Cape Town – Many young South Africans are taking it upon themselves to start their own businesses amid an imminent jobs crisis, but they face one big hurdle: funding.
Fin24 user Mpho's letter seeking advice highlights this problem, along with the challenge of intense competition he has to face.
Mpho writes: “I would like to start my own Vodka brand that will target consumers between the ages of 18 to 35 years old. I have taken time to research the market regarding branding your own alcohol and have noted the market is highly competitive. I would like to get an expert’s advice on how to start my own alcohol brand.
What would I need to give my product a chance in this (competitive) market? Will I get funding from government as they have made it clear in the past that they do not fund entertainment and alcohol driven businesses?
Lastly, what channels do I need to follow to get started and how do I compete with ‘imported’ brands and introduce another proudly South African brand like the locally produced Four Cousins wine brand? Can you please advise on what to do?"
Small Business growth specialist Anton Ressel, who consults for SME incubator Fetola among others, gives advice:
You are correct when you say that the alcohol (and beverages in general) market is highly competitive. You are also correct in stating that most funding vehicles will expressedly exclude any business concepts to do with alcohol, cigarettes, sex or any of the other 'sins'.
This leaves you with two options, in my opinion. Firstly, you can look for a venture capital partner/angel investor to help you fund the development and launch of your product. This would require a very compelling business plan, and all operational areas such as manufacture, distribution etc would need to be in place, at least on an in-principle basis, for any investor to even consider such a venture.
The second option, is to take your concept to one of the existing big brand houses, such as Distell, Brandhouse or Edward Snell & Co. If you can present a compelling argument as to why they should consider partnering with you to develop the product and launch it into the market, this would be a smoother ride as most of these brand houses have existing supplier and distribution resources in place and your time to market would thus be considerably shortened.
In both the above instances, you will need to be prepared to give equity in the business away in exchange for access to capital and expertise. I do not really see this idea working any other way, unless you have access to lots of cash and serious patience.
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