Dan Rowell serves as Vermont Hard Cider Company’s President and CEO. He grew up picking apples at a local orchard in Lebanon, New Hampshire, which sparked his lifelong interest in cider. He joined the Woodchuck ranks in 1996, helping to grow the company from an operation being run out of a two-car garage to a nationally recognized brand. Dan also serves on the board of the United States Association of Cider Makers. He lives in Addison County with his wife and two kids, playing an active role in family and community events around Middlebury, Vermont.
Note to readers: Each of these monthly interviews will feature a craft beverage maker who has achieved success on a large scale and is willing to share the hard-won knowledge and real-world experience he or she has garnered along the way. Any growing brewery, cidery, distillery, or winery owner or producer will benefit from insight and advice from industry pros.
This installment features Dan Rowell. The following interview has been edited for length; a more complete transcript is available as a free download and a full recorded version is available via free podcast.
You went from being the COO and CFO of Vermont Hard Cider Company (VTHCC) to taking over the CEO position in early 2014. When you first stepped into this role as the CEO, what were you most focused on?
Dan Rowell: My main focus was on changing our company's mindset and culture. We've always been a pretty conservative, reserved, quiet company.
When I took over, there were hundreds of players in the category, both large and small. I really wanted us to get a little more vocal and a little more boisterous. Be proud of our heritage. We've been doing cider for twenty-four years. We're the experts in the cider industry. We've spent years trying to convince retailers to carry a cider. Our success woke up the big beer guys. Now it's a genuine category.
In the same year that C&C purchased VTHCC, MillerCoors purchased Crispin, and Sam Adams introduced Angry Orchard. What were you thinking when all of this happened?
DR: Within a year of that, Budweiser came in with Johnny Appleseed. Miller with Smith and Forge and Heineken with Strongbow cider. In about a year-and-a-half period, all the big beer companies got in.
What was I thinking then? I knew they would spend millions of dollars on advertising. I think they spend over $100 million dollars on TV between the four or five of them. That's a lot bigger than my budget, that's for sure.
I (also) knew that they would get distribution and displays and bring awareness to the category and bring new consumers into the category. I welcome them coming in and bringing awareness to the category.
What predictions did you make about the business at that time when all of those big plays were taking place?
DR: I knew the business was going to grow. Not that long ago, cider was 1/10th of 1% of the beer market. That's like the solar energy of energy. I knew it was going to get above 1% of the beer market within the next couple of years. That has come true. I also speculated that it would continue to grow double digits until we hit about 5% of the beer market. I think we're on that path. It's becoming a legitimate category.
Right after C&C purchased VTHCC, that's what enabled you to build your second facility, a $34 million facility. What did you learn throughout that process that you can share with us?
DR: It takes a lot more time, energy, and planning than you would ever think. It took us three years in planning and about two years to execute it.
We wanted to build a facility dedicated to making the best quality cider and the most innovative ciders in the world.
Our old cidery really did not have a tasting room or any way to interact with our fans. Now we have a fantastic tasting room. Our facility is set up for tours, so you can walk safely on a mezzanine through and see the cider being fermented, being blended (and bottled.) It really allows us to get closer to our fans because our fans are as passionate about cider as we are. We feed off of that.
Has there been one piece of equipment or one vendor that you've worked with throughout the years that's been critical to your success, would you say?
DR: Our bottling line has got a Krones filler and labeler. Most of our products are in bottles, so then that's probably 80% of our production. They were very critical. The lines that we get from Krones allow us to package our cider very efficiently with all of the safe-keeping controls in place. For us, efficiencies are key because when you spend $34 million on a facility, you need to put a lot of cider through it to pay for it. Efficiencies are the key, and Krones has done a fantastic job with us.
80% of the product that you package is in bottles. How do you see cans taking shape for the cider industry in particular, if at all?
DR: It's a significantly growing part for us. We do sell some of our stuff in cans, and we're starting to do more and more in the can as consumers are demanding it. It really started to take off in the craft beer industry four or five years ago. I think today's consumer now accept cans as a container that can contain great liquid. It's going to continue to grow.
How do you see the smaller producers impacting the growth of the cider category?
DR: I think it's going to be a big impact. I think today's consumers want to know where their products come from. If they're small local producers, it's very easy. You can go down and visit them.
Some of the larger craft guys, they wonder is it a real cider from a real cidery, or is it a cider coming from a brewery? I think regional players in are going to be a bigger part of the industry going forward just because the consumers want to know more about where their products are coming from.
You’ve mentioned that competition has forced VTHCC to get creative, playful and add more SKUs. What type of planning goes into deciding what your next SKU will be?
DR: It's a team effort. We've got a group of people here from different functions of the organization that meet periodically and brainstorm about different ideas. We get ideas from everywhere we can whether it's from our cider makers, ourselves, employees, fans. We talk about the ideas, and we whittle them down to a few to focus on. Then we let our two cider makers do their experimentation.
Last year is we had a ‘Be the Cider Makers’ contest within our organization. 50% of our employees participated. They submitted their samples and then our cider makers did blind taste testing and picked the winners. A saleswoman was one of of the winners.
One question that I always think about a lot is how tax rates impact a company’s decision to release a certain product. How does VHTCC take that into consideration?
DR: We need to put on our business hats and look at the costs of making that product. At the end of the day, our biggest driver in what goes to market or not is the quality of the product. We do have to make a profit on it, and taxes can play a big role.
Most cider is taxed at 22.6 cents a gallon. Once you add a fruit other than apple, it gets taxed at a higher rate of $1.07 a gallon.
If cider goes over a certain carbonation level, which is lower than what most beers are, then it gets taxed as a champagne. It goes to $3.30 a gallon. Clearly the higher CO2 is cost prohibitive.
What advice would you give to smaller producers who might struggle in the early days with knowing exactly how many different SKUs to release as they're growing?
DR: For me, the focus for the smaller producers should be making the best quality cider you can. I would keep it limited to just a couple of styles. By keeping it to just a few styles, it lets you focus on quality. When your core consumer base grows and your brand is established, then I think you can play around a little bit more.
Woodchuck had two styles for the first six or seven years it was in existence. We had amber which is the original one and then 802 which came out about a year after amber. Then in about 1997, we came out with our Granny Smith cider, which is our first and only varietal cider. We've really only expanded our line-up in the last five years or so.
Sometimes I feel like you can get pressure from distributors a little bit. What's next, what's new, what's coming? It's hard to balance that with production capacity and really not having that testing ground quite yet to be able to judge what's okay to release at a specific time.
DR: You really need to establish your brand first. I think this happened with wine coolers way back when. It used to be that people identified with named wine coolers. Then there were so many different flavors and styles, people started to identify with just the style. Now you're competing on who can come up with the newest style first. I would much rather compete on the quality of the Woodchuck name and the brands and get that established first. Then you can play around.
In your opinion, is there any secret sauce or science to selecting the right apple?
DR: For us, I think we find cider is a combination of art and science. We feel that most of the time you need a blend of apples, so it isn't any one specific. As I mentioned before, our Granny Smith is the only single variety cider that we do. All the others use blends.
For us, at the end of the day, it's still a personal decision. We like to try different blends. We taste them and go from there. Don't forget the taste changes pretty dramatically during fermentation, so don't underestimate how important that part is.
So many of our readers in the early days almost wear CEO, COO, and CFO hats. I was a little curious to learn about some of the lessons that you've learned in each of those roles.
DR: For the CFO, you need to have a seat at the decision-making table. Most entrepreneurs will say, "Don't let the accountants run the business." I agree with that statement, but I also say, "But you need to listen to them." You need to understand what the long-term goals of the company are. Then you need to put in place the financial resources and the plans to achieve the goal. Because if the goals are to grow exponentially at all costs, you need the capital to grow. If your goal is to make the highest quality cider and that's it, then maybe you don't need all those facilities, to spend all that money. It will come organically.
For the COO, quality and safety are essential. Without them, nothing else matters. The COO should also be involved in the business strategy decision-making. I've always took the attitude of how do I achieve this goal, and what resources do I need.
If somebody came to me and said, "We need to be in cans," my answer would never be, "We don't have a can line; we can't do it," or "We don't have the space."
What I would do is I would go out and do some research and find a line that can fit in our facility. Then I would sit down with the CEO, the CFO, and other management, and we'd say, "OK, do we have these resources? Are we willing to use these resources to achieve this goal?" If these answer is yes, you get it done.
I didn't know this about VTHCC, but the company was pretty much at the point of bankruptcy when HP Bulmer's was involved. Bret Williams, former CEO, and the company's first hired salesperson bought the company and then turned it around. How did he do it?
DR: Without getting into too much of the details, Bulmer's built an infrastructure for a company in the US that it just couldn't sustain. They had a build-it-and-they-will-come strategy. They really upped the size of the company, added a lot of overhead, added a lot of sales people, spent a lot of money on marketing over and above what the volume could sustain.
When Bret got an investment group together and bought the company, the first thing we had to do was to resize the company to make it profitable again. Go back to the basics. We cut back on a lot of the marketing spending and really refocused a lot of that money on going directly to the people and trying to get them to try cider for the first time. Once they did, they were a fan. Then we just repeated that and repeated that and repeated that. That's why we had over ten years of double-digit growth. It wasn't overnight.
Producers reach that critical juncture where they need more help. They can't do all the festivals, and talk to consumers all by themselves. They need a salesperson. What advice to you have for brands who have reached that point and need to get full-time feet in the street?
DR: I think the most important thing is hire people who are passionate about your product and hold the same beliefs as you. If they don't have the same passion and dedication that you do about your product and the same love for your products, it's going to show. They also need to make sure that they understand what the company's goals are. Keep things simple for them. Don't just let them loose and say, "Go sell.” You really need to tell them where you want them to target first.
Have there been any mistakes that VTHCC made along the way that you wish the company would have done differently?
DR: Absolutely. The biggest thing I've learned is sometimes you get what you pay for. Sometimes a cheaper price tag up front does not always mean less expensive. When you buy a piece of equipment and you compare from one vendor to another, if one has got a significantly lower price tag, it may be because it's lower quality. People forget about utilities and maintenance costs. Sometimes if you go cheap early, it can cost you more in the long run.
When you're young and small and struggling, you have no choice. If it's all you can afford, then that's what you got to do. If you have the financial strength, you really need to look long term.
How big a part of building a brand these days is creativity?
DR: Yeah. I still think focus on quality. Make sure your brand is the best it can be or your products are the best it can be. You need to be creative to get noticed.
We just said we're going to create one series of ciders called ‘Out on a Limb.’ The outer box and the six-pack carrier stay the same. What goes into the bottle and the label on the bottle change roughly every couple of months. Mr. Retailer and Mr. Distributor, all you have to do is order ‘Out on a Limb.’ It's going to stay the same as far as you're concerned, but every sixty days or so, we're going to change what's in there. That has revolutionized how we can get our product out to the consumers in a much more efficient way.
It's working pretty well for us. We're still trying to educate some of the retailers and distributors on how that works. It's nice that we don't have to go back and say, "Next month, we're coming out with our ‘Oopsy Daisy,’ so now you need to make sure you got rid of all your ‘Chocolate Raspberry.’ Then two months later we're coming out with this they just say give me whatever you've got out on the floor," and it goes out. That has been a pretty creative thing that we've done recently.
The last and final question I always like to ask relates to naming of something. Given the fact that the name of our website is The Equipped Brewer, what does being equipped mean to you?
DR: To me, you need to know what your goals are, and you need to know what you want to be. You have to be able to visualize where you define success and where you think your company belongs. You have to put a plan together to achieve those goals, but you have to be ready for changes in those plans and embrace the challenges. For me, if you're passionate about your business, and you have the gumption to face the challenges ahead of you, you'll succeed. You're equipped.
The more planning you can do, obviously, the better, but to me, it still comes down to a willingness and a passion for your product and a love for what you do. Then you're equipped. You'll succeed.
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