gating of capital deployments can new entrants maximize the likelihood of success.

4. Form a Legal Business Entity

When launching a liquor brand, the legal business structure carrying the most appropriate liability protections and growth prospects must be chosen from day one. The four main entities to evaluate are:

Sole Proprietorship

Forming a sole proprietorship allows branding founders to avoid complex paperwork and legal fees. However, the founder’s assets remain entirely vulnerable should any business liabilities like customer injury lawsuits or commercial lease disputes emerge. Accessing external investments for expansion is very difficult without an official company structure behind the brand.

Partnership

Like sole proprietorships, general partnerships expose the personal assets of their co-founders to risks tied to the liquor brand’s commercial activities. However, partnerships allow founders to split startup costs and leverage shared expertise in finance, marketing, sales, or distilling operations.

Corporation

Establishing a distinct corporation protects owner assets and limits legal liability to the capital invested into company shares. Corporate structures provide the most flexibility for raising investment capital. However, extensive corporate record-keeping, board oversight, double taxation of profits, and dividend rules add administrative burdens unsuitable for early-stage liquor brands.

Limited Liability Company (LLC)

Given high product liability and regulatory complexity in the spirits sector, forming an LLC offers new liquor brands the best of all worlds, personal asset protection, pass-through taxation, unlimited growth prospects, and lean governance relative to corporations.

5. Register Your Business For Taxes

One of the first legal steps for any entrepreneur starting a US business is obtaining an Employer Identification Number (EIN) from the Internal Revenue Service (IRS).

Similar to a social security number for an individual, an EIN serves as a unique numerical identifier the IRS assigns to business entities for tax administration purposes. Even single-member LLCs with no employees require an EIN to comply with federal and state tax filing requirements tied to business income and expenses.

Applying for an EIN is free and can be completed online via the IRS website in just minutes.

The online application asks basic questions about the business entity type, ownership structure, and contact details. Most applicants receive their EIN confirmation letter with the official number immediately. All other requests are issued an EIN via mail within 4 weeks of applying.

With EIN in hand, liquor brand entrepreneurs must next contact their state revenue department to register for key local taxes and permits applicable to alcohol manufacturers and distributors in that region.

These include state excise taxes which must be collected and then paid per gallon of bottled spirits sold, state sales tax permits for handling point-of-sale collection on branded merchandise, and special event permits that govern tastings or experiential marketing.

Though state registration procedures vary, most are also free or inexpensive to complete online. With both federal EIN and state tax IDs established, new liquor brands demonstrate tax compliance during licensing, gain exemption from certain supplier withholding taxes, and can accurately report financials to the IRS and state.

6. Setup Your Accounting

With multi-channel distribution, trade promotions, and alcohol excise taxes in the mix, liquor brands must immediately establish organized financial systems. Sloppy record-keeping risks non-compliance fines or even license revocation for failing to remit taxes on time.

Accounting Software

We strongly advise implementing small business accounting software like QuickBooks to categorize and track every business expense. The software connects directly to bank and credit card accounts to automatically import entries, saving hours of manual entry time. Essential functions like invoicing, inventory management, and tax readiness are built-in.

Hire an Accountant

Supplementing QuickBooks with an external accountant provides expert guidance on capturing revenues, deducting business expenses, depreciating equipment assets, and maximizing tax savings legally. Expect accountant fees of $200-$500 per month for periodic bookkeeping assistance and sales tax filing.

During annual income tax preparation, accountants charge around $1,000 to classify LLC owner income versus distributions, handle liquor excise tax reconciliation, and advise on tax reduction strategies. Worth the price when an IRS audit strikes.

Open a Business Bank Account

New liquor brands must make separating personal and business finances a priority. Commingling personal credit cards or bank accounts with startup costs and operating expenses is a recipe for disaster. The IRS requires detailed evidence proving which purchases were for business purposes versus personal during audits.

Apply for a Business Credit Card

Apply for a business credit card in your company’s legal name with your EIN to simplify the organization. Business cards offer higher limits than personal ones to accommodate big upfront purchases like brewing equipment or glass bottles.

7. Obtain Licenses and Permits

Before selling a single bottle, all alcohol manufacturers and distributors must adhere to strict federal and state licensing requirements. Find federal license information through the U.S. Small Business Administration. The SBA also offers a local search tool for state and city requirements.

At the federal level, the critical permit is TTB Approval issued by the Alcohol and Tobacco Tax and Trade Bureau. The TTB reviews production methods, sources, labeling language, and quality assurances through a comprehensive application process that can take 3-6 months to finalize.

Hefty application fees fund facility inspections and formula reviews before brands receive formal federal consent to bring liquor products to market. However, selling products across state lines without a TTB greenlight leads to confiscated shipments or criminal charges.

In addition to federal clearance, liquor startups must apply for separate state distillery licenses enabling in-state production and self-distribution privileges. On the distribution side, brands must also pursue state wholesaler licenses in any markets where they aim to sell through third-party distributors.

Depending on specific activities like onsite tasting rooms, direct-to-consumer shipping, or event sampling, more county and municipal permits may apply. Common examples include:

Tasting Room & Event Licenses Special permits for serving branded liquor products to consumers onsite or at external marketing events. Can cost over $100 a day.

Common Carrier Licenses For brands managing their distribution vehicles and deliveries to in-state retailers rather than using third-party logistics firms. Requires proof of insurance and vehicle inspections.

Public Venue Licenses Allow brands to freely provide product samples for exposure at concerts, sporting events, and festivals rather than facing restrictions on open container laws.

8. Get Business Insurance

Given the flammable materials and regulations in commercial alcohol production, liquor brands must prioritize business insurance to mitigate key operational risks not covered under typical property or casual policies.

Specifically, there are three exposure areas where uninsured incidents could permanently sink a liquor startup:

  • Product Liability Lawsuits: If a consumer has an adverse reaction to ingredients or contamination issues after drinking a brand’s product, severe bodily injury or even death could result. Multi-million dollar settlements are a possibility without liquor liability insurance at minimum levels of $1 million or more per incident.
  • Equipment Damage or Spoiled Inventory: Whether covering against natural disasters, fires, pipe leaks, or electricity outages in warehousing facilities, commercial property insurance prevents massive financial hits from damaged distilling equipment or spoiled bulk ingredients/inventory.
  • Commercial Auto or Delivery Truck Incidents: When dealing with independent distributors, their insurance policies have sellers covered. But for new liquor brands managing their local deliveries and distribution vehicles, extensive commercial auto insurance is a must to account for at-fault accidents.

The application process examines production methods, facility safeguards, serving procedures, inventory storage, and transportation plans. Coverage levels, premiums, and claim procedures are fully disclosed before signing agreements.

Upon paying the first premium, immediate protection from the inevitable mishaps impacting all emerging wine, beer, and spirits producers kicks in – so you can focus on delighting customers rather than worrying about accidents sinking your business.

9. Create an Office Space

While production, warehousing, and tastings occupy most of a liquor startup’s operations, securing office space plays an important role during launch stages and beyond. Offices allow founders to handle licensing paperwork, plan launch events and hold investor meetings in professional branded environments.

Home Offices

Solo entrepreneurs can save thousands of dollars per year by designating areas of personal residences as deductible home offices. This works during the early planning and development phases. But hosting partner meetings or storage quickly becomes impractical at home.

Coworking Spaces

As team size grows, liquor brands should consider plugging into trendy, affordable coworking spaces like WeWork. Open layouts allow for focused individual work or team collaboration at $300-$800 per desk per month. Amenities like conference rooms, printing, event spaces, and networking are included.

Retail Spaces

Once a liquor brand launches, tasting rooms, and brand-owned stores that put founders and customers face-to-face provide the ultimate brand immersion experience while gathering feedback.

Expect $4,000 per month and up for visible storefront spaces in high-foot-traffic areas. And significant investments in interior buildouts for tasting counters, shelves, and equipment.

Commercial Office Spaces

As national expansion gains steam, liquor brands scaling to dozen-plus employee counts eventually graduate into traditional office setups. Expect transactional business park rates of around $20 per square foot. Space allows the departmentalization of roles into marketing, sales, distribution, and operations teams.

10. Source Your Equipment

Whether opting to contract production or launch an owned distillery, specialty equipment like copper stills, fermentation tanks, bottling lines, and storage barrels represent huge upfront investments for new liquor brands. Here are the best equipment sourcing options to balance quality with cost:

Buy New

In an ideal world, brands would love to purchase best-in-class, brand-new stills, and stainless steel tanks tailored to proprietary recipes and volumes. Many do this by working with equipment manufacturers like JV Northwest and Equip Chef. Expect prices from $20k up to $500k and up for full turnkey packages.

Buy Used

Other liquor startups tight on funding search classified marketplaces like Craigslist and Facebook Marketplace for quality used equipment at 50% discounts. Distiller is an online exchange exclusively for spirits equipment. Patience pays here, vintage copper pot stills do pop up needing some elbow grease.

Lease

Rather than huge outright equipment purchases, leasing agreements allow affordable monthly payments while using gear. Terms like $2,000 monthly over 5 years help ease cash flow until revenue stabilizes.

Rent

Instead of buying or leasing long-term, startup distilleries can rent equipment as needed for periodic production runs. This eliminates storage fees in between uses. Rental specialty sites like Williams Refrigeration connect overstock inventory with excess demand. Useful for limited releases.

11. Establish Your Brand Assets

Beyond liquid quality and packaging, memorable brand building represents the only sustainable competitive edge for new liquor ventures facing off against deep-pocketed giants.

Getting a Business Phone Number

Toll-free numbers lend startup brands instant credibility whether responding to investor inquiries or taking orders from retailers. Cloud-based systems like RingCentral make customizable call routing, voicemail, and call forwarding accessible for $25-$50 monthly.

Creating a Logo and Brand Assets

A logo encapsulates the personality and positioning of liquor brands. Vibrant labels, coasters, and merch help imprint identity too. We recommend exploring basic logo design software like Looka to visualize creative directions on a budget upfront.

Creating Business Cards and Signage

Don’t be the liquor startup that shows up to tradeshows or sales meetings with makeshift business cards. Vistaprint equips founders with 500 high-quality cards for under $50. Retail signage and banners build awareness once open.

Purchasing a Domain Name

Secure matching .com website URLs during entity formation to reinforce the brand – before copycats sneak in. Tools like Namecheap provide domain availability searches and $15 annual registrations.

Building a Website

Outsource website development or easily craft one yourself. Platforms like Wix require no coding for professional templates at $20 per month. Or access thousands of skilled web developers from sites like Fiverr to customize sites from $500.

12. Join Associations and Groups

Instead of tackling every startup obstacle on their own, wise liquor founders surround themselves with communities of like-minded entrepreneurs, industry veterans, and regional support networks.

Local Associations

Area distiller’s guilds offer collective bargaining power on ingredient pricing, share equipment rentals, and even coordinate tourism trails directing visitors between facilities. For example, the New York State Distillers Guild has created a rising tide for all craft spirit producers through strength in numbers.

Local Meetups

Tools like Meetup track professional gatherings, tasting competitions, masterclasses, and networking happy hours where distribution connections happen organically. Conversations with fellow local founders and cocktail bar owners have sparked many distribution arrangements and co-marketing campaigns for leading craft liquor brands.

Facebook Groups

Online communities enable advice access from thousands of fellow entrepreneurs and experts globally. Facebook groups like Distillery Nation compile startup journeys across industries. And niche groups like The Distillery Network Inc. dig into operational problem-solving for rookies and veterans alike via crowdsourcing.

13. How to Market a Liquor Brand Business

Raising awareness and trial for newly launched spirits requires creative, consistent marketing across digital and real-world channels. With limited startup budgets, tactics must ignite organic word of mouth and retail pulls to drive sales velocity.

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Referral Marketing

Satisfied liquor customers become a brand’s best spokespeople when encouraged. Simple tasks like shareable social posts or two-for-one happy hour codes entice consumers to introduce friends for free. Reward top brand advocates with VIP access to new releases and their names etched on signature bottles.

Digital Marketing

  • Google/Facebook Ads – Geo-targeting walk-in/delivery customer conquesting and retargeting drives measurable conversions
  • Instagram Influencer Partnerships – Align with mixologists, bartenders, and party hosts to showcase cocktails
  • YouTube Channel – Build subscribers through tasting reviews, founder interviews, and cocktail demo videos
  • TikTok Hashtag Challenges – User-generated content unlocks viral exposure
  • Guest Writing – Pitch spirits/hospitality blogs and regional outlets for earned media placements
  • Spotify Podcast Advertising – Audio ads enable direct-to-consumer brand storytelling and offers

Traditional Marketing

  • Guerilla Sampling Teams – Dispatch brand reps to engage consumers and give out samples at local summer concerts and festivals
  • Bar Napkins/Coasters – Keep your brand top of mind while patrons imbibe competitor products through branded barware as daily impressions
  • Posters – Tap into local music scene synergies through branded band posters and venue signage where target demographics converge
  • Transit Shelter/Billboard Ads – While lower ROI, outdoor signage raises awareness for commuters and pedestrian traffic
  • Radio Call-in Contests – Align specialty spirit giveaways with lifestyle morning shows popular with listener segments

The most effective marketing frameworks combine digital efficiency with real-world brand immersion to lock down loyal local followings, community buzz, and word-of-mouth referrals. Patiently build an owned audience before chasing paid channels.

14. Focus on the Customer

In an increasingly crowded craft spirits landscape where new vodka and gin options barrage consumers daily, stellar customer service represents the only sustainable edge for startups taking on big brand marketing budgets.

Delivering exceptional experiences during tastings, distillery tours, or even via personalized handwritten thank-you notes in online shipments fosters customer loyalty that pays long-term dividends.

First, delighted patrons drive repeat purchase rates higher through an emotional connection with the founders’ brand vision versus simply rating liquid quality. This lifts lifetime value substantially over one-and-done transactional customers.

Secondly, exceptional service earns customer referrals as sincerity gets recognized organically in conversations with friends planning birthdays or weddings. Enthusiastic brand advocacy remains the most valuable marketing asset.

Finally, customers turned brand champions will gladly engage across digital and social channels through reviews, check-ins, social shares, and user-generated content given their affinity developed onsite. This acts as a referral force multiplier while validating quality cues for prospective new buyers.

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