Introduction
On behalf of the iStill Team, I wish you a Happy New Year! May all your dreams come true. In good health. Achieve your personal and business goals, as well as your good intentions.
Here’s my take on the state of our industry. What challenges face us? How do we translate threats into opportunities? Why do I expect the Golden Age to start and what will iStill’s role be? Let us dive in deeper, as 2023 might well become a truly amazing year …
Challenges
Inflation is high, so consumers have less money to spend. Interest rates are high, making investments in new business opportunities more costly. Energy and grain prices are up significantly, impacting production costs and profit potential.
The distilling industry, craft as well as Big Alcohol, is affected particularly hard by the above challenges. Lower demand plus higher investment costs plus rising production costs do not sound like a Golden Age is eminent. But it is. At least for iStillers.
Understanding the difference between commodity, luxury, and premium products
To make opportunities out of challenges, it is important to understand the difference between commodities, luxury items, and premium products. Commodities are goods needed for a basic level of existence or survival. Bread, meat, electricity, gas, vegetables, and housing are all examples of commodities. Commodity goods are relatively price-inelastic. We need them, so we’ll continue buying them with the money we have left, even at higher prices.
Luxury goods are products or services we want but don’t really need. They make life nicer, but they are not essential to our survival. In a downward economy, where people have less money to spend, most will spend more money on the now higher priced commodities at the expense of luxury goods. Luxury is about faith and, as the overall sentiment in the market is becoming more negative, trust in the state of the economy negatively affects luxury goods disproportionately. Put differently, luxury goods are very price-elastic. With less money around, much less luxuries will be sold.
Premium goods offer better quality, or materials, or services, or a combination thereof. Premium products are called “premium”, because people want to pay a premium price for those higher-quality products. Especially in times of economic contraction, premium products flourish, because if someone can spend their money only once, well, then it better counts. Premium goods make life easier – and that’s appreciated at times when life is becoming harder. In economic terms, premium goods have a reverse price-elasticity: the more expensive money becomes, the more the focus will be on purchasing “premiums” at the expense of “luxuries”.
Effects on Big Alcohol
Big alcohol produces bulk spirits at low prices. Their products are as close to a commodity as alcohol can come. I therefore expect Big Alcohol to be relatively okay. There are challenges, yes, but the economies of scale and associated low production costs make their spirits the “go-to” place for everyone that needs a drink.
Traditional craft distillers
Traditional craft distillers produce small-batches of expensive spirits. The quality struggles to reach the level of Big Alcohol, while the production and marketing costs are about double. Traditional craft distilled spirits are luxury goods. The goodwill factor of the consumer is what drives most of their sales (“this is locally made, so let’s give it a try”). With faith in the economy taking a down-turn, the traditional craft distillers will face hard times in 2023 and beyond. I expect a substantial amount of them to be pruned away.
iStillers
iStillers have the ability to produce high-quality, premium spirits, at a lower cost price than traditional craft distillers. Premium always sells, since people – with money being more expensive – want quality products and services rather than mere luxuries. I therefore expect iStillers, that focus on delivering premium products to customers, to do well. Especially as there will be less competition from traditional craft distillers, which opens up marketshare, and because iStillers can establish a bigger value-gap to the spirits made by Big Alcohol than traditional craft distillers can, allowing for a higher selling price per bottle.
iStill
More than any other supplier to the industry iStill has been able to deliver premium products, materials, and services to the market. We are the only one to sell automated equipment, that is able to produce high-quality spirits reliably and repeatably. Our mashers, fermenters, and stills come with 10 year warranty. We don’t just sell a product, but also educate our customers and help them develop award winning spirits. Where the Corona Crisis grew our market share from 15 to 35% globally in just two years, the oncoming recession will only see more distillers choose for iStill. You simply cannot beat our numbers: 70% lower costs on energy and staffing, and 100x more control over flavor consistency and quality. In fact, I wouldn’t be surprised to see iStill become the new norm in distillation technology in the coming few years, replacing most of the copper pot and plated still technology that is currently being purchased by 60 to 65% of the starting distillers.
Towards a Golden Age
The challenges, that the industry faces, provide us with this simple yet massive opportunity: as the luxury products of traditional craft distillers get pruned away and Big Alcohol spirits are mostly considered commodities, we can finally create a craft distilling industry that delivers on premium spirits. If you have an iStill and a focus on bringing premium products, services, and experiences to your customers, you – as an iStiller – can grow your marketshare, your turnover, and your profits. Not in face of the recession, but because of the recession. Why? As mentioned before: premium goods sell at a premium, especially in times when there is less money to spend and people want to spend it wiser and better.
Our support to your success
Of course, in 2023 we’ll keep on innovating on our disruptive distilling technology. We have some amazing developments coming up. Even more good news: our prices will remain the same for this year. Also, we are dedicated to further broaden the services we offer via the iStill University, iStill Laboratory, and our Recipe Development Department.
We’ll keep on fighting the fear, uncertainty and doubt which is spread by the so-called “consultants”, that restrain our industry. We’ll keep on calling out the BS propagated by too many self-proclaimed “industry experts”, that look to make a living at your expense via the spread of non-sensical information. We no longer support the tradeshows they organize to promote their services.
The new year of 2023 will also see us break the monopoly on information, which the “consultants” and “experts” and their tradeshows have put in place. How? Via more research in the iStill Laboratory. Via more posts on the iStill Blog. And via the release of more videos on iStill TV.
Any other good intentions, Odin? Anything else iStill wants to disrupt in the new year? Yes, on an industry level, I expect us to disrupt both the old boys network, mentioned above, and the award industry. Here’s how and why:
We’ll introduce a charter of industry watchkeepers; people who make our industry a more vibrant and empowered market place. Being appointed a Watchkeeper is both an acknowledgement of your positive impact in the past, and a responsibility to help distillers in the future. To call out what’s wrong and help amend it. The Watchkeepers Charter aims to develop practical peer-to-peer consultancy and expertise. An alternative to the current industry-wide infestation of self-serving consultancy, provided by clowns that never produced a drop in their lives.
Secondly, we are working on a scientific measurement and scale for award recognition. The current medal competitions are profit centers. Arbitrariness at best, and money spend on the “right” consultant at worst, decide on who wins medals. Medals you pay for! We find that unacceptable, both ethically and from a professionalization perspective. Awards should be given based on objective criteria. Awards should be accompanied by feedback that helps the craft distiller improve his spirits. The alternative we are working on aims to address both issues.
In summary? In summary I feel confident that we can wish you an amazing new year. You are iStillers. You are the future of our industry. And we are here to help make distilling easier. For 2023 and beyond!
At your service,
Dr. H.E.J. (Odin) van Eijk, MScBA, etc.
Founder, owner, and CEO of iStill – Distilling made easy
http://www.iStill.com
The iStill Blog 