ALCOHOL MARKETING AGENCY

How much does it cost to launch a new beverage brand?

How much does it cost to launch a new beverage brand?
March 1, 2023

Well... It can vary widely depending on numerous factors, including the type of drink, bottle or can chosen, the country and local laws, your strategic vision as a brand owner, planning horizon, and many other variables.

As a professional beverage marketing agency, we understand the importance of conducting thorough research before launching a new beverage brand. Whether you are an investor or an entrepreneur, your bottom line will ultimately determine the success of your venture. However, determining the cost of production is not always an easy task.

There are numerous factors that can impact the cost of producing a beverage, such as the type of ingredients used, packaging, labeling, and distribution. As such, it is crucial to have a clear understanding of the market and industry trends, as well as the costs associated with each stage of the production process.

To help guide you through this process, we have put together this article that can be used to estimate the costs of producing your beverage. This will enable you to determine the feasibility of your concept and make any necessary adjustments before going to market. By conducting this research now, you can avoid the disappointment of investing time and money into a product that ultimately fails to generate a profit.

One common mistake we see among new beverage producers is a failure to consider the profit margins. It is not enough to simply produce a product that you believe is unique and desirable. You must also ensure that there is a sufficient margin between the cost of production and the selling price to make a profit. We often hear from small distributors who have purchased cases of a new drink that they are struggling to sell. In many cases, the issue is that the cost of production was too high, leaving little room for profit. This is why it is so important to research the costs of production ahead of time to ensure that there is enough margin to make the product financially viable.

Another common mistake we see is new producers being taken advantage of by suppliers who overcharge for ingredients or other aspects of production. Without a clear understanding of the costs involved, it can be difficult to know when you are being overcharged. That's why it's essential to do your homework and learn as much as you can about the beverage industry, market trends, and production costs.

RESEARCH

Research can take on many forms, including reading informational resources, evaluating statistics, conducting field research, examining store shelves, and analyzing marketing strategies. By conducting this research, you can answer key questions that are essential to the success of your drink concept.

One of the most critical questions to answer is whether there is a place in the market for your product. This requires evaluating your competition and identifying any gaps or opportunities in the market. Additionally, you need to determine the profit margins for your product and understand how much retailers and distributors are making. Freight costs, distribution plans, and sales strategies are also essential components to consider.

As you progress through the development of your drink, you may find that you need to make changes to ensure a profitable business model. By conducting research early on, you can anticipate potential issues and plan accordingly.

We recommend conducting a variety of research methods to get the most accurate and complete picture of the market. This includes field research, conversations with retailers and distributors, and analyzing sales data for similar products. By gathering as much information as possible, you can create a meticulously planned product with a clear plan for distribution, sales, and marketing.

Conducting research is crucial to the success of your beverage brand. By thoroughly evaluating the market and your competition, you can make informed decisions that will ensure profitability and long-term success. If you're looking for a marketing agency to do research for you, get in touch with our team.

COST OF PRODUCTION

Understanding the cost of drink production is critical to determining the viability of your beverage concept. Without knowing the costs associated with producing your drink, you won't be able to determine if there's enough room for profit margin to ensure your success in the market. Here, we'll go over some of the primary components that factor into the cost of drink production.

First and foremost, you'll need to think about the physical components of your drink, such as the container, top, labeling, and ingredients. The type of container you choose, whether it's glass, plastic, or aluminum, will have an impact on the cost. The top or cap, seals, and additional safety or freshness seals will also add to the overall cost. Labeling is another essential component, and you'll need to consider not only the type and size of the label but also any design or artwork costs involved with hiring graphics professionals.

Of course, the ingredients and flavors that make up your drink will be the cornerstone of your product, and the costs can vary significantly based on your choices. It's crucial to do your research and determine the most cost-effective options without sacrificing quality.

Once your drinks are produced and bottled, they'll need to be packed for transport and distribution. This includes packaging bottles into cases, boxing or wrapping those cases, and bundling them into pallets for shipping. Each of these components will add an additional cost to the overall production expenses.

It's also essential to consider the bottler's fees. While many people assume they need to set up their own bottling facility, outsourcing production to a co-packer can be a more cost-effective option. Co-packers are bottling facilities that handle different lines of products for other companies. Each facility has unique processes and packaging options, and you'll need to work with them to ensure your product specifications are met.

Understanding the cost of drink production is just the first step in bringing your beverage concept to market. From there, you'll need to consider the costs associated with sales, marketing, and distribution. However, by doing your due diligence and researching the costs of production upfront, you'll be better equipped to determine the viability of your product and make informed decisions throughout the development and launch process. At our beverage marketing agency, we're here to help guide you through every step of the way and ensure your product's success.

WAREHOUSING & LOGISTICS


Failing to flesh-out these costs could spell disaster for your drink before it ever reaches store shelves. It's important to note that once your drink is produced at the bottler, it cannot stay there. You will incur additional costs for warehousing your drink as it will not go straight from the bottler to the distributor or retailer. Warehousing involves a number of costs that will affect your specific warehousing costs, including material handling, equipment, employees, racks, rent, and space (number of pallets).

We recommend outsourcing your warehousing as this is a significant cost that can easily be overlooked. Don't let the lack of attention to these costs ruin your chances of success.

The expenses associated with moving your product from point A to point B is known as transportation costs. These costs are highly dependent on the quantity of product being transported and how frequently the transportation occurs. While it's important to accurately estimate transportation costs, it's equally important to keep them flexible, as unexpected changes in trucking and transportation costs can add up quickly. To get an accurate understanding of transportation costs, you should consider all the little costs that can be easily overlooked, including shipping costs for mailings and sample distribution. For example, while sending out a few single samples may not be expensive, sending out multiple cases to each distributor can get costly. To create an accurate business plan, it's important to consider all of these transportation costs.

SALES

Now it's time to move on to what are called Point of Sale (POS) costs. POS costs are everything you need to communicate effectively and efficiently with your consumers. This includes your sales materials, manufacturing costs, in-store advertising and marketing, sales costs, slotting costs, and other expenses such as websites, distributor expenses, incentives, and third-party logistics.

Sales costs are the expenses associated with getting your new beverage brand into stores or other selling venues and then getting it sold. The costs involved in sales can vary depending on the type of sales channels you use to sell your product. While many beverage brand owners think of sales costs as the expenses associated with maintaining sales representatives who sell their product, there is more to it than that. When starting out, you may not have a sales representative, or you may have one assigned to you through a distributor. In either case, you will need to provide sales materials and marketing support to the representative, as well as an incentive to motivate them to sell your product.

Incentives are often overlooked by new beverage brands, who assume that the sales representative will simply do their job. However, sales reps usually sell other products as well, and they will focus on the products that are most profitable for them. Offering commissions and incentives for a certain amount of product sold can encourage the sales rep to push your product and lead to increased sales. Neglecting to offer incentives could mean that your product is left in the trunk of the sales representative's car while more profitable products get their attention.

Sales costs involve more than just sales reps and marketing materials. They can also include expenses such as slotting costs for premium shelf space, website creation, distributor incentives, and retailer incentives. However, these costs must be carefully planned for in order to ensure the profitability of your product. Incentives can boost sales and encourage sales reps, retailers, and distributors to work harder to promote your product, but if you are too generous or fail to accurately calculate the profit margin, there may be no profit left to be made.

Similarly, slotting fees can be a valuable investment for getting your product into major grocery chains, but they can also be an unreasonable cost that your new drink cannot support, particularly if your profit margin is slim. It is important to assess the market before considering slotting fees or attempting to enter large retailers, as these stores can be difficult to break into and require a large amount of cash flow to manage their receivables.

Slotting fees can be beneficial for many drinks, but before considering them, it is essential to evaluate whether the market is worth the investment. It is a common misconception among those entering the business to believe that large retailers are the ideal places to sell their products. However, this thinking is flawed due to two significant problems: difficulty in getting into large stores until sales have been established and the need for significant cash flow to support large vendors' receivables. Additionally, being in big stores may not always be the best option for new drink products.

As a professional drinks marketing agency, we have the expertise to help you navigate through these costs and determine the most cost-effective approach for your drink product. Partner with us to ensure your drink product is poised for success from production to POS.

PARTNERS

To create a cost-effective drink production strategy, it is crucial to delegate different aspects of production to appropriate facilities and professionals. Throughout the drink development and production process, many outside sources are needed for supplies and production, including flavor and ingredient houses, packaging and graphic designers, bottle and package suppliers, bottlers, warehouses, distributors, sales representatives, and retailers. Understanding this and performing an accurate cost analysis will enable the creation of realistic costs and expectations while simultaneously saving money by placing drink production in the hands of professionals who are better suited for the job. Ultimately, outsourcing and relying on partner companies will yield significant dividends.

SO HOW MUCH WILL IT COST ME TO START A BEVERAGE BRAND?

Developing and producing a new beverage brand can be an exciting and potentially lucrative venture, but it is important to consider the costs involved before jumping in headfirst. In this blog, we will take you through the process of production and discuss the various outsourcing resources that you will need to utilize to bring your drink to market.

The first question on every aspiring beverage entrepreneur's mind is likely "How much will it cost me to launch my own beverage brand?" The short answer is that the ballpark figure we use for a beverage brand production is between $6 and $11 per case for a product case of 12 drinks 1L each (NOTE: all numbers in this article are very average and can vary widely from country to country).

To get a rough estimate of your costs, you will need to multiply this figure ($6-11) by your run size (the number of cases in the production run). For example, if your run size is 10'000 cases, your production costs will fall somewhere between $60'000 and $110'000.It is important to note that this figure only covers the actual production and filling of the product. Before you can even think about filling cans or bottles, you will need to purchase them from a separate facility or supplier. Once you have purchased 8'500 cases of bottles or cans (the average minimum order), you will need to have them trucked to the bottling company where your ingredients will already be waiting.

This is where the first discrepancy in costing comes in. You now have 8'500 cases of bottles, but the bottler will only require you to fill 5'000 cases in each run. You will need to decide whether to fill all 8'500 cases or store the other 3'500 cases for the next time.

Once you have filled your 5'000 cases with your product, you will need to account for the cost of your ingredients and raw materials. To get the cost of your first production run, you will need to multiply this figure by 5'000 and add in the cost of your additional 3'500 cases of unfilled bottles. This will give you a rough estimate of the amount of money you will need to invest in your production.

It is important to remember that this estimate only covers production costs. You will also need to account for research and development, sampling, labels, POS materials, sales sheets, websites, marketing and other expenses. It is crucial to accurately calculate all of these costs to avoid any surprises down the line.

To keep costs at a reasonable level, it is generally advisable to go with 10'000 cases for your production runs. While there are occasional bottlers who will produce less than 10,000 cases, this can have an adverse effect on your budget due to economies of scale. By starting off with a reasonable production cost, you will be setting yourself up for success in the long run.

ADDITIONAL COSTS

In addition to production costs, there are a number of other factors to consider when developing and producing a new beverage brand. Research and development is a crucial part of the process, as it allows you to fine-tune your product and make sure it meets the needs of your target audience. Sampling is also important, as it allows you to get feedback on your product before it goes to market.

Now, let's discuss these additional costs in more detail.

Research and development: This cost includes the expenses associated with creating and testing the recipe for your new drink. It can also involve market research to determine if there is a demand for your product and if it can compete with existing brands. The cost of research and development can vary widely depending on the complexity of the drink, the level of innovation involved, and the resources available to you. It could range from a few thousand dollars to several hundred thousand dollars.

Sampling: Once you have a drink recipe you're happy with, you'll want to get it in front of potential customers. This means creating samples to give away at events, to distributors, and to retailers. The cost of sampling can vary depending on the size and frequency of events, the amount of product you give away, and the method of distribution. It could range from a few hundred dollars for a small event to tens of thousands of dollars for a large-scale promotion.

Labels: Label design and printing is an important part of creating a successful beverage brand. Your label is your product's first impression and it needs to be eye-catching and informative. The cost of label design and printing will depend on the complexity of your label design, the printing method used, and the quantity of labels you need. Expect to spend a minimum several thousand dollars on label design and printing for your initial production run.

POS materials: Point-of-sale materials are the signs, displays, and other marketing materials used to promote your product in stores. The cost of POS materials will depend on the number and type of materials you create, as well as the stores you want to place them in. Expect to spend several thousand dollars on POS materials for your initial launch.

Sales sheets: Sales sheets are used to pitch your product to distributors and retailers. They should include product information, pricing, and other details that make it easy for buyers to make a decision. The cost of sales sheets will depend on the design and printing costs, as well as any fees associated with distribution.

Website: In today's digital age, a website is a critical part of any new business. Your website should include information about your product, its ingredients, and its benefits. It should also make it easy for customers to purchase your product online. The cost of website development will depend on the complexity of your site and the resources you have available. Expect to spend on website design and development from a few thousand US dollars to $35'000-50'000 (in case you're looking to create one of the best websites in the industry).When you add up all of these costs, you can see that developing and launching a new beverage brand can be expensive. However, it's important to remember that these costs are investments in the success of your brand. If you can create a high-quality product and effectively market it to your target audience, the returns can be substantial.

IN CONCLUSION...

The cost of developing and producing a new beverage brand can vary widely depending on a number of factors, including the complexity of the recipe, the size of the production run, and the marketing and promotion strategy. By utilizing outsourcing resources and carefully planning for all of the associated costs, you can develop a cost-effective strategy that maximizes your chances for success. Remember to factor in all of the additional costs associated with research and development, sampling, labels, POS materials, sales sheets, marketing activities and website development, and be prepared to invest in your brand for the long haul.

To produce and launch your beverage, the minimal cost will be around $60'000 to $110'000, which depends on the size of the run, ingredients, and additives used. It's important to understand the big picture and all the small and unforeseen costs to prepare for a successful product launch and sustainable future. Now that you have this information, you can use it to factor into your planning as the brand developer. Costing is all about planning and making decisions that make sense for you, the consumer, and the retailer.

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