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Entrepreneurs
Business Observer Wednesday, Nov. 25, 2009 8 years ago

Bang the Rum

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An accomplished executive has pumped nearly $1 million into a quenching entrepreneurial venture since leaving the corporate world. Now he's on the cusp of a recession-laden risk: Will he find customers?
by: Mark Gordon Managing Editor

Troy Roberts made a solid six-figure annual salary in the 1990s while working for an international software and information technology firm.

But even as he was crisscrossing the globe for 10 years running a $350 million unit for Compuware, Roberts, who grew up in Sarasota, longed for something more. “It was a lot of fun for a while,” says Roberts, “but I learned I like working for myself.”

He also learned that he wanted to get behind a product he could see, touch and smell. Something he could make from scratch. And he wasn't going to find that in software and information technology.

“I wanted something tangible and scalable,” says Roberts. “Something that I could hold in my hand and put on a shelf.”

Roberts, 45, found his answer in a bottle of rum. At first, actually, he thought the answer was in a rum cake he enjoyed baking, and of course, eating — a pastime Roberts had employed with his family for years. But as he did some research, he discovered that across the country, there were a few niche players who made their own rum and competed against big global rum producers such as Bacardi and Captain Morgan.

“Other people were making money at this,” says Roberts. “I figured I could, too.”

So in 2007 Roberts sold a small, highly profitable Web site business he was operating and began making plans to open a unique Gulf Coast startup: Drum Circle Distilling.

Named for the popular Sunday night drum circles held on Siesta Key, Drum Circle is a full-service rum-making, marketing, bottling and sales operation.

It's a business almost three years in the making that, Roberts hopes, will be selling its first bottles of Rum by the end of 2009. It's also a business Roberts has invested close to $1 million of his money into, in addition to many 18-hour days of sweat equity.

Roberts runs the distillery out of a 6,400-square-foot warehouse in an industrial park just north of downtown Sarasota. The distillery can currently produce up to 3,600 bottles of rum a month, a number Roberts says he has the capacity to triple, if and when sales take off. Roberts is also planning to produce a Vodka line.

Roberts, who declined to discuss his sales projections, has encountered a litany of startup challenges that aren't unique to the distillery business. Those hurdles range from navigating the government bureaucracy in securing zoning and permitting to fine-tuning the ingredients in the product line to finding the right vendors and partners.

Jimmy Buffet style
Roberts has also learned a key startup business lesson, one he keeps relearning: Pursuing perfection means the willingness to sacrifice time and money.

That happened first in the early stages of Drum Circle Distilling, as Roberts rewrote the Siesta Key Rum recipe umpteen times. The mix now includes Florida-grown sugar cane, three-times filtered water and a French West Indies-based yeast. The yeast part was the constant bugaboo, causing Roberts to go back and start over multiple times.

With the recipe down, Roberts encountered another pursuit of perfection holdup. This one was in the bottling process. The idea there was to use a cork made of natural fibers, to match the rum's high-end presentation.

But the high-end corks Roberts bought to cap the bottles were troublesome. Many were shedding tiny pieces of cork into the rum, something barely visible, but visible enough to matter. “It's nothing harmful or bad,” says Roberts, “but it's not attractive to the consumer.”

While some of these lessons are new to Roberts, this isn't his first go-around at running his own business. He actually did that for the first time in the early 1980s in Portland, Ore., when, at 19 years old, he ran a frozen yogurt shop.

A decade later Roberts landed a job at Compuware in California. After a series of promotions, he was running a sales division and traveling all over the world.

But Roberts says his Jimmy Buffett-infused Florida lifestyle clashed with Compuware's button-down philosophy. “I wasn't your standard corporate player,” says Roberts. “I didn't fit the culture.”

So in 2000, Roberts left Compuware to launch a series of Web sites dedicated to car enthusiasts. At the time, recalls Roberts, “a lot of people thought I was nuts” for leaving a high-paying executive job to run a business that at first, made $250 a month.

However, one site in particular, corvette.forum.com, developed a large cult following, which led to an Internet business rarity back then: It made money.

Roberts says the Web site's annual revenues never passed $1 million. But when he sold it in 2007 to Internet Brands, a publicly traded Internet media and marketing firm, the company was running at a 74% profit margin.

After selling his Web site business, Roberts took a road trip out West with two of his four children. When thinking about his next business venture, Roberts first looked into opening a small winery in California. But he balked at that after looking at some profit-loss statements of other wineries.

Roberts settled on rum for his entrepreneurial venture.

More challenges
But traveling from idea to actually distilling the beverage turned out to been an arduous road.

To start with, there is the space Roberts found to launch Drum Circle. Robert's plan for the facility, which counts a boat builder, a home furnishing warehouse and a coffee supply business as neighbors, confused Sarasota County zoning officials. They debated for several weeks whether to classify the space as light industrial or heavy industrial, ultimately settling on the former.

Other county departments, such as code enforcement and the fire department, struggled with how to categorize the business as well. Says Roberts: “They didn't know what to do with me.”

The next challenge was to turn a warehouse shell into a rum distillery. First, Roberts found a centuries old German-based manufacturer that was able to custom-build the system and come over to the U.S. to install it.

That system, which cost Roberts $200,000, includes two hot water tanks, two mash tanks and a copper pot still for mixing up the rum ingredients. It arrived in large container trucks and Roberts had to hire a crew to get it out of the containers and into the warehouse.

The distilling operation also requires a large low-pressure steam boiler to work. That boiler cost $18,000, says Roberts, and almost as much to install.

Roberts even had to learn how to do some installation work by himself, as there isn't a page for rum distillery operators in the phone book. Says Roberts: “There aren't people used to doing this kind of thing around here.”

Facebook fans
Roberts, along with his parents and friends, also spent time rebuilding parts of the facility that surround the distillery. That included building a platform and steps; replacing and removing old pipes and ceiling tiles; and painting walls and floors. He also built a bottling room.

One reason Roberts says he spent so much time and effort on the aesthetics of the facility is that he hopes to use it as a marketing tool someday. He envisions a time when potential customers visit the factory to watch the rum-making process.

The distribution end of the business is one of Roberts' latest and greatest challenges. State regulations ban independent distillers such as Roberts from selling products such as rum directly to customers, be it individual end-users or bars, hotel and liquor stores. An independent operator such as Roberts can market the product directly to bars and other entities, but he needs to sell it through a licensed distributor.

So that lack of control in the process makes picking the right distributor crucial.

On that front, Roberts has recently discovered that he has a distinct choice to make: He can go for a big distributor that has a wide reach, but comes with higher fees and with more volume requirements. Or he can go with a smaller distributor that might be less expensive and more accommodating, but not have the same track record.

There is one other significant challenge facing Roberts: high expectations. That goes from his own hopes all the way to those of the nearly 3,000 people that have become Facebook fans of Siesta Key Rum.

“I fully expect it to sell well,” Roberts says. “But soon we will get to see if the sales really do come in.”

Fun on the Rum
When Troy Roberts founded Sarasota-based Drum Circle Distilling two years ago as a startup rum-making business, he went from being a globetrotting software sales executive to working 18-hour days for nothing more than a bottle of rum.

Roberts, however, says he longed to start his own business making and selling something he could see and feel. Here are some of Roberts' tips on how to go from a day job being paid by someone else to opening your own business:
• Be honest in knowing what you want to get out of being in business for yourself. “You don't open a collection agency to have fun,” says Roberts, “and you don't open a small neighborhood bar to get rich.”
• Be flexible. The way you expect to make money when you start may not be the way you make money a few years down the road. Look for unexpected opportunities.
• Be prepared for high-stress levels. “No matter what business you choose, remember that it's a lot harder to walk away from a business and start a new one than to walk away from a job and find a new one,” says Roberts. “You will be tied to your choice. It can elevate the stress level of events when you realize that you can't walk away from it easily.” 
• Be open to listening to what others in the industry have to say. Use them to get as much knowledge as you can, but remember to be decisive because it's your business, not theirs.

REVIEW SUMMARY
Businesses. Drum Circle Distilling, Sarasota
Industry. Beverage
Key. Troy Roberts faced a litany of challenges with his latest business venture, a startup rum distilling operation.

Mark Gordon covers the Sarasota-Man-atee region. He can be reached at [email protected], or 941-362-4848.

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