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.
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.
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.
I’ll admit I’m rather new to “cask ale”, or “cask conditioned beer”, but I am definitely a new fan. Truthfully, I have had it during my numerous trips to the UK but I wasn’t aware it was called anything different, and in fact its called “real ale” there. So what is cask ale you ask?
Cask Ale is not pasteurized, or artificially carbonated. The beer is simply put straight into a “cask” rather than a CO2 carbonated keg where it undergoes a second fermentation. You might call it “naturally” packaged. The carbonation is from the natural fermentation process and not pumped with CO2 or Nitro. Casks are supposed to be kept at room temperature and so the result is a pour that may appear flat and warm to the untrained palate. However, during my last trip to Indiana, my brother-in-law’s brewery, The People’s Brewing Company (http://peoplesbrew.com/) introduced me to it both at their own taproom and another pub in town. It was fantastic. The lower carbonation allowed for more flavor and it goes down smooth without the overly carbonated side effects that CO2 can produce.
Sure on a hot summer day it may not be my first choice but I sure hope more breweries, bars, and drinking establishments add cask ale to their offerings. It is a great way to mix things up and really gives you an “authentic” or “traditional” beer experience. I highly recommend it so all you beer drinkers out there, do yourself a favor and search out an establishment that offers it and let us know your thoughts.
Here is a great article on the subject that is certainly worth the read. http://news.yahoo.com/forget-warm-and-flat–cask-ale-production-on-the-upswing-in-the-u-s–094154846.html
Packaging decisions are important for brewers too. When a brewery is first starting out they likely don’t have the resources and capital to jump into multiple different packaging options and will start with keg products. Kegs come in multiple size options with three main options; the 1/6 barrel which holds about 5.17 gallons, the ¼ barrel or pony keg holding 7.75 gallons and the half barrel or “keg” that holds 15.5 gallons. The keg package keeps unit costs down as it uses the least amount of labor and you can package a lot of beer in each container. Restaurants and bars like it because the retail margin is usually much better for draft beer and most beer drinkers feel draft beer is better in general.
Although it takes more resources and capital to package your beer individually in either cans or bottles, it is necessary for expansion. A very small percentage of the beer drinking market buys their beer for home consumption in a keg. By far we consume the most beer in cans and bottles. So when you are looking to expand your distribution you are going to need to bottle or can your beer.
This brings us to the question, bottles or cans? Until recently bottles were far more preferred over cans as the aluminum cans had a tendency to mess with the character and flavor of the beer. A craft brewer who relies heavily on flavor wouldn’t be caught dead in a can and instead would choose 22 oz or the traditional 12 oz bottles, preferable a dark colored glass to keep light out. But now can technology has come around and many are arguing there is no taste difference between a bottled or canned beer. Plus any good beer drinker knows you should pour your beer in a glass to let it breathe much like a wine. So does it matter what package you choose? The big guys are canning. Check this out http://www.poughkeepsiejournal.com/viewart/20130705/FOOD/307050013/Craft-beer-cans-make-comeback
I think the masses still prefer the bottle to the can but likely out of habit and not reality. I applaud breweries like 21st Amendment that have embarrassed the can and only package that way. Plus cans have a distinct advantage when you are going rafting, going to the beach, boating, or other activities where glass is frowned upon. Craft beer is now getting into that game so you don’t have to settle for a Coors, Corona, or Heineken when hitting the beach.
There is no substitute for a good draft beer but what do you think, bottles or cans?
Earlier we talked about the trend in marketing a style of beer vs. a brewery brand. One of my favorite questions for my friends is to ask them to build their favorite mixed six pack without duplicating a style. This exercise is case in point to the style vs. brand question. In my favorite mixed six pack I don’t repeat the same brewery twice.
In a way this topic is like the age old saying in business, “you can’t be all things to all people”. That is absolutely true and trying to in any business is a sure recipe for failure. Instead focus on a couple beers you do particularly well, market the hell out of them and then use your variety for incremental business. It’s just not possible to be the best in all categories.
For me, if I were to build my favorite mixed six pack it would look like this: Steelhead Pale Ale by Mad River Brewing Company http://www.madriverbrewing.com/mad_river_brewing_the_remix_004.htm , Black Butte Porter, by Deschutes Brewery http://www.deschutesbrewery.com/brew/black-butte-porter , Mr. Brown, brown Ale, by The People’s Brewing Company www.peoplesbrew.com/OurBeers/tabid/60/Default.aspx , Sessions, lager, by Full Sail Brewing Company http://www.fullsailbrewing.com/session.cfm , Oatmeal Stout, by the Humboldt Brewing Company (although I don’t believe it is still in production or its under a different name), and Lagunitas IPA by Lagunitas Brewing Company http://lagunitas.com/beers/ipa/ .
What would be your all time favorite mixed sixer? Would it have more than one beer by the same brewery?
As I mentioned in my last post beer marketing is changing to focus on beer style as much if not more than brand. So then how important is it to have a flagship beer or dominate a certain beer style?
I would argue that it depends on what your market is. If you are largely a small regional brewer then having a true flagship beer is less important and being a “jack of all trades” offering constant variety can be a great strategy. As a self proclaimed beer connoisseur I love breweries that offer multiple style offerings and are always trying something new. After all variety is the spice of life right?
However, if your brewery is already distributing out of your local market, or aspires to do so, then I think the flagship is important. Take Sierra Nevada for example. They launched their signature or flagship Pale Ale in the early 80’s and has come to dominate that category. You can go almost anywhere in the US and even overseas now and find Sierra Nevada Pale Ale on tap or in a bottle. Sierra built their brand around the pale ale and has continued to put out great beers in other styles. But their flagship beer has done the heavy lifting and really helped put them on the map.
I would also argue that a strong flagship beer helps open doors and get tap space in bars and restaurants. If you have a great style that already has strong demand you will be far more likely to get a bar or restaurant to take on one or two more of your offerings because you have built in name recognition and people are far more likely to try a new style from a brewery they already like.
So from a pure beer drinking standpoint I love the regional brewery that is always experimenting and offers a ton of different styles. But from a pure business standpoint I think the flagship beer is key for success. Think of it like a brand extension strategy but you have to have that anchor first before you can really roll out extensions or in this case new styles.
Are you more likely to try a new style from a brewery you know and like, or try a completely new brewery and style? I suspect the former.