BLOG

Insightful opinions and timely responses to the most important business issues facing the craft beer industry. Crafting A Strategy members have access to additional blog content from our founders and from industry experts in marketing, financial modeling, economics, and business strategy.

Blog

Making Sense of the Revised Craft Brewer Definition

By Mark R. Meckler, Ph.D. & Sam Holloway, Ph.D.

Summary

Outrage, confusion, hurtfulness, desperation … these emotions flooded online forums as small breweries all across the USA tried to comprehend why the BA would alter the definition of “craft” to include seltzers and (seemingly) whatever Boston Beer Company needed. We admit we were hurt, too. It was like when your parents tell the teenage version of yourself that you need to grow up and take care of yourself more, they want time for “other things,” so make your own breakfast and lunch and by the way, there won’t be anyone waiting for you when you come home from school anymore.

With a week to cool off and try to reconcile how our former beacon of hope, the Brewers Association, could seemingly turn on us in favor of only the largest craft breweries we came to a sobering realization: The Brewers Association is doing the right thing. They’ve grown up, the industry has grown up, and the problems the BA needs to concentrate on are more grown up. We certainly think they made a mistake on how they communicated this change, but we all need to get used to a new reality. The BA is no longer centrally focused on the needs of the smallest breweries – and that is exactly what they should be doing. Read below to learn our argument in favor of these changes and a new future for our industry leaders and ourselves. Note: We have not spoken to anyone at the BA, just consoled ourselves over some strong winter ales and management theory.

The Proposal to Alter the Definition of “Craft”

Recently, the Brewers Association board of directors proposed to alter the definition of a craft brewery to make it more inclusive. The current definition of “craft” includes three pillars: Craft breweries must be small (less than 6 million barrels), independent (not owned more than 25 percent by a non-craft brewery), and traditional (a majority of its total volume must be derived from traditional or innovative brewing ingredients). As reported by Chris Furnari and Justin Kendall (Brewbound), the “traditional” pillar in the current definition of craft may be changed: “It’s the last pillar, traditional, that is under review, in part because an increasing number of craft brewers are already experimenting with non-traditional beer offerings such as flavored malt beverages and hard seltzers. A growing number of BA members have also expressed interest in creating beverages infused with THC and CBD…”

The motive behind this change to the ‘traditional’ pillar is being vociferously questioned by smaller traditional breweries, who mostly think it is just a way to keep Boston Beer Company defined as a craft brewery. Beervana creator, Jeff Alworth, presents a compelling argument that supports this viewpoint.

We agree that the BA has screwed up in its communication and messaging on this. At the same time it is possible that the BA still holds strong to its core values to support all craft, not just large craft. Sometimes leaders need to solve new problems to sustain the same mission.

We’d like to first comment on the broad feeling of betrayal that small craft brewers are feeling. A core belief of craft brewers is that “local” and “small” is the core, the heart and the soul of craft. We agree completely. However, this also can lead to irrational thinking that that “non-local” and “large” mean not-craft. We disagree with that conclusion. Two things may be true at the same time: a) the core of craft breweries are small, independent and local, and b) a craft brewery can get very large and still craft their beer beautifully with similar values and passion as any other craft brewery.

So is there no betrayal, nothing to be upset about?  Yes, there is at least a bit of betrayal here by the Brewers Association. They have decided to focus their attention on big issues, big goals and formidable tasks, seemingly at the expense of focusing attention on their traditional core members. Also, they have disrespected traditional core members by communicating poorly and disregarding the importance of how small traditional brewers might feel. This is where a lot of the hurtful emotions come from.

If you are feeling bad or completely betrayed by this re-definition of craft, try looking at it this way. The BA finds itself in a position to exert power and influence in the name of craft brewers, and push back on the practices of the multinationals / marketing giants. It had its first major success at the national level by influencing excise taxesBy expanding to keep large craft brewers on our team, we keep and grow that power. In this sense, the BA is positioning itself to get positive work done that none of the rest of us can do. We say go for it BA, get big, powerful, get bad-ass and go kick some corporate butt for us. That is work state-level guilds and we small breweries cannot do.

But what about us? It feels awful when an organization or a club that was “ours” changes and seems to leave “the little guy” behind. Is this abandonment? I hope not, and the Brewers Association needs to step up and let its members know. Small brewers need a lot of help and a lot of support. Small brewers are the soul of the craft movement. The Brewer’s Association has to learn how to grow without abandoning their base, traditional microbreweries, brewpubs, and tasting rooms.

Let’s craft a counterargument with a little thought experiment. What happens if a small, 500-barrel brewpub gets really popular and starts selling 51 percent burgers and fries and 49% beer? Are they off the list too?  Is Dogfish Head less craft or less important to our industry simply because they took money from private equity to grow? What about CANarchy, Enjoy Beer, or Artisanal Brewing Ventures who make sound business decisions to expand their ability to make well-crafted beer: are they no longer one of us? We didn’t think so either – we should and do celebrate our friends who’ve decided to get big in the right ways.

Craft Brewing has grown exponentially. Formerly small breweries have turned into regional and national breweries. This has not stopped local micro, nano and pub breweries from entering the market and succeeding. The “rising tide floats all boats” theory offers logic to the argument that the growth has helped everyone.

Advice for the Brewers Association

  1. Know what you are know why you are. Know what you are not and why you are not. When you have decided this, please broadcast it loud and clear, and stick with it. This is what binds leaders and followers, organizations and communities. Let everyone know, so that we can affirm or deny that at the core we (mostly) share common beliefs, expectations, assumptions and values.
  2. Give us ability to make sense of things in a similar way through that common lens. The BA may have reasons for this decision that would resonate with many members large and small.  The BA’s failure to explain and make senses of this redefinition for its members is a major failure. This can be corrected. The BA should immediately engage membership at all 3 Levels of LeadershipExplain how this proposed change is a pursuit of an opportunity rather than just problem solving for Boston Beer Company. Explain why this is right and good for the enterprise and for all members.
  3. Be especially clear with membership by affirming values, beliefs, assumptions, and expectations. Perhaps some of these are re-affirmations, and perhaps the BA is affirming some new values, beliefs and expectations. Just clearly declare where you stand on principles, and move away from awkward definitions. This will allow each member the ability to listen, reflect and decide if they still want to follow and support the BA or not.

A lesson for all of us. All change is loss and loss must be mourned. Then we move forward, together, onward, and upward. The Brewers Association has grown a lot. Much of the effort and attention now goes to breweries that are larger and more powerful than the vast majority of breweries. But you have not been abandoned! Now is the time to look to other organizations for the specialized support that the BA can no longer provide. Join Crafting A Strategy. We are here to help all breweries.

Two Weeks That Changed My Brewery's Strategy

By Tim Hohl, Founder, Coin Toss Brewing (Oregon City, Oregon)

Please Join Me As A CAS Member

 

I admit to you that I didn’t really use the value that CAS and Sam Holloway offered for two years. I only recently logged in again because I was finally ready for help. In just 14 days, I was able to tap into the real power of CAS. I can’t believe it took me this long, but I don’t want you to make the same mistake. This is the best $99 you can spend as a brewing entrepreneur. Join now!! Don’t wait!! I’m ready to be your colleague, your confidant, and share a few beers while we grow and learn together.

 

When I Stopped Relying on Hope and Reached Out to CAS for Help

A Brief Recap of My Situation

 

I’ve been a member of Crafting A Strategy since June of 2016 when I asked Sam Holloway to use my brewery as a case study in his undergraduate business policy and strategy class.  I learned about Sam via my former career as a morning news host on the radio, which featured a weekly craft beer segment called “The Beer Geek.”  My station managers reached out to The University of Portland when they learned of Sam’s growing reputation as a beer industry researcher. Sam and his students developed a growth strategy around the core elements of our brand and mostly reinforced what we already knew. I felt good giving these students a glimpse into a real company, but their analysis wasn’t a real game changer. I kept with my basic strategy and enjoyed a couple years of slow growth and fun while I kept my day job on the radio. 

 

I ran my business on fun, hope, high quality beer, and a commitment to build a community of breweries in Oregon City, a suburb of Beervana (Portland, Oregon). I also had a lot of hope and a dream to someday leave the radio booth and make this my full-time job. What I didn’t realize was that hope would become reality faster than my wife and I expected. I was let go by the radio station ten months ago. I no longer had the safety of making this brewery my side hustle. With a kid headed to college next year, I could no longer rely on hope and I needed help. The rest of this blog shows a daily path through the community at CAS and details how in only two weeks, I’ve asked for and received help.

A Two-Week Timeline That Changed Everything

September 12, 2018 – My First Ask For Help

I emailed Sam Holloway (Co-founder and President of CAS) because I needed a ‘reality check’ on my strategy to expand Coin Toss Brewing. I had worked up some financials, though that isn’t my strength. My initial plan was to expand my self-distribution business to points of sale outside our local area.  Sam wrote back within one day and we scheduled a lunch.

September 19, 2018 – Lunch, New Ideas, & Connections

Sam and I met at the Barley Pod, a new and innovative expansion project of another CAS member, Baerlic Brewing Co. Sam wanted to show me other ways to expand my self-distribution business and one that was very successful. I learned it was also near Sam’s house so he was maybe a little biased. I did a mental download about everything. My daughter going to college, my dismissal from the radio station, my excitement over our success at Coin Toss, and my strategy moving forward. Sam listened and basically said he didn’t like the strategy. We talked a bit more and Sam offered to make introductions to two other Crafting A Strategy members whom I could bounce ideas off of and also a CPA firm he really liked to help me with my financials. The CAS members were spread across the west coast of the USA, but all of them offered to help:

  • CAS Member, Randall Behrens (Santa Rosa, CA) Live Oak Bank Senior Loan Officer
  • CAS Member, Steve Waters (Carson, WA) Backwoods Brewing Company CEO
  • Irvine & Company CPA, Karly Tell (Portland, OR)

September 20, 2018 – CAS Content For Me to Review

One day after our lunch, Sam responded with seven content pieces from the CAS website that could also shape my thinking. Sam knew I was a busy beer entrepreneur, so he only sent me webinars & podcasts that I could listen to while driving around to make my sales calls. It turned out several CAS members had already discussed the pros and cons of expansion; I just hadn’t engaged with the content – I was too busy running my brewery. Without judgment, Sam sent me the seven content pieces and then went to work setting up meetings for me. Here was the content he sent:

 

Webinars:

Podcasts:

September 24, 2018 – New Canning Line Quote

I sent Sam a link to the canning line I was interested in, which we had discussed over lunch. We agreed to keep gathering information and meet again for lunch the first week of October.

September 25, 2018 – Conversation with Live Oak Bank

Sam encouraged me to get a better understanding of the SBA 7A loan program and referred me to Randall Behrens at Live Oak Bank. Ultimately, Coin Toss’ situation wasn’t a fit for this program, but speaking with Randall introduced new ideas into my strategy and offered yet another piece of new information I didn’t know to ask for. Thanks to this CAS member, I had another piece of data to make a better decision.

September 26, 2018 – Conversation with CAS Member, Steve Waters (CPA, CEO)

Steve and I met for beers to discuss my overall situation and just to bounce ideas off each other, one brewery entrepreneur to another. I didn’t realize Steve had been Sam’s student a decade ago and only came into the beer industry when his family founded a small brewpub in his hometown. Steve was a CPA and seasoned auditor and operator, just not in the beer industry. Steve discussed how he used CAS to get up to speed and how he is now a very willing mentor to people like me who make great beer and need occasional help with the numbers. Steve is actually what Sam calls a “Member Expert” within the CAS community. A member expert is someone with a high level of expertise in one area who makes herself/himself available to other members. As a CPA, Steve’s expertise is accounting and finance. He’s also a super normal dude who has slowly, methodically, and profitably grown his brewery with CAS’ help.

September 26, 2018 – Conversation with Irvine & Company CPAs

Karly Tell and her colleague, Jason Nishikawa telephoned me to learn more about my situation. They have deep knowledge of the craft beer industry and quickly helped me articulate my challenges to determine if they were a fit or if they could recommend someone better. Within just a few minutes, they set up an in person meeting and connected me with a trusted bookkeeper in my hometown, Oregon City.

 

In just 14 days, I was able to tap into the real power of CAS. I can’t believe it took me this long, but I don’t want you to make the same mistake. This is the best $99 you can spend as a brewing entrepreneur. Join now!! Don’t wait!! I’m ready to be your colleague, your confidant, and share a few beers while we grow and learn together.

12 NW Whiskeys Reviewed

By Lenny Gotter, CAS Member Expert, Spirits Guru and more

Note: Neither Lenny nor CAS receive financial compensation or other benefits from the selected companies. Analysis and results are from whiskey enthusiasts and made out of love and delight…

Photo by Polara Studio: PolaraStudio.com

Most consumers have performed some blind taste test in one form or another. In talking to friends and family many reference wine tasting as their first experience tasting something they know nothing about and then trying to determine flavors, aromas, and quality. Participating in many wine tastings myself, I remember looking around and observing others with the very same question on their minds “Do I like this?” Pretty tough question when you don’t know the ingredients, manufacturing process, cost, and how the packaging looks. Researchers typically use blind taste testing to compare one brand to others. Here in Portland, Oregon State University has a Sensory and Consumer Group in which I have volunteered a few times to blind taste test foods, the last being frozen Ahi Tuna. The Sensory Group has strict guidelines including no one is allowed to wear fragrances on the day of testing.

This year was my first year as a spirits judge.  Previously, I had been on the production side of the industry as the founder of Eastside Distilling.  There I had created flavor profiles for more than 20 products, many that ended up winning awards and several that are now multimillion dollar brands. I have done hundreds of experiments on flavor. Back then, before becoming a judge, I thought I had an educated and diverse palette. Wow did I have a lot to learn! When your first task as a judge is to rate 21 corn vodkas, all made from the same bulk neutral grain spirit, your taste buds and your brain go to a whole new level.  When all those glasses of clear alcohol stare at you blankly with no input as to cost, and packaging and marketing, you have to dig in and really evaluate based on smell and flavor. I know that sounds obvious, but trust me, organize a blind test with your friends.  Pool together ten bottles of very similar products, say 4 year Bourbons, have your spouse pour the samples in another room and start tasting them one at a time (you will need lots of glasses).  What you think is your favorite Bourbon may not be your favorite Bourbon!

American malt whiskey is not a defined category in spirits, yet… so a blind tasting is even more challenging.  What is American Malt Whiskey? Well here is the standard from the American Malt Whiskey Commission: Made from 100% malted barley and distilled in entirely one distillery. Mashed distilled and matured in the United States of America. Matured in Oak casks not exceeding 700 L. Distilled to no more than 160 proof or 80% alcohol by volume. Bottled at 80 proof, 40% alcohol or more by volume. This is pretty loose for a whiskey definition and leaves plenty of room for variation and innovation.

The products we tried here did not all fit into this guideline as some were made with less than 100% barley, but they are all similar enough in production to warrant a taste test. Everything we tasted was in the range of flavor from an Irish whiskey to Scotch whiskey to something totally different.  I decided to do my tasting at Polaris Studio here in Portland because they have been working with me for many years in taking product shots for not only my products but also other companies I work forI had originally thought of bringing in whiskey professionals, but I decided that instead of professionals I would get enthusiasts.  I was not disappointed with the results.  Out of the 12 samples, three rose above the rest, and the top two spots were very… very close.  All of the products were very good and there were no bad whiskeys in the lot.  In general, the products that did not score in our top were simply younger and a bit less structured.

All of these whiskeys are from Oregon & Washington where some of the best barley in the world grows:

#1
Westland Single Malt Whiskey

aromas of blackcurrant tangerine and walnuts
flavors of mossy bog, tar, waffle cone, and campfire smoke
a long pleasant lasting earthy hint of peat finish
Westland Distillery - WestlandDistillery.com

#2
Bull Run Oregon Single Malt Whiskey aged four years 89.08 proof

the nose is moderate with aromas of malt, toffee, light peat smoke and a touch of cardamom and tobacco leaf
the taste is cocoa powder, waffle cone, white pepper and raisin
an oily lasting finish of coffee, caramel, and a touch of mushroom funk on the end
Bull Run Distillery - BullRunDistillery.com


#3
Clear Creek Distilling’s McCarthy’s Single Malt Whiskey

nose is peaty smoke with a hint of cinnamon
flavors of smoke, peat, and honey
earthy campfire smooth finish
Clear Creek Distillery - ClearCreekDistillery.com

The rest in alphabetical order:


13 Corners American Malt Whiskey 80 proof
nose is very light aromas of alcohol fuel oil and whole wheat bread
flavors of soggy toast clove and milk chocolate
finish complemented by a lasting light malty and almond flavor and a bit medicinal
Wishkah River Distillery – WishkaRiver.com

Copperworks Distilling American Single Malt Whiskey 106 proof
the nose is very light of smoky cocoa beans a touch of cinnamon
the taste is lots of caramel and graham cracker with black pepper
finish is dry and malty with a burnt sugar sweetness
we found it to be a bit hot at 106 proof, but a few drops of water opened it up nicely
Copperworks Distilling – CopperworksDistilling.com

Four Spirits Single Malt Whiskey 80 proof
This was the wildcard of the bunch. Aromas of banana popsicle and chai tea
flavors very sugary reminiscent of custard and bananas foster
a short fruity, grassy finish
4 Spirits Distillery – 4SpiritsDistillery.com

Idle Hour Malt Whiskey 88 proof
aromas of peach pie, caramel, and grain
flavors a little bit hot reminiscent of lightly burnt wheat toast
sea salt air finish that ends a bit medicinal
Seattle Distilling Company – SeattleDistilling.com

Madam Damnable Washington Single Malt Whiskey 88 proof
nose is rising rye bread with white pepper and hazelnut
Flavors of rye toast moss and black cardamom with a spicy rye finish that burned a little bit.  Few drops of water took off the excess spicy bite
finish of modest peat smoke and caramel
Sounds Spirits – DrinkSoundSpirits.com

Ransom Spirits The Emerald 1865
noses pleasant and balanced shortcake allspice and brown sugar
full-bodied and rich flavors of butterscotch pancakes almond and a dusting of clove
finishes smooth and malty
Ransom Spirits – RansomSpirits.com

Rogue Spirits Oregon Single Malt Whiskey 80 proof
the nose is very light gunpowder phenolic with aromas of orange piecrust demerara sugar and hazelnut
flavors of buckwheat pancake peaty smoke hazelnut and nutmeg with a waxy texture
the finish is lasting malty mushroom and smoke
Rogue Spirits – Rogue.com

Tualatin Valley distilling Oregon single malt 92 proof
almost no nose cinnamon cookie with clove moderate alcohol presence and a slight medicinal quality
flavors very light of barley biscuit pecan a touch of caramel with a white pepper burn
a lingering finish of pepper spiciness
Tualatin Valley Distilling – Tvdistilling.com

Westward American single malt whiskey 92 proof
aroma doughy cinnamon roll prune and a light iodine aroma
the flavors are ready yeast general and malt
finish of burnt caramel, with a bit of mushroom funk
House Spirits – HouseSpirits.com

In closing I would like to add that this was an exceptionally enjoyable tasting and I’m very excited about all of these products what the future holds for American malt whiskey.  It is my firm belief that American Malt Whiskey will become the next big category in the American spirits so you heard it here first.  I’m very excited to have so many excellent products from so many local distilleries.

Lenny Gotter
Spirits Guru/Brand/Marketing/Sales Consultant/CAS Member Expert
LennyGotter.com

In a Year That Soured, Here Were Some Winning Strategies

By Sam Holloway, President Crafting A Strategy

This blog features a few of our member success stories from 2017. I’ve organized these stories using the Boston Consulting Group’s decision-making framework: The Strategy Palette. This should help you decide how your brewery should think and act in 2018 if you survived the craft beer pinch of 2017.

The last five days have renewed my confidence in strategic thinking and how our approach at Crafting A Strategy works. This may seem odd since the last five days have been dominated with bad news, brewery closings, layoffs, and a general malaise resulting from 2017. Still, at the risk of shameless self-promotion, I think it is worth noting that during the toughest year in beer since the mid 1990s none of our member breweries closed. How did they survive? Why did their strategies work? How do our members work together? It’s because we think and act differently, not building strategies typically taught in a traditional MBA. It's no longer sufficient to have one strategy. Success in 2017 and beyond requires breweries to operate in multiple business models, each with their own strategy, goals, and mindset.

We hope these brave entrepreneurs will inspire. We also hope that more committed entrepreneurs will join Crafting A Strategy and help us sustain the global craft beer renaissance. This blog is longer than I would normally like, but it could help save your business by teaching you how to think. Here’s one of our members describing how his thinking has changed:

Ben Parsons, Co-Founder, Baerlic Brewing (Portland, OR): “In terms of the brewing industry, I tend to exist in the gray area between the brewers and the owners. More often than not, the owner is not the brewer. They are vastly different skill sets and require vastly different mind frames. This is where I really get the most out of the CAS community. It’s more a brewery entrepreneur community and that's really where my time gets more bang for its buck in terms of making better beer. If I run a better business now then I am afforded the opportunities to make better beer in the future.”

The BCG Strategy Palette: The Inspiration For Crafting A Strategy’s Strategic Mindset

Developed by Martin Reeves and his colleagues at the Boston Consulting Group, we believe this lens allows us to explain why our members succeed when others fail.

Source: BCG Henderson Institute: https://www.bcg.com/publications/collections/your-strategy-needs-strategy/intro.aspx

Quadrant 1: Classical

I’m already big, and won’t need to change

Unfortunately, this quadrant is where a classically trained MBA lives. The best way to win here is to be big. If you are big, you get all the scale advantages and bargaining power. Getting big was a great strategy if your brewery was founded before about 2003. This is the quadrant of a blind commitment to volume growth. This is the quadrant of deep pockets. If you aren’t already big, don’t think this way. If you are already big, congratulations and be prepared to adjust your strategy. If you are big and you don't adjust, prepare for a blood bath, a red ocean, and to merge and acquire each other.

Quadrant 2: Adaptive

It’s harder to predict, but I can and will change

This is where most of our production brewery members live. They trade profit maximization and volume growth for growth in happiness, sustainability, employee morale and reasonable profitability.

Steve Waters, CEO Backwoods Brewing (Carson, WA): “2017 was the first year we acted differently. For the first time, we didn’t bank on explosive growth. We readjusted our goals to include profitability and moderate growth. Everyone saw the slowdown coming; we just decided to respond to it where previously we ignored it. You see, my parents put their life savings into this brewery and then gave it to my brothers and I to run. That’s a lot of responsibility. We joined Crafting A Strategy because we wanted to think and act differently. We wanted to be profitable. I’m happy to report, with Sam’s guidance and support from our CAS peers, 2017 was our first positive EBITDA year ever and we grew volume on top of it!”

McKean Banzer-Lausberg, Co-Owner Migration Brewing (Portland, OR): “The entire Migration management team receives the (CAS) weekly emails and very often have strategic discussions about relevant topics brought up in the emails. We have also referenced a wide variety of white papers to help drive decision making. Migration's primary goal for 2017 was to secure a production facility location and financing for a major expansion. Secondary was to bolster our growing team with talented, thoughtful people that compliment our company's culture. We worked with Noah Brockman at the SBDC, Josh Bean of Ethos Commercial Advisors, Columbia Distribution, and Pacific Continental Bank in order to achieve these goals.”

Quadrant 3: Shaping

I can’t predict it, but I can control it

This is where most of our brewpub members and self-distributor members operate. Sure, some also have wholesale agreements that place them in the adaptive quadrant for that part of their business, but their forward looking and strategic choices lie in shaping a future where they can win. Often, this starts with looking in the mirror and asking themselves if they can commit to thinking and acting differently.

Ben Parsons, Co-Founder of Baerlic Brewing (Portland, OR): “For me, 2017 was a year of trying to get into stride. Since Baerlic opened in 2014, it has been a near endless amount of work in mostly the putting out fires category and I have worked really hard to try and move away from that mentality…The biggest of which was removing myself from the day to day operations of physically brewing beer. Which was hard, because I absolutely love brewing beer. It's why I wanted to open a brewery in the first place. But, as much as it pained me, I quickly recognized that decision as one of the best business decisions I have ever made. It has allowed me the proper amount of time and energy to build the business side of Baerlic.”

Steve Waters, CEO Backwoods Brewing (Carson, WA): “The weekly updates from Sam and Joe have helped shape our mindset. We realized a reckoning was coming and our market was getting tougher by the day. We had to treat Backwoods first like a business and second like an art – not the other way around. Looking ahead to 2018, there is so much knowledge within Crafting A Strategy – other breweries, distributors, professors, lawyers – we are leveraging this knowledge to improve our operations. We’re even taking a few field trips to other member breweries to steal some of their secrets. Everyone here shares knowledge. Everyone here wins together.”

Tom Schmidlin, Founder and Head Brewer Postdoc Brewing (Redmond, WA): “We are not doing much differently than other successful breweries, but I think there is some separation between the successful and not successful breweries. New beer releases always give a brief uptick in sales, whether it is a new product, a new package, or a new distribution channel. Even with the recent closures I believe there are more breweries in Washington than ever and consumers are looking for what is new. We will continue to create new products and packaging to keep people interested in our brand. At the same time, we are committed to our core brands and continue to grow those, opening new channels for selling those beers.”

Quadrant 4: Visionary

I can predict it and I can change it

We teach our members to fail cheap and fail fast. The strategic way to try new things is to do them in a way that won’t wreck the business. These strategic moves are business model moves based on your vision of your best future. They are hypotheses, both of business model and markets, and they influence and shape each other over time (Holloway and Sebastiao, 2010).

Ryan Flynn, North American Sales Director for Oproer Brewing (Utrecht Netherlands): “We believe that it is nonsense to waste the environment with the transport (of Dutch-made beer) to the USA. So, we reached out to Sam Holloway and asked if any CAS members had excess capacity and a desire to make our beer closer to where it was going to be consumed. Sam recommended CAS Member Coin Toss Brewing and CAS Member LGM Distributing to make and sell the beer for us in Portland. Since then, we have expanded our vision to include brewing American craft beer in Utrecht for sale in The Netherlands and beyond. We articulated our vision in this blog, and now we have a growing and different business model of fresher beer at a much lower cost to the breweries and to the environment.”

Ben Parsons, Co-Founder Baerlic Brewing (Portland, OR): “As Baerlic is a pretty direct expression of who I am, it has been hard at times to really dig into what makes Baerlic “Baerlic” without going down that rabbit hole of self-exploration that might have some scary implications, ha! But, in a pretty concerted effort to discover what truly defines us, I realized that our biggest differentiator in the market is our agility. This is where our ninja like agility has evolved from. We are a very small brewery making and selling just over 1100 BBLs in 2017 and we have learned to use our size to our advantage. We can turn on a dime, when a larger brewery cannot. We can change our entire sales strategy, when a larger brewery cannot. We brew many many different styles well and can push new products to market at lightning speed when larger breweries simply cannot. Every time we try and act like a large production brewery, we fall flat. This has been a crucial realization for us over the last several years and I attribute our year over year growth in terms of brand equity AND actual sales to this mantra. We are not a hoppy beer brewery. We are not a German or Belgian beer brewery. We are not a lager brewery. We're not a sour brewery. We are all of these things and that is what really defines Baerlic. And we will continue this scrappy mindset as long as it works.”

Renewal: The Penalty Box

BCG Director, Martin Reeves calls strategic renewal “The Penalty Box.” In this mindset, the most strategic thing you can do is survive. Our members faced tough times in 2017 and found ways survive and advance toward a profitable 2018 and beyond.

Tom Schmidlin, Founder and Head Brewer Postdoc Brewing (Redmond, WA): “In this market, success sometimes means outlasting the competition. We grew in 2017, although not as much as we had hoped. Our Seattle sales rep left us for personal reasons, and we have been unable to find a suitable replacement. This definitely put a dent in our sales. But when we look around our area, there have been several brewery closures while we are still growing. Just in Redmond we had one surprise closing and another coming up in a month, so there will only be three breweries left.”

To Summarize: Your Strategy Needs A Strategy

Winning in 2018 and beyond means that your brewery can’t survive with only one strategy. It all starts with your business models. Each channel you sell beer through (or plan to) needs its own business model and its own strategy. These business models should complement and reinforce each other as much as possible, but don’t try to jam a single business model into every channel. Also, don’t rely upon a volume growth strategy as your primary strategy (unless you are already large or have unusually deep pockets). Finally, you don’t have to do this alone. The breweries at CAS work together and continuously share ideas, successes, and failures. Plus, other members including lawyers, CPAs, bankers, consultants, and several professors surround them.

Please review our membership and testimonials from beer entrepreneurs like you. Our community gets stronger with more breweries. For less than the price of one nice dinner with your management team, you can give them a year of training, networking, and learning on our all digital and on demand platform.

Sources and Additional Resources

If you’ve made it this far through the blog and still want more…

Watch BCG’s 3-minute video on The Strategy Palette, "Your Strategy Needs Strategy".

If you want a 10-minute video on why The Strategy Palette helps companies in tough times, watch this Ted Talk from lead author, Martin Reeves. I use Reeve’s Ted Talk to start all of my Executive MBA workshops – both in the USA and abroad.

How to Make Investors Understand You

It's about being clear, not convincing.

Several of our Crafting A Strategy (CAS) members are reaching a critical milestone in their growth – the need to ask for other people’s money (again). While the financial pro formas, your two years’ worth of taxes, profitability (if you are profitable), business plan, and business model will garner lots of attention; today I want to write about what may ultimately seal the deal – your investor presentation.

As President of CAS, as a brewery shareholder, as an outside director, as a professor, as a beer industry researcher, I make presentations for a living. Whether I am asking for money, asking for time, asking for students’ attention, I am always asking for something. I change my presentations all the time, but there are some key take-aways from my best presentations. For this blog I will deconstruct what, according to several audience members and advisors, was my best presentation to date. The 2016 Craft Beer Finance and Investment Conference in San Diego, CA. This was a presentation where everyone in the room knew more than I did about finance and investments. I was the outsider, asked to speak to a strong network of industry insiders, financial professionals, and people I look up to. Some of them were CAS members and some were key CAS partners – I was a little terrified.

I think many CAS members feel this same way when asking financial professionals to invest in their breweries. By retracing my steps in San Diego, I think I can help you do your best at raising money.

1. You Have About 30 Seconds to Inspire or Scare Them (You choose)

I was the last speaker in San Diego, usually a dreaded spot in the lineup because people are packing up their tradeshow booths, checking flights, and (especially at a good conference like this one) intellectually drained and tired. In my audience were people from Goldman Sachs, Private Equity, Bankers, Equipment Leasers, M&A Advisors, and a host of other people who could run circles around me when it comes to finance and investment. I knew I had to be memorable or lose half the audience in the first minute. Buoyed by experience and a little worried by what I was going to say next, I pushed forward: “Why would a crowd of finance and investment experts want to listen to a strategy guy? I think it’s because you are all lying to yourselves.”

Analogous opening lines in your investor presentation:

How many of you have an investment in your portfolios that you truly love?

At a dinner party with your closest friends, how many of you break out pictures of your stock portfolio and pass them around? Asking your friends to hold them up to the light, smell them, and talk about how being near your portfolio makes them feel?

2. Ask For Help, Be Vulnerable

Now that I had the attention of all these smart people, I had to keep them interested. I had to deliver. I find the best way to do this is to ask for help. In San Diego that morning, I began by being vulnerable. I admitted that I went home early from the conference gathering at Karl Strauss Brewery. I couldn’t figure out what I was going to say. I sat through every presentation the day before learning about the wins and losses for investors having the courage to enter the craft beer space. I then went to dinner with these professionals. After a few rounds, the narrative began to change. I learned the future wasn’t as clear as they made it seem publicly just a few hours before. I felt the pain and confusion in their voices; I knew my original talk would perpetuate more sameness. I knew my standard stump speech wouldn’t be memorable.

I reminded all of these finance professionals that I sat through every single presentation, that they painted a clear picture of the future, and set measurable and achievable financial metrics to achieve those goals. Then, over beers I learned the future was more uncertain than they let on. There was a lot of confusion, missed targets, and fear that the future won’t look anything like what their models predicted. That’s when I knew I had them. I study decision making under extreme uncertainty. Financial projections are based on certainty. My research studies actions managers can take when there is no good data to rely upon. Their everyday lives rely upon data from the past – data that represents an alternative reality to what they were experiencing in August 2016.

I told them the next 20 minutes would be completely foreign to what they may have expected. But, if they trusted me, they would have a new way to make decisions on Monday when their old decision models no longer applied. After being vulnerable, I offered a path forward.

Asking for help at a brewery investment presentation:

Running my craft brewery, everyday I open up my portfolio for the world to love, to hate, to criticize, and to talk about. And I don’t know how to measure that kind of value on a spreadsheet but maybe one of you does? Could you help me quantify the joy and happiness my business creates daily and where that fits in your portfolio?

If you want a soulless exponentially increasing ROI that returns value to investors first and to employees, the community, and the environment a distant second, then you are at the wrong presentation. But I need help, my top line is good but I am about to bite off another big piece. I know I can do better on expenses, but do any of you know how hard it is to make beer consistently and at scale? I need balance, experience, and your trust. I need patient money, not just your money.

3. Focus on Being Clear, Not on Being Right

Making good presentations is about communicating your expertise as simply and clearly as possible. The simplest way to communicate your expertise is to talk in your own language and not the audience’s. Scientists often do this, they use jargon and acronyms because it is how they speak with each other, but they leave the audience confused. A confused audience doesn't receive a clear message, thus the presentation isn't as effective.

No message will be effective unless it is clear. Clear messages give the audience a choice to opt in or opt out. Clear messages equal understanding. That is the goal for you as a presenter. Be convincing with your passion, be clear by using words that the audience understands, and give them the choice to ask for another meeting or simply thank you and move on. I really like the formula presented by Melissa Marshall in her Ted.com talk: Talk Nerdy To Me.

I finished my speech in San Diego by talking about decision making under uncertainty. This, finally, was something I did know more about than my audience because I had been studying it for a decade. I didn’t try to compete head to head with finance and investment professionals on topics they were better at. I didn’t try to convince them that I was smarter or that I had a better way of thinking. However, I did say that the science I study is just as rigorous as their decision models. I removed jargon and used pictures and quotes instead of bullet points (admittedly, I still had a few bullet points). I then asked them if I could show them my science. To conclude, I made my science relevant to their new reality. I didn’t try to convince them to change; I only wanted to understand that there are other ways to make hard choices.

Being clear at a brewery investment presentation:

Let me tell you about how my business improves the lives of my employees, my neighbors in the community, and how we bring happiness and joy to all that enter our tasting room. If that isn’t part of your ROI calculation, then this may not be the ideal investment for you.

Making an investment into my brewery will likely not yield the same financial ROI you are used to in your other investments. It may be higher, but it can likely be lower. However, I imagine your investment in our brewery may be the only investment you talk about at your dinner parties. It may be the only investment where your money stays locally here in the community where you live. If that doesn’t sound great to you, no problem... Enjoy the beers we provided and thanks for your time.

The Case for International Contract Brewing

For the past several months, I have been engaging CAS members on the topic of contract brewing. There is a growing movement within our membership that believes in a simple principle: Beer should be made as close as possible to where it will be consumed. Several members have come out more strongly, saying “it is morally wrong to ship beer across oceans.”

What principles does shipping beer overseas compromise?

  • Environmental principle: Shipping water over water is wasteful.
  • Freshness principle: If beer needs to be consumed within six months, why let it spend a month on a boat before it enters a distant market?
  • Cold chain principle: Many foreign countries simply don’t have a cold infrastructure set up for beer
  • Brand and community principle: Suppliers that simply say goodbye to their beer when it leaves their dock have less control over how and where their beer is marketed and lack a direct connection to their new, local market. And, they don’t make good partners to their distributors
  • Financial principle: Shipping beer internationally is expensive. Because it can be impossible to retrieve brewery owned kegs internationally, new costs and environmental impacts of one-way kegs are introduced

How could a new business model based on international contract brewing remove these obstacles? What are the benefits?

  • Environmental benefits: carbon footprint is reduced
  • Freshness Benefits: Beer can be packaged and delivered to retail bars or grocery stores within days (not months)
  • Cold chain benefits: There are certain distributors in Europe/Asia that have cold storage, although many bars store beer in the basement (not terrible, but usually 16 degrees Celsius instead of the preferred 5 degrees Celsius). Finding the right distributor with enough cold storage is essential
  • Brand and community benefits: Local knowledge, local networks, and an understanding of local labor laws and wages/benefits packages to attract the best talent. Also an understanding of how to remove employees, which is nearly impossible in some countries.
  • Financial benefits: It costs between 5,000 Euros (East coast of USA) and 9,000 Euros (West coast) to ship a refrigerated 40 foot container of beer to Europe. Brewing locally, this cost goes away, but pricing stays basically the same. Cooperating partners can use this value to ensure QC/QA, to procure the right ingredients, and also ensure each entity’s margin targets are met.

Fundamentally, a new business model based on international contract brewing creates business advantages. Here are some examples:

  • Access new markets and grow your business without capital investments.
  • Reciprocity: Contract brew beer for your foreign partner at home, grow new and diverse revenue channels
  • Fractional in-market sales reps: Imagine offering your European wholesale partner on the ground support personnel in Europe, but sharing this cost with other CAS member breweries? Each Brewery pays a percentage, the distributor picks up a percentage and you now have a knowledgeable person talking about your beers to new consumers.
  • Have fun! Imagine a business trip to Europe or Asia to promote your beer. When was the last time you took a vacation, anyways???
  • Be local. We all know that being local and small is a great competitive advantage. Why not partner with a local brewery to brew your beer on their system? You are automatically local, new and innovative.
  • Develop your people. Have you ever had a sales person or other employee approach you saying they needed a change? What if you could rotate people through your European operations and create a win-win professional development and personal development scenario?
  • Be environmentally friendly.
  • Increase the variety of beers you can brew in new markets by eliminating the freshness challenge.

Of course there are risks as well, and we’ve got an entire forum thread on concerns about ingredient quality, equipment, beer quality, storage, and more. Click here for the forum thread: Contract Brewing - Key Contract Provisions.

Next Steps:

CAS member breweries should consider this new business model. Brewers in Europe have a long history of contract brewing. And distribution is not subject to traditional franchise laws like you may see in your state. With no shipping, there is money in the system to make sure everyone gets a fair price. CAS members are already engaged in facilitating contract brewing here in The Netherlands.  And, I just toured a brand new, cold warehouse in Breda, Netherlands (images below) and spoke with the owners of USA Beer. They see a bright future in partnering with us. Who’s in?

Building a PR Foundation with Nuts and Bolts Press Releases

Note from CAS President, Sam Holloway: I am thrilled to add CAS Member, Kerby Meyers to our group of Member Experts. Kerby’s background includes a career in journalism as well as several years as Principal of The Communications Refinery where he offers training and consulting services in strategic thinking and communications. This first blog post is publicly available, future posts will be exclusively for CAS members.

You see them on a regular basis: announcements from national, regional and local brewers published in industry magazines, on brewing websites, local news sites and business publications.

Sometimes the news item features a new flagship ale or a seasonal concoction. Other times, it touts a new hire. Occasionally, it describes a brewery’s investment in a new brewhouse or taproom.

While usually brief and too the point, each bit of such content provides a valuable boost to a brewery’s online presence and, to some degree, its reputation among consumers and fellow brewers, as well as editors, reporters, bloggers and other influencers.

Given the potential ripple effect, the basic press release should be a key tool within your promotional toolbox.

Key Steps to Writing an Effective Press Release

Emphasize Newsiness

Simply put, the basic press release must convey news of some sort. That is, a timely development within your business that is relevant to the readership of a publication, website or blog.

As noted above, the craft beer industry has some long-established news themes, but it could also make sense to announce community support events or other unique aspects of your brewery’s business that are coming down the pike.

To convert that newsworthy element and shape it into a press release, grab a piece of letterhead (copying and pasting your logo on the top of a blank Word doc will do) and write it at the top of the page.

On subsequent lines, add two or three supporting facts or data.

Review what you’ve written.

Confirm that all of the following questions answered: Who? What? Where? When? Why? How? If not, determine if they need to be.

Now, looking at all of your notes, is the most essential point—the most newsy one—at the top of the piece of paper? Do the supporting points truly round out the information you’re looking to share?

For example, if you’re rolling out your Winter Warmer Ale, what are the flavors I’ll find in it? How are you selling it? When will it be available? Where can I find it? Is it becoming part of your core lineup or is it seasonal?

Once you’re satisfied that you’ve successfully covered all the relevant bases, you’re ready to whip your notes into shape.

Build on the Basics

Starting from your simple outline, put some meat on it: Add some context, some color and some active verbs.

Think of the added points as the answer to the question “so what?” Assess the relevance of everything you add, and if you determine it doesn’t add any value—or if it gets too technical—cut it out.

For example, will the specific hop strains be important to the description of your new IPA? Quite likely. How newsworthy is the background of your new head brewer? Probably worth a sentence or two. Do you need a lengthy quote on the life-changing journey that served as the inspiration for your Winter Warmer Ale? Save the complete version for the taproom, but whittle it down to the gist for the press release.

In the end, you should be looking at 3-5 paragraphs. Any more than that, go through the “so what” exercise again.

Top it with a basic headline along the lines of “ABC Brewery Taps Winter Warmer Ale,” and it’s virtually ready to go—allowing for a bit of time for polishing.

Regardless of the news you’re looking to share, adhere to the traditional KISS adage—Keep it Simple, Stupid (yes, that’s how it’s explained to young reporters). Provide enough information to support why this is news, but don’t clutter things up with extraneous copy.

Remember, it is generally going to be edited down to a short blurb, or if it is run in its entirety, it will appear on pages where readers only skim the first couple of paragraphs anyway.

Some Technical Pointers

To help enhance the effectiveness of any press release, consider the following:

  • Assume the reader knows nothing about your organization—always close with a couple of descriptive sentences about your brewery (also known as boilerplate copy).
  • Better yet, assume the reader knows nothing about anything—short explanatory phrases may seem redundant to you, but for some readers they’re absolutely necessary, and you don’t want to lose them.
  • Keep paragraphs short—one or two sentences. Try and keep lengthy lists to a minimum.
  • If you believe you have two items of near-equivalent importance, break them out into two press releases and send them a week apart (if possible).
  • Once you’ve written a press release, put it aside overnight. Then, when you return to it in the next day or two, you’ll be looking at it as a reader/editor, not the creator.

As with any public relations effort, there are no guarantees of placement in any medium. But with a smart approach you’ll boost the odds that your announcement will establish a foothold in your targeted newsfeeds.

 

Why is Being Small Such Good Strategy?

Sam Holloway, Ph.D., November 15, 2016

What if being bigger isn’t enough to win anymore? The 3-tiered system was originally conceived to protect consumers and little distributors from big breweries (Tied houses). Now, the big breweries and the big distributors control everything. It used to be that being big was the only way to survive, but that has changed. How can being small work to your craft brewery’s advantage? Small isn’t only a measure of barrels produced. Small isn’t just a mindset or part of what it means to be ‘craft.’ Now, for perhaps the first time in the global beer industry, ‘small’ is a source of competitive advantage. If you don’t believe me, watch this Ted Talk. If you want to learn how to compete and thrive, no matter your craft brewery’s size – keep reading. If these ideas resonate with you, stop wasting your time and money on old ways of thinking. Join Crafting A Strategy, where our members rewrite the rules to feature their own strengths, not those popular in the archaic 3-tiered system.

How Do Entrepreneurs Make Small A Weapon?

This isn’t wishful thinking or desperation, it’s science. Small is the weapon of choice among expert entrepreneurs. I have spent my career being fascinated by expert entrepreneurs.  They start with nothing and eschew traditional thinking about how being ‘big’ is the only answer. Let me share with you a little bit about how small works in uncertain markets.

Building off the work of Sarasvathy and her colleagues (Effectuation.org), I have sought to reinterpret traditional ways of thinking through an effectual lens. First, Dr. Helder Sebastiao and I wrote about how business models can be used as strategic weapons when traditional competitive levers are too expensive, unavailable, or require resources outside the entrepreneur’s control. Next, Professor Peter Whalen and I wrote about how marketing planning needs to be reinterpreted if it is to prove useful under extreme uncertainty. We wrote these papers to talk about new ventures in general, it was only recently that I realized how powerful these ways of thinking can be for small and independent craft breweries trying to do the right things for themselves, their breweries, and their employees.

August 2016 – Craft Breweries & Investors Need To Wake Up

I was asked to speak at the first ever, Craft Beer Finance and Investment Conference in San Diego, CA. It was fortuitous that I was the last speaker. Going last gave me the chance to listen to a bunch of presentations about how professional investors evaluated craft brewery investments, what was working, what was not working, and how a craft brewery should prepare for outside investment. I was shocked at how orderly the presentations went. It seemed that each of these professional investors was applying a playbook from a time when craft breweries and the consumer market were tightly linked, growing fast, and easy to predict. However, over beers that evening, many investors confided in me that the current reality was very different than what they predicted when they made the investment.  I realized at that conference that the craft beer industry was becoming increasingly more uncertain and, perhaps for the first time, the principles I learned studying uncertainty could apply. I quickly rewrote my speech and focused on how old ways of thinking can be misleading and dangerous when a market is changing as rapidly as the craft beer industry. I wasn’t sure if anyone would stick around to listen to my speech, nor was I sure those that stayed would buy into this new way of thinking. I decided to go for it anyway.

The response to that speech has been tremendous. In San Diego, I had leaders from Goldman Sachs, private equity firms, brewery executives and bankers taking furious notes. I’ve since been asked to give the same speech at the Orchestrate 2016 Conference, with over 200 craft breweries present. It made me realize that the principles of decision-making under uncertainty apply to all craft breweries. It’s time to get the word out.

Over the next several weeks, I am going to write about how to apply the principles of effectuation to your craft beer business. My approach, which is to summarize the new way of thinking as a business model paradigm, has resonated with many folks. Those that apply the business model paradigm introduce new innovations, take market share, drive down costs, and increase margins – even if they don’t have vast amounts of cash and even if they have zero leverage against their wholesale partners. This new way of thinking is our industry’s future. If we continue to play by the old rules, then only those firms that are already big can win out. Here is a preview of how business model thinking (new paradigm) differs from business planning (old paradigm). Are you ready to join the new paradigm?

Old Paradigm - Business Planning New Paradigm - Business Models
Market Research Market Entry & Experimentation
Full Scale Marketing Plan Short Term Hypercycle Plan
First to Market First to Mindshare
Be Secretive and Be Perfect: Hide in your office conducting market research, write the perfect business plan, only enter the market after securing outside funding Fail Fast and Fail Cheap: Talk to everyone, get outside the building, launch the business as soon as possible, experiment, fail cheap, learn, try again
Upside market potential drives business plan funding needs Downside market risk drives business model needs
Return on Investment Affordable Loss

 

China is the Future of Craft Beer

If you are a supplier in the U.S. craft beer industry, you had better get your game plan ready for China

 Sam Holloway, Ph.D., May 30, 2016

I just returned from a week in Shanghai where I attended the first ever, China Craft Beer Conference and Exhibition. Over six hundred eager entrepreneurs attended and their laser like focus on learning and willingness to share knowledge was impressive. Throughout the week I was reminded of a famous paper written by my friend and mentor, Alan Meyer and his colleague, Joseph Lampel.  Their paper: Field Configuring Events as Structuring Mechanisms: How Conferences, Ceremonies, and Trade Shows Constitute New Technologies, Industries and Markets[1], tries to predict the initial conditions of market emergence. Lampel and Meyer hope to answer a famous question that is not well understood: “Where do Markets Come From?” A field, like a market, can emerge due to many different initial conditions. In this blog I will lay out the initial conditions proposed by Meyer and Lampel (2008) and show our readers why China is poised to dominate the global craft beer market.

What Are Field Configuring Events (FCE’s)

FCE’s are “arenas in which networks are constructed, business cards are exchanged, reputations are advanced, deals are struck, news is shared, accomplishments are recognized, standards are set, and dominant designs are selected” Lampel and Meyer (2008). Meyer and Lampel (2008) go on to suggest: “FCEs can enhance, reorient, or even undermine existing technologies, industries, or markets; or alternately, they can become crucibles from which new technologies, industries, and markets emerge. Recognizing this, their organizers often design FCEs with an eye towards influencing field evolution.” CBCE organizer Michelle Wang and her colleagues at The Beer Link China are change agents, helping the craft beer industry accelerate in China.

With Lampel and Meyer’s (2008) definition as a baseline, let’s examine the precursors for field (market) emergence and how the China Craft Beer Conference and Exhibition is a catalyst for the entire Chinese craft beer industry. I will lay out each criterion in order, and provide examples of the people I met, the speeches I heard, the business cards exchanged, and the standards being set in China that will enable this country to quickly become the new home of craft beer. And I am going to mostly use pictures, to ease the strain on your eyes and let the images tell a more powerful story. In the end, you too will realize that China is poised to dominate global craft beer production, consumption, and innovation – perhaps in as little as ten years from now. You had better get your game plan ready!

1. FCEs assemble in one location, actors from diverse professional, organizational and geographic backgrounds.

Spend a few minutes reviewing the CBCE conference program here. You will see industry experts from America, Europe, Latin America, and China all descending on Shanghai, China for three days. Here is a brief snapshot:

China for three days. Here is a brief snapshot:

2. FCEs duration is limited, often running from a few hours to a few days

Over a three-day period, conference attendees were subject to multiple interactions, instructional demonstrations, meals and networking, and live translation of all English/Chinese discussions.

3.  FCEs provide unstructured opportunities for face-to-face social interaction

Hosted by CAS Member, BoxingCat Brewery and featuring a Firestone Walker Tap Takeover, complete with Firestone Walker Brewmaster Matt Brynildson, conference attendees attended a fun evening at BoxingCat’s Liquid Laundry facility:

4. FCEs include ceremonial and dramaturgical activities

Traditional foods from the Yangtze River Delta region were shared by the Dean of the University of Portland, Robin Anderson, the Dean of Doemens Asian Beer Academy, Professor Guangtian Zhou, and CEO & Brewer of the Beer Link China, Mr. Liu:

5. FCEs are occasions for informational exchange and collective sensemaking

Dr. Mark Meckler speaks about how craft breweries help the economic conditions in every state of the USA, even rural regions, as he explains how craft breweries can help any village of any size in China.

Dr. Sam Holloway speaks about economic strategies for small breweries, no matter their size or location in China:

6. FCEs generate social and reputational resources that can be deployed elsewhere for other purposes

Maybe my favorite part of the whole conference... Discussing with the Beer Link and Doemens Asian Beer Academy how the University of Portland and Crafting A Strategy can help Chinese brewing students understand the business side of craft beer:

 

[1] Field-Configuring Events as Structuring Mechanisms: How Conferences, Ceremonies, and Trade Shows Constitute New Technologies, Industries, and Markets. Available from: https://www.researchgate.net/publication/228316629_Field-Configuring_Events_as_Structuring_Mechanisms_How_Conferences_Ceremonies_and_Trade_Shows_Constitute_New_Technologies_Industries_and_Markets [accessed May 30, 2016].

The Case to Reduce Federal Excise Taxes for Distilleries

Note from CAS President, Sam Holloway: About once per month I get asked if CAS can help distilleries. The truth is, I’m not sure. It’s hard enough for me to keep current on the beer industry, but I also know that craft distilleries need a voice and need access to business wisdom. I’m thrilled to announce our newest Member Expert Blogger, Lenny Gotter. Lenny founded Eastside Distilling and took that company from an idea inside his own head into a publicly traded and industry leading craft distillery. Lenny has literally “done it all” in distilling and he approached me with a desire to give back. I’d like to personally thank Lenny for being in our community the past year or so, for seeing a need to give advice on distilleries and business strategy, and stepping up to lend his voice to our community. This initial blog is publicly available and shareable, future blogs will be exclusively for our membership.

Lenny Gotter, Member Expert – Founder, Eastside Distilling & Lenny Gotter Brand Consulting Services
April 24, 2016

Owning a local distillery is something to be proud of, for you can supply your neighbors with the libations they need to celebrate life events. Bringing joy to people is a Pro in being a distillery owner, and naturally one of the most stressful Cons is taxes. I know the sheer mention of taxes can bring one to drink, but before you fill your shot glass just know for the past few years, we craft spirits business professionals have been working hard with our elected officials to get a craft distillery tax break in Federal Excise Tax (FET). Several local distillers of Distillery Row and I met with Congressman Bleumenaur in the summer of 2010. We were expressing the need for this tax break to ensure the survival of local distilleries, and after many years, the prospect of a tax reduction similar to what is already enjoyed by the craft beer and wine industry is a possibility.

According to the Alcohol and Tobacco Tax and Trade Bureau (TTB), if you are a small alcohol excise taxpayer who has paid less than $50,000 in beer excise tax in the previous year, you may be eligible to file returns and pay excise taxes on a quarterly basis. So cheers to that! However, if you exceed $50,000 in a calendar year, which is only 3700 proof gallons or roughly 2000 cases, you must pay semimonthly instead of quarterly.

Grab a bourbon on the rocks, pull out a chair, and allow me to break it down for you. When a distillery grows to approximately 2000 cases per year their federal tax is due semimonthly instead of quarterly.  Taxes on products that leave your bonded space, some of which not being sold yet, from January 1st thru the 15th will be due on January 21st. What this means is you will pay tax on a product that you may not receive payment for weeks or months.  The tax paid in advance increases so much that it becomes an asset on your balance sheet. A huge amount of operating capital becomes tied up in tax payments instead of growing your business.  I cannot stress what an enormous cash drain this is and how it can increase as your business grows.

How could this tax break really help?

At 10,000 proof gallons, current FET would be $135,000, and the tax break FET would be $27,000. That savings is equal to two new employees or a new still.

At 20,000 proof gallons, current FET would be $270,000, and with the tax break the FET would be $54,000. 

At 100,000 proof gallons, current FET would be $1,350,000, and with the tax break the FET would be $270,000. That savings is equal to five new jobs/employees, a rick house, and full health benefits for staff. Let’s drink to that!

We are pushing to create a bill to receive a 20% FET rate for the first 100,000 proof gallons of any distillery production from $13.50 to $2.70 per proof gallon, and following with a 30% reduction from $13.50 to $9/gallon. Instead of only pertaining to “craft” distilleries, this discount would apply to every distillery, thus giving the bill some chance for success.  This FET reduction is a double benefit for small producers; you would have to pay semimonthly at roughly 18,000 cases instead of 2000, and that alone means years of tax relief for small distillers. Time to toast with your favorite spirit for this good news!

This tax benefit has been enjoyed by the craft beer and wine industry for some time now. With this tax break implemented small distilleries will flourish, staff will have better pay and benefits, necessary equipment could be purchased, and all those tax savings will go right back into growing your business and local economy.

We as local distillers deserve tax breaks that will ensure the success of our business.

A new bill in place is beneficial for owners, employees and local economy. So raise your glasses to decades of supplying your townspeople with the Spirits they need at any celebratory occasion.

It’s time we take action to help the growing craft spirits industry and support FET reduction. For more info check out the ACSA FET info page.

Pages