Growth Challenges

ImageImageIf 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?

Prost

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About Kurt Althof

I am a father of two boys, a business development and marketing professional, with a love for outdoor recreation. I'm an avid sports fan and enjoy the leisure life whenever possible. Here's to you! http://youtu.be/96S6qIOwK6g
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