The rise of the boutique beer market in Australia has seen the emergence of a more discerning consumer – the refined beer drinker.
Gone are the days when Australian beer drinkers conjured up images of loutish men in thongs and singlets, with many beer lovers now prepared to pay a bit more for a premium product.
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Attempting to tap into this trend is Beer Cartel, an online boutique beer retailer that offers brands such as Matilda Bay, Red Oak and The Little Brewing Company.
Beer Cartel was founded in 2009 by Geoff Huens. He talks to StartupSmart about shaking things up in the beer business.
What inspired the idea?
I had the idea probably back in 2005. I’d always had a love for beer and my heritage is from Belgium, so it was either going to be something to do with beer or chocolate.
I went overseas on a nine-month trip through South America and then back up through Europe and I ended up catching up with some cousins in Belgium and a whole world of really good beers came to life for me.
I came back to Australia and I went back to working in research for about a year and then at the end of 2009, I decided to resign from the corporate world and start Beer Cartel full-time.
Why did you decide to start-up online?
The reason we chose that is because it was a good way to test the waters before we invested too heavily into a bricks and mortar premises.
Also, the liquor licensing makes it easier to get a liquor license that way as well. It’s quite restricted because of the potential impact on the community, but it’s quite minimal when you’re only operating online.
It also reduces costs significantly because you’ve just got to build the website and upload all your products. You don’t need a physical shop front where you’ve got to pay for your electricity, your rents and all your other expenses that go along with it.
It was operated out of home for the first 18 months and then just recently we purchased a bottle shop, which is based in Sydney.
How did you go about building up your stock?
All the beers that we sell on the site have to be of a premium quality; they’re not mass produced beers.
They’ve all got to be either boutique beers or pretty hard to find – you may find it in one bottle shop but if you went down the road to another one, you would be unlikely to find it or you might find it in a really obscure place in Australia.
We source a lot from the Australian market as well as distributors and importers that bring in container loads of products from overseas into the country, so we don’t actually import anything ourselves at the moment.
How did you establish relationships with suppliers?
The first key challenge with any small business, when you’re starting out, is getting a bit of street cred with people.
People are less willing to trade with you because you have no prior history in either retail or the liquor industry.
The other thing is that we obviously started on very small orders as well, so a lot of people with their first orders always want COD until they give you credit terms.
We had to build a reputation within the industry that we do stock good quality products, we’re good to deal with, we pay on time and we don’t try and dwindle down people on their price.
Did being online make that easier or harder?
I think most of the suppliers were open to the idea but one of the challenges that they always questioned was how we were going to get the products cost-effectively to consumers’ doorsteps.
An average case of beer is about 15kg and so transporting that is difficult because it’s quite heavy and we’re dealing with glass.
The transport companies tend to increase your costs but you still want to make it a cost-effective price point.
With a lot of suppliers, I went out and personally met with them so they could see what we were trying to do. The majority of them are small businesses themselves so they understand you’ve got to start somewhere to be able to grow, so they’re willing to partner on that aspect.
What challenges do you face with regard to deliveries?
The key challenges are that they can be heavy products, and Australia’s such a big country – we deliver Australia-wide.
So you’ve got heavy products going quite long distance. We use Australia Post and their eParcel system, which effectively means they deliver to pretty much every address in Australia.
In terms of costs, it’s like any start-up – you have to bear the more expensive costs until you establish yourself. Just recently, I was able to renegotiate our pricing structure through Australia Post because we now have the volume.
In the early days, it was about packaging up the product that people are purchasing so that they see the value in it.
A lot of our purchases go through as gifts. When people are purchasing for that, I think they’re a bit more willing to pay that little bit extra to get something that is quite different.
How did you fund the business?
It was a home loan deposit, so I had a house that I was looking at and I put that on hold to be able to invest into the business.
The setup of a website, liquor license, getting everything organised – you’re probably looking at around the $30,000-40,000 mark.
We’re looking to grow by about 200% in 2011 compared to 2010.
How many staff do you have?
The bottle shop came with staff that we’ve kept on, so it’s myself and about two and a half staff.
There are always going to be barriers with people online because some people want to come in and pick up a product or they just want to come in and speak to someone.
Is there anything you would have done differently?
One of our biggest challenges in the early days was the development of our website. We found a reasonably cost-effective provider but it also meant that they took a bit longer than anticipated.
If we were doing it again, we possibly would choose someone else to develop the website or do a bit more investigation into their credibility. While they delivered a really good product in the end, it just took a while to get there.