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Slow Brewed

Broken contracts, losing their core brand and needing to replace 60% of their revenue stream could have been daunting for brothers and co-founders of Aces Brew Worx, Dyllan and Lliam Roach. Instead, they chose not to focus on what was going wrong, but rather what was right – and how to use that to full advantage.

Nadine Todd

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Aces Brew Worx has enjoyed 100% year-on-year growth over the past year, which is all the more impressive considering the tough lessons its founders, brothers Lliam and Dyllan Roach, have had to learn over the course of the year – lessons that have necessitated changing the business’s name, and replacing 60% of its product line.

”It’s always difficult navigating a completely unexpected turn of events,” says Lliam. “Luckily, we were working off a strong base. We took a hit, but we’ve recovered well.” Here’s why.

Getting started

In 2008, two things happened to the Roach brothers. First, like many entrepreneurs and employees around the world, the economic crash had a negative impact on their financial situation. But the second thing would be more positive. On a trip to the US, Lliam would be introduced to craft beer, a craze that was starting to take hold in a big way.

“I recognised the elements that would make craft beer a hit in South Africa as well,” he says. “South Africans love beer, but more importantly, they’re increasingly loyal to local brands and businesses.”

He saw the challenges as well, however. South Africans might love beer, but they tend to be very loyal to their brand, and so marketing would be incredibly important. The start-up capital required to set up a micro-brewery is upwards of R3 million, which the brothers also did not have.

The solution? “We began negotiations with Mitchell’s Brewery, a micro-brewery based in Knysna,” says Lliam. “Our focus would be building the brand in Gauteng and the North West. Mitchell’s was doing well in the Western Cape region, but it was unknown up here.”

Negotiations took a year, but the brothers would ultimately become the sole suppliers of Mitchell’s in their area, naming the business Mitchell’s Gauteng – and then the hard work began.

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Slow and steady

“In any sector, you need to understand how the industry works, and how customers respond to brands,” explains Dyllan. “We had R220 000 start-up capital, which basically meant we were bootstrapping the business.”

Because they are competing with SAB and BrandHouse, which both instal taps as a value add at their clients’ pubs and restaurants, the brothers have had to follow suit for each client they sign up.

“When we launched, this was quite constrictive for us,” says Lliam. “We didn’t just need to convince pub owners to stock our product, but we needed to be able to purchase and instal kegs and taps as well.”

It meant growing a consumer base was slow, but the brothers were patient.

“We quickly learnt that this business is all about relationships. It can take months, even years before a pub owner is willing to stock new brands, particularly independent craft brands. Once you understand that there won’t be a quick turnaround though, you can plan for it. We’ve worked hard at fostering relationships built on trust, and always delivering on what we promise,” says Dyllan.

The team has also discovered a talent for introducing and growing new brands, which has played a pivotal role in growing the business.

“We’re at every food, beverage and lifestyle expo, getting consumers to taste the range we offer and introducing them to these great local brands. They’re organic, chemical free, and of course local.”

The slow growth has suited the fact that the brothers needed to invest in each new sale as well. “As cash flow has improved, so we have been able to afford the installation of more taps,” says Lliam. “It’s been slow growth, but very steady, stable growth.”

And of course, the brothers’ original expectations for craft beer materialised – over the past few years it’s become increasingly popular. “We don’t sell budget beer,” says Dyllan. “Craft beer can price anything from R25 to R50 a draft, which means it’s often more expensive than imported beer. The margins also aren’t high, which means we need to focus on volume.”

Within the first year, the business expanded its portfolio to include a range of other brands, including most notably Brauhauss amm dam, Nottingham Road, Standeaven, Aces Brew Worx, Clarens Brewery, Copperlake, De Garve Brewery, and Dragon Ginger Beer. Because of the nature of micro-brewers, many breweries cannot produce in high volumes, which meant the brothers needed a number of brands in order for supply to meet demand – particularly as the business and its clientele has grown.

“By the start of 2013 almost 60% of our sales were still Mitchell’s sales, however,” says Lliam.And then the unexpected happened.

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Learning the hard way

“By 2012 we had substantially grown our client base,” says Lliam. “We had great products, excellent relationships with pub and restaurant owners in our region, and craft beer was steadily gaining traction.

“Mitchell’s had new ownership, and recognised that we were doing well,” says Lliam. “Prices were raised, which we completely understood. The point of sourcing local craft beer is to support local businesses, and the brewery naturally also needs to do well.”

And then the new owners made an unexpected decision: They wanted to start distributing their products directly in Gauteng.

“By mid-year it reached a point where they stopped supplying to us altogether,” says Dyllan. The brothers went from a 60:40 Mitchell’s split, to 100% other craft brands. “We didn’t have a proper contract in place preventing Mitchell’s from stopping their supply to us.”

It meant a massive shift in gears, but the brothers had two very important things going for them: Excellent relationships with pub and restaurant owners, and a number of other breweries already on their books whose brands they had been promoting.

Dealing with the unexpected

“We realised the best thing we could do was be completely honest with our customers. We explained why we didn’t have Mitchell’s in stock, showed them what we did have, and asked them to stay with us. All but two pubs agreed – they saw us as their vendor, not the brand. They like doing business with us. They trust us, and know we offer excellent brands at good prices, and always deliver on our promises,” says Lliam.

The second challenge was having enough product. “We have signed a deal with a local brewery to create our own proprietary brand, Aces Brew Worx, which we own, and they brew under contract for us. We have also sourced a number of other breweries. Most can’t — or don’t want to – upscale, so we need a number of different suppliers to meet our stock requirements,” adds Dyllan.

A true entrepreneur, Dyllan soon saw the revenue stream value in importing dispensing equipment and kegs that the business needed, and created a second business, The Tap Room. “Dyllan found a way to make a business of importing the kegs,” says Lliam. “We recognised there was a market for good quality kegs at an affordable price. The additional revenue of The Tap Room has certainly helped the cash flow during the transition period from Mitchell’s Gauteng to Aces Brew Worx.”

Going forward, the brothers have changed the business’s name and are much more careful about how contracts are created, what they cover and the signatories involved.

“It’s taken us four years to learn these lessons. We lost the brand that accounted for 60% of our turnover, and have had to recover from that. Our own brand, the range of other excellent products we offer and of course the relationships we’ve spent four years building will all play a role in our growth moving forward,” says Lliam.

Next up is growth in Durban. “Relationships are in place and we believe the craft beer craze will take off in that area soon  – and we’ll be ready for it when it does,” says Dyllan.

Vital stats

  • Players: Dyllan and Lliam Roach
  • Company: Aces Brew Worx
  • Est: 2009
  • Contact: www.acesbrew.com

Nadine Todd is the Managing Editor of Entrepreneur Magazine, the How-To guide for growing businesses. Find her on Google+.

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