We had Rassul Zarinfar, Founder and CEO of Buffalo Bayou Brewing, and Chris Dodd, CFO, in the studio to talk about how they have grown Buffalo Bayou from a start up to a thriving brewery.
Please pardon any typos, below is a hasty transcript.
Matt Register: Hey guys, welcome back to Texas Business Radio. Beer is what we’re talking about this week. Beer is a big business in Texas. Beer is a huge business in Texas. We got folks in here to tell you all about it. Jake Curry had to step out for a few minutes. I’m your host Matt Register. Guys get your calls in 844-814-8144 is our 24 hour call in line. 24 hours. That means call now, call later, doesn’t matter. We will get the experts in here to get your questions answered. We also monitor #TBR on Twitter. A lot of ways to get in touch with us. Go to the Web site Texasbusinessradio.com. See the whole thing in beautiful high definition video. Houston’s most creative brewery is in the studio. We have Rassul Zarinfar and Chris Dodd the guys behind Buffalo Bayou Brewing Company. Guys welcome to the show.
Rassul Zarinfar: Thanks for having us.
Chris Dodd: Thank you.
Matt Register: So tell me a little bit, Rassul, about Buffalo Bayou Brewing Company. You are the CEO and founder.
Rassul Zarinfar: Yes Sir.
Matt Register: Of the brewery. Tell me a little bit about what do I need to know about Buffalo Bayou Brewing.
Rassul Zarinfar: Well you know we’ve been around for just under five years. Come up on five years next January. January 2017 and we’ve done over 50 beers in our first five years.
Matt Register: That’s a lot.
Rassul Zarinfar: Actually. Yeah I lost count. We we got one page for each of them on the wall of our coal box. And sometimes I have to go out on Friday and just count them down. All right we’re up to 52 now, 52 guys. You know, so yeah, we just play around. We take, we take a lot of different flavors that you get, maybe in a culinary sense, you know. We’ll just be inspired by anything. Whether it be Thai food in terms of mashing up lemon and basil or…
Matt Register: Sure.
Rassul Zarinfar: Or Mexican cuisine when you talk about the jamaica of flower and hibiscus flowers and then combining that with ginger. That’s a backbone to our summer wit.
Matt Register: Well I’ll tell you what. You know if you’re watching a video guys. We have a studio full of beer here and as if you can’t tell we have been testing some of them and they’re absolutely delicious I mean they’re very, very good.
Rassul Zarinfar: Thank you. Thank you very much.
Matt Register: Very very good beers. This being a business show. Us being business guys. I should ask, you know, this is an incredibly tough market.
Rassul Zarinfar: It really is. Yeah.
Matt Register: You know and it is, this is not an easy task to start a brewery.
But tell me a little bit about how you guys got started. Because you are… have done a lot of things right and done a lot that hasn’t been.
Rassul Zarinfar: Thank you.
Matt Register: There has been, you know, there are more breweries that failed than succeed. And you guys have succeded beyond what a lot of the successes have done. So.
Rassul Zarinfar: Thank you.
Chris Dodd: Yeah, thank you.
Matt Register: Tell us a little bit of how that started.
Rassul Zarinfar: Yeah it’s been really scary. I’ll tell you that much. So you know everyone is like “oh man, beer is so fun, right?” Well you know if you like a highly regulated, extremely competitive industry. Where it only takes about $200,000 for someone else to open up. And you’re going up against guys who have literally at a minimum ten times the revenues that you do. Sometimes literally a hundred thousand times of revenue. Is I guess and as a bridge, right? Where you really do feel like the deck is stacked against you sometimes. But you know that’s what you see in the bar, in the restaurant world. And I’ve got a lot of friends who own bars and restaurants. And they open it up. And I think that the key always comes back to having the right people on the bus and taking care of your customers. And really just focusing on your customers and being as close to customers as possible.So…
Matt Register: We’ll I tell you what, we deal with a lot of companies that are process of starting up and I always tell them there’s eighty four reasons why this is going to fail.
Rassul Zarinfar: Sure.
Matt Register: And you have to have a perfect track record of getting over all 84 of those, right? And if you do, then you’re going to pop out on the other end as a successful business. But that means that you have to master a lot of skills. We were talking just during the break about, you know, and I commented to you about, about you know self-awareness. Because…
Rassul Zarinfar: Yeah.
Matt Register: You are you are big on identifying where the gaps are in your skills.
Rassul Zarinfar: Absolutely I think the number one thing that you’ve got to do is you’ve got to have self-awareness. You’ve got to understand what you care about, what you’re good at, what you’re not so good at. And then you have to go out with ruthless honesty both with yourself and also with your founding partners and make sure that you find the right people to complement your skills. You know I think this is an industry where a lot of people start up with their home-brew buddies or whatever have you. And when you think about it like is your best friend on the planet or your home-brewing buddy the right person to be your business partner. You know like I’ve got a couple of our original investors, one of my board members Jeff Scott. You know he and I were roommates and home-brewed together. Chris and I were roommates and home-brewed together and that’s really awesome you know. But from my first business partner Ryan Robertson he was my founder, the O.G. that started it all. The man who’s behind all this liquid. I went with a classified ad probrewer.com and interviewed people on six different continents. Because I don’t think there were breweries in Antarctica. I actually flew up from Bolivia. Right? We literally interviewed someone from, from Bolivia and found a guy that I didn’t know. I met Ryan’s beer before I met him. And… But you know, you have to zoom out. You got to look at a blank piece of paper. You got to imagine, “OK” what are the things that I need to do well, as a company. What does this firm’s competencies need to have. Right? And then you’ve got to think, well what am I good at. Well I’m good at this, this and this. I don’t know how to do this and I don’t know how to do this, I don’t know how to do this. And then the challenge is in year two, year three are going to change. And for that you’re going to need this and for that you need this. You know, so, we brought Chris in. It turned out we looked everywhere. Turned out that the best guy was right under our noses from the beginning.
Matt Register: Sure.
Rassul Zarinfar: He had been doing our taxes for several years. We brought Chris in when it was time to negotiate an SBA loan and really get the growth capital needed to get to the next level. We just bought on our fourth partner Jason Armstrong, who is a national sales director for Sun Brewing Company.
Matt Register: Okay.
Rassul Zarinfar: Yeah, huge rancher, Yeah. So now it’s time to, you know, think about, really think about a sub-distribution arm and transition into a distribution network possibly. We signed our first distributor and who better to do that than someone who managed 70 distributors across the across the country and took it he took a sales force of eight sales guys and scaled them up to 80 sales guys.
Matt Register: So good for you.
Rassul Zarinfar: Across 25 states.
Matt Register: It sounds like you guys are on a trajectory that is, that is very tough to beat. Chris and I go way back. He was an intern of mine years ago.
Chris Dodd: Yes.
Rassul Zarinfar: I didn’t know that.
Matt Register: And then became wildly successful as a CPA and a tax accountant. And I could no longer afford him. And he always had a passion for brewing beer and a passion for beer. And being able to merge those skills, you know, the skills that you make a living with, with your passion is remarkable. So I mean I’m proud of you.
Chris Dodd: Thank you.
Matt Register: That’s great. You know. So. Well talk to me a little bit about some of the things you thought were going to, you were going to have to face whenever you started, and some of those were incorrect assumptions. Right? I mean.
Rassul Zarinfar: Yeah.
Matt Register: This is… Nobody starts and nobody bats a thousand in the major leagues, right? I mean so what were some of the mistakes, some of the things you had false assumptions for.
Rassul Zarinfar: Well I’ll tell you the number one mistake I made and this is going to sound a little bit like false humility. But the number one thing I messed up was the market sizing. Right? So back when I, when I wrote the business plan in October 2010. Right? St.Arnolds was the only brewery. Also Southern Star was getting going, you know. But St.Arnolds and Southern Star we’re the only ones around. Right? And then Carbuck opened up right after I started writing the plan, taking money, you know. And they just blew up and I knew that there was depth in the market. I do not know how much depth. We started off with between half a million and a million in upfront capital. Every step of the way, I underestimated how much cash I needed. And that was because of the growth clip. I still to this day I mean we’re in a cash crunch literally this minute and we just, we just close another 1.7 million in funding. Right? And we’re back out of cash and it just, when, when you’re doubling and tripling growth and you’re getting… you can mess up your working capital. So be able to you know have a little… some extra dry powder, plan for the best, not just the worse. I’m a very conservative thinker.
Matt Register: You’ve got a plan for catastrophic because success as much as catastrophic failure. Right?
Rassul Zarinfar: A lot of people go out of business between series A and series B because they grow too fast.
Matt Register: Well and in fairness the market fundamentally shifted.
Rassul Zarinfar: It did.
Matt Register: You know over the, over that time period right. The public here in Texas realize that all of a sudden craft beer is an option. Where prior they probably not so much.
Rassul Zarinfar: You know but you know Matt, it comes back to knowing your customer. I mean I was a bar slide on every different stool and every different, and every different beer bar around town. Right? And I was there drinking not Texas craft beer, listening to people drinking not Texas craft beer. Saying “I wish there was a brewery in Houston that brew beer like this” you know. So I just started the brewery. That would make the beer that I wanted to drink because no one was doing that, right? And so if I knew, you know, a lot of people who say “I knew it, I knew it, I knew it”. And then they turn out to be wrong. There’s always selection bias and survivor bias, right? But I knew it. I just didn’t know how much, you know, And I don’t think any of us did. And now the pendulum shifting back and there’s a real question is whether this is a bubble. Because a lot of people are coming in now, chasing the wave, if you will. Over levered. They’re taking capital from the wrong sources. One thing that we did very well from the beginning was a decentralized capital race. Where I turned a lot of investors down based on interviews that I had with them. Where I just didn’t think they understood. If they couldn’t tell me what IPA stood for I don’t want to take the money, you know.
Matt Register: No I got it in that long term leads to more issues than anything else. Well we’re about out of time guys. Rassul Zarinfar, Chris Dodd from Buffalo Bayou Brewing Company. The Houston’s most creative brewery, if you will. Guys go buy their beer. Try it. It’s really good. I assure you. Rassul tell me what’s the easiest way for somebody to get in touch and learn more about Buffalo Bayou.
Rassul Zarinfar: You know, Facebook is always the simplest way. Our web site is Buffbrew.com.
Matt Register: Buffbrew.com.
Rassul Zarinfar: Simple too.
Matt Register: Got it. We’re gonna have links to both of those guys. As always Texasbusinessradio.com, Texasbusinessradio.com. As always guys don’t take notes.
We’re going to have all these guys and you can see what these guys look like right there on the Web site in high definition.
Rassul Zarinfar: Face for radio.
Matt Register: So guys don’t go anywhere we have to pay a couple of bills. We’ll be right back. You don’t even have time to go anywhere else. We’ll be back right after this. Don’t go anywhere.
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In addition to hosting "Texas Business Radio," Matt is an investment banker and serial entrepreneur from Montgomery, Texas. He is the owner of RREA Media and Register Real Estate Advisors and a Managing Director and Principal at Corporate Finance Associates. He has a BS from the United States Military Academy at West Point and an MBA from Rice University in Houston. You can read more about Matt HERE.