THREE GRAD­U­ATES, TWO BREW­ERIES, ONE DREAM

NZ Business - - CONTENTS - GLENN BAKER IS EDI­TOR OF NZBUSI­NESS.

Par­rot­dog is a tale of three uni grad­u­ates named Matt – Matt Kristof­ski, Matt Warner and Matt Stevens – who pur­sued their pas­sion for brew­ing beer and are to­day backed by a com­mu­nity of loyal sup­port­ers.

Par­rot­dog is a tale of three uni grad­u­ates named Matt – Matt Kristof­ski, Matt Warner and Matt Stevens – who pur­sued their pas­sion for brew­ing beer and are to­day backed by a com­mu­nity of loyal sup­port­ers. Glenn Baker has their story.

Many peo­ple might think you’d have a screw loose to pass up a per­fectly good ca­reer in ac­count­ing or law to chase a dream of es­tab­lish­ing and own­ing a beer brew­ery.

Par­rot­dog’s three Matts – Kristof­ski, Warner and Stevens – cer­tainly had their share of doubters, but that’s ex­actly what they ended up do­ing.

When Stevens met Kristof­ski and Warner, he was a char­tered ac­coun­tant work­ing for Deloittes and they were study­ing law and com­merce at Welling­ton’s Vic­to­ria Univer­sity, as well as turn­ing out a very cheeky home brew.

They jok­ingly called each other ‘dog’; and yes, there was a pet par­rot.

Kristof­ski and Warner held “par­rot­dog home brew tea par­ties” in their flat and asked Stevens to help them form a com­pany.

The brand name stuck – Par­rot­dog Brew­ing Limited was formed in 2011 and the three grad­u­ates found them­selves in busi­ness to­gether. Six months of contract brew­ing fol­lowed.

Win­ning the Peo­ple’s Choice Award at Beer­vana cat­a­pulted Par­rot­dog’s now flag­ship ‘Bit­ter­bitch’ brew onto the mar­ket. It was time for the three Matts to make the hard de­ci­sion on whether to make brew­ing their life or just a hobby.

As it turned out, the de­ci­sion wasn’t that hard. Things were al­ready on a roll – a 290 square me­tre shed was rented in Welling­ton’s Vi­vian Street and a loan was raised.

Stevens quit his job and on Fe­bru­ary 1st, 2012, the three ea­ger grads all turned up for work at their very own brew­ing com­pany.

They didn’t waste time get­ting prod­uct to mar­ket – and with out­put run­ning at around 2000 litres per week Par­rot­dog was earn­ing enough to pay the Matts a mod­est in­come from day one.

For the next four years the com­pany grew quickly on re­tained earn­ings and bank debt – tripling fer­men­ta­tion ca­pa­bil­ity and grow­ing to ten staff, of­ten work­ing dou­ble shifts on bot­tling days.

But the site was far from ideal and it be­came ob­vi­ous that to up-scale the busi­ness and be­come a na­tion­wide, suc­cess­ful brand they would have to shift to a new site.

A search for new premises in Welling­ton spanned 18 months and they looked as far away as Up­per Hutt. The plan was to in­clude an on-site bar and take­away.

They also knew that to pro­vide enough scale they would re­quire fresh equity, and they be­gan weigh­ing up the ben­e­fits of crowd­fund­ing against pri­vate in­vest­ment.

“We re­alised that our con­sumer prod­uct was so re­lat­able, and knew that crowd­fund­ing would work so well,” re­calls Stevens. “We knew that peo­ple were so pas­sion­ate about our prod­uct and would want to come on board.”

The site they set­tled on is lo­cated just one build­ing off the beach­front at Lyall Bay, and it in­cludes a large bar that over­looks the brew­ery (plus at­tached smaller gar­den bar area), a take­away and ad­min ac­com­mo­da­tion.

“We knew it would be the home of Par­rot­dog for many years to come and pro­vide a great life­style en­vi­ron­ment for the whole team.”

PledgeMe was the equity crowd­fund­ing plat­form that res­onated the most, says Stevens (the word ‘equity’ mean­ing in­vestors ac­tu­ally own a small share of the com­pany). What fol­lowed was a truly re­mark­able fund rais­ing ef­fort. The goal was to raise $1.2 mil­lion – enough to fi­nance the brew­ery move and buy some up­graded brew­ing equip­ment. But $2 mil­lion, the max­i­mum al­lowed un­der crowd­fund­ing leg­is­la­tion, would buy com­pletely new equip­ment.

There were al­ready 4000 peo­ple fol­low­ing the PledgeMe sales cam­paign be­fore it launched in Au­gust 2016 – and such was the de­mand when the green but­ton was pushed, that the web­site ini­tially crashed.

“We raised half a mil­lion in half an hour and a day later we had our $1.2 mil­lion,” re­calls Stevens. “We par­tied hard that night, and af­ter 48 hours we’d raised the full $2 mil­lion. At the time it was the fastest, largest crowd­fund­ing equity raise in New Zealand.”

The suc­cess­ful fundrais­ing trig­gered a crazy two year whirl­wind of projects to de­velop the busi­ness, he says, in­clud­ing a new 5,000-litre brew­house, new larger fer­men­ta­tion ves­sels and a Euro­pean bot­tling line.

A sec­ond equity raise in De­cem­ber 2017 raised an ad­di­tional $1 mil­lion for build­ing the bar with a commercial kitchen and in­stalling a new can­ning line.

“There has been a huge ex­port de­mand for cans,” says Stevens, “par­tic­u­larly through Coles in Aus­tralia.”

He re­mem­bers Par­rot­dog’s share­holder bar open­ing night on April 12th 2018 – af­ter which he drove home to his preg­nant part­ner, who pro­ceeded to go into labour the next day and give birth to their first child at two am the fol­low­ing morn­ing! “It re­ally has been a crazy ride!” Stevens de­scribes Par­rot­dog as a “widely held pri­vate com­pany”, and the three direc­tors work hard to keep share­hold­ers re­warded with ‘perks’ and dis­counts and up to date with de­vel­op­ments. This com­mit­ment is per­haps best il­lus­trated by an en­tire wall of ‘per­son­alised beer han­dles’ that greets pa­trons in the bar.

They’re also grate­ful for the ser­vices of the lawyer they en­gaged who was a pi­o­neer in the crowd­fund­ing space and knew how to in­cen­tivise share­hold­ers to be an ac­tive part of the brand and the com­pany.

LESSONS LEARNT

Matt Stevens ad­mits that sales and dis­tri­bu­tion has caused a headache or two along the way. Switch­ing from a third party dis­trib­u­tor back to man­ag­ing their own sales team proved to be the right de­ci­sion, al­though a de­gree of sales mo­men­tum was lost head­ing into last sum­mer af­ter mak­ing the switch.

Now hav­ing their own pas­sion­ate team of reps out on the road pro­vid­ing di­rect ac­cess with buy­ers is prov­ing to be a win­ning strat­egy, he says.

Other busi­ness chal­lenges in­clude the usual con­stant grind of man­ag­ing cash­flow and bal­anc­ing in­ven­tory lev­els, as well as plan­ning a steady sup­ply of raw ma­te­ri­als in what can be a volatile mar­ket sec­tor.

“We’ve also gone from an in­dus­try that had just three brew­eries 20 years ago to one with 150 brew­eries to­day,” says Stevens. “Try­ing to at­tract and re­tain tal­ent ex­pe­ri­enced in this in­dus­try is very dif­fi­cult. The num­ber of can­ning and bot­tling lines in the coun­try has ex­ploded over the past five years, and there’re not enough skilled peo­ple to run all the new spe­cialised equip­ment out there.”

AWARDS WON

Win­ning Cham­pion Brew­ery Awards at the Aus­tralian In­ter­na­tional Beer Awards (AIBA) helped build Par­rot­dog’s re­la­tion­ship with the Coles su­per­mar­ket group, and cre­ate aware­ness across the ditch. There has been a New Zealand Brewer’s Guild 2018 Cham­pion Brew­ery award too – and Stevens says all their awards serve to af­firm that the qual­ity as­pect of their brew­ing and pack­ag­ing is on point.

Win­ning three gold medals and two tro­phies in the New World Beer and Cider Awards also had a pos­i­tive im­pact on dis­tri­bu­tion reach within the trade – es­pe­cially New World dis­tri­bu­tion.

Suc­ceed­ing in awards such as the Malt­house West Coast IPA Chal­lenge, which at­tracted en­tries from 27 brew­eries this year, was es­pe­cially sat­is­fy­ing and helped garner re­spect and ‘ku­dos’ from peers within the brew­ing com­mu­nity, says Stevens.

Mean­while New Zealand’s beer in­dus­try con­tin­ues to ma­ture. Stevens doesn’t be­lieve the sec­tor has reached “peak good beer”, and there is more po­ten­tial for growth.

He per­son­ally be­lieves the mar­ket will split into two dis­tinct packs: • Those that will in­crease their econ­omy of scale, but with a qual­ity

prod­uct. The bar­ri­ers to en­try will get in­creas­ingly higher and it will re­quire in­fra­struc­ture, the right equip­ment and skills. Par­rot­dog is well-spec’d in this space, he be­lieves, and well po­si­tioned to ex­pand pro­duc­tion on a lower cap­i­tal ex­pen­di­ture. • Those smaller brew­eries that come un­der the ban­ner of ‘hy­per­local’ or ‘mi­cro’ – small provin­cial brew­eries that dis­trib­ute lo­cally and of­fer a de­gree of life­style liv­ing, but have low over­heads and/or full re­tail mar­gin on less sales vol­ume. Op­er­at­ing in the mid­dle ground be­tween the two packs would be a scary place to be, he says. “That’s why we made the in­vest­ment to op­er­ate at the higher level and play with the big­ger brands.”

AD­VICE GIVEN

It’s not nec­es­sary to rein­vent a prod­uct or in­dus­try to be­come a suc­cess­ful en­tre­pre­neur, be­lieves Stevens. “Just do some­thing re­ally well (in an in­dus­try you’re pas­sion­ate about) and fo­cus on qual­ity,” he says.

“What we’ve learnt at Par­rot­dog is to just be gen­uine in all that you do. “A lit­tle bit of our naivety has just been in fronting up and say­ing we don’t know ev­ery­thing (on dis­tri­bu­tion), but we’re keen to learn. We’ve had a lot of high-level buyer sup­port as a re­sult of that at­ti­tude,” he says.

“Then there’s the age-old ad­vice around sur­round­ing your­self with good peo­ple and em­pow­er­ing ev­ery­one around you by pass­ing down re­spon­si­bil­ity.

“Re­alise too, that you can’t make ev­ery­one happy. And it’s bet­ter to pri­ori­tise your im­me­di­ate is­sues rather than waste your time try­ing to please all peo­ple.”

Stevens is grate­ful for the sup­port they’ve had from fam­ily, part­ners, share­hold­ers, staff, and “every­body who drinks our beer”.

PROD­UCT EX­PORTED

It’s fair to say Par­rot­dog had two at­tempts to crack the Aussie mar­ket. The first at­tempt while still at the old brew­ery failed due to limited ca­pac­ity and lack of re­sources. How­ever, in pulling back out of the mar­ket, they did re­tain their Coles contract (now two years old).

Now with ev­ery­thing un­der the one roof at the Lyall Bay premises and its new can­ning line putting out three brand new SKUs, they’re much bet­ter set up to suc­ceed in the Aus­tralian mar­ket. The Coles part­ner­ship now rep­re­sents a large chunk of Par­rot­dog’s busi­ness.

The re­la­tion­ship with the su­per­mar­ket net­work has suc­ceeded with­out the need for on-the-ground rep­re­sen­ta­tion, and it goes with­out say­ing that the beer has been well-re­ceived by Aussies.

Par­rot­dog’s fu­ture is look­ing ex­cit­ing, with lo­cal sales ex­pected to build over sum­mer and stronger ex­port sales pre­dicted (they’ve just pushed the ‘Go’ but­ton on a ‘trial’ en­try into the UK, through the NZ Beer Col­lec­tive and are con­duct­ing due dili­gence on a key Asian mar­ket). The busi­ness is no longer ex­posed in any one area of its op­er­a­tions.

Kristof­ski, Warner and Stevens all feel the brand is now in a unique and sta­bilised po­si­tion – be­ing, as Stevens puts it, “the only in­de­pen­dently-owned brew­ery with sig­nif­i­cant scal­a­bil­ity un­der their roof”.

With no contract brew­ing in­volved they have ab­so­lute con­trol over qual­ity, scal­a­bil­ity-speed and prod­uct con­sis­tency in the mar­ket. Hav­ing their own sales team also means greater con­trol over dis­tri­bu­tion, with a lot of prod­uct now de­liv­ered di­rect.

Staff num­bers now to­tal around 28. They’re a long way from their home brew­ing days.

FU­TURE SE­CURED

Look­ing back – yes, there have been lessons for the three Matts, not least of which those around dis­tri­bu­tion in the early days be­fore they took con­trol back. But there have been great times, and fun times, too.

“The mile­stones have been ab­so­lutely con­stant,” says Stevens. “Build­ing both brew­eries, turn­ing on the can­ning line, open­ing the bar. There have been a lot of happy times.

“My ad­vice to any young en­tre­pre­neur who’s about to launch a busi­ness ven­ture just like we did is to sur­round your­self with busi­ness part­ners who love what you do just as much as you do ev­ery day. And make sure ev­ery day you have a laugh.”

And get­ting back to Par­rot­dog’s fu­ture, Stevens refers to 2018 as a “re­set year”, with the sales-team fully mo­bilised from March, a ton of prod­uct devel­op­ment car­ried out over Win­ter, and the bulk of the hard work be­hind them.

Now they’re look­ing for­ward to a “peak sum­mer” and they’ve never been bet­ter or­gan­ised or cap­i­talised.

“The goal is to grow the busi­ness in a sus­tain­able and prof­itable way, achieve wider dis­tri­bu­tion and in­crease ex­ports,” says Stevens.

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