A Hispanic Brew For Success

This post is also available in: Español (Spanish)

Two friends borrowed Aztec magic to create 5 Rabbit, the first Hispanic American micro-brew.

5 Rabbit BeerFour years ago, at 4 a.m. on a Sunday, an exhausted and highly stressed Isaac Showaki casually suggested to his friend and colleague, Andrés Araya, that they should open their own brewery.

Barley, hops and yeast had long played important roles in the career of Araya, who worked at the sole brewery in Costa Rica before consulting breweries throughout the region for global management consulting firm Bain & Company.

Araya liked Showaki’s idea, but not enough to act. Showaki soon shifted industries and homes, relocating to New York to consult for airlines. But his  love of craft ales, and his desire to start his own brewery, couldn’t be squelched.  “The craft brewery scene, led by Brooklyn Brewery, was enchanting,” he recalls.

More conversations with Araya to rekindle interest in their dream couldn’t sway him. It wasn’t until an impassioned Showaki unexpectedly showed up on Araya’s doorstep 4,000 miles from the Big Apple that his friend was persuaded to pursue the dream.

Today, Araya and Showaki are winning notice as the co-owners of Chicago-based 5 Rabbit Brewery, the nation’s first microcervecería.

5 Rabbit has benefited from word of mouth and grassroots marketing, in addition to local media coverage. Select mom-and-pop restaurants and pubs sell 5 Rabbit brews on tap. Consumers can also snap up six-packs of 5 Rabbit beers at select Whole Foods and Binny’s Beverage Depot locations.

The brewery has already earned accolades: Chicago magazine in its July 2011 issue named its 5 Lizard variety, a Belgian-style witbier with a hint of passion fruit, one of Chicago’s 36 best craft beers, proclaiming it “limey (and delicious).” The brew, along with 5 Rabbit golden ale and 5 Vulture, an  Oaxacan-style dark ale made with pilloncillo and roasted ancho chile, have been entered into the 2011 Great American Beer Festival. A fourth beer is presently in the testing stages, with a release date set for November 1st. It will be called Dia de los Muertos.

The need to turn an idea into an inventory led Showaki and Araya to put up 50 percent of the capital necessary to get 5 Rabbit off the ground. Private entities, including family friends and angel investors, contributed the other half. They avoided large investment firms out of concern that their brewery’s growth would be directed by others.  “As we were growing organically, we wanted full control of what we did,” Showaki says.

The Decision To Launch 5 Rabbit In the U.S.

The decision to launch 5 Rabbit in the U.S. came after 18 months of research and planning by Showaki and Araya. “Originally we wanted to launch a craft beer in Mexico or Costa Rica, but that would have been impossible, as brewers there have their own distribution channels,” Showaki says.
The duo then looked at the potential business growth within the U.S. Hispanic market. “This will be one of the biggest markets for beer for the next 10 to 20 years,” Showaki says. But marketing a craft beer to Hispanics presents a challenge. He adds, “We learned that the Latino beer drinker was not used to drinking craft beer.”

Showaki and Araya shifted their strategy, targeting the craft beer aficionado while retaining Latino flavors and themes. The 5 Rabbit name derives from ancient Aztec mythology:  “5 Rabbit” was a deity among 400 rabbits who were the children of the god of fermentation.

Showaki and Araya then scouted out U.S. locales for launching their brewery, focusing on markets with a large and affluent concentration of Hispanic residents that also had a growing craft beer scene. The availability of good distribution channels was also considered.

“Chicago was perfect for everything we wanted to do,” Showaki says. “It has a big, solid [Hispanic> middle class, second- and third-generation Hispanics, and many English-speaking Hispanics.” The Windy City beat out Miami, Los Angeles, New York and Austin, Texas.

According to Hispanic market research firm Geoscape, there are more than 900,000 Latino households in the Chicago DMA with annual household incomes of at least $100,000. Another 1.14 million Hispanic households have annual incomes between $50,000 and $100,000.

The selection of Chicago also resulted in a chance encounter between Araya’s wife and the nationally recognized beer expert Randy Mosher, who has authored books on brewery and is an instructor at a local brewing school.  Showaki and Araya discussed their idea with the U.S.-born Mosher, who agreed to assist in perfecting the recipes of 5 Rabbit’s initial releases. Mosher officially joined the brewer in early 2011.

Beer drinkers in Wisconsin and Indiana can find 5 Rabbit at select vendors by year’s end.

Big brewers need not worry. “Anheuser-Busch controls more than half of the U.S. beer market,” Showaki says.  By comparison, Boston Beer Co.’s Samuel Adams microbrew captures less than 1 percent market share, on sales of about $900 million.

“Anywhere we went we knew we would be able to capture perhaps 5 percent of the market,” he says. “But the craft beer industry sees itself as together in this, and the big guys don’t care – at least right now.”

Hopping Over Start-Up Stresses

Isaac Showaki, a co-founder of Chicago-based 5 Rabbit Cervecería, says he’s just lucky that the brewery’s launch has gone smoothly. That’s not to say there haven’t been some headaches along the way.

Here are observations Showaki offers to other budding entrepreneurs:

1.  Get Enough Funding Up Front. “Lack of capital and the exhaustion of funds are the main reasons why any start-up business fails.”

2.  Prepare For Paperwork. “Obtaining the legal permits for the brewery was a total drag. The bureaucracy of it all … We received our permits three days before our launch date.”

3.  Safeguard Your Standards. “We are always looking for the best quality control methods.”

4.  Strive To Meet Demand. “Our biggest issue now is not being able to grow the brand as big as we could.”