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.


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 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 (, 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: [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.



The End of Big Beer

Sam Holloway, Ph.D. - President, Crafting A Strategy - February 29, 2016

I believe that industry consolidation may be the death throes of mature industries as they struggle to compete with America’s return to a more entrepreneurial, craft economy.
--Nicco Mele, HBR Blogs, October 26, 2015

When I first read Nicco Mele’s article in October 2015, I was impressed with his arguments for why M&A activity might be a sign that craft beer was winning. In fact, I think these large scale mergers mostly function as a way to play for time before the big decline. I am guessing that in boardrooms in fancy office suites, executives with nice shoes are praying that craft goes away, somehow, during that time.

But it won't. It is not a passing fad. America's craft breweries are strong and getting stronger, and smarter about business, every day. The movement is spreading all over the world. Craftspeople are rising up all over the world, reclaiming their professions, and in turn offering customers products and services of real value. The maturity stage of the life cycle for the monoliths is ending. There is no place left to merge. Adding a few craft acquisitions here and there to extend their portfolios was/is a good idea, but this pulls their average margins down, not up. If I were a major brewer, I'd be a seller about now. Is there a place in the new reality for the monoliths? Yes. But it's going to be a lot smaller place than it was.

Since October 2015, I've seen several more signs that support Mele's claims and it's time I put these before our membership.

Mele suggests that the rampant M&A in the beer industry (most notably AB InBev’s acquisition of SABMiller) is a sign that scale is no longer winning. Economies of scale arise when greater quantities of production also result in lower costs per unit (Porter, 2008). Since the industrial revolution, scale was always expensive to maintain and served as a primary barrier to new entrants joining a market. Mele, with an assist from Maxwell Wessel, suggest that in a game where innovation is rampant (like craft beer with its sour beers, saisons, barrel aged, etc.) companies cannot rest. For companies that ignore innovation and focus on doing business the same way as before, then M&A is a value creation lever that can be pulled to appease shareholders – at least for a while. Wessel (2012) goes as far as saying that big incumbent firms turn to M&A as a last resort, referring to scale economies as a “last bastion of the competitive storm.”

A lack of innovation and a commitment to scale and extreme profits is what has historically killed big companies (Which I first blogged about in 2014).  However, I was still skeptical, especially when Matt Allyn of Men’s Journal suggested that the price AB InBev was paying for SABMiller could buy the entire American craft beer industry five times over! Where were more signs that the ideals of the craft economy were winning out over big business?

My next indication that the craft economy was winning came from our own Dr. Mark Meckler in February 2016. Mark suggested that most Americans are “addicted to efficiency” and their purchasing habit is always looking for a better deal, a cheaper price, a shorter route, or faster service. However, Mark said the craft beer industry was different. Rather than an addiction to efficiency, craft beer entrepreneurs accept lower profits and less efficiency if it means a better work life, better wages for employees, providing them health insurance, and raising everyone's overall happiness. According to Meckler, craft breweries can afford to do this because the public, going against their typical efficiency driven demand for the lowest price, is willing to pay a higher price for a pint or a six-pack of good craft beer. In this case of craft, they are not engrossed with bargain seeking. Why? Maybe it is because the beer is so much better, and maybe because they love the movement and the ethic behind it. Maybe it is because they know that even with that high price, craft brewers are not ripping them off. For me, craft brewers are my neighbors, working hard and making a living by providing value, something wonderful that has been missing from our community for so long. The Portland Tribune’s Peter Korn gave several examples of brewery owners choosing less efficiency for more happiness, which goes completely against conventional wisdom and economies of scale logics. Why is craft beer so different?

The latest indication that craft beer is changing the rules came from the last place I would ever look for innovation – Private Equity Investors. The news that Victory Brewing founders were able to cash out and still maintain control of decision-making completely knocked me over ( This merger was innovative and went completely against the cold-hearted traditions in private equity where transactions come with total control for the new money and the abdication of the founder’s and any residual brand nostalgia or authenticity. Big money wins out, scale wins again, and consumers complain that they’ve lost another one of their own to greed and a commitment to getting big – that’s the traditional narrative that was missing from the merger between Victory Brewing and Southern Tier. Why was Ulysses Management, LLC willing to do things differently?

Keep your eyes on the craft beer industry as it will teach us how innovation, inefficiency, people and happiness continue to win over money, scale, efficiency, and big.  I am starting to agree with Nicco Mele and Max Wessel, the end of big is upon us.

Works Cited

Korn, P. 2016. Brewing a new model for sharing the wealth. The Portland Tribune. February 9, 2016 accessed at

Mele, N. 2015. Why More M&As is a Sign That Scale Is No Longer and Advantage. Harvard Business Review Blogs. October 26, 2015. Accessed on February 28, 2015

Porter, M.E. 2008. The Five Competitive Forces That Shape Strategy. Harvard Business Review 86(1): 78-93.

Wessel, M. (2012). The Commoditization of Scale. Harvard Business Review Blogs. March 26, 2012. Accessed on February 28, 2015.



Your Strategic Weapons Against AB InBev

I get asked a lot to give advice on how craft breweries can respond to the moves being made by AB InBev and what the future may look like for small independent craft breweries. There is great concern among the Brewers Association and its members surrounding the merger of AB InBev and SABMiller and even greater worry about accusations that InBev is purposefully freezing out craft beer by instructing their company owned distributors to stop buying it.  While the Brewers Association is doing its part to support our interests (you can read BA CEO Bob Pease’s full U.S. Senate Committee testimony about the merger here), what sort of strategic moves can we be making? What moves should we be making to protect our futures?

I am always inspired when I see creative entrepreneurs using business model innovations to overcome such constraints. My latest inspiration is Mr. Richard Doyle and his company, Enjoy Beer. Rich Doyle is a former CEO of Harpoon Brewing, who understands that the craft beer industry can’t simply wait around and hope for help from the Department of Justice. Those looming constraints from AB InBev’s merger with SABMiller – Mr. Doyle isn’t scared. Mr. Doyle sees those constraints as opportunities, and he’s building a new business model that overcomes these constraints through value chain innovations. Below I will describe how this works.

Value chain innovations look at the current supply chain relationships in the beer industry and seek ways to collapse or combine these relationships to allow a brewery to capture more value. (CAS members can click here for a 14-minute video on value chain innovations in the craft beer industry; non-members can click here for a free 45-minute presentation). Craft beer entrepreneurs should look at the looming constraints associated with the AB InBev & SABMiller merger and use these constraints as a source of inspiration that leads to innovation.  Let me give you two business models that embody this type of innovation.

First, let’s look at a type of value chain innovation I like to call “Collapsing Value Chain Functions” or a “Collapsing Business Model.” The best example of collapsing value chain functions is the brewpub business model. By serving beer on site and directly to the consumer, brewpubs collapsed the value chain and removed the need for a brewery to use a distributor or retailer, since they perform both of those functions themselves. The value capture associated with the brewpub innovation is that the brewpub can now sell each keg for $500 - $600 instead of selling that same keg to a distributor for $110. This elegant innovation, collapsing value chain functions, is what has disrupted the traditional beer market over the last 30 years and continues to be the driving force of change in our industry.

Second, let’s look at a different value chain innovation: The aggregation of multiple functions into a distinct entity or what I call “The Aggregation Business Model.” Rather than collapsing value chain innovations like the brewpub business model, aggregation business models allow for purchasing efficiencies, increases in bargaining power, and thus, lower prices for all partners of the combined entity. Aggregation Business Models are a strategic response to shortages in supply, rising prices, and downstream pricing pressure from distributors. For craft breweries worried about access to hops and other inputs if the AB InBev merger is allowed to proceed, the Aggregation Business Model is a perfect strategic response. This is exactly what Abita Brewing Company did a few months ago by joining forces with Enjoy Beer.

Enjoy Beer is a classic Aggregator Business Model that uses value chain innovation to help breweries like Abita survive and thrive. Enjoy Beer buys supplies for Abita and other breweries, they also perform other value chain functions like bookkeeping, negotiating with distributors, financing expansion, marketing, logistics, you name it. This innovative business model has aggregated several value chain functions into one entity, and because they are buying for many breweries, they have greater bargaining power and can get a better deal. Further, this company does much of the “dirty work” or “boring business stuff” so their partner breweries can focus on the beer and the brand, without worrying as much about supply chain, purchasing, and marketing.

Want my advice for craft beer entrepreneurs and the overall craft beer industry? Follow the lead of innovators like Rich Doyle and develop new business models that aggregate value chain functions. Scale your brewery through brewpub business models (like Fathead’s is doing) and not via traditional wholesale distribution. Think differently, work together, and be innovative! You will insulate yourself and your partner breweries from fluctuations in supply and also increase your ability to bargain with distributors. Choose your partners wisely, but don’t simply keep doing the status quo. If you choose to do nothing, AB InBev wins.



Collaboration Brews - Regulatory Concerns

Note from CAS President, Sam Holloway: I am thrilled to introduce our newest CAS Guest Expert, Janene Grace. Janene has over 11 years experience as a TTB compliance officer and as Regulatory Manager for Craft Brew Alliance. We are thrilled to bring Janene’s expertise to our learning community. As you can see from her first blog post, she brings a wealth of knowledge and practical advice for how to run your craft brewery responsibly and within federal and state regulations. This first blog post is publicly available; future content will be exclusively for CAS members.

Collaborations are becoming increasingly common amongst craft brewers, and for good reason:  working together on a beer allows for an exchange of ideas and techniques.  Unfortunately, brewery regulations in the United States aren’t exactly designed to make collaborations easy.  From a regulatory perspective, the best intentions of two willing breweries can lead those firms into trouble. I will demonstrate this with an example from cider making, an increasingly hot market within the craft food and beverage industries.

In America, the federal Alcohol and Tobacco Tax and Trade Bureau (TTB) and most states consider cider to be a type of wine, and as such, these agencies require wine permits/licenses to make cider.  Along with the wine licensing comes the wine regulations, and for TTB this means wine can be transferred in bond between any two (or more) wineries.  (“Transfer in bond” refers to the movement of alcohol between bonded facilities without the payment of tax).  This is important because once taxes are paid, breweries and wineries are very limited in what they can do with the beer or wine.

The ability to transfer wine and cider in bond means that production can begin in one facility and end in another.  So let’s say Jack’s Cidery is planning to collaborate with Jill’s Orchards to make a barrel aged cider.  Jack has good facilities for pressing and fermenting, but no room to store barrels.  Jill, on the other hand, has less fermentation capacity but plenty of room for barrel aging.  Clearly, it would be most efficient if Jack handled the pressing and fermentation, and then transferred the bulk cider in bond to Jill for barrel aging. Once the cider is ready for packing, Jill bottles some of it, then transfers the rest back to Jack because he has a canning line.

Rumor has it that similar transactions occur often among breweries in Europe, but here in the USA, when Congress wrote the laws after prohibition they didn’t provide for similar movement of beer between American breweries.  Breweries of the same ownership can transfer beer in bond between facilities (if state law allows), but that is the only legal circumstance when this movement can happen.  In order for a brewery to receive and store beer produced by another brewery:

  • The beer must be received taxpaid;
  • The beer must be packaged (a requirement to tax pay beer);
  • The taxpaid beer can only be stored on the receiving brewery’s premises if:
    • It is in the brewery’s pub (if they have one) or
    • The brewery must hold a wholesale permit and store the beer in a segregated area (which may need to be designated on the Brewer’s Notice);
  • The state law must allow this transaction, and proper state licensing must be in place.

What About A Similar Collaboration Between Breweries?

If you don’t currently make cider, but you do barrel age beers, how does our example affect you and a similar collaboration? What if Joe’s Brewpub wants to handle brewing and fermentation, then send it to Ben’s Brewery for barrel ageing and packaging?  With beer collaborations, all aspects of production must occur at the same brewery, except the production of wort.  (Because wort does not contain alcohol, TTB allows it to be moved freely between breweries.)  This means collaborators generally decide which brewery has to do all the work and which one will only contribute recipes or expertise. This affects the cost structures for both breweries, something CAS Guest Expert Dr. Andre Sammartino discusses in his blog on Crafty Collaborations. Alternatively, each brewing partner can make their own batch using a shared recipe, or they can share a single batch of wort.

In my 11 years as Regulatory Manager for Craft Brew Alliance and as a TTB compliance officer, the arrangement I most often oversaw had one partner in the collaboration make all the beer, so let’s take a look at the regulatory logistics of this arrangement.  First, labeling:  Ben’s Brewery is going the make the collaboration beer, but Joe’s Brewpub designed the label – who must secure the TTB Certificate of Label Approval, the COLA?  That would be Ben.  Why?  Because the COLA must always be secured by the entity that puts the beer in the bottle, can or keg.  Which brewery’s name goes on the label?  Well, that depends on the part of the label we are looking at.  All breweries participating in the collaboration get to have their name/logo on the label, but they must be shown in conjunction with each other and be of similar prominence.  But for the mandatory name and address statement, this must be the name and address of the bottler.  So while Joe and Ben both have their logos front and center on the label, somewhere else the label must say “Ben’s Brewery, Portland, OR”.

State label approvals may be handled differently, depending on the state and which brewery is shipping the beer to that state.  This is a bit more complicated that I want to address here, but if you have questions about this, visit or email me at 

Since collaboration brews often contain unusual ingredients, they most likely also need formula approval.  This is less of an issue since TTB exempted a number of ingredients from formula approval with Ruling 2014-4, but brewers are far more creative than the government so don’t be surprised if you need formula approval.  Like the label, formulas must be secured by the brewer who is brewing the beer – in our example this would be Ben’s Brewery.  If there is any possibility that the other breweries in the collaboration may make the beer at some point, they should get the formula approved for themselves as well.  Remember:  formulas must be approved before you begin making the beer; and unlike COLAS, formulas are required whether the beer is crossing state lines or not.

Now that Ben’s Brewery has gotten the formula and COLA approved, and has made the beer, how does Joe’s Brewpub get some?  If Joe’s Brewpub is also located in Oregon this isn’t a problem – Ben can just give/sell Joe his share of the beer.  Ben will pay the taxes on it (both TTB and OR taxes, in this case) and Joe will have to store the beer in the portion of his brewpub that was designated as the pub on his Brewer’s Notice.  Easy.

Interstate Collaborations

But what if Joe’s Brewpub is in another state?  This raises a few issues.  First is licensing.  As in normal interstate distribution, in order for Ben to ship beer to another state his brewery (usually) must hold a license, such as a certificate of approval or importer license, in that state.   Another issue is label approval or brand registration, which is required in America by more than half of the states.  Typically the producing brewer secures this, but as I mentioned above, this may not always be the case.  Label approvals may cause timing issues, because even if Ben’s Brewery already holds the proper state license, label approvals in some states can take 2 or more months.  This needs to be accounted for early in order for Joe’s Brewpub to have any chance of getting fresh beer.

Getting the beer to Joe can be another problem.  Aside from the logistics of shipping the beer, there are regulatory issues inherent in interstate commerce.  Although TTB doesn’t care about breweries moving taxpaid beer to other brewers across state lines, most states have a different opinion.  Our good friend, the three-tiered system, makes this more difficult because beer normally has to be imported into a state by a wholesaler.  More industry friendly states will allow a brewery to import beer from another state, but in some cases the beer must be sold to a distributor in the receiving state, who will in turn sell it to the collaborating brewery.  If wholesalers are allowed to sell to manufacturers in that state, and Ben’s Brewery has a wholesaler there, and the stars are properly aligned, and the month has an “r” in it….  OK – this is another issue beyond the scope of this article, but definitely something to look into in the early stages of an interstate collaboration.

Then there are the tax issues.  As always, the brewery that removes the beer “for sale or consumption” must pay the federal excise tax.  In this case, that would be Ben’s Brewery.  But the state taxes will be reported and paid according to the receiving state’s rules.  If you are new to the state in question, be sure to confirm how taxes and reporting are handled.

International Collaborations

Collaborating with a foreign brewery creates a whole different set of issues.  While you get to avoid our three-tiered system, you add customs, foreign liquor laws, international trade issues, language barriers and a host of other red tape.  This doesn’t mean international collaborations can’t be done; they just take additional advanced planning.  Assuming a US brewery is producing the beer, matters are greatly simplified if you are collaborating with a brewery in a country that you already export to.  In this case, you can work within your existing framework to get beer to your partner.  If you don’t already do business in that country, then you will need to contact trade experts in advance.  A good place to start is the US Export Assistance Center; the local Portland office’s website is:  You can also find information on foreign alcohol import requirements on TTB’s website at: Last, CAS members have direct access to an award winning beer exporter, Craftport Exports. Founders Andy Kalamaris and Nate Webb are very active CAS members and can answer questions directly or via the CAS member forum.

What if the foreign brewery is producing the beer and you want to import it?  In this case you will either need an Import Permit from TTB, or work with someone who has one.  The importer will need to secure a COLA for the beer before it enters the US, and will have to pay the excise tax and any duties due.  For more information, check here:

Speaking of TTB, what role do they play in exported beer?  They do not require label approval if the beer is not sold in interstate commerce; so if your collaboration beer is only sold in your home state and Canada then you don’t need a COLA.  But you still need a formula if the beer contains ingredients that are not on the exempted ingredients list.  No state or federal excise taxes are due on exported beer, but the transaction has to be properly documented and reported.

I hope I haven’t scared you away from collaborations!  Complying with regulatory requirements on collaborations isn’t as complex as it is time consuming.  In other words, if there is one thing I want you to take away from this blog, it is: please involve your regulatory compliance person as soon as possible in the planning process.  This will keep the regulators happy, and prevent watching beer age in your cooler because you don’t have approval to send it to your partner. 

Feel free to let me know if you have any questions or comments.  Thanks!

Janene Grace, CEO

Grace Regulatory Consultants, LLC



Crafty Collaborations

Note From CAS President, Sam Holloway: It is my pleasure to introduce our latest Guest Expert Blogger, Dr. Andre Sammartino. I’ve had the pleasure of working with Andre on an international research project that investigates the business motivations behind collaboration brews. I am flattered Dr. Sammartino has joined the CAS learning community as a Guest Expert, and our hope is to grow this community in Australia and New Zealand by featuring an expert strategist from down under, who also loves craft beer and the entrepreneurs who make this industry a global force. Welcome, Dr. Sammartino! {Note: This initial blog post is publicly available. Future posts will be for CAS Members only}

Andre Sammartino, Ph.D. - Guest Expert, International Business Academic

Welcome to my first blog post. Let me introduce myself (briefly). Like Sam Holloway, I am a strategy professor, although, as I come from a small, open economy (Australia), much of my research looks at multinational businesses and international engagement. Like everyone around here, I have a passion for good beer. I am fascinated by what makes the craft beer industry tick, and how a moribund mature sector has been revitalized by the new wave of brewers. For years, I’d been pondering a research project that would get me talking to craft brewers in a more formal setting. While on a research sabbatical in Italy last year, I kicked off a project with a colleague in Denmark and Sam, looking at the nature of craft beer collaborations.

Inter-brewery collaborations - brewers getting together to co-create some new beer - are interesting because they’re so common in the craft beer scene, yet so unusual in the broader business world. It is not typical to see notional competitors sharing their core intellectual property and know-how so willingly, and pushing out co-branded products.

Collaborations are certainly flavor of the month across the more developed beer scenes. Here in Australia there are loads of domestic collabs between brewers of all sizes, and local craft brewers have brewed with folks from Norway, Italy, Denmark, the UK, New Zealand and numerous US counterparts.

We kicked off with a series of interviews within Europe. We spoke with breweries from Italy, Denmark (two), the UK (two), Spain and Norway.  I got to see one collaboration in action. These brewers differed considerably in size. Three of them ranked in the top 3-4 craft brewers by volume within their home country. Four have been ranked among the 100 best breweries in the world by Ratebeer. Two others have featured in the Ratebeer top 10 new breweries lists in recent years. Most exported some portion of their output, and all had collaborated at least five times. All but one had engaged in international collaborations.  

We were concerned with various aspects of these collaborations: (i) the motivations (Why collaborate?); (ii) the mechanics (How do brewers hook up? How do they decide a recipe? How do they distribute?); (iii) the outcomes (Do the beers become core products? How widely are they distributed?); and (iv) the pitfalls (What risks are there?)

In terms of motivation, most brewers spoke about the opportunity to learn new brewing techniques, to see different brewery setups, and to experiment with different styles and ingredients. Some collaborated to expose their brand to new drinkers, especially in foreign markets, and/or because their distributor suggested a prospective collaborator. But by far the most common motivation was simply “fun”. This partially connected to part of the mechanics – namely how brewers hook up. Most collabs sprung from friendships, from chance encounters at festivals, and a small amount of matchmaking by distributors (and sometimes festival organizers). Several brewers described collabs as a chance to hang out, to relax, and that collabs are like ‘having friends over for a party’. There was some hint of altruism by one brewer who felt collabs were a good way to give new emerging brewers greater exposure through his networks. Several collaborations had also been designed to collectively promote an event, or to celebrate the successful growth in a community (e.g. annual collective brews).  This speaks to an admirable and, again, unusual characteristic of the craft beer scene – community.  Most brewers we spoke to saw collaboration as a natural extension of a common desire to promote craft beer as artisanal, experimental and celebratory. This dynamic flows through to the collaboration process itself.

The mechanics of the process were typically pretty haphazard, informal and unplanned.  Recipes often came about via some email exchanges, through late night, alcohol-fuelled brainstorming, and/or via out-and-out improvisation. Typically the host brewery bore all the costs of production and the label more closely resembled the host brewery’s livery (but still prominently acknowledged the collaborator’s brand). Most brews were single-batch, and often only available in kegs, sometimes at special events. Visiting brewers were often given ‘first right’ to some portion of the output for distribution, at a discounted price. There was no attempt to ‘contract’ around intellectual property in any formal way, and almost no instances of royalty payments. It was assumed that the recipe might be used by any of the parties at a future time. All aspects of the collaboration appeared to be based on trust.

A small proportion of the collabs resulted in beers that joined a brewery’s core line of products. This was more common for breweries collaborating at an early stage in their growth (i.e. when product lines were being established), and for collaborations that were international. Most brewers saw such outcomes as unlikely due to the experimental and often uneconomic nature of the beers they produced as collabs. The beers were often seen as a bit too ‘marginal’ or ‘high risk’ to consider brewing regularly. On a more positive side, several brewers noted that the novelty factor meant they’d often presold the output to their distributors before the collaboration so there was no real financial risks in the exercise. One further outcome reported was that this rarity factor often fuelled positive attention from beer geeks on rating sites, leading to some reputational gains.

As a cynical professor, I had assumed there might be problems with opportunistic behavior between collaborators and some concerns about risk exposure.  There was very little evidence of such fears among the brewers we spoke to. As noted, no formal contracting or negotiation was entered into. No one reported concerns about loss of trade secrets or damage to their brand. Partner selection may be part of the explanation, as brewers rarely collaborated with parties they didn’t already know, and several spoke about the importance of good reputations (and, simply, that a partner was a ‘nice guy’).  The only concern that did pop up was whether there might be diminishing returns from frequent collaborations and whether some newer collabs might be motivated by more cynical marketing agendas and/or a compulsion to do it because it is the ‘trendy thing to do’.

Overall, this mini-research project has confirmed that the craft beer scene is highly communal and cooperative without much of the cynical, individualistic behavior one often sees in business dealings. Collaborations can certainly result in fun beers, and in fun times for brewers, and there can be some positive brand building. They don’t seem to be core to anyone’s business model, but they certainly can lead to new lessons and new products.

CAS Members, share your experiences with collaboration brews on our forum thread:

[What have your experiences been? Have you collaborated?  Why did you do it? Would you do it again? Did it help your business? Was it fun?]