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Is 2021 The Most Important Year Ever For Your Brewery To Win A Medal?

by

Sam Holloway, Ph.D.

With comments from Breakside Brewing (Portland, OR USA), Brewery Deseveaux (Boussu, Belgium), Engkanto Brewery (NCR Manila, Philippines), Antwerpse Brouw Compagnie (Antwerp, Belgium), and the Brussels Beer Challenge (Brussels, Belgium)

I’ve spent most of my time this year thinking about bringing new customers into craft beer. Whether you are in North America, Australia, Asia, or Europe, the global pandemic has caused us to re-evaluate every aspect of our businesses. Today I want to examine the role beer competitions should play in your strategy. Here’s my conclusion: It’s never been more important for breweries to participate in beer competitions and to win competition medals. Smart breweries need to consider three things in making their decisions:

  1. How exclusive is the competition, do they have high enough standards to justify the costs of entry (entry fee, time, marketing, travel, etc.)?
  2. Do consumers understand the value of a win and are you prepared to dedicate resources to tell them about your success (or failure)?
  3. With so many new competitions, how do you choose the right ones? {Hint, it depends on two factors – the size of your brewery and the geographic reach of your sales. We offer a 2x2 matrix at the end of this blog to help you choose the right competitions}


“New beer drinkers don’t necessarily have the education to understand the flavor nuances of yeast strains or hop profiles, but everyone knows what a gold medal is."  Dr. Ian Parkman, University of Portland (USA)


                                                                                                                                                                           

The current relationship between craft breweries and new craft drinkers is dangerous in many ways. Much like the wine industry in 2001, current craft beers require a lot of education on the part of consumers for them to feel confident in their purchase decisions. Back in 2001, wine industry messages focused on the land the wine grapes were grown in (terroir), the prestige of the winemaker, the complexity of the wine, and wine labels often had a chateau on them, even if there was no chateau on the property itself. For new wine drinkers this was an intimidating place – and many potential new customers simply opted out of wine altogether so they wouldn’t look stupid during their purchase experience.

Prior to the pandemic, it was OK for breweries to expect a fair bit of education among beer drinkers because we had the infrastructure in place to educate them. Wholesale sales reps were trained on the nuances of the beers they sold and were incentivized to continue learning about their products and thus, incentivized to teach their buyers. Beer drinkers visiting taprooms (pre-pandemic) could use servers and brewers as an interactive resource library and grow their knowledge in a safe and fun atmosphere. Post-pandemic, we will certainly love to reopen our taprooms and educate new beer drinkers as they visit, but what about all the Direct To Consumer (DTC) sales and mobile ordering features we’ve implemented during the pandemic? Don’t we all love those new channels and their higher margins? If you’ve made a big bet on mobile and you want to grow this channel, which one of these two options will be most successful on those small screens?

  • A list of hop profiles, aromas, and technical brewing statistics that requires three screen scrolls to get to the “buy now” button
  • A giant picture of a recent gold medal on the first screen with a “buy now” button

Amazon has made billions by displaying information on a single screen with one click purchase functionality. They don’t use words, rather they use images, symbols and videos. Beer drinkers new and old expect this kind of functionality and get frustrated when it isn’t there. Can a gold medal from a prestigious beer competition signal quality and drive sales for your brewery? Let’s ask some of the world’s most prominent academics and brewers what they think heading into 2021 and beyond.

Academic Science


The academic science below isn’t beer specific, but it does offer a place to start. Check out this flow chart and blog from Professors Gabriel Rossman and Oliver Schilke, How Ratings and Awards Do (and Don’t) Benefit Companies (via Harvard Business Review). Hint: They Refer to Award Competitions and Ratings as “Judgment Devices.” {Image Credit: HBR.org}

 

 


International Beer Industry Experts’ Opinions


OK, with the academics behind us, it still isn’t crystal clear how and why craft breweries should enter their beers into competitions. I reached out to my friend and founder of the Brussels Beer Challenge, Luc de Raedamaeker to ask him why breweries do and don’t enter beer competitions:

Luc de Raedamaeker, Director, Brussels Beer Challenge:

In my experience brewers are generally entering for three reasons:

  1. Win an award and use it as a marketing tool
  2. Benchmark your beers and get feedback on their beer (especially small and starting breweries or well established breweries with new products)
  3. To support the industry (this is an underestimated motivation).

Brewers don’t register for the following reasons:

  1. Too expensive
  2. They don’t find the time/or forget to do it
  3. Large/successful breweries don’t want to lose their status: Example, it’s real bad publicity if Westmalle Tripel wins a bronze award.

Ben Edmunds, Brewmaster at Breakside Brewing (Portland, OR) had this to say:

Any well-run beer competition should, at a minimum, provide brewers with feedback about how their beers fared in a blind setting. After all, as anyone who enters competitions know, you lose more than you win, so it's the feedback, and not the glory that you're really after. Sending beer to international competitions such as the Brussels Beer Challenge has become more and more important for a brewery like Breakside because it gives us that valuable feedback from skilled judges outside of our regional orbit.
It's one thing to do well when you have home field advantage in a local or regional event-- judges from any given region are going to favor beers from that area not because they play favorites or cheat, but because they are subtly influenced by the beer that they drink every day. It's another thing to send beer across the world and have it perform well in front of a novel set of palates. At the Brussels Beer Challenge, we know that our beers are evaluated by an international panel of judges with unimpeachable bona fides.

Sébastien Deseveaux, CEO & Brewmaster of Brewery Deseveaux (Boussu, Belgium) had this to say:

Participating at Brussels Beer Challenge is important to us, our beers are judged by selected professionals and known for their skills. The majority of the breweries that participate are very old and famous. For each of our beers we receive a detailed evaluation which reveals the important characteristics, after which it is up to us to develop them if necessary. We have won a Gold medal 3 times in the Traditional Season category, which is a great honor for us and a great recognition of the work of my team.
 

Johan Van Dyck, Founder of Antewerpse Brouw Compagnie (Antwerp, Belgium) had this to say:


As a small independent craft brewery, quality is our key differentiator. We cannot compete on price, nor on heavy marketing or elaborate sales teams. We therefor invest heavily and put all our focus to pushing our quality to the  highest level, as we are convinced this is the only long term valid strategy. The Brussels Beer Challenges is part of this philosophy: it gives us an objective neutral ‘external’ quality audit on our beers and in comparison, to competition from all over the world. Judged by an experienced and diverse team of judges.
 
Winning a medal is a real boost for our brewers  and confirms the efforts invested. While this is our main reason for entering, winning a medal at the BBC put your brewery and beers on the radar of many beer lovers,  beer buyers across the country and world. They know that a BBC medal has actual value and is a true proof of quality. This way, the BBC is a part of our drive for top quality, and serves as an ambassador for our philosophy.

Conclusion


Based on the feedback from some prominent minds in the global craft beer scene, I’ve concluded it’s never been more important for breweries of all sizes to enter beer competitions. Most small breweries don’t have the budget to enter everything, thus you need to be selective. Here is a 2x2 matrix of beer competition strategies based on what kind of brewery you are.

&nbso;

 

 


Note On Emerging Markets

From CAS Member Expert Michael Jordan, Brewmaster at Engkanto Brewing, Philippines

The perspective you share in this blog makes a lot of sense for America ( or other mature craft markets). For craft breweries in emerging markets the situation is much different. In these new markets people tend to trust and place a higher value on international brands. A way to change their perception is to win international beer awards to convince them that locally made craft beer is on par with “famous” international brands. I saw this in China during my 10+ years there and I am seeing it again in the Philippines. This strategy worked very well in China and is likely the case for all of Asia.

 

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Creating New Demand In 2021 and Beyond

 

Sam Holloway, Ph.D.

January 5, 2021

 

“Insanity is doing the same thing over and over again, but expecting different results”

~Rita Mae Brown

 

I’m really scared as the President and Co-founder of this global community. I’m really scared as a beer drinker who loves the people in our industry that work so hard to make a difference in their communities. I’m scared because many of you aren’t thinking strategically – you’re just holding out hope for widespread distribution of a COVID-19 vaccine so you can get somewhere closer to “normal.” Trust me, there is no normal anymore. Even after widespread vaccine distribution and a potential herd immunity. Even after taprooms reopen and all of our regulars return. Even if craft beer sales approach 2019 numbers, we still have one huge problem – due to a lack of diversity in our industry, we are all competing for the same customers (a customer segment with flat or declining growth) instead of creating demand in new and growing customer segments. I want to start off 2021 by asking everyone to make a difficult choice and take a good long look at customer segments who aren’t buying from you and why this is the case.

 

MAKE A BLUE OCEAN SHIFT IN YOUR BEER BUSINESS

 

Making a “Blue Ocean Shift” is about creating demand for your products and services from people who aren’t currently buying from you. First theorized in 2004 by two Professors at INSEAD, Blue Ocean Strategies offer craft brewing entrepreneurs a method for planning for growth in 2021 and beyond. That’s right, I am encouraging each and every one of our members to plan for growth and to plan to be different once we get a vaccine – going back to the way things were is too easy and essentially involves no strategy. Strategy is about doing something different than your rivals …  If everyone solely goes back to serving the same beers and attracting the same beer drinkers (whom we dearly love), we will continue to fight each other for a smaller share of a shrinking market instead of creating new markets with enough room for everyone. And I’m not asking you to pivot your whole business in 2021 – that would also be insane. How about the 80/20 rule? What if you put 80% of your strategy toward bringing back your regulars and stabilizing revenues post vaccine and 20% toward what I describe below? I think it is a winning recipe for many craft brewing entrepreneurs.

 

THREE TIERS OF NONCUSTOMERS

 

Professors Kim and Mauborgne, the authors of Blue Ocean Strategy, suggest that there are 3 Tiers of noncustomers that currently are not buying from you. In order to convert these noncustomers into new customers, you have to think strategically about why each one doesn’t get you, doesn’t like you, or maybe worst of all, doesn’t understand you, your products or services. Creating new demand in 2021 is about converting these noncustomers into repeat customers. Check out the image below (Image Credit: Brad Dunn via Medium.com).

 

 

CRAFT BEER EXAMPLES FOR THE 3 TIERS

 

The first tier of noncustomers sit right on the edge of your industry – “soon to be” customers. They buy from you only when they have to or because there is no other choice. I think of these as beverage alcohol drinkers who really love the ethos of the craft beer industry, but only drink when their friends take them to your brewery and perhaps they order your lightest lager. These customers will put up with drinking a craft beer they don’t love if it means they can hang with their friends and participate in the great atmosphere your brewery experience provides. This tier also includes seltzer drinkers and low- or no- alcohol beer drinkers. Craft beer taprooms and bottle shops can attract tier one noncustomers by offering wine, cider, seltzer and other less hoppy beers to overcome any reticence by some patrons who don’t like your standard offerings. It gets a lot harder for production breweries but as Athletic Brewing has shown, the growth potential in converting Tier 1 noncustomers is impressive.

 

Have Questions? CAS members can click here to share ideas on our members only forum: Creating New Demand In 2021 and Beyond

 

The second tier noncustomers are customers who “consciously choose against your market.” These customers can be regular alcohol consumers who simply prefer the taste and health benefits of wine, spirits, cider, etc. I imagine gluten intolerant consumers would fit this category as they likely enjoy consuming alcohol for some of its effects, but still “consciously choose” against craft beer for its adverse effects on them.  Beers like Omission from Craft Brew Alliance or Portland, Oregon’s Ground Breaker Brewing are actively converting Tier 2 noncustomers and bringing their dollars into our markets. This is also a great space for architectural innovations and barrel aging. Creating beers that taste like cocktails is a great way to win over Tier 2 noncustomers. Check out Alesong Brewing and Blending’s Manhattan and French-75 beers as examples.

 

Have Questions? CAS members can click here to share ideas on our members only forum: Creating New Demand In 2021 and Beyond

 

The third tier noncustomers are the furthest away from your industry and have never even considered your products or services as an option. The advantage of pursuing Tier 3 noncustomers is that it is also likely that your competitors are also ignoring them. Tier 3 noncustomers represent the largest group of potential customers, so getting this right can lead to huge rewards. However, don’t assume Tier 3 noncustomers are simply “everyone else.” Think of them as people who could benefit greatly from interacting with your brands and products that simply have never considered you as an option. Examples of Tier 3 non-customers include lending money to “unbankable” people, such as in the microfinance industry or designing cosmetics for men instead of women. Beer industry specific examples of converting Tier 3 non-customers include Brewery Finance using their education and industry knowledge to lend money to otherwise unbankable craft breweries and startups. Perhaps sour beers, Brut IPAs, and milkshake beers represent product designs that current market customers may see as a passing fad or “not real beer,” but altogether different customers would pay top dollar for if only they were approached with a message that made sense to them. If craft beer is to build a business case to match the moral imperative of increasing diversity, I believe Tier 3 noncustomer thinking is an important first step.

 

Have Questions? CAS members can click here to share ideas on our members only forum: Creating New Demand In 2021 and Beyond

 

 

 

 

 

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What Does Sweetwater Brewing Company’s Sale Mean For Most Small Breweries?

Submitted by cas_admin on

Sam Holloway, Ph.D. with commentary from Kevin O’Brien, Principal Zepponi&Co.

 

During the “frothy” period of the craft beer boom (2014-2017) when large strategic buyers like Heineken, AB InBev, and Molson Coors gobbled up several of America’s craft beer darlings, it was common for scholars and investors alike to refer to the acquisition price paid per barrel of beer produced ($/Bbl) as a good measuring stick for the deal. Way back in 2011, AB paid $305/Bbl for Goose Island and at the height of craziness, Constellation Brands paid $3,600/Bbl for Ballast Point. Just last week in our own newsletter, I ran through some other recent multiples to try and discern whether Aphria, Inc.’s (APHA) $1150/Bbl purchase of Sweetwater Brewing Company was too much, too little, or just right.

 

I spent some time last week talking with my friend and beverage alcohol M&A advisor, Kevin O’Brien. Kevin is a longtime contributor to the CAS knowledge base, authoring blogs about contribution margins (publicly available) and giving a very informative podcast (members only) on valuation strategies. I reached out to Kevin to get his take on the sale of Sweetwater Brewing Company. Below are my questions and his answers.

 

Overall, at $1150/Barrel, did Aphria, Inc. overpay? If not, why do you think they are in a good position to benefit from this strategic acquisition?

 

I believe this was a unique transaction due to the nature of the brand that was acquired. Sweetwater carved a niche in the cannabis community due to its branding and reference to cannabis in their product names and marketing. APHA is a large Canadian cannabis producer that has growth aspirations in the U.S. market. I think it is difficult to compare this acquisition with prior transactions by large strategic breweries. The per barrel metric from the “frothy period” (2014-2017) may be dated at this point. The $/Bbl metric was appropriate at that time, but less appropriate now. There are just too many variables in place now, whereas before it was about a large multinational manufacturer adding more beer to an already strong beer portfolio. Moving forward, the metric that should really be evaluated is either revenue or profitability. The multiple on EBITDA was reported at ~12.5x, that is a reasonable valuation for a consumer packaged goods (CPG) business that is growing and profitable.

 

Kevin and I had a subsequent discussion about the quality of the management team at Sweetwater and how that may figure into Aphria’s strategy. There is much speculation as to why Aphria, Inc. would enter the market prior to federal legalization, but gaining expertise in consumer packaged goods (CPG) is a major bonus. Also key was that Sweetwater was profitable. Kevin and I discussed how TSG Consumer Partners’ private equity investment into Sweetwater in 2014 and their subsequent strengthening of the Sweetwater management team also played a key role in motivating APHA’s acquisition. Sweetwater was scalable, profitable, and had product lines well positioned to cannabis. APHA has the cash on their balance sheet to spend the next two years learning as much as they can about Sweetwater’s customers and also about how they can leverage Sweetwater’s drinks manufacturing expertise into future cannabis drinks. Kevin’s explains:

 

APHA is banking on cannabis being legalized in the U.S. in the near term (2022?) and wants to be able to capitalize on the market with an established footprint in place. Cannabis drinks is projected to be a large market but there are only a few recognized brands in the market at this point. By acquiring a large, well-known brand in the U.S. they should be able to leverage the brand goodwill to “hit the ground running” once legalization occurs. Additionally, this deal provides them with production infrastructure and a professional management team. These are invaluable assets to have in place when looking to expand into new markets.

 

Next, I asked Kevin if small breweries could leverage the seemingly high price per barrel multiple APHA paid for Sweetwater in their discussions with investors, bankers, landlords or employees. Kevin basically said “no” and that there isn’t a lot a small brewery can take from this sale:

 

I don’t think small breweries can draw a lot of correlation with this deal and future deals. This was a unique, very strategic deal that was completed for more than just adding more beers to a portfolio. We know that a lot of breweries are struggling and have “for sale” signs listed. Due to the large number of sellers, and limited buyers, valuation multiples have declined. The market is so fragmented at this point that I don’t think small breweries should take this as a sign of another wave of deals happening in the near-term. Buyers may be opportunistic if the right brand, or production assets, hits the market but otherwise they are content to sit on the sidelines and ride out the COVID wave and see what’s left standing.

 

Next, I asked Kevin if he thought a craft brewery aligning themselves with the cannabis industry was a good strategic move. In other words, could a growing regional brewery follow Sweetwater’s lead in developing and branding products with strong cannabis ties and (perhaps) enjoy a similar result:

 

The cannabis drinks business has the makings of being a very large market. With this, strong brands in the brewing space may be attractive for other cannabis companies in that they can leverage the goodwill of the brand to help accelerate growth. That being said, the Sweetwater branding had a long history of connecting with consumers. Perhaps a brewery could launch some beers in the same vein and see if they gain traction, but it certainly doesn’t guarantee a cannabis company will have the same strategy as APHA in finding a platform to build on. Let’s not forget that Sweetwater is a large, regional brewery that has a scalable infrastructure to build on - the same can’t be said about the majority of craft breweries in the U.S.

 

Finally, since this transaction may not provide much “juice” for craft breweries looking to sell, I asked Kevin for some best practices for breweries looking to sell, in terms of getting the highest possible valuation:

 

Focus on your financials. The better you understand your numbers the better your business will do and the more likely an interested party is going to be confident about what they may be acquiring. Additionally, spend the money on securing trademarks. The brand is what someone is buying, if you don’t have legal control of that brand then the deal is off, simple as that.

 

About Zepponi & Company - ZEPPONI & COMPANY is a merger and acquisition advisory firm that provides corporate finance and transaction advisory services to the global beverage alcohol industry. From sourcing and securing growth capital to advising on partial and full liquidity events, Zepponi & Company designs and executes effective transaction processes that result in exceptional outcomes for business owners. The firm serves a wide range of clients from family-owned businesses to global, publicly-traded beverage companies.

 

About Kevin O’Brien - Kevin O’Brien has experience advising businesses in the beverage, consumer packaged goods and manufacturing sectors. His beverage experience has been focused in the wine, beer and distilled spirits industries. Kevin has presented on various accounting and finance related topics at the Wine & Spirits Daily Summit, American Craft Spirits Association Convention, Craft Brewers Conference, and Oregon Wine Symposium. He is also a lecturer for Sonoma State University’s Global Executive MBA in Wine Business. Kevin earned his bachelor’s degree in Accounting from the University of Portland and holds a certified public accountant (CPA) license.

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A Helping Hand For Cash Strapped Breweries

By Thad Fisco, Landlord, Brewery Owner, & Brewing Equipment Fabricator

As with many of you, my current livelihood is completely dependent upon the craft beer industry’s success. I’ve watched with pride and amazement as my coworkers, employees, customers, and fellow brewing entrepreneurs have made the best of an unprecedented and difficult first half of March 2020. Difficult choices like laying off employees so they can get in line early for unemployment have been made. Government mandates have shuttered bars and taprooms and wholesale orders are evaporating. Craft Brewing entrepreneurs keep fighting and innovating as we pray our customers keep buying beer so we can all stay alive.

April Fool’s Day will be especially cruel this year as in less than ten days your brewery’s first rent and/or loan payments since the COVID-19 crisis started comes due. By now you have likely driven COGS to a bare bone minimum.  Unless you are 100% capitalized with cash and own your real estate, a significant portion of your overhead expense will be your capital equipment loan, building rent, or mortgage.  I want to help you understand the best way to talk with your landlord or bank about not making payments according to terms.

In general, it is going to be far more advantageous to all parties to give short term payment relief than to evict or foreclose on your brewery.  Tenant changes typically cost landlords 12 to 24 months of revenue. Banks rarely come out whole when they are forced to foreclose.

If the intention is to short, or not pay your loans, it is both good etiquette and will strengthen your position with your lender if you discuss this with them ahead of time.

Lenders tend not to be proactive about checking on the health of their clients until something goes wrong.  If the intention is to short, or not pay your loans, it is both good etiquette and will strengthen your position with your lender if you discuss this with them ahead of time.  The people behind the contracts are feeling a lot of stress and are likely not prepared for what is coming.  Banks hold the biggest hammer, but like your landlord, they will want to avoid wielding it to its potential.  The win:win for everyone is that no breweries go out of business, and the entire lending stream suffers a momentary shock with a quick recovery.  However, we all know this is not likely.

As you prepare to speak with your landlord, remember that they are entrepreneurs too. They are scared and now may be the best time to pour your landlord a beer and ask for their help. How you ask for help could be the biggest factor in successfully negotiating payment relief. We recommend you have the following information at your fingertips:

  • Reread your lease and loan documents. Look for clauses like “force majeure,” which is an “act of God” or an “extraordinary event” clause. Know your loan covenants, and what happens if (when) you violate them.   The sobering facts surrounding the “Remedies” articles in your contract are what is to be avoided. Knowing your contract is a good foundation for the call to your landlords or banks.
  • Be ready to show how you’ve done absolutely everything possible to reduce costs while staying alive. Show how your brewery has driven COGS to near zero. Remind your landlord that, thankfully, our legislators seem to have our employees' backs as we drastically reduce staff. When discussing cost reduction, this is a great time to ask your landlord for help. Is there something they see that you may have missed, something that could free up cash and eventually be used to pay rent.
  • Be empathetic to your landlord’s situation and their relationships with their lenders.  

 

What is responsible behavior and what can we expect from our landlords or lenders?

A strong relationship with your landlords and lenders may be your most valuable asset in the next few months...

As a landlord, I can say with 100% confidence that responsible management of our lending or lease relationships is the pillar of our businesses.  Lenders and landlords want the businesses of their clients to be strong and in the best possible position to pay.  

  • The “trickle up” effect in the lease and mortgage world means that tenants who do not pay rent, reduce cash flow to landlords, which can put landlords in violation of their loan covenants.  Banks are constantly on guard to keep covenant violations to an absolute minimum, because they are a primary means of ranking their strength by their overlords, the Fed, FDIC and other federal entities.  The same hierarchy applies if you “own” your real estate, as your real estate holding company is your landlord. Regardless, a respectful and business minded conversation is an absolute necessity if we intend to short pay or not pay our obligation in the coming month(s).   
  • When you call be prepared with facts, and lay out a rational argument without wasting time. While your insurance company is not likely to assist at this time, it would be helpful to call your agent before speaking with your lender. Let your lender know you have read your contract, and that you have every intention of abiding by every article that you possibly can, but you need something right now. Be prepared with numbers, how much business is down, have you suspended operations, what you are doing to control costs, and exactly what you would like from them.  Let them know that you intend to resume operations, if you intend to do so.  If you do not it’s probably time to inform that of that fact now, unless you have a buyer. Follow up your conversation with an email, copying all stakeholders.
  • If you are a brewery in planning or under construction you should be asking for an extension on your free rent period, and for a concession on your loan payments.  Breweries in the formative stages of their business may or may not be in better positions than operating breweries, depending on the amount of cash they have on hand.

 

Conclusion

We Are in for a Wild and Messy Ride – Stick Together, Keep Talking, Don’t Hide

What can we expect from these conversations depends on a lot of factors.  The beer and hospitality industries are in completely uncharted waters.  Even in 2008, some tenants were able to limp their business along and pay substantial portions of their rent.  Today 90% of small businesses, restaurants, breweries and taprooms are shut down.  The loss of tenant cash flow is going to result in a lot of unpaid rent, and landlords with debt obligations will begin defaulting in unprecedented numbers if they do not get assistance from the banks.  (Since starting this blog, the banks I work with have begun the process of mortgage hiatuses, with details still forthcoming.  If this comes to pass, your landlords and banks will be positioned to grant lease and loan moratoriums.  I will comment in the threads as I learn more.)

Regardless of the chaos that is about to ensue, we should be capable of negotiating  a vacation from our lease, and hopefully, our mortgage obligations for the month of April. What happens with operations in April is anybody’s guess.  If we don’t get green lighted to open our doors until April 28, the day Oregon schools are scheduled to re-open, none of us are going to be well positioned to pay our lease and mortgage obligations in May.  Thereafter, lets all hope the beer engines are running at full steam again.

In an effort to leave on a positive note, this is an excellent time to consider refinancing your loans.  Interest rates are at their lowest since the 2008 meltdown.  Owner occupied buildings can expect rates below 3.0% if supported by a well capitalized and profitable business.  Most of us are currently paying rates in the 4.5% range or higher.  Assuming a 25 year amortization and reducing our rate from 4.5% to 3.0% on $1,000,000 saves $780.00 per month in mortgage payments, ($9,300 annually).  The extra cash flow may come in extremely handy in the coming months.

Stay calm, hold on, and believe in the power of beer.  People are still thirsty!

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Has Craft Beer Flavor Innovation Played Itself Out?

Submitted by cas_admin on

A Conversation with Tomme Arthur

Co-Founder and COO, The Lost Abbey

In late November 2019, Tomme Arthur reached out to Sam Holloway at Crafting A Strategy and asked a few questions about innovation in craft beer, hard seltzer, and strategies for small and independent craft breweries in 2020 and beyond. Tomme was preparing for a speech to kick off Brewbound Live in December 2019, and if you haven’t had a chance to watch that speech, he absolutely nailed it. We found working with Tomme to be extremely helpful in our own thinking, and we asked Tomme if we could create this blog so other people could benefit from the process we went through to decide how craft breweries should view innovation in 2020 and beyond.

 

This blog will take you through the thought process Sam Holloway (CAS President), Mark Meckler (CAS V.P. of Strategy & Curriculum) and CAS Member Expert, Jeff Althouse (Oakshire Brewing, Eugene, OR) used to craft a response to Tomme’s innovation questions. We think it will be useful to any craft brewery owner, brewer, or beer industry stakeholder who is worried about innovation and wondering if we’ve reached the limits of innovation when it comes to beer flavors.

 

Here were Tomme’s initial questions (sent via email, in italics below):

  1. Role of Innovation in beer flavors:
    1. I have this sense that true innovation of flavors may no longer be the driver in a crowded marketplace as it would appear right now that almost every flavor permutation under the sun has been attempted.  In this way, it feels that brewers might not be in a position to create differentiation needed to set their business apart.  So in a sea of imitation, what are the expectations (both for the consumer and producer)?
  2. Strategic threat from hard seltzer
    1. Do you see hard seltzer as a true disruptor/radical innovation?
    2. If seltzer isn’t a disruptor, is it more like a 4th category (wine, beer, spirits + seltzer)?

 

In short, our answers were:

  1. Yes. If you only innovate within the standard beer product parameters, yes we are reaching the limits of innovation. However, only focusing on product innovations and ignoring component innovation and architectural innovation is limiting your brewery's ability to survive.
  2. No. Hard seltzer is not a true disruptor, it is an architectural innovation.
  3. Yes, hard seltzer is more like a 4th category. And, somewhat concerning to us, seltzer is more scalable because it can be a component of other innovations (like when you add gin to tonic, champagne to orange juice, or vodka to tomato juice and tabasco). Craft beers and their dominant flavor profiles have always hindered their ability to be combined with other components where wine and spirits have found ways around this limitation.

 

What follows is a look at innovation theory (Henderson and Clark 1990) to support our answers to Tomme’s questions. We use pictures and tables to define, develop, and apply the different types of innovation to the craft beer industry of today and the future of beer/flavor innovation. The first two tables define the concepts. The third table introduces examples of each concept from the perspective of craft beer flavor and style innovations. The last table offers strategic advice for breweries to consider.

 

If you have additional questions, send us an email or visit our website. We also offer a free newsletter each week that discusses how to run a better beer business. If you like what you see, you can join hundreds of craft brewing entrepreneurs in 19 countries who belong to our online community. At only $99/year, we feel it is the best value available in craft beer business education.

 

Four Main Types of Innovation

Adapted from Henderson and Clark (1990)

 

There are four main types of innovation and they vary based on whether you are changing the components of a product or process (new/different equipment or processes) or whether you are changing the way your existing processes "talk to each other." At Crafting A Strategy, we believe strongly that most craft brewers only innovate beer flavors & beer products in one fashion - incremental innovations (lower left quadrant of the 2X2 below). If craft brewers want to continue to benefit from innovation, they need to think more broadly about their whole production process (the other 3 quadrants in the 2X2), and not simply the hops/yeast/barley or incremental input changes.

 

Table 1 - Generic Model of Types of Innovation

 

 

Table 2 - Definitions of Each Type of Innovation

 

 

Table 3 - Craft Beer Example Innovations for Each Type

 

 

Table 4 - Strategic Implications for Craft Breweries

 

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Craft beer is NOT depressed, but the Brewers Association may be...

By CAS Member Thad Fisco and Portland Kettle Works

Late last year my team and I had a chance meeting with two Brewers Association (BA) executives in a brewery. This is not the start of a bad joke -- it is how I learned about a serious problem with the BA and the huge opportunity I see in the craft brewing industry.

 

After a couple of beers and some serious conversation we understood that the BA is not focused on the +80% of beer drinkers that don’t drink craft beer, and that protecting craft beer’s 12.7% of independent market share from AB-InBev is their primary goal. According to these BA folks, Anheuser-Busch is absolutely determined to put independent craft breweries out of business.

 

We believe this vision is flawed and out of sync with reality. It is based in empty rhetoric and fear that harms rather than helps independent craft breweries and keeps good ideas from finding the light of day. Below we describe why this is true, and we start by getting quite blunt about what craft beer is and who is making it.

 

What is craft beer? We all know it’s not fizzy, yellow water. Instead, it’s the “Premium Beer” that we all love as beer drinkers, regardless of who makes it. A “craft brewer” is someone or some firm that is engaged in producing it. This is not the BA’s “definition” which seems to change subject to political or economic necessity. Our inclusive definition of craft beer provides a view of the industry landscape from a broad and open perspective, and here is what we see:

 

Anheuser-Busch, Heineken, Constellation Brands, MillerCoors, Mahou San Miguel, Kirin, Asahi and the other big players, are fully invested and very engaged in the business of craft beer. Collectively they have likely invested over $2-billion into the business of premium beer. That investment will continue. They are also in competition with the mounting number of world-wide independent craft breweries, and they are strong competitors in a space that they have traditionally owned. The competition is healthy and helps to drive innovation and quality throughout the industry.

 

AB InBev and the other large breweries that have invested in premium beer offerings are helping raise all boats

 

The evidence shows that the big brewers are not out to destroy craft beer, craft beer drinkers, or craft breweries.  Last year Anheuser-Busch became the nation’s largest dollar volume craft beer producer surpassing both Boston Beer and Sierra Nevada in craft-derived revenue. 

 

The systematic plan that Anheuser-Busch has implemented in buying independent craft breweries between 2011 and 2017 is likely over.  Adding to their portfolio through the acquisition of SABMiller makes Anheuser-Busch the undisputed king of craft.  Yet the craft beer community is needlessly being led into battle against AB InBev who is actually helping the industry make headway toward what we need most: growing the premium craft beer market share. Should we follow the BA, industry in-fighting and craft maxing out at 18-20% market share, or should we instead push craft forward toward 50% market share of the beer market?

 

Portland Kettle Works isn’t the only company that thinks the Brewers Association has painted themselves into a corner. The members of Crafting A Strategy (CAS), a global online community of beer business entrepreneurs of which PKW is a member, recently spoke out against how the ever changing and narrow definition of “craft” from the Brewers Association is misleading and potentially dangerous. In an October 2018 blog, CAS President Sam Holloway and V.P Mark Meckler noted that AB InBev, Heineken, and Mahou San Miguel were using their vast resources and marketing expertise to convert the 85% of non-craft drinkers in the USA into craft drinkers. These breweries are working hard to bring in more craft beer drinkers, but their contributions to the overall premium craft beer market share are not counted in the BA definition. CAS suggests that we are closer to a 20% craft market share and this is a tipping point where we can quickly accelerate market share toward as much as 50% by 2025. CAS’s logic, borrowed from innovation diffusion logics, is depicted in the figure below. Whereas the BA’s definition of craft suggests we are maxed out, CAS and PKW believe we are on the cusp of widespread market growth if we are wise enough to keep our eyes, and our strategy, looking forward.

 

Growth in business is a measure of success.   Stagnation and shrinking market share eventually lead to failure.  If craft beer does not grow as a market segment we, meaning craft brewers including AB InBev, put ourselves under siege as we fight over a non-growing business with increasing competition. It is therefore incredibly dangerous to narrowly under-define the craft beer sector.   The stakes are high.  While the BA is engaged in protectionism, AB InBev is experimenting and redefining the market in an effort to remove barriers to entry for the 80% of non-craft beer drinkers.  Independent brewers have a lot to learn from their efforts to grow demand in an increasingly competitive business.

 

Using BA statistics, 3,743 new breweries opened between 2014 and 2017 which translates to a 116% growth rate.  During that same period, market share for craft beer, as defined by the BA, grew just 4.9%.  This is equivalent to 30% growth per year in brewery openings against 1.3% growth in market share.  This is a serious problem, but only because of definitions inadvertently designed to depress the business of craft beer.

 

...equivalent to 30% growth per year in brewery openings against 1.3% growth in market share. 

This is a serious problem...

 

Portland Kettle Works makes continuous efforts to define trends that affect our business. While the most recent annual numbers are just now becoming available, they are almost certainly supporting recent historic trends.

 

Here are some recent findings:

  • Using publicly available data from the BA, we calculated from 2014 to 2017 approximately 1.5 million barrels of craft beer were removed from the craft market sector as big breweries bought small breweries
  • At the end of 2017 the breweries previously defined as “craft” controlled roughly 4.9% of the overall market share 
  • When this 4.9% is added to 12.7% “craft” beer share, the more widely defined craft/premium sector becomes 17.6% of the overall market
  • AB InBev and the other large breweries that have invested in premium beer offerings are helping raise all boats

It would not be at all surprising to find that craft beer, as defined in this article, is now, in 2019 controlling over 25 and possibly as much as 30% of market share. This number feels better.  However, it needs to continue growing. 

 

At a recent brainstorming session, our team along with Crafting A Strategy examined what success should look like in the future.  Framed in terms of market share, we decided that 50% for craft/premium is a worthy goal.  In this moment, the Brewers Association has chosen to lead us into a battle, armed with a well-intentioned campaign of “independence”.  We absolutely stand with the BA’s effort to promote the importance of American entrepreneurial innovation, grit, and an undying determination to succeed.  Given time and enough money, the independence campaign may well move the needle a bit as a small minority of the public that cares to identify and buy our beers over those of large breweries becomes educated.  However, in our opinion, this is a misuse of BA resources. This effort will not grow the craft/premium market share one bit.  We will remain besieged.  Growing craft market share should be our collective and undisputed priority.

 

About 196 million barrels of beer were produced in the US in 2017.  According to the BA definition and statistics, craft beer accounted for about 25 million barrels of that production (12.7%).  Adding the premium sector increases that craft/premium piece of pie to 34.5 million barrels in 2017 (17.6%).  This means, at 49 million barrels, craft/premium owns 25%, and at 98 million barrels, it is half of the market.   How can that not be good for independent craft brewers, even if Anheuser-Busch and other big breweries help to get us there?

 

This is a future that we can look forward to.  A robust environment with a huge, inclusive base of enthusiasts, willing and eager to enjoy high quality, flavorful beers from thousands of innovative independent breweries across the US and, if trends continue, tens of thousands worldwide.  A lot of collaborative and rewarding work lies ahead.  Rewarding work beats the blues any day.

 

Cheers.

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Nailing the Basics: Inventory for a Brewery

By Steve Waters, CEO Backwoods Brewing Co., Carson, WA USA

For most brewery owners, just operating the day to day aspects of the business absorbs all of your time. When you do get a little extra time to spend on figuring out the best way to keep good records and ensure that you’re not making costly errors, it’s easy to feel like there are so many things you could be doing that you’re not sure where to start.

As with anything in life, sometimes you just have to start with what’s “good enough” and then work toward making it great. Brewery inventory is one of those topics that can seem daunting at first, but when you break it into smaller pieces and attack it with the time that you have, you’ll find that improvements can come quickly. The key is to follow the below steps, work through more of them as you have time, and don’t beat yourself up if it’s not perfect – just make it better every time you work on it.

 

Step 1 – Start counting!

If you paid for something that gets used up in production and it sticks around for longer than a week, go count it and write down what you find. Have too many items to count all at once? Go count your most expensive stuff (i.e. the highest value hops, some of your specialty malts, and easy to count packaging materials). Still too much? Go count half of it and plan to count the rest in a week (pro tip: large companies do this all the time, they just give it the fancier name Cycle Counting; more on that later). You might feel like you have an idea of how much you have in brewing inventory, but you also probably have your mind on dozens of other aspects of your business on any given day. Taking a count and writing it down is a good first step in getting a baseline of inventory that you hold at any given time.

Step 2 – Commit to a counting schedule

Alright, you’ve done the deed. Maybe you’ve even done it a couple of times and you’re starting to get pretty good about it. Most importantly, you are getting a feel for the level of inventory that you keep, and some of the reasons it might fluctuate up or down depending on your production needs. Now it’s time to commit to a schedule so you don’t lose sight of it, and so you can compare it to sales over the same period (later on – don’t worry about that just yet). Monthly is an easy starting point, and coincides well with monthly financial review. Semi-monthly can be helpful too because it gives you a point midway through the month that you can say “There’s a lot of waste of our base malt compared to sales this month. Are the brewers following the right recipe? Can I adjust and come close to budget before the month is out?” As mentioned above, if there are too many materials to count all at once, consider cycle counting. Count a quarter of all of the materials once a week and by the end of the month you’ll have a fairly recent true count of everything on the floor.

Step 3 – Set up a pricing sheet for all raw materials

Once you know what you have on hand, the next step will be assigning dollar amounts to your inventory. Setting up a bible for what each item costs you is good to do early on. Giving everyone who orders product access to this bible will help ensure that it stays up to date. Making someone responsible for keeping these prices updated will be the real silver bullet to making sure it stays up to date and accurate. A production manager can easily fit this into their day, or even a brewer or cellar worker.

Step 4 – Multiply item costs by the counts of materials

This is the part that starts to add real value, because it’s easier to make decisions when you break it down to dollars and cents. By this step you’re able to calculate a snap shot of your costs in raw materials.

Step 5 – Combine raw materials costs and labor for work in process/finished goods

This step can be tougher because there are a lot of moving parts, so don’t get caught up if your method for counting work in process and finished goods isn’t perfect at first. Combine all of the “ingredients” (this would include packaging materials, though not kegs as they are reusable) into a pile. Now that you have dollar figures for each of your materials, simply multiply the quantity used by the cost per unit to arrive at total cost of each item in the recipe, and add it up. You will also want to add labor associated with production into each item, which often varies each time you produce something new, but an estimate or average will work for now.

Notice that we combine work in process and finished goods for our purposes here. The reason for this is because the distinction between the two can be slight, and it means different things to different people. When is beer finished? After fermentation? Once it is kegged? What if the beer is pushed from a full keg to three pony kegs because there is more need for smaller kegs than larger kegs at the moment? Obviously this distinction can get tricky, and it’s up to you to determine where you draw the line and how useful it is for your business to treat this too granularly.

Step 6 – Use your next count to adjust

Whatever process you use to manage amounts going into inventory, it will never be perfect. It isn’t perfect even at the largest, most well-managed manufacturing companies out there. Use your scheduled counts to compare your actual balances to your expectations based on production reporting, and adjust any differences to your cost of goods sold account on the profit and loss statement.

 

Brewery inventory can be a burden to manage, but keeping a keen eye on it is integral your success. Following the steps above has made the process less daunting for many of the breweries who have taken it on. Keep in mind the suggestion to start by doing what you can and building on it as you have the time. With a little work, you can develop a highly functional, low cost inventory system and stop worrying so much about what might be idling on your shelves.

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Has the BA Become Too Big to Succeed?

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

 

Frustration with the Brewers Association (BA) is reaching a boiling point within the membership at Crafting A Strategy.

 

Crafting A Strategy (CAS) is an online community of craft brewery entrepreneurs and the allied trade members who serve them. With brewery members spread across 15 countries and four continents, our community rallies around each other, helping brewing entrepreneurs solve the problems they currently face and also helping them avoid problems they didn’t even know to look for. Sensing the growing frustration with the BA, we started a forum thread to get the issues out into the open.

 

Here are some member comments:

 

If I were as large of an organization as the BA with such a diverse group of constituents, I feel like I'd be paying more attention to the portions within that are struggling instead of trying to support the ones that are slowly trying to redefine their way out of the original mission of the group.

 

It is clear that the BA has once again shown its true allegiance. They repeatedly take actions to support its minority members like Boston Beer Co. The 6000 “small” breweries may see some benefit from altering the BA’s definition of “traditional,” but the clear winner is Boston Beer Co. as this change allows them to remain “Craft.”

 

Part of our role as leaders of this community is to listen to our members and help them find solutions. Reading some of their comments, I was reminded of a discussion on a Harvard Business Review discussion board titled: Should CEOs worry about companies being too big to succeed? 

 

In an era when companies are deemed “too big to fail” perhaps the Brewers Association (BA) has become too big to succeed. Next, I will insert 3 ”Too Big to Succeed” company characteristics discussed at the Harvard website as they ring very true with our members’ frustrations.

 

1.   "Toobigs are enormously complex, with massive, self-defeating strategies at war within, producing a lower return."

 

Here are some member comments:

 

It must be tough to be the organization tasked with trying to be "everything to everyone", but that is the role they took on and it certainly feels like the small brewers are being left in the lurch of late. I have spoken with a number of our customers who feel the same way.

 

Instead of changing their mission, maybe the BA's time and resources would be better spent trying to support the struggling members that make up a significant number of their base. It's simple ops management - wherever there are bottlenecks in your system, you spend time and resources trying to make that part of your system more healthy. How much would people's perception of the BA improve and how much would the true, core industry as a whole benefit and increase our likelihood of survival if the BA took time to address the struggles that are really going on in the industry right now instead of trying to be more accepting of the companies that are trying to diversify their way out of the industry?

 

2.   (For too big to succeed companies) Size has to be considered alongside such things as "conviction … focus … ability to create a culture of belonging."

 

Here are some member comments:

 

And what about independence? Don't get me started - circular logic. Independent brewers are those that are not owned by not-independent brewers. Got that?

 

We need support, we need education, and we need a community that provides us more than one big party every year in exchange for our annual dues.

 

I've been a devout supporter of the BA. We've bought very expensive ad space in their magazine, we've overpaid for floor space at their tradeshows, and we've shelled out big money for sponsorship opportunities. I've worked with some nice people there, but I've never worked with anyone who cared to ask me how they could help me as a small allied trade member (aside from offering to sell me more ad space, etc..).

 

3. "Success and growth (for too big to succeed companies) depends on a variety of factors of which greed is not one."

 

Here is a member comment:

 

I also have a general concern for an organization that puts on the largest beer festival in the world and charges brewers to attend, doesn't buy their beer, requires an army of unpaid workers to pull it off, and disrespects the product by putting it in a plastic cup. It really seems like it is all about the money.

 

In conclusion, it’s tough to explain the BA’s decisions without seeming overly critical. I think there are good people at the BA who in trying to be all things to all breweries, they have lost sight of the unique challenges, needs, and goals of small breweries. Unfortunately, small breweries make up the vast majority of their membership. The researcher in me also knows the BA may be falling victim to what Clay Christensen called “Good Management.”

 

In fact, many companies get into trouble precisely because they follow the principles of good management. They listen to their best customers, innovate to meet those customers' needs, charge higher prices, report record profits and miss a transformational change innocently incubating at the fringes of their respective markets. - Clay Christensen (Forbes, May 24, 2006)

 

Last week, several news outlets and industry magazines loudly questioned the latest change to the 'traditional' pillar in the BA's definition of craft. A diverse group of critics from The Motley Fool, to Food and Wine, to Brewbound all chimed in with direct and veiled critiques of a move to keep Boston Beer Company part of the BA's dataset. We felt we needed to respond in our forum. The floodgates opened, anger and emotion surfaced... so we wrote this blog to share our views with the wider industry.

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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 taxes. By 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 Leadership. Explain 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.

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Two Weeks That Changed My Brewery's Strategy

Submitted by Tim Hohl on

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.

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