The Black sheep leads the herd: The Story of KOVAL, Chicago’s Top-Class Craft Distillery

KOVAL Distillery

 

From living a life you love to an unknown adventure

Sonat Birnecker realized the dream of any successful academic, she was tenured, taught in American and Europe and was well published. Further, she was in a career she loved!

On the personal side life was also great, she had a new born son and enough money saved for a down payment on a house.

But her and her husband Robert made a decision, they wanted a different lifestyle, they didn’t want to commute all the time, they wanted to work together, and have a family business in the city they loved, Chicago.

So, they took a chance and did something bold, they opened Chicago’s first distillery since the Mid-1800s!

They began an exciting but, in my opinion, scary adventure.

Chicago’s first distillery since mid-1800s

 

Being born into a crazy world

Robert and Sonat’s son was a baby when the business began, like all babies he probably progressed little by little, crawling lead to walking and babbling lead to talking. He built upon each victory and achieved one victory after another.

Startups are like a baby and conventional wisdom says that financing is to startups what mother’s milk is to a baby. When I asked Sonat how she obtained their financing she answered “we had no financing, we had the money we saved for a down payment on a home, which was about $30,000 and everything else we advanced money of credit cards.”

With the interest rates on credit cards going up past 20% after a year, Robert and Sonat felt the pressure to sell product almost immediately!

Within 2 weeks of distilling white spirits, fruit brandies, and liqueurs, they were ready to sell product. However, it is not that easy to sell product in the spirts world. Unlike marshmallows, anyone who wants your product must order it through a distributor.

The first order of business, even before manufacturing, was to find a distributor, which is challenging when you don’t have a product ready at the time. All the big distributors said no! Some distributors said that if you can’t find someone else, we will take you, not the most glowing endorsement. But finally, through diligence and hard work they found a distributor that agreed with their vision and took a chance on them.

Scared by the prospect of high interest rates and not much in the way of savings, they needed to sell product quick and get their product recognized in the marketplace! One small problem, they had no money for sales, marketing or advertising!

But there is something you find about the KOVAL’s founders when you meet them, they work hard and don’t give up. Their determination is worth millions in marketing! Sonat went restaurant to restaurant and talked about the products and through word of mouth, KOVAL started getting noticed. However, even with Sonat’s hard work there were obstacles. Because of how the law governing spirits sales is setup in Illinois, she couldn’t take orders for her products, remember, she wasn’t selling marshmallows! So, she had to convince potential customers to contact her distributor, she could get people interested in the product, she just couldn’t directly sell it.  However, Sonat and Robert worked diligently with their customers and their distributor to achieve sales.

 

The baby grows up!

A baby will grow up during the first year aided by those they love, without this love a baby sadly dies. A business is no different and the love Robert and Sonat have for each other and their family helped KOVAL.

When Robert and Sonat started they did not throw caution to the wind and just decide KOVAL would be a cool business idea. Robert had distilling in his blood, as it was the family business back in Austria. Him and Sonat researched the business for 9 months before opening KOVAL.   Armed with the money meant for an initial house down payment, they purchased their still.

With all their money spent on the business, Sonat and Robert moved in with her parents for two-and-half years. Through the love of Sonat’s parents and their great support, Sonat and Robert were able to utilize their resources in the business.

But what really made this business in my opinion was the love of a couple whose greatest desire was to work together. Their inspiration is being together and distilling is a byproduct of this desire. As Sonat said “it’s a product of love, love for the craft, love of working together as a family, I mean we are really a family run business”

In those early days KOVAL ran more on love for each other and family then on private equity financing or large corporate investment. But then again KOVAL was never the normal distilling company, as its Yiddish name means “Black Sheep”, it certainty lives up to that moniker.

KOVAL got through that first year, they achieved their goal of paying off the credit cards!

During year two they could concentrate on growing the business.

Then they decided to get their product into other states, they did a lot of research and studied the distribution model for their product. They became successful in getting their product into other states.

But if you know one thing about KOVAL is they are never comfortable with a success, they believe that one victory will lead to another. As Sonat stated “every little victory we built on that and built on that  and kept building.”

KOVAL next wanted to concentrate on the export business. Through much diligence, determination, and hard work, they succeed in their next step. Today they have 55 export markets including Australia, Canada, Japan, Singapore and all over Europe.

Presently, they are one of the largest independent craft distilleries in America. They are not under the control of private equity investors or large distillers.

KOVAL has rejected offers to buy their company and cash in the riches. To them this has never just been about distilling, it is a love and a family business. They are unique in that way, sort of like the black sheep leading the herd.

Neary ten years from the start date and they are a success and like their baby son, they built upon everything little step and every little victory to get there.

The steaming still of KOVAL

 

Making it and always evolving

I asked Sonat when did she know she made it. “Day 1.  We are doing what we love. I feel that making it is relative; making it for us is what we are doing every day: being with family, working on creating something of high quality, and not compromising on anything.”

Sonat loved teaching but when I asked her whether she missed it she said, “no, life has stages, chapters, but just because you love one chapter, doesn’t mean you won’t love the next.” Her life progressed to the next chapter, making it.

But along with making it, KOVAL has another constant state, evolving. Remember those white whiskies that KOVAL first sold? All were phased out, except one, a Rye that sells well in Italy.

There is always something exciting happening at this never still (no pun intended) company from coming out with a new gin to working with beer companies in Denmark to utilizing their barrels to age the beer for the biggest craft distillery in Japan.

But it is not just products that are evolving, KOVAL’s processes are changing to increase efficiencies and adapt to the competitive marketplace. KOVAL constantly vets and streamlines its manufacturing process and constantly is thinking about the marketing message to stay fresh.

 

What are KOVAL’s next steps?

KOVAL is done with baby steps, it is a mature company but one with explosive growth. Sonat notes that “our business model is focused on making a great product and distributing it around the world.” KOVAL has done great in Japan and looks to make a move into the Chinese market soon!

But with growth comes challenges. KOVAL is not large enough to take on every battle that a larger company can take on and it doesn’t have the marketing resources of a larger company. It also finds itself disadvantaged by less resources and fighting for shelf space against the goliath. Hence, KOVAL is forced to be savvy in its marketing approach.

And of course, there are bourgeoning competitors, sometime well-funded competitors nipping at their heels.

I asked Sonat what is the biggest potential headache operating in this ultracompetitive and highly regulated marketplace? “Being able to deal with the growth, it’s a constant need to adjust, to pivot, and that can be a world wind experience. It can also be an exciting environment for some and stressful for others.”

 

O’Leary’s opinion

This is a business you just fall in love with, a business started by two people who loved each other and always wanted to be together.

I love that this family wears everything on their sleeve and are proud of it. Their love of family, of craft, of their Jewish heritage, and of never compromising.

I love that this family rejects the riches of being bought out so they can work together and do something they love together.

When I came into the KOVAL production facility, it was like being in the Birnecker’s home, husband and wife working closely in the same office. And when you talk with Sonat and Robert they will talk about distilling but will also tell you about their love of family.

In concluding, this is a great family business and one that I truly love. Sonat and Robert, I look forward to the day that your baby can grow up and carry on the love that his parents gave him!

Sonat Birnecker Hart and Robert Birnecker, co-founders of KOVAL, a great Chicago family business

 

 

 

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