Mendocino Brewing Company
This 1994 DPO presented a new marketing challenge to the
DPO process. Unlike the banks and catalog retailers, this 11-year old brewer of ales,
stout and porter did not have a database of the people who were its' customers, except for
those who had signed the brewpub guest book. In other words, Mendocino Brewing
did not pass one element of the "Screen Test for a Direct Public Offering," the
one that calls for a database of the affinity groups to whom the shares are to be offered.
The company's products are marketed primarily through distributors and then retailers.
There was no way to get the names, addresses or any other information about the ultimate
customers. (Actually, there are ways, but they take years to be effective. See the story
about Annie's Homegrown.)
The lack of a data base did not change the assumption that
only those who bought the product would buy the shares. Our marketing was entirely
directed to people who drank the Company's Red Tail Ale and other ales, so we needed ways
to let them know they could become shareowners in their favorite brewery.
We projected (conservatively, as it turned out) that 20%
of those who received a prospectus would buy shares. We also projected (also
conservatively) that the average purchase would be $1,000. That meant we needed 3,600
investors to sell out the offering and five times as many (18,000) people requesting the
prospectus. An answer to the question, "what media did you use to announce the
offering?" would be, "every one we could think of, if it looked to be
To keep tabs on how well each medium was drawing, callers
requesting prospectuses were asked how they had learned of the offering. Responses from
half fit the "word of mouth" category. Second highest responses were from a
"tombstone" announcement card placed in six-pack containers of ale. Several
other media were used and the combination helped to get the "word of mouth"
started. Total costs of the offering were $260,000, or about eight percent of the $3.6
million raised. The shares have been trading ever since, on the Pacific Stock Exchange.