In 2004, Amy Cartwright delivered 650 kegs of beer to Austin-area bars with her Honda Accord. In the last fiscal year, the craft beer microbrewery she and husband Rob Cartwright founded delivered more than 5,000 kegs.
Their venture, Independence Brewing Co. .Independence Brewing Co. Latest from The Business Journals Beer brewer bottles success Microbrewers lobby state to sell beer directly to consumers’Horns drunk on power, a 9-year-old Follow this company ., has grown to nearly $1.1 million in sales with a profit margin of 11.4 percent, and its production will soon reach capacity. And while they will need to move to increase production, the Cartwrights find themselves more able to meet a daunting new challenge, having learned many lessons while overcoming seven years of entrepreneurial hurdles, including obtaining funding, finding a niche, ramping up production and staff, optimizing distribution and building a brand identity.
Underpinning all those obstacles and influences was a common element of entrepreneur success: “Then, it was just dogged pursuit and perseverance,” Amy Cartwright said.
Money matters
Before anything could happen, they had to secure startup funding. A year was spent seeking an unforthcoming Small Business Administration .Small Business Administration Latest from The Business Journals Titan Bank weighs DFW branchBB&T ranks as top SBA lender in North Carolina in October SBA lending in Hawaii reaches record level Follow this company .loan. So the founders raised $250,000 through private sales of shares.
Having sufficient capital and credit — although at times, barely enough — has been crucial for Independence, particularly in dealing with tasks that invariably turn out to be more difficult and expensive than expected. For example, much of the company’s financial safety net was expended paying rent on its brewing location while a permitting delay held up the start of production. It would have helped to raise more working capital, Amy Cartwright said.
Also, starting its bottling operation required $100,000 and was made more challenging because suppliers provided no terms, instead requiring the new customer to pay in advance.
“You’ve literally got to shell out for everything before you see a dollar,” Rob Cartwright said. “The capital requirements of continued growth are tough.”
Identifying a market
One thing Independence hasn’t been able to do because of state law is sell on-site — as many out-of-state brewers can — as a means to test beers with consumers and generate immediate revenue. As a result, the Cartwrights and their company had to commit and were “thrown into the meat grinder,” Rob Cartwright said.
The Cartwrights determined that the craft beer market featured very little brown ale, and they’ve been able to gain traction by filling a void, Amy Cartwright said.
They identified the top 20 local restaurants and bars they wanted to sell to, visited them one by one and convinced them to stock their beer. They also sought exposure by donating beer to community events.
The next wave of growth came during the second year as they began bottling their beer, in addition to selling kegs, bringing their product to grocery stores and neighborhood markets. That was big in that about 95 percent of consumer spending on beer in Texas — compared with about 90 percent in the rest of the country — is in packaged beer, Rob Cartwright said.
Between the second and fifth years, the next milestone was hiring a full-time staff, while the Cartwrights refrained from drawing salaries to ensure they could pay their workers. The company now has 11 employees, besides the founders. A crucial addition was a dedicated sales person.
“Having somebody really focused on your sales effort was really key,” Amy Cartwright said. That addition, she said, contributed to the company’s first major break in its fifth year, when production, sales and profitability came together.
Brand building through creativity
Typically, a microbrewer will enlist a distributor to increase sales outside the brewer’s local market, but Independence flipped that model around, using a distributor in the local market while retaining distribution beyond it, Rob Cartwright said. The rationale, he explained, is that a market not yet developed is worth less to a distributor. So in Houston, where the company recently expanded, Independence is doing the initial leg work to develop the brand, whereas it considered the brand strong enough in Austin to hand over distribution.
A big part of building its brand is connecting the company’s beers with the story of independence, Amy Cartwright said, which, in turn, gives the company’s employees a concept they can focus on.
Meanwhile, staying competitive in craft beer requires more than business skills, Rob Cartwright said.
“The market now is extraordinarily demanding of continued creativity,” he said. “What is a good India Pale Ale 12 months ago is now commonplace. The bar is constantly moving up.”
Texas intangibles
With 27 million people, Texas has a burgeoning craft beer market, in which Independence’s production grew by 76 percent last year. And behind the numbers are intangibles further spurring the growth of craft beers like Independence’s, such as “an adverse reaction to commercialization,” Amy Cartwright said.
Michael Portman, co-founder of Birds Barbershop .Birds Barbershop Latest from The Business Journals Birds Barbershop set to open 5th store in Hyde ParkBirds Barbershop opening Hyde Park location — blogBirds Barbershop broadens business model Follow this company ., attests to the value of local, having launched a co-branding partnership with Shiner-based Spoetzel Brewery in July. Besides being “able to work with a really pro team that’s right here in town,” he finds a benefit to being associated with local and Texas brands.
“As a Texan, you just root for [Shiner]; it’s like rooting for the Cowboys or the Astros,” he said. “It’s an intangible Texan thing.”
While also benefiting from such Texas intangibles, Independence is focused on the numbers, aiming to attract further investors to enable a 2012 move to a new and bigger brewing site — the next stage in the Cartwrights’ 10-year plan.
“I never expected it to be easy,” Rob said. “But I never fully understood the depth of the hardness.”