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SUBMITTED BY Sam Holloway ON Tue, 01/05/2021 - 03:10
Sam Holloway, Ph.D.
January 5, 2021
“Insanity is doing the same thing over and over again, but expecting different results”
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.
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.
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.