The joys of……CANS.

My first guest post.  By beer connoisseur James McMaster.  Thank you James!

That’s right, I said it.  For a guy who has been drinking beers since the early part of 1990’s.  I had my years of beer snobbery.  Shoot, I grew up in conservative Orange County (So I was used to snobbery.)   I went to college in Humboldt.  The home of Lost Coast (Eureka), Humboldt Brewery (Arcata), Six Rivers (McKinleyville), Mad River Brewing (Blue Lake) and Eel River (Fortuna).  I only drink micros, nothing macro…everyone knows what I am talking about.   If I went to a party and they said there would be kegs, my first question would be what type?

Yet, the macro beers had the outdoor market cornered.   Maybe you know what I’m talking about… those times when you are out on the lake with friends hanging out on a boat.  A boat that has a no bottle rule.  Or down on the beach, at a concert, fishing, hanging out on a tail gate where there was nothing like an ice cold beer straight out of the cooler. the best beer to come out of the coolers was a canned beer.  The feeling of that cold aluminum on my hands and the way it flowed down my throat; there was nothing better.  So, what was a beer snob to do? 

Then came Oskar Blues Brewery out of Colorado.  Now, I’m not sure if they were the first micro brewery to can their beers.  But, it was the first one that I was aware of.  It’s as if someone who enjoyed the same experiences with canned beer had the same feeling as I did.  There’s got to be something better.  And then it came.  You don’t need to drink that watery schwag to have those experiences.

Did I have a resistance to the can like wine drinkers have with screw tops and boxes?  Maybe, initially.  But I soon wised up and realized these beers from this lightweight aluminum was just as good as anything that came out of the bottle.  In fact, it’s a lot better.  It’s colder, lightweight, better for the environment, and I can drop it and now worry if I’m barefoot or not.  Plus, the CRV redemption is so much better than those heavy ass bottles.  And I never have to worry about whether or not I have a bottle opener or not.

Now when I got to the store, I don’ have to go to the specialty liquor store to purchase these micros.  The canned movement has it.  So thank you 21st Century (San Francisco), Anderson Valley, Mammoth, Sierra Nevada, and some others.  If left you out, you can always send me a sixer for tasting.  Hell, it’s a lot cheaper for shipping.  

But thank you craft beer industry.  You are moving in the right direction.

So You Want to Start a Brewery

I’ll bet there a lot of home brewers and entrepreneurs out there that are kicking around the idea or temptation to start a brewery.  As you have seen in my blog and tweets, the craft beer business is still growing but it is starting to flatten a bit so if you are going to do it, waiting may not be the best move. 

My advice to the home brewers looking to take the next step, consider starting a nanobrewery first.  This is a brewery with a batch capacity of less than three barrels.  Sell to a couple of select bars or restaurants and leverage the uniqueness of the limited production.  See http://beervana.blogspot.com/2013/01/brewery-categories-defined.html for brewery size definitions and categories.  My second bit of advice is get the skills and education to be a master brewer, doing this as a hobbyist is going to make things a lot harder.  My third bit of advice is find a business minded guy or gal that can help you with the business end.  It would be a bummer to put out a great product only to fail due to blowing the financial side of the operation. 

For those business minded people out there thinking about opening a brewery for the business of it, recruit a great master brewer.  A great business plan with financial backing is going to fail every time if you can’t put out a good product.  The best beer comes from those brew masters that have the education, experience, and willingness to create products that the masses like.  I’m not saying conform, but a really unique beer that few people like is hard to build a business on.  I’d also recommend some investing in focus groups, find out what your market likes and what is missing in the market before jumping into production of any one style.

Lastly, for either group, be sure there is still an unmet need in your regional market.  As we know the craft beer industry almost always has to start regionally and if your region is saturated breaking in is going to be an uphill battle.  But with that said, the world can always use another spectacular beer, or two, or three so BREW ON!

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Seasonal Brews Good or Bad Idea?

I have had many conversations about the importance, or lack thereof, of seasonal brews.  I admit I’ve had some downright horrible ones and wondered why they bothered not to mention the stain such a thing can leave on a brand.  But on the other hand, I’ve had some dynamite ones that I almost wish I could get year round.  My all time favorite seasonal beer is Sierra Nevada’s Celebration Ale, http://www.sierranevada.com/beer/seasonal/celebration-ale.  The funny thing is I like it so much I sort of enjoy the fact I can only get it during the winter holidays.  It gives me something else to look forward to during the holiday season and lets admit, the extra 6.8% ABV is a nice bonus when dealing with family during the holidays. 

I am also pretty fond of most of the summer seasonal brews, lighter crisper ales, pilsners, and lagers are just the ticket on hot summer days.  One of my favorite summer beers was Pete’s Wicked Summer Ale.  The label alone was brilliant, a baseball depiction of years gone by, ball players dressed in the uni’s of the 20’s and in a color scheme that was like black and white.  If that doesn’t say days of summer I don’t know what does.  I loved the beer too but alas it was discontinued and I haven’t seen a Pete’s on the west coast in a really long time.

The other advantage for a brewery is a chance to try some new things and create anticipation for seasonals that are a big hit.  It’s a chance to steal a little market share during a particular season and a chance to introduce new potential customers to your brand.  Of course be careful because a really bad one can do just the opposite. 

As fall is approaching I’m already looking forward to seeing pumpkin and nut brown ales on the shelves where they haven’t been the rest of the year.  So keep up the good seasonal work my brewing friends, but please leave the smoke out of the winter beers.  Smoke is great on ribs, chicken, and pork, but not my thing in a beer. 

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Give the Gift of Beer

If you are like me you often find yourself needing a last minute gift for your brother’s birthday, a thank you for your neighbor, new baby congratulations, etc.  That’s when I turn to the beer section at my local health food store, specialty spirit shop, or whichever establishment has the best craft beer selection.  In fact, just yesterday I was looking for a thank you gift for a friend that helped me out on a project and he wound up with a six pack of Duke’s Pale Ale in his fridge.    

I think craft beer makes an excellent gift (for a beer drinker or course).  Who doesn’t love a surprise six pack or new 22 oz brew?  Furthermore, because there is so much variety in craft beer you can give the same person the gift of beer over and over without really repeating the gift. 

My wonderful wife has learned this little trick and I look forward to a beer I haven’t yet tried nestled in my Easter basket, or a 22 oz taster in the fridge on Father’s day. (Thank you Honey).  It’s easy, appreciated, and usually I get to try something new which often times leads to repeat purchases because I discovered something I really like. 

You too can give the gift of beer.  Be creative, look for something off the wall, pick something you doubt the gift receiver has ever tried.  That is the beauty of craft beer.  There are thousands of brands and styles to choose from and you can take this opportunity to introduce your friend or family member to something neither of you have likely had.  Variety is the spice of life right? 

So next time you are scratching your head trying to think of a special unique gift to get someone, go to the craft brew selection at your local beer outlet and pick out something fun.  If you are feeling really fancy put a bow on it.  And best of all, they just might share with you.  So give the gift of beer today!

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Beer sommelier

You have likely heard of a sommelier, a wine steward who is a trained and knowledgeable wine professional who typically works in fine restaurants and specializes in all aspects of wine.  Well there is such a thing for beer too, commonly referred to as a cicerone even though the term is a trademarked organization rather than a general term.  That is just good marketing much like the confusion Kleenex and Xerox enjoy, but that is another topic.  Although not nearly as popular as the wine sommelier, the profession is growing likely due to the growth in the beer industry in general and trends suggest it will continue to grow and be in demand.  The Cicerone certification program, as of 2008 had anointed 4 Master Cicerones, 400 Certified Cicerones, and more than 1,400 Certified Beer Servers.  Some great resources on the topic can be found at The Beer Sommelier http://www.thebeerexpert.com/beer_sommelier.shtml and Cicerone Certification Program https://cicerone.org/

According to the Cicerone certification program there are three categories of certification; Certified Beer Server, Certified Cicerone, and Master Cicerone.  The Certified Beer Server is the first level of certification and anyone can apply.  The Certified Cicerone is the second level of certification and candidates must have passed the Beer Server certification first.  This certification shows that those who achieve this level have a well-rounded knowledge of beer and beer service as well as being competent in assessing beer quality and identity by taste.  Lastly, the Master Cicerone can only be achieved by those who have passed the Certified Cicerone test, have a minimum of two years selling, serving, or managing beer service.  Three recommendations from different brewers, beer wholesalers, or beer retailers can be substituted for the work experience.  A Master Cicerone has an encyclopedic knowledge of beer and a highly refined tasting ability. 

Tests and courses for these certifications range from $69 to more than $650 and a lot of time, study, and recommended travel to famous beer regions world wide.  Although there is a significant amount of time and money investment in acquiring any of these certifications I would certainly recommend it as a great way to stand out in a crowded beer industry.      

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The Importance of the Tap Room

For anyone thinking about opening a craft brewery, in the process of opening one, or just opened one, “Don’t under estimate the Tap Room”!  When in the planning stages for the brewery I have an interest in, pro forma budgets were drawn up and they did include and budget for a tap room.  However, the tap room was grossly under budgeted regarding the revenue and profit it would generate.  Granted there are worse problems to have, but had we more accurately estimated the cash flow the tap room would generate they possibly would have started with more square footage because they could have afforded it.  As it turns out, it outgrew the original space in just 3 years and we are now expanding. 

Now back to the tap room topic.  It is easy to see how a tap room goes unappreciated at first.  When estimating your sales you are focused on the core of your business, and that is likely keg distribution to restaurants, bars, catering companies and the like.  True those sales will definitely make up the vast amount of volume and total revenue but a successful tap room can generate a very healthy profit on a fraction of the beer sold.  Why you ask?  Well because breweries have the opportunity to sell beer at or near retail prices while paying cost.  When cutting out the wholesale middleman you can tripple or even quadruple the profit margin. 

The tap room is invaluable when it comes to other merchandise sales including glasses, hats, T-shirts, etc.  The tap room is also a key marketing tool, allowing your customers and potential customers the opportunity to sample every beer you make at anytime.  The tap room also provides for a built in focus group facility.  You have customers and potential customers in your tap room every day and you can use their feedback on sample batches or seasonal beers before going into full production.  If you get negative feedback you can scrap it altogether before spending production run money on a recipe that is destined to fail. 

Listen folks, the tap room has a TON of value and I encourage you to embrace it and look closely at the profit potential and marketing value as you plan the business.  To the consumers out there, remember the brewery can more than afford to offer their local clientele prices a bit south of retail, at least regularly, if not always, and I believe they should. 

Who has your favorite tap room and why? 

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Growth Challenges

If you follow the conversation on craft brewing these days you will note there is a fair amount of talk regarding craft beer hitting a saturation point, at least in some markets.  Craft beer has enjoyed high single if not double digit growth for decades and frankly that sort of growth is just unsustainable forever.    For now that is great if you are on the brewing side of the craft beer business. 

Right now the biggest obstacle in the way of growth for just about any one brewery is production.  For the most part brewers are able to command their price and sell all the beer they produce.  So the only way to increase sales, revenue, and profits is to make more beer.  The trouble is it is expensive to make more beer and going from a few hundred barrels of production a year to a few thousand is a major jump and not one that is easy to make.  Another consideration is that to get to that next level even if making more beer isn’t the problem, you will be faced with the risk of opening new markets.  Perhaps you have done well serving your local and regional markets, you have a strong following but you haven’t ventured outside your region or even state.  This means you are either going to have to increase production and go for it, or you might have to take distribution away from your bread and butter markets, risking frustration, in order to test the market outside your comfort zone.  Both have risk but I’d recommend the latter before just doubling your production.  Yes your regular fans may be disappointed but I’ve found that scarcity usually increases demand so long as you don’t make them go to long without satisfying all the demand.

Right now People’s brewery is embarking on its first major production expansion.  They will go from a 3500 barrel a year capacity to between 5500 and 6000 barrels but can expand from there with the addition of some ancillary equipment.  They are still in the growth stage regionally and have significantly more demand than production which warrants the expansion.  It will be interesting to see how well they are able to get through the extra inventory.  If they stay on the sales pace they are currently on it shouldn’t be too hard and the next challenge will be what to do next because they are out of space at their current facility. 

What do you think is the right size craft brewery with regards to production and why?

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Time for Bottle and Can Distribution

Let me start this post by disclosing that I don’t have direct craft beer bottle/can distribution.  However, I have followed a lot of breweries and I’ve done a lot of sales in general; direct to consumer, direct to retail, and through distributors. 

When a brewery has really maxed out their regional wholesale avenue the next growth opportunity comes out of market.  One of the best ways to introduce your beer is through retail in either bottles or cans.  This can be done simultaneously as you are selling kegs across regional or state lines or it can come as precursor to introduce markets to your line of beers.  I would recommend starting with your flagship beer (as I discussed in earlier posts) and 3 to 4 additional SKU’s.  Your flagship is likely your best foot forward and can open doors to shelf space for its sister styles. 

The next question is do you hire a sales force to go direct to retail or use a distributor?  In my experience the best answer is both.  You likely won’t have the resources to hire a robust enough sales force to do it all on your own, but if you rely solely on distributors you risk getting lost in their menu.  I think the best option is a small sales force that can do some direct sales to certain key accounts or chains and then use that sales force to support your distributor’s efforts.  This, in my opinion, gives you the most bang for the buck.  You get that direct contact and relationship building that only comes from using your own people dedicated to your brand and it also shows a distributor that they aren’t just a rainy day partner but someone who you are dedicated to help succeed on your behalf.  This combination gives you the most leverage and the ability to grow more volume faster.  The warning here is to be sure you have the capacity to supply these pipelines without developing demand then going dry on them.  If done right, it is a great way to grow your business incrementally while also using it as a marketing tool for more wholesale business right now or down the line. 

So bring on the bottles and cans and hit the retail road. 

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Craft Beer Resources

There are a lot of online resources out there for craft and home brewers alike.  I figure that since this is a blog about craft beer business it would be appropriate to introduce the top 3 most valuable resources on the topic. 

Craft Beer, www.craftbeer.com.  This site helps you promote your events, collaborate with other brewers and breweries, they promote American Craft Beer Week, and in general support the industry.  They have an active blog, facebook page, and you will find them on twitter @BeerWeek1.  Go to http://www.craftbeer.com/news-and-events/american-craft-beer-week/resources for more on what they offer.

The Beeradvocate, http://beeradvocate.com/ is another great resource.  Beeradvocate is also a monthly magazine publication.  The website offers up to date information on beer and an ongoing blog about beer talk in general.  They consolidate and promote beer events, offer multiple RSS forums of discussion, promote beers, and provide general information.  You can also find them on twitter @BeerAdvocate and on google +

Brewers Association, http://www.brewersassociation.org/ promotes their platform as a passionate voice for the craft brew industry.  They have a public web site but also a members only portal for specialized information.  The Brewers Association is likely the most robust offering business tools in general from marketing to sell sheets to guidance on label approval and more.  They have a government affairs section, a community section including a blog, promotion of beers and breweries, along with a history of the industry and of course event promotion.  They can also be found on twitter @BrewersAssoc, and on Facebook.  If you are in the business I have found Brewers Association to be a great resource.

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When is Craft Beer No Longer Craft Beer?

Well let’s start with the definition of craft beer from the Brewers Association.  “An American craft brewer is small, independent, and traditional”.  They produce 6 million barrels of beer or less per year, less than 25% of the brewery is controlled by an alcoholic beverage industry member that is not themselves a craft brewer, and  produces at least 50% of its volume in either all malt beers or beers which use adjuncts to enhance rather than lighten flavors.  For more on this check out:  http://www.brewersassociation.org/pages/business-tools/craft-brewing-statistics/craft-brewer-defined

The first part of the definition is pretty self explanatory.  If you are huge you no longer count as craft beer.  To put this in perspective, Sierra Nevada brewing company is a large well known craft brewer and still only produces about 800,000 barrels per year.  New Belgium known best for their Fat Tire Ale produces 600,000 barrels and Sam Adams is right around 2 million barrels.  That is still a LOT of beer and still maintains the “craft brewery” label. 

The second part is a little trickier thanks to marketing.  For example, many people think that they are enjoying craft beer when they pop the cap on a Shock Top or Blue Moon.  But in fact Shock Top is an AB Inbev product and Blue Moon is owned by the Coors company. 

Lastly is the taste mechanism and a true craft brewery is not short on flavor.  They use all kinds of malt and hops, often including a hops infusion at the end of the process to add even more hoppy goodness.  One of the advantages of the craft brewer is that they brew in smaller batches and can play around with different recipes and try new variations without significant investment.  This, in my opinion is perhaps the number one reason that makes craft beer so good.

But what about craft breweries that brew high gravity (high alcohol) beer and then water it down for packaging?  Sure this process allows for higher and more consistent production but doesn’t that detract from the subtle changes you get from a craft brewer’s batch to batch?  What about those brewers that source ingredients from long distances namely for price purposes?  These factors do not disqualify a brewery from being categorized as “craft” but I’d argue that a true local craft brewery would shy away from such practices.  What do you think?

In fact I expect we will start seeing “from farm to brew” practices in the not so distant future where brewers own their own hop fields etc. and source from themselves.  Much like the “farm to table” fad you see now from local restaurants.  It may be a bit extreme but keeping it real makes a lot of sense.

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