The Tap Room founders Dyllan and Lliam Roach have managed to grow a niche business into a significant operation that currently boasts a R25 million turnover, and is set to grow to R50 million within the next 12 months.
- Players: Dyllan and Lliam Roach
- Company: The Tap Room
- Established: 2009
- Contact: +27 (0)11 334 6410
- Visit: thetaproom.co.za
Like many new start-up founders, Dyllan and Lliam Roach found themselves in in a precarious position during the early days of their business. The fate of their company was dependent on the success (and benevolence) of a business partner.
Of course, a large partner can seem like a blessing when you’re starting out, but it can quickly turn into a curse.
The Roach brothers had an agreement with Mitchel’s in Knysna to distribute the brewery’s product in Gauteng through their craft beer distribution company. Although they also distributed beer produced by other breweries, Mitchel’s was the focus of the operation. For a few years, things went well – until new owners of Mitchell’s decided to cut out the middleman and start distributing their own product in Gauteng.
More than half of company sales were attributable to Mitchell’s at the time, so the decision was very detrimental to the Roach Brothers’ company.
Related: How The Tap Room scaled back to achieve growth
But the Tap Room not only survived. It thrived. How did Dyllan and Lliam do it?
Locking down new suppliers
When The Tap Room lost the Mitchell’s contract, the company managed to quickly establish new suppliers.
“Brands are crucial,” says Lliam. “Our customers want the trendy and successful brands, so we focused on supplying the products that were in demand.”
The Tap Room went out of its way to provide a service that would attract the top craft breweries.
“We don’t only distribute, we also install, maintain and sanitise equipment on behalf of our suppliers. Craft beer can be spoilt completely if the equipment at the pub or restaurant where it is being sold isn’t maintained,” says Dyllan.
“We maintain equipment at our clients’ premises, ensuring that our suppliers’ products always taste the way they should. This is very important – if a person has one bad experience with a craft beer, he or she will never go back to it.”
The Tap Room also assisted breweries in setting up the infrastructure needed to sell their products.
“Setting up a keg and tap at a single location can cost R20 000, which is a prohibitive financial outlay for small breweries. We absorbed a lot of the initial cost, allowing our suppliers to pay it off over time,” says Lliam.
Letting go of old suppliers
After losing the Mitchell’s contract, the Roach brothers were keen to get hold of new suppliers. Before long, they had close to 30 suppliers. But, as the company grew, they started to understand the value of culling that list significantly.
“As our client list grew and the orders started getting bigger and bigger, we realised that we needed to focus on suppliers that could provide a consistent product and were reliable. As your company grows, the logistics becomes exponentially more complex. This means that you need to partner with suppliers that can handle the increase in demand. When expanding your business, consider how this will impact your suppliers. You cannot grow without the help of your suppliers,” says Lliam.
Related: How Green Office understands the real meaning of customer service
Redefining ‘customer service’
Just as The Tap Room needed to take a serious look at its suppliers, it has also needed to re-evaluate its client list.
“Customer service is incredibly important. Some businesses have tried to adopt our model, but most of them have failed because they weren’t able to provide the same level of service,” says Dyllan. “In addition to distribution, our maintenance service ensures a top-quality product.
“That said, we’ve realised that you can’t keep running a business the same way you did when you started out. In the early days, we would personally get out of bed on a Saturday night and deliver a keg to a pub that had run out. Nowadays, we pay closer attention to the costs involved in providing a client with product.
For example, the Roach brothers noticed that one client regularly ordered a relatively small amount of product, which meant that they were delivering kegs to his premises as often as three times per week.
“Once we crunched the numbers, we saw that the logistical costs involved meant that we were actually making a loss by doing business with that client. We had to be firm and ask him to start placing bigger, less frequent orders.”
The value of great customer service should never be underestimated, but clinging to clients that are costing you money is counter-productive.
Balancing growth and liquidity
With aggressive growth, capital is almost always a concern. “It’s surprisingly easy to grow yourself into bankruptcy,” says Lliam. “Most of the money we make is being reinvested in the company to grow it, but we know that we shouldn’t over-leverage ourselves.
“Rapid growth can place a lot of financial pressure on a business. So, if you want to expand, balance growth with security.”
The Tap Room has aimed to keep growth organic, using revenue to fund expansion, without placing the company under excessive financial strain.
Related: For Aptronics when the customer wins, so does the business
For instance, the Roach brothers had plans to expand into KwaZulu-Natal a couple of years ago, but changed their minds when they realised that it might be too much too soon.
Instead, they focused on Cape Town and Gauteng where they were already operating. Now that they are firmly established in those markets, they’re revisiting their expansion plan and finally moving into KwaZulu-Natal.
Copyright is owned by Entrepreneur Media SA and/or Entrepreneur Media Inc.
All rights reserved. Click here to read our editorial disclaimer.