In the last post, we talked about how there were some unintended consequences of releasing our cider in cans. After a year of canning - exposing more folks to our cider and growing our sales - we realized that we’d been losing money because having our cider available in a package format affected people’s purchasing patterns.
After taking some time to check our work and make sure it was really true, we had to jump into action to stop the bleeding. These are the steps we took to turn things around (and, spoiler alert - we did! Things are going great! Phew!)
We bought a canning line ASAP - I mentioned last week that canning lines are super expensive. That’s for the big guys that do the work for you. If you get an old, used, manual canning line, you can find them for a lot cheaper. We found one of those canning lines for $10,000 from Northern Indiana and snapped it up quick. Once we cleaned it up, replaced some parts, and got it running, we made twice as much on each can of cider than we did before (remember, before was a negative number. So…this sounds wildly better than it really is. But, from -$.05 per can to +$.10 per can is a huge swing when you sell a lot of cans!).
This was the biggest and most important change we made to fix our situation. However, a manual canning line is exactly what it sounds like: a human being stands in one spot and literally fills each can by hand. In one minute, it takes two people to package 8 filled and sealed cans of cider. It takes three people a full day to package 100 cases of cider. For comparison, when we had the mobile canning people helping us, it took three people one hour to package 100 cases.
Around the time we started using our new canning line, we had a big, organic jump in sales. A great thing! But instead of using that canning line once a week or so to maintain our supply, we use it 2-3x more often. So, while getting it was transformational and 100% the right choice, it is a temporary solution. We need a bigger line already so we can keep pace with our growing sales.
We adjusted our pricing structure. Introducing our cider in cans led to several of our accounts switching from our cider on draft to carrying it in cans. In an effort to encourage folks to keep buying draft cider we actually lowered the keg price so it would be the better deal.
As a quick aside about that point I just made - it wasn’t as simple as just saying, ‘Hey, we’re lowering our prices!’. We had to think really carefully about how to send out that message and what unintended consequences it might have. It might make an account feel like they were getting ripped off the previous few years and leave a bad taste in their mouth. It might make them think we’d secretly switched to lower-quality ingredients. Plus there’s the whole thing about leaving money on the table - if people were willing to spend this before, why accept less? We finally decided honesty was the best policy - we told folks that instead of pricing our cider per ounce regardless of the vessel, we are adjusting our prices to hit a specific profit margin. It seemed to go over well and made them feel like they were getting a great gift (which they were! Cheaper cider!)
We Released Draft-Only Options. One of our mistakes on the distribution side was putting everything we offered on draft into cans. In other words, for every possible cider available to a bar or restaurant, they could get it in either kegs or cans. But one thing that we knew and somehow didn’t think about enough is that bars like to rotate their tap handles ALL. THE. TIME. Even if they have a draft line dedicated to cider (not that common), they never want to put the same one on twice. I suppose we thought that having 4 flagships and one seasonal at all times would cover our bases for the rotation issue, but it turns out that bars really love limited edition, specialty kegs that ONLY THEY can get. Which…I don’t blame them. But we didn’t prepare for that. So, looking to 2020, we are going to be continuing our very popular Cider of the Month Club, where we put a new cider out in our tasting room for one month only, and set aside 5-10 kegs for accounts that want the special stuff. We’ve dipped our toe into this already, and have started getting more and more requests for these specialty ciders, so we’re making it an official thing next year. If an account wants a special cider they can get it! But only on draft.
These three changes really worked. We still sell way more cans than draft cider to accounts, but we aren’t losing our draft accounts any more. We’re selling way more cider in cans, and now, instead of losing a bit of money each time, we’re making a decent profit margin each time. We also have a path for how to continue making upgrades to our production equipment that will continually bring the costs down of getting our cider out the door, so our profit margins will continue to go up without increasing the price.
Owning a business has been a really interesting experience, and I’m sure it will continue to be. What seems so obvious at the time (buy the dang canning line!) takes a lot of waffling to get to. And what seems unimaginable (lower prices to make more money!) can be the ticket to profitability. We’re still figuring it out, but this experience was really helpful. It was a chance to do some real-time, high-stakes problem solving, and at least for now, we’ve solved the canning problem. Onto the next!
