tv John Mc Laughlins One on One WHUT May 13, 2012 11:00am-11:30am EDT
- bob scully's world show is brought to you by smi-enerpro, the solution in energy optimization. ♪ - hi, this is bob scully, and welcome to another edition of the world show: the smi series. say, how about having a drink after the show? i know i will, and i'll probably be having some pinnacle apple ice wine, not just because it tastes great, but because i know the entrepreneurial story behind it, having met charles crawford, who
started this apple ice winery in the eastern townships up in canada when he became an urban refugee. but getting to the pinnacle wasn't that easy. here he is. charles crawford, a lot of people dream of becoming urban refugees, i.e. having a--buying a farm, sometimes a hobby farm, something nice and bucolic; and a lot of people dream of being entrepreneurs. generally, those two don't intersect--one is lifestyle, and the other one is hardscrabble business--but actually they did for you. how did it start? - well, yeah, in fact they did, they intersected perfectly. i always had the dream of moving out to the country, and an idea to buy a country place, which turned out to be a--what we found was a 430-acre apple farm--turned into our business venture, which eventually became--we started making ice apple wine, but that-- - but first it wasn't that. it was just a nice lifestyle for your kids. - yeah, originally it was. originally we were looking to buy a place in the country, and
the place that we found had this drawback--or an advantage, depending how you look at it--of having this 150-year-old house falling down, this falling down apple orchard, hundreds of acres. so we had to decide what to do with it, so we looked at different op--you know, renting out the farm, having someone look after the apples for us, or doing some transformation. and that was-- over a period of a few months, we finally came to the idea of doing ciders or ice apples wines, and that's kind of how we started, but we started very small, but it came from the idea to move more from a lifestyle point of view than the business point of view. - and that changed your life, because in the first scenario you could be there and have your kids go to school there and so on, but you could hop back into town and maybe do work through your computer or whatever. this is different. this is like enslavement. this is farming, right? this is, uh... - oh, absolutely. it was a real... we originally-- we were living in the city, and we started it part time for a couple years, but after two years--we started in 2000; two years later we said, "wow,
this business is taking off. there's an opportunity to build it and to grow it", but it really needed my full-time attention, so that's when i told my wife that we would sell our house in the city and go out lock, stock, and barrel with the kids. and that was just as they were starting elementary school, but that was always part of the vision for a personal point of view, lifestyle point of view, but also to kind of work full time on the business, so that's what we did. we sold the house in the city, and we moved out in the summer of 2002, really cut all strings, cut all ties, and really made the big leap both business-wise and personally as well. - and when you made the announcement, did she throw dishes at you, or give you a big kiss? what was her...? - there was a couple months of... - dishes? - of dishes. well, you know, at the time, my wife was--it was a bit of an awkward time because she was... gone back to school, was doing her doctorate, and was not employed at the time, so we kind of went there with--you know, it was a bit of a risk on
many, many fronts--financially, personally, and so on. so at the beginning she was not entirely convinced, but i knew that if we were going to grow the business i had to kind of dedicate myself permanently to it, or full time to it. so we did that, and the timing was good--we had two children; they were both starting elementary school, so they were able to go to the local school, and the timing seemed to work well on many fronts, so that was kind of how it worked. - and you never looked back, really. and we will see, you had a whole bunch of difficulties. you stuck with it. so it's a labour of love, and i assume you didn't start with, you know, very intricate market studies and--'cause when something doesn't exist yet, you can't really market-study it. - yeah, well, the idea was to do ice apple wine, which is basically a dessert wine made from frozen apples. so a very specialty product. there were a couple producers that existed, but, no, the market really did not exist. my friends, when we went out there, said, "how big is the market?" and i said, "basically it doesn't exist". and that's, you know, when you're looking at it... - daunting.
- ...from a business point of view, first thinyou look at is market size, and there was no market size. but i had the vision that the market could grow, and i had the vision that we could export the product, and i knew it was a great product. the concept was great, we had tasted some, and people liked it a lot, and, you know, i gathered some friends who were in the wine business, really, before we even made the purchase of the property, to get their opinion. and a lot of their ideas, a lot of their advice and experience kind of helped guide me along the way, and i've kind of kept true to that guidance, you know, almost 10 years later. - and, by definition, since i think it's a two-year process--fermentation and so on--you had to carry the business for at least two years. - yeah. you know, it's over a year before we had our first vintage, and really on average it's a year and a half to two years that we're selling it. so, you know, we purchased in 2000, and it was only towards 2002 we were getting revenues. so, yeah, indeed, there was basically no revenues. we were selling apples because we weren't using all our
apples. now we use all our apples in transformation, but at the time we had a little bit of revenue from selling apples to the local packing facility and so on, but, uh, at the beginning, you're right, there was very, very little revenue. - and i'm just thinking--i'm flashing back to this famous scene that a lot of people will see at christmas on tv: holiday inn, bing crosby is all happy with his hobby farm up in connecticut, and he brings the peach preserves to fred astaire, and they blow up in the dressing room at carnegie hall, or the rainbow room. so did you have disasters? i mean, did you look at your first-- was your first-- very first--bottling a success, was the taste right? i mean, did you miss the train any time? - no, i think in terms of the product we were good, and it turned out very--actually, it exceeded our expectations in terms of the product. what, you know, we didn't realize was how much--to grow the business, how much it would-- you know, we produced 1,500 cases in the first year--very, very small amount of product. and then we
realized it actually sold out in a few months, so we came to the problem of saying, "oh, we're out of product, so what do we do? we have to kind of produce more next year". but because it's a two-year cycle, you have to keep trying to fund that, and so the financing was extremely, extremely challenging the first few years. the more you grew it, even if you were making a little bit of profit, you were sinking much more in terms of--into inventory, so from a cash-flow point of view it was negative, and the bank would only supply so much of that. - 'cause the bank, technically, what did they look at? the receivables? or a stock they could seize--and drink, maybe-- but i mean it wouldn't have been... it's not like seizing real estate, right? i assume the bank was tough with you. - well, they financed--you know, typically in a line of credit they'll finance the receivables, which are, you know, much easier to pledge, and then the inventory, but the inventory at a much smaller level. i don't think i ever got inventory financed over 40%. so,
basically, 60% of the inventory, the majority of it, we had to finance ourselves. so, as we grew the business from 1,500 cases to 4,000 cases, and we moved up to 10,000 cases, there was a lot of inventory to support and having to finance. - and even the receivables are generally not financed at 100% either. - no, they're financed depending on what they are--75 to 90%; export receivables, less. so, you know, that part is--the majority is financed, but the inventory was... it's always the minority in our case because it's really liquid; it's not even finished goods. - and you had to get it into the stores; that's another challenge. no matter how good you are, others are using up that shelf space, so were you nervous? you went cold-calling, door-knocking? how did that unfold? - well, in the beginning we had a store on site, so we were selling on site. that was, you know, small scale, and we were selling to local restaurants. the first production we had, we loaded up the back of the car and went out knocking on doors and introducing the product to restaurateurs. - it's like selling moonshine or mountain dew.
- getting them to try it, yeah. they had no idea what it was, and we got some--fortunately, we had people who liked the product--you know, tasting it was obviously the key-- and supported it. and then eventually we got, at the same time as i made the move to move to the farm, we got a listing with the liquor--the monopoly, the liquor board here in quebec, which is a monopoly, so it covers the whole province, but the listing was the key thing. that was kind of the trigger that said to me that there was an opportunity to build it. - 'cause by then you were still the only one. there was, like, you say, no market; ergo, the minute they let you in, you were bound to have some customers. - yeah, exactly, and we had to build the customers from the ground up. we had to do tastings, we had to do-- the restaurants helped us, they put it on their menus, they did tastings, but we did a lot of very much hand-selling, one on one. i think over the years we calculated we've probably done 3-400,000 individual tastings with people. - wow. holy cow. - so it's a lot of grassroots
type of things. but that kind of built the awareness, got people interested in it, because when you say, "and i sample wine," people say, "i have no idea what it is". it's not like an existing category. so the only way to get people to have an interest is to taste the product, so the tasting is really at the core of building the product. - and do people confuse it-- because it's considered high end. i mean, the packaging is very nice, and i know you recommend having it with dessert. it's like a high-end dessert wine, but people could confuse it with plum wine or berry schnapps and stuff like that, which is kind of, you know, very sweet and not high-end at all, right? - yeah. well, it is premium, and they don't confuse it when the pricing is a little on the high end too. it takes--it's about six kilograms--about 12 pounds-- of apples for one of those half bottles, so it's a lot of fruit, a lot of raw material. it's all natural, the natural cold concentrates the sugar, so it's really a high-quality product that will age well over time.
so, you know, the packaging and the pricing, i don't think people confuse it too much. but certainly fruit wines do have that association, so we had to get over that stigma, if you will, so there was definitely a lot of education, and i think coming back to the sampling, coming back to getting the references--some of the wine critics were important, and the chefs also were important. - yes, now, the wine critics, i'm told, are a coterie. you must have them on side. but then they're like movie critics: they can go to bat for you if they really like you. did that work? - well, yeah, at the beginning that was definitely key, getting some key opinion-leaders. i think in the wine business its opinion-leaders drive a lot, people sort of look for references from experts, because it's a very fragmented thing, there's a lot of different things, there's a lot of knowledge to have, so the wine critics, the chefs, those sorts of people were very much important for us at the beginning, and i think we were fortunate to get them on board. we spent a lot of time making sure they were aware of the product, they were able to taste
it and so on early on. - and i mentioned in the entrepreneurial story per se, you did have your travails, among which: this monopoly we're talking about of all the liquor stores, basically your number- one client, i assume, suddenly goes on strike. - yeah. - let's talk about that. just before christmas, i think. - yeah, it was two years and a bit after we'd moved to the country. we had one product, which was our ice apple wine, we launched a new product, a sparkling ice apple wine, and we had, you know, great hopes for it, and we invested in equipment, and we'd put a lot of effort and money behind a big launch; you know, christmas is the peak time for the sale of a lot of wine and spirits, and particularly our sort of higher-end products, they tend to be much more focused towards christmas or the holiday season, so we put a lot of effort into the promotion of it, and in, i think, just the end of november 2004, i got a call from my sales manager. he said, "oh,
by the way, the liquor board"-- which was the monopoly, which is basically all the stores in the province, which was at that time 95% of our business-- "they're on strike". i said, "they're on strike? ok, well, this can't last for very long, because it's coming up to the holiday season, it's their peak sales. they're going to have to resolve the strike or they're going to lose a huge chunk of sales". so i was optimistic it would last a couple days. and then it would last a week, or a couple weeks. - well, you weren't alone. a lot of drinkers were thinking the same calculus, but... - yeah, i guess people were getting their stuff elsewhere, but for us it was our only source of--really our only source of revenue, or almost all. so i thought it would last a couple weeks, and it went on. i remember being on the chairlift with some friends, they asked me the question. i said, "i just can't believe it. i sold my house in the city, i put everything in it, and now it's all going to fail because of a strike". - you were indeed staring-- you were staring bankruptcy in the face, i guess. i mean, this could wipe out the year. - it could wipe out the year, and literally-- we talked about
having invested in the inventory for the year. from a cash-flow point of view, it was... at that point i was thinking, "i just hope we can make it so my kids make it through elementary school at least". - and what happened? the strike ended... - the strike ended, but what i thought would be a couple weeks lasted... i think almost four months. so we kind of had to batten down the hatches, we had to focus. we were still able to sell direct to restaurants, which we had done in the beginning, so we kind of refocused on that, and then when it ended we had kind of a plan of action to kind of rebuild the market, do some tastings, go out and really do a blitz to get the product back into stores, to get sort of--capture a little bit of what we lost. of course, we didn't make it all up, but we managed to kind of ride out the storm, yeah. - it didn't flatten you out. - no, we were able to ride out the storm. - and since one should learn lessons from every--you know, you get burnt like that--i guess the number-one lesson there would have been other markets. - yeah, exactly. but at the time we were really just in the early
infancy of building the business. we were looking at other markets, and we had just, just started some exports, so that was... after that, i really redoubled my efforts on the exports because in this case it was one client covering--you know, selling most of the product. - yeah, that's always vulnerability in any case. - exactly. that's the definition of business risk: to have one product sold to one client. we had that in spades, so we had started to diversify our products already with the sparkling, but then we kind of diversified our markets, so we started to look at export markets and that's kind of when we-- - mainly the us, or...? - well, you know what, we worked... initially it was actually in asia, believe it or not. we met and we partnered with a cognac company, camus cognac, which is a family- owned... - very famous, yeah. - ...150-year-old cognac company. still family owned, i think the largest that's not part of a multinational--it's still independent. and we met
them at a trade event in the states while we were starting to look at penetrating the us market, but it turned out they thought this would be a great product for the asian markets and would be complementary to their product portfolio. - well, cognac is very popular over there, and i guess this is... it's a cousin. - yeah, exactly. - and you make a brandy too, don't you? - yeah, we make, like, a fortified thing with apple brandy and this apple wine, so it's kind of like a porto-- port-style thing, a fortified drink. but, yeah, so they thought there would be an opportunity in the asian markets. we did a little test market over in--really focusing on the japanese market, and that led to expansion, market by market. they're still our partners today. - and how did you do in the us? 'cause that's a natural market. apples, when you think apples, you think vermont, new hampshire--right next door to your farm, actually. - well, the us has been an adventure for us. we had an importer in the us, our first importer. the us market is fairly complicated in terms of
wines and spirits. it's actually almost a remnant from prohibition, so it's what's called a three-tiered system. so you need an importer, you need to have state-by-state distributors, who in turn sell to either restaurants or to the retailers. so, we had an importer that we had found, and it was actually the same importer as camus. a big national importer, and we were so thrilled. it was just like, "oh, wow. this our gravy train, we have the importer". - homerun. - and they were all very optimistic, very bullish on the potential. we did a national sales meeting with their sales team. there was 50 people; they all got really excited. we put a program, sales incentives together. and a few weeks later, i got a call from the marketing person that was kind of our key contact, and she said, "i have some news for you, and our agency's been sold, our importer has been sold--the company's been sold". i said, "well, that's good. that's ok. who's the new owners?" "well, the new
owners are a european wine company, and they're really interested in just selling their own product, so all the other products that we represent--" - out you go. - out you go. and i said, "well, when will that happen?" she goes, "well, it's already happened. it's effective today". so, we had actually gone through the process of having-- - yeah, that's bad luck. well, like the strike was bad luck. - you know, there's some uncontrollables, and in that case we made a decision to go with one importer. there are other ways to do it where you can maybe mitigate your risk. - mm-hmm. well, 'cause since the market is fragmented, you could follow that. - yeah, exactly. but in this case we had one importer with, on the label, was the name of the imported: "imported by..." and we had gone through label approvals at the federal level, at the state level, so we kind of had to restart on that one as well. - and have you? - oh, yeah, we have. we have another importer. it's a family- owned group, and that's been a couple years, and it's going well. - and have you spawned--i don't know if it was true on both sides of the border that apple wine didn't exist. maybe it did exist in the us, but, in any
case, have you spawned competitors or imitators who have watched you and do the same? - yeah. well, actually, it's become very, very rapid. we've been very successful in growing the category here, from zero to multi-millions in revenues, and so then everybody who produced apples or produced cider, or decided, "hey, we're going to get on that train", so now we probably locally have 40 competitors, i would say. - forty! that's enormous. - a lot of them are very small scale, and we've also got people doing it in new york and vermont, and... - but you're still--at least here, you'd be the frontrunner. - we're the leader, and we're also the leader in other markets as well, but there are definitely a number of competitors. there's competitors that have come up in--i've seen them in europe, in sweden, in germany, and other places. which is good. i think it's actually... in the sense that the category was unknown, so by having... - yeah, people become fans. - become fans, and understand what the product is. we're not the only ones having to educate the market, we're not doing all
the missionary work, so having other players in it, i think, in the end is positive. - and since grapes have good years and bad years, do apples have good years and bad years? - yeah, absolutely, they do. we've had better vintages, and lesser vintages, but the fact that we're blending--we use six varieties of apples. and winemaking, and also in our product, apple bases, by using blends you're able to kind of adjust the mix a little bit. - like a scotch. like a scotch that's... - yeah, exactly, like blended like that. or a bordeaux wine is a blend. and by doing that, if some apples have more sweetness or have more aroma or more acidity, you're able to kind of balance off to kind of get a profile that you're looking for. so, yeah, we're able to control that to some extent. so it's not as widely varying as, say, a single cépage wine would be. but we do have better and less--
- and can you taste it by biting into the apple? i mean, the grape growers begin by tasting the grape even before they ferment them. - absolutely. - can you taste your apple and say, "oh, this is a winner"? - yeah, we know from the weather, first of all. if there's more sun and there's more concentration of the sugars, and so on, we're able to tell from the weather over the growing season. and then by tasting the apple we're to tell that as well. and then we taste the product during its fermentation. in our case, the fermentation-maturation cycle is quite long. it's about eight months long. you know, normally, wine might spend a few weeks in fermentation, so we have a long, slow, cold fermentation process and maturation process. so we taste over that period of time, and then in the end, with the final--we ferment each of the varieties separately, so in the end we're able to kind of adjust and create the profile that we're looking for. - and is it parallel to--with grapes, it's grape juice that turns into wine; this is apple juice that turns into...?
- exactly. it's apple juice, but it's frozen apples, so it's a very concentrated, high level of sugar before fermentation which yields this sweet dessert-style wine. - like port a bit. - yeah, it's a sweet wine a bit in that style, exactly. like ice wines, or sauternes, or any of the other--tokajis--any of the other sweet wines you would find, yeah. - and apples--am i wrong--apples obviously are more sturdy than a grape; therefore, i would assume, you have less falloff from, i don't know, bad weather and so on. i mean, they don't spoil as easily as grapes, i would imagine. i don't know if that's true. - yeah, they're a little more hardy, and you can have total write-offs in grapes. but we'll have higher productions and lesser yields, depending on the year. we probably lose about 30% to ground-falls, and we don't use any of the ground-falls-- - why not? - just because once they fall, we found that they don't have the same taste and profile. they get contaminated a bit by what's on the ground. - you could pick 'em up. you could run around in the morning. don't you pick them up?
- not the ground-- the ground- falls we sell, because they're all handpicked. that's just the kind of focus. any of these products, it comes down to what you start with, the original material. in our case, the handpicked apples are important for us to ensure the quality. so we do have a fair loss, but that's pretty consistent every year. - and would you consider buying other specialty--i mean, growing this country industrially, or is it going to remain...? - well, i think we might, but right at this point, i think we've kind of reached a level that we think is good and is performing. we're not having to grow that inventory every year, so we've reached, i think, a good level. we have other products that we've developed. we have cider made with maple as well. - yeah, that's right. i saw that. - we've developed a maple grove on the--our sugar bush on the property that was sort of abandoned, and we've rebuilt that, so we have some products that are maple-based that we think are kind of interesting as well, so we're just starting into that. so the idea is to kind of diversify the line a little bit, but not
necessarily to-- in terms of our apple production, we're at a level that... - you don't want to be the next seagrams. not just yet. - not yet. - ok. well, i'll help you, though. i'll be having some of this tonight, and, charles crawford, thank you so much. and, of course, to your wife, as well, who's your partner, long life and good luck. - thank you very much. appreciate it, bob. - charles crawford. and, as usual on the smi series, there is a final word. here it is. - i am impressed because it's a guy that you can... that, from what i see, left living in the city to go to living in the country, for whatever reason. he's making a success of something of an agricultural business that is very, very hard. and i think... i do not know his background, but rare
are the individuals that leave and go to the country and want to do... a change in life have the stamina and the strength to not only develop the products and take care of the farm--to do it in a way that conforms to the marketplace is, i think, a great achievement. also, i think he was a good manager of his family situation, since he seemed to have convinced everybody to follow him in this adventure. he became a leader-- i guess the quality of his product. and i guess another issue: being the first, or one of the first, to enter a market is always... if you do the right product at the first time, you take a lead on the competition. so i think that's also part of his success. - charles crawford was our guest this week on entrepreneurs/the