Tag Archives: craft beer business

One Beer Article You Need To Read And Why, 4/17/17

This feels good.  I’ve spent the last two weeks moving across town.  It is never the physical aspect of moving that upsets my balance.  I am a creature of habit and when you move all your habits get disrupted.  From the direction you drive to and from work, to where you shop and eat, to the sounds you hear as you try to sleep, moving is a disruption.  However, disruption is good.  It changes what you do, how you do it, and it shifts your perspective on many aspects of your life.

American craft beer has spent the last 20 years disrupting the whole beer industry.  As craft beer has expanded almost exponentially the last 5 years, many of us who have been around since the last “great expansion” have been fretting over another bubble bursting.  However, we may have had it wrong.  This article from The Motley Fool has a better term for what is coming: shakeout.

The difference between now and the bursting bubble of the late 90s is that the beer industry has matured and changed.  As the article points out, the coming shakeout will be a continuation of the consolidation we’ve seen begin with the mega-brewers buying up regional breweries and those same regional breweries consolidating themselves to protect against outside purchase.

With such explosive growth over the last few years, we have seen a lot of breweries enter the market who have no business being there.  Those breweries will be the leading edge of the coming contraction.  Of the ones I’ve seen shudder in the last 18 months or so, the most common reason is poor planning.

We all know the apocryphal story of many breweries that started as a home brewing enthusiasm that leads to good beer and friends deciding to pool their money and resources to start a brewery.  That is a dream that dances around the back of almost every home brewer’s mind.  That is a great story, that can go one of two ways that are mostly dependent upon having a good plan.

From my vantage point on the bar/retail side of craft beer, I encounter a lot of small breweries who either self-distribute or are starting to work with a distributor.  Some of the things I’ve noticed about the breweries have come and gone in just the 2.5 years we’ve been open

  1. Inconsistent beer. It is either, they have one good beer and the rest are mediocre at best or they have a few good beers, but they taste different with each batch.
  2. No plan for their beer. What is your brewery’s aesthetic as far as beer and personality? What is your plan for your core/year around beers?  What is your plan for your seasonal beers? What is your process for creating new beers?  Then, how will you market them?  That is why you need to know how your beer and your brewery’s personality are tied together as your business front face.
  3. No distribution/unrealistic distribution plan in your business plan. I’ve seen many breweries come into the Charlotte market with unrealistic expectations.  This market is immature in two ways. One, the craft beer drinking community is very young and new to craft beer.  Two, most the breweries in the market are less than 10 years old.  The market is also very locally focused (meaning Mecklenburg County) and very IPA and lighter craft beer focused.

I want to spend the rest of the week exploring these three points and how they may affect the next couple of years of craft beer.  Also, now with the move over, I have a new part of The Beer Counselor colony that will start in May.

One Beer Article You Need To Read And Why, 2/24/17

Amid a myriad of fascinating craft beer storylines, one that I keep coming back to is the how do legacy brewers navigate this world that they have created.  It is one increasingly unforgiving to brewers who get a little too old and too successful.  Boston Beer Company released their 2016 4th quarter earnings yesterday and they were not good.  Neither are their projections for 2017.

I was struck in reading the article that Boston Beer Company thinks of itself as just that, a beer company.  I see a distinction between a beer company and a brewery.  I always refer to ABI and MillerCoors/SABMiller/whatever as big beer companies.  They own breweries, but as a company they are concerned more with selling beer than making beer.  I think Boston Beer and the people that work there think of themselves as a brewery, but the rest of the world sees them as a beer company.  That is in contrast to a brewery like Sierra Nevada.

I think craft beer drinkers still have respect for Sierra Nevada as a brewery and see Boston Beer Company as simply a beer company who owns a lot of different brands. One of the first things the article points out is that the company was hurt by flagging sales of Angry Orchard Cider.

Boston Beer jumped into cider the same way ABI jumped into craft beer.  They bought a producer, then dumbed down the recipes while pumping up the production.  While I think in his heart Jim Koch is a beer guy, his company has seemingly lost sight of its beer core.

It is something you see a lot.  Your business starts to slow down and in an attempt to keep growth at a certain level, you begin to chase the new hot trends in your sector.  Instead of innovating you begin imitating and in the process, you lose what you are best at and you fail anyways.

The brewers that best survive whatever is coming next in craft beer are the ones who stay true to the core of who they are.  They will be the ones who may brew a hot new style, but won’t change their core products just to stay relevant. If a core beer is flagging and dragging the whole company down, they will shelve it, but they will come up with a replacement that still plays to their strengths.

Don’t chase trends and just brew the next hot beer style.  Understand why beer drinkers are drawn to that style and why it became a thing and incorporate that into what you do.  Understand that the haze in a NE-style IPA is simply a by-product of how the beer is made and concentrate on making a bright fresh hop forward beer.

David Bowie made vital and good music literally up to his dying days.  He stayed relevant and successful so long because as trends changed he didn’t chase them, but he absorbed the cultures that spawned them into his music.

As craft beer matures, the brewers who operate like Bowie will be the ones left standing.

One Beer Article You Need To Read And Why, 11/29/16

There are so many stories surrounding brewery mergers and beer distribution that it can be hard to keep up with what is the most important things to remember.  This article does a great job of showing how the two issues are connected and how each exacerbates the problems caused by the other.  The one thing that I think is most clear from this article is that beer franchise laws are one sided screw jobs for most breweries in this country because most breweries are too small to buy their way out of these contracts.

When the brewers who self-distribute bring buy kegs we bought sometimes we’ll talk.  Often, we get around to discussing distribution and distributors.  One thing I’ve found is that many of the small distributors don’t want to self-distribute for too long.  It is hard, even if you hire a driver or two.  Also, at that point, you are running your own distribution wing instead of concentrating on the beer.  Some like doing that and some don’t.  Regardless, it should be up to each brewer to decide.  In other words, there should be no self-distribution cap.

For those that want a distributor, they ask me which distributors do I like dealing with the most.  The answers are easy, but I won’t go into them here.  Suffice it to say, the two or three I always mention are the smaller houses that a small brewery won’t get lost in.  The problem for breweries is this: If you sign a distribution contract and after a period of time it becomes clear the relationship isn’t right for you, you are screwed.  The franchise law was set up at a time when there were more distributors than brewers, so the laws were set up to protect the distributors.  Now, that equation has flipped, but the laws are still built to only protect the distributor.

This is where the breweries fighting the most for a lift of the self-distribution cap and I disagree.  I think it is more beneficial for more of the breweries in North Carolina to have legislation to make distribution contracts fairer for both sides (and cut the excise taxes in NC).

Here is the other advice I give brewers when we talk and they ask: Self-distribute as long as it is fiscally and physically possible.  If you are a brewery with a small distribution footprint, you will probably lose money going with a distributor.  You will pay less than the 30% or whatever the going rate is right now for a distributor’s cut in paying a driver or two and having a couple of trucks.

Another thing I like about his article is that it tried to look at the effects of the mergers and buyouts from the perspective of the smaller breweries.  Many times, the issues in craft beer are seen through the lens of the larger craft brewers that many people know.  However, the vast majority of craft brewers in this country are small.  They majority of breweries in this country are microbreweries meaning they produce 15000 barrels a year or less as defined by the Brewers Association.  These mergers and how they affect distribution won’t disrupt your Boulevard, Stone, or Ballast Point availability, but if a smaller brewery gets lost in the distribution shuffle it can affect whether you get their beer or if they even survive.

One Beer Article You Need To Read And Why, 11/6/16

It is refreshing to read a piece about big beer companies buying craft breweries that isn’t full of the sky is falling hysterics.  Usually, a column/blog post like this frets over how big beer is killing the soul of American craft beer by selling out and treating beer like a business and not a religious calling.

This blog post out of Dallas is a more sober look at why that is the usual reaction and whether it is justified in any way.

I think there are two reasons craft beer fans have such visceral reactions to craft breweries being bought out.  The first is touched on in the piece and that is craft beer has built itself on the idea of the small local business taking on the big guys.  Craft beer was born of an us vs. them dialectic that gets turned on its head when a craft brewer sells to a big company.

I think that view of craft beer comes at the detriment of craft beer because it doesn’t respect the fact that craft beer is a business and not just a calling.  Not only is it a business, it is a hard business that gets harder every day as more breweries open around the country.

When something like Stone laying off staff happens, it is a bucket of ice water to the craft beer system.  The writers and other beer people I like the most are the ones who understand how much fun the craft beer business is yet treat the business part of it with the same respect they treat the beer part of it.

Another reason I think the reaction to big beer buying craft breweries is so visceral by people in the craft beer business is many of those people came from big beer.  They worked for big beer companies or distributors and they know the shenanigans that go on with big beer not just by the beer companies, but by the bars and restaurants they sell to. They know how much harder it makes the job of getting craft beer in bars and restaurants.

Rarely is it envelopes of cash that change hands.  It is more, “We will give you permanent tap handles if you sponsor a festival for $30,000.” For all the talk about how big beer is evil for handing out money, remember for bribery to work, you must have someone willing to take the money.  Big beer has the advantage in that it has the money, but they aren’t putting guns to bar owner’s heads making them take it.  That is the advantage small craft brewers can’t compete with at all.

I am one of those who hates seeing craft brewers being bought by big beer.  There are two reasons.  One, I don’t think big beer cares about beer.  These are large companies whose primary goal is to sell the most product possible and not the best beer possible.  They could just as easily be selling lead pipes.  The other reason, I like to think of myself as someone who supports small, local businesses.  I think your money is better spent for your community by shopping local whether that be the local craft brewery or the independent bottle shop down the street.  However, I also shop at Amazon, Target, and Total Wine.

One Beer Article You Need To Read And Why, 10/25/16

There is a point, somewhere around 24 or 25, when you understand you can’t act like you did in college.  It is that point where you have been out of college the same amount of time you were in college.  Your job is going well.  You may be up for a promotion.  You’ve gotten a couple of raises and have moved to a better apartment.  Maybe you’ve even bought a car that is reliable.  However, you keep thinking of yourself as a college student with no responsibility.  You still try to go out on Thursdays and drink with your friends until the wee hours, but slowly you and they realize, you have to go to work the next day and it’s much easier to work without a hangover.  Maturation comes in steps of realization that point out to you that the things you did in college may have been fun, but they aren’t feasible all the time.

Craft beer likes to continue to think of itself as this bunch of insurgents.  This rowdy bearded group of pirates out to make beer and have fun drinking it.  The slow realization that this fun anything goes insurgency has become a business with all the attendant problems is creeping across the craft beer world.  At the high end, beer is a business that is increasingly cut-throat.  Layoffs and plant closings are here in this little happy valley and they aren’t going away as the business matures and morphs into its next phase.

Some of the answers and quotes in this Jason Notte piece show an almost naive or arrogant belief that the explosive growth of the last few years would continue unfettered.  That is either a lack of common sense or a lack of vision.  I don’t know.

Until the last few months, anyone who dared say that the kind of growth craft beer saw over the last 4 or 5 years was not sustainable was accused of saying the “craft bubble will burst.”  That seemed to be a way of pushing the inevitability of maturation down the road so people would not have to think about it.

I think there were bad assumptions made by many in craft, in retrospect.  One, there seemed to be a belief among many that they would get to make their beer and eat away at Big Beer’s edges and Big Beer would not respond.  Big Beer did respond by buying some smaller breweries and investing in others.  They did that because they saw something coming that many of the larger craft brewers didn’t.

I think among craft people the initial assumption was that the Big Beer national brands would be replaced by a group of smaller craft national brands like Sierra Nevada and Stone and Ballast Point.  While that has happened to a certain extent, Big Beer is also being replaced by really small beer. If you are a craft beer drinker in North Carolina, Big Beer was replaced with Sierra Nevada, Stone, and Ballast Point, but also Olde Mecklenburg, Lonerider, Newgrass, and Legion.  Craft beer is becoming increasingly localized which somehow the people who helped create the attitude that local and fresh is better didn’t see coming or maybe they thought they were immune to its effects.

Five Beer Articles You Need To Read And Why, 6/16/16

Today is Bloomsday.  It is June 16, the day Leopold Bloom walked through Dublin in James Joyce novel Ulysses.  Once again, I will begin my quest to start and finish the book. I’ve made it pretty much half way through on my last attempt.  Anyway, on to the Five Articles.

Five Beer Articles You Need To Read And Why, 4/25/16

Sorry, I’ve been absent again, but working 12-14 hours a day, on your feet, for 4 days in a row takes its toll and I really needed to sleep.  Anyway, there are three blog posts coming in the next 2 weeks.  One of which will probably be a multipart post because it is a big subject I am going to try and tackle.  The other are a continuation of my fascination and exploration of creativity and a fundamental question about everything I’m writing about on this blog.

  • Many if not most states in the union are in the midst of changing many of their alcohol laws. Most of these laws are left over from Prohibition and some even date back to when the country was still a group of colonies. Most of these changes are slapdash and piecemeal. Look at how most of the laws concerning growlers are not part of a larger look at beer is sold in a state, but just a law to fulfill a niche in a market.  New York is the first one that I’ve noticed take a hard and systematic look at its laws and how they should be changed.
  • Here is another case of brewers wanting to change the law specific to brewers. You know what would be great? If this state’s brewer guild took a few months and came up with a list of 5-10 legislative items and presented them to sympathetic state legislators telling them that if you can pass most if not all of these laws, we can guarantee a strong business segment that will generate tax revenue.  I’m just kind of tired of reading stories about brewers upset that they can’t sell growlers or sell beer in their taprooms.  These are all part of the same problem. Of course, a legislator in Oklahoma is trying to do that and she keeps getting hit in the face with 2x4s from self-interested lobbyists.
  • How much is too much when giving incentives to businesses to move to your state? That is a question NC has been trying to answer for years now in all business segments, not just beer.  I became interested in this topic a few years ago when a few professional sports teams moved because they couldn’t convince the cities and states they were in to pay to build them a new stadium.  Basically, the owners want cities and states to put up all the money for construction and infrastructure for a stadium the teams would control, including all the profits from ticket sales, parking, concessions, etc.  They would spout off about all these pie in the sky jobs created by the stadium, which had no basis in any economic fact, and hold cities ransom.  So, I have mixed feelings about states and municipalities giving away too many incentives for any business.  I think luring businesses with tax breaks is great up until the point where the municipality is no longer making money off the venture.
  • Here is look at the alcohol industry in Michigan. It is interesting to think about craft beer as a part of a larger craft alcohol business segment.  Again, instead of just trying to get growler and crowlers legal or getting the state to allow sales in brewery taprooms, it may help to position these things as part of a larger business segment that can have good tax revenue implications.
  • You know, I’ve felt like a character on Game of Thrones who goes around telling anyone who will listen, “Winter is coming.” I’ve been reading articles for almost 2 years now telling us that a hop shortage is coming and I’ve been writing about those articles in this space.  Yet, the craft beer world, by which I mean craft beer drinkers have been going along like this bounty of hoppy beer will continue without end. Here is another article explaining what is and what will probably happen.  What will probably happen? The price of your favorite double IPA is about to go up in the next few months if stays available at all.

Five Beer Articles You Need To Read And Why, 2/18/16

A pattern is emerging.  American craft beer and American beer in general is going through a lot of changes.  The big beer companies are scared so they do what the overly rich do when they see a threat, the purchase and/or coopt it. At the state level, most states still have Prohibition era or post-Prohibition alcohol laws that seek to keep people from drinking alcohol instead of making sure people are able to enjoy alcohol legally and safely.

Five Beer Articles You Need To Read And Why, 2/11/16

Though I hate all the knee jerk reactions when ABInbev buys a craft brewer, at least, it makes people write about beer in a somewhat interesting way.  Between those convulsions of hand-wringing spawned by the idea that craft beer is an actual industry, the worst place to find interesting beer articles is through Google Alerts.

Here is a profile of Townes Mozer of Lenny Boy Brewing.  The small kombucha and beer brewer is prepping to move into a new space soon.  This is part of a series of profiles of Charlotte area brewers and breweries.

This is a really interesting and good look at why lagers are the red-headed step child of American craft beer from Bryan Roth.  Sometimes with our search for the next big thing or the most popular thing, we forget to enjoy a good beer.  We ignore the solid consistency of a good lager or a good pale ale.  I was looking at my fridge (calling it a beer fridge would be redundant) the other day, I noticed two things.  The first, is I have more beer than food in it.  The second, is I have all single beers.  They are all great beers, but none are what I would deem an everyday drinker.  The kind of beer you want to drink when you just want a beer to enjoy while vegging out to some crappy television show.  I am going to do that this week, just go out and find a good six pack of beers to drink without having to think.

Daniel Hartis with a look at The Cellar, Duckworth’s new beer centered speakeasy under its uptown location.  The food is wonderful and the 20 beers on draft are all rather hard to find limited releases that any beer geek will love to drink.

This leads to a great article on beer cocktails.  This is one of the things I want to get into over the next year.

This article doesn’t really break new ground, but it does a good job chronicling how Virginia jumpstarted its brewing business.  It’s good to remember this whenever you get too worried about what the big multinational beer companies are doing.  I am going to try and not call ABInbev a brewer anymore because that isn’t what its focus is.  Its focus is selling beverages no matter what those beverages are.

Five Beer Articles You Need To Read And Why, 1/15/16

The Five Articles are a little late this morning, but here they are.  This is the first day this year, where I had more articles than I had slots.  That is a good feeling.  The world is starting to right itself after the holiday season.  Onto the list.