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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.

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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 (Brewbound.com). 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 http://www.graceregconsult.com or email me at janene@graceregconsult.com. 

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: http://export.gov/oregon/index.asp.  You can also find information on foreign alcohol import requirements on TTB’s website at: http://www.ttb.gov/itd/interre1.shtml. 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: http://www.ttb.gov/itd/importing_alcohol.shtml

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

janene@graceregconsult.com

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?]

Finding a Space

Note from CAS President, Sam Holloway: At CRAFTINGASTRATEGY.COM, we are committed to bringing our members the most relevant, up to date business wisdom. Over the past year, we have realized that our members are great resources of wisdom, and through our guest expert blogs, we can give them a voice. Tom Schmidlin was an incredibly skilled and well-known home brewer in Seattle, Washington. He decided to “Go Pro” almost exactly one year ago. We’ve asked Tom to reflect on his journey and to offer wisdom to our members with breweries in planning. Tom will author four pieces this year, beginning with the current piece: How To Find The Right Space For Your Brewery. This initial blog is publicly available, future blogs will be for CAS members only.

Tom Schmidlin - Member Expert, Brewer and Proprietor, Postdoc Brewing

There is a lot that goes into finding the perfect space for your brewery; it is a process that can take months to years.  The first and most important thing to keep in mind is there is no such thing as perfect, each space will have its pros and cons.  You may find an awesome space for what you want to do, but with a landlord who wants you to agree to move out with three months’ notice (this actually happened to me).

When you start looking for a space, it is helpful to have a vision for your business.  Are you looking to build a production brewery, with any retail sales being incidental?  Or do you want to build a brew-pub, where almost everything is retail?  Or is it something in between?

In the beginning, I was willing to have my vision fit the space available.  Because I was open to a wide variety of business models, I looked at spaces that would make great brewpubs, would be perfect for a mostly production facility, or would combine production with a large tasting room.  Since I lacked a partner for the food and thought it would be too much to manage on my own, I soon decided that a brewpub was not for me which helped narrow the search.

Beyond the physical aspects of the space itself, it is critical that you understand the community where you plan to locate your facility.  Think about who travels through the area and why they are there.  What kind of jobs do they typically have, how much money do they have to spend, and what kind of beer do they like to drink? Consider who your competitors are, and why they are successful or not.  Why will people come to your place instead: convenience, better beer, better atmosphere?  Will they get to you on foot, bikes, buses, or cars?

The more I looked, my mind coming back to this one area in Redmond that I drove past twice daily on my commute.  As it was, there was no place for me to stop for a beer on my way home without going out of my way and fighting traffic one way or the other.  It is a relatively small area with high car and bicycle traffic, next to a 640 acre multi-use park, in an area with a lot of high wage earners.  With all of that going for it, I decided to focus the search in this area.

Narrowing it down to that vicinity, I felt that a brewery and tasting room would be the best option.  Our taproom is essentially a bar serving only our beer, which may not be legal in every state but is common in Washington.  This helped further define the requirements.  Tasting room means car traffic, so you need to make sure there is adequate parking.  Redmond’s building code dictates the number of parking stalls required, so it was easy to figure out if a given space meets that criterion.  But we also had to expect truck traffic for deliveries, so the parking lot needs to handle that as well.  Obviously there are a lot of things to take into consideration.

Getting a commercial real estate agent was a tremendous help for us.  It was in his best interest to help us find the right spot, since he only gets paid if we are able to pay our rent.  He was also a great source of knowledge about reasonable lease rates and terms in our area, and knew about spaces coming open before they were actually on the market.  He even went so far as to set up meetings with officials he knew in local governments as we tried to decide in which city to locate the brewery.  In a competitive real estate environment, having this kind of assistance will help you find a great place for your new brewery.

In my experience, it will be very helpful for you to talk early and often about your plans with the local government.  Other than a brief conversation very early on, I did not keep in touch with them or keep them in the loop about what we were trying to do.  I knew the area was properly zoned and we should have few hold ups, but I didn’t realize how helpful they could be in the whole process.  They were very happy to work with us to make sure that we could do things within budget but also meeting the code.  In matters of the building code, it is definitely not a situation where I would ask forgiveness rather than permission.

Hopefully, your relationship with the government is not an adversarial one, and that is from the federal level on down to your local inspectors.  They simply have too much power to delay you or shut you down to try to go head to head with them.  In some cases they pointed out common mistakes before we made them, which saved us time and money.  In other cases we were able to change which section of the code applied to us.  In yet other cases they agreed that the code made no sense, however their job is to enforce the code and it is a rare inspector who will take the risk of approving something substandard.  I have yet to meet one.

Alcohol businesses are under increased scrutiny compared to your average business.  My experience with the city government so far is that if they get the sense that you are trying to do the right thing then they are will do whatever they are allowed to help you be successful.  They want our business in town, because it means jobs for the residents, increased traffic to other businesses, and a growing reputation for breweries that will help attract other businesses.  All of that translates into increased revenue for the city.  Hopefully you can find a welcoming place for your venture.

Where Will The Next Great Brewery Come From?

By Sam Holloway, Ph.D. and Mark Meckler, Ph.D. - Crafting A Strategy

One of our goals to better serve our members at CAS has been to “go vertical” and understand everything about the craft beer industry. By deeply understanding this important and complex industry, we can help ensure the survival and healthy growth of the craft beer industry.  Sometimes, by looking in other places and at other industries, we see a gap in our own understanding.  A recent trip to a local home brewing supply store spawned just such a discovery and made us aware that we can do more to help support the next generation of great breweries.

Who Are The People And Organizations That Seed The Craft Beer Industry?

In Portland, Oregon if we like fixing and building things ourselves at home, we go to a local hardware store for the supplies we need. The good ones have experts that know where everything is, and can tell us what we need and even give excellent advice on how to get things done. The hardware store employees are a wealth of knowledge for the home repair enthusiast. This is similar to the role and relationship between the home brewer and the local home brewing supply store. The home brewing/distilling/fermenting supply retailers typically do a fantastic job of teaching, coaching, selling, motivating and creating community for the home/private craft-brewing enthusiast. While we were at Bader Beer and Wine Supply in Vancouver, WA, (a fantastic place) we realized: these are the people and the organizations that seed the entire industry.

A Knowledge And Support Gap In The Craft Beer Supply Chain

We believe the mentoring relationship between home brewers/fermenters/distillers and the homebrew supply shops and owners needs to be reflected in the craft beer industry supply chain. Where are these shops, guides and relationships for fledgling craft breweries and the brave former home brewers that have decided to “go pro”? We can follow our local hardware store example in the construction industry to look for a blueprint for success.

Like the craft beer industry, the construction industry is a highly fragmented industry populated by a few global firms, a few large national firms, a handful of regional firms and mostly thousands of small local firms that specialize in the various trades and crafts. The large construction companies buy supplies differently than small and emerging companies. Large construction companies know what they need, rely less on mentoring, and focus on price, volume, inventory management, and market forces to dictate how and when to make purchasing decisions.   Large construction companies do not shop at Ace hardware anymore.  And what about the small independent contractors that dominate the industry? They also do not shop at an Ace hardware anymore, but the construction industry has a mature supply chain, that adequately fills in the knowledge gap…

Because construction is a mature industry, the supply chain has figured out how to deal with fragmentation and what is needed for each type of business. Once a contractor decides to “Go Pro,” they have a slightly different, more professional hardware store to fill their needs – more volume and lower prices than a typical neighborhood store, but still small enough to provide personal service, mentoring, and relationship building. The craft brewing industry should learn from construction – we should also offer entrepreneurs transitioning from hobbyist to professional a one-stop shop for supplies and advice. In Portland, Oregon a typical, small contractor shops at specialty retailers like Parr Lumber. They can have a credit account, and they typically get a “contractor” discount so that they pay closer to wholesale than a homeowner would pay as a walk in.  A place like Parr lumber is in between a small, neighborhood hardware store and a big box retailer like Home Depot. The primary difference is the knowledge and mentoring that Parr lumber provides above and beyond what a big box retailer can save on pricing. Businesses like Parr Lumber bridge the gap between DIY enthusiasts and the large professional contractor who orders directly from lumberyards, steel manufacturers, roofing suppliers, concrete manufacturers and so forth.  This is where small businesses may source almost all of supplies they need, all under one roof, and gain valuable advice from experts. Often, the relationships grow so strong that when a contractor grows large, they still buy from Parr Lumber even if it costs them a bit more.

The Business Opportunity

Since home brew supply shops play such a crucial mentoring role in getting breweries started, perhaps our industry needs other suppliers to continue this mentoring role after a brewery launches. The Brewer’s Association does a good job on the fermentation science side of things, but business wisdom is lacking.  We started CRAFTINGASTRATEGY.COM to fill this gap and serve this need. But we can’t do it alone; so we are always looking for industry partners that understand the knowledge gaps that exist and want to help. We believe we have found another one in the GrainCorp family of companies. It is clear to us that they really want to help the industry, from bottom to top. One of the GrainCorp companies, BrewcraftUSA approached us with a simple but powerful proposal: “How can we, as a company, better serve the craft brewing industry? What can we do together with CRAFTINGASTRATEGY.COM?”  

Much like that home brew supply shop owner that coaches, motivates, and creates community at a local level; mentoring and sharing knowledge needs to occur at the industry level. The bad news is that there is no “Parr Lumber” equivalent in the craft brewing/fermenting/distilling industry. Once you go pro, you leave the comfortable home brew supply shop and move to separate bulk suppliers, and typically less nurturing relationships. The good news is that by putting knowledge and mentoring ahead of sales – doing what is good for the industry first –companies like BrewcraftUSA are making a concerted effort to fill the existing knowledge and mentoring gap in our industry supply chain. We all know there is more that can be done. That is why we’ve partnered with BrewcraftUSA for the 2015 National Homebrewer’s Conference (NHC).  Come by their booth, the CAS team will be there

We would both like to listen to your ideas about the kind of support you need, and we would both like to help you learn how to run a successful beer business.

AB/In-Bev's Apparent Strategy

Sometimes it’s good to get out of Beervana. Portland, Oregon is a wonderful city and it has been my home for the past sixteen or so years. I still remember my first visit, when I was interviewing for my job at the University of Portland. My potential new colleagues took me to the old Bridgeport Brewing on NW 14th, and we had fantastic pizza and the most delicious ale this kid from New York had ever tried. I had been all over the world, cooking food and running food & beverage departments in some of the world’s most beautiful places. Yet almost immediately, Portland stood out as special. Peaceful and progressive; old growth with new green; healthy and alive. It was like begin dropped into Tolkien’s “The Shire.” And the beer was fantastic, nearly magical. The flower-blossom aroma and high spirits of that IPA we shared made me feel like we were drinking the sap of a living beer plant; it was like tasting truly fresh food for the first time. Sixteen years later, I remain comfortable in Portland. It is my "happy place."  And it’s also a good thing that I get out of town now and then.

Today I am in Florida for a business meeting.  When I put on my strategist’s hat, a warning light started blinking in my brain. I think by living in Portland, Beervana, I am being lulled into thinking that the craft movement is unstoppable, and that small independent breweries will most certainly win the day.  The data reported by the Brewer’s Association confirms my confidence, my comfort -- and thus the big problem. Warning light! Cognitive bias alert! I had to get out of Portland and see if this comfortable state-of-the-industry well being is really happening elsewhere.

Many months ago, in our CAS Forum, I warned a seasoned production manager that you couldn’t blindly trust data to inform your strategy – you had to get out of your cubicle, turn off the computer, and manually check your operations.  In that forum thread, we were focused on production planning, so we spoke of the difference between virtual and actual inventory. I suggested how “look and see” verification to see how far you actual inventories varied from the data being reported on the computer screen was essential to his success. The same issues apply to broader business analysis and strategy. You have to get out of your comfort zone; you have to take a critical look at whether your data are deceiving you. Sometimes you have to go outside and sit on the deck, and look at things from a different perspective to save your company, or your industry.

I decided to see if AB/In-Bev’s strategy, as viewed in the comfort of Portland, surrounded by independent craft breweries and culture, was the same if I analyzed it in Florida.  So here I am, in a fancy-ish bar (Deck 84) in Delray Beach, Florida. Lots of beautiful people here sitting on the deck, sipping drinks and watching the Atlantic Blvd Bridge over the Intracoastal Waterway rise for the passing yachts. Aside from the view, Deck 84 is a typical South Florida watering hole. They have standard bar menu food. They have a decent beer menu, mostly bottled, with a few tap handles. They have what seems to most a nice selection of craft beer. I just finished my meeting with a partner of a well-known Angel investing group to discuss mergers, acquisitions and other geeky business stuff. He had a Blue Moon (MillerCoors) served with an orange on the rim of the glass (“brilliant marketing ploy,” he says). I got a Full Sail Cascade IPA. The bottle that came says: “Employee Owned.”  This is where I started to get scared…

Of the dozen or so craft beers on the menu, more than half are owned by AB/In-Bev. Then there is Bud Light, Budweiser and that whole assortment. Sitting here, far from Beervana, The AB/In-Bev strategy seemed simple and clear. Own the beer menu. Leverage bargaining power up and down the supply chain. Defend your territory and develop consistent sales routines that make it easy for Deck 84’s beverage manager to make money. AB/In-Bev’s strategy in Florida is to minimize menu (shelf) space for MillerCoors and Heineken brands. When their sales guy comes in, he has an entire portfolio of easy sales: The old standard American lagers, standard nice imported lagers (Stella Artois, Becks), excellent imported ales (Leffe) and a nice handful of fully (Shock Top, Elysian) or partially AB/In-Bev owned American craft beers (Craft Brew Alliance stuff: Widmer, Kona, Omission, etc.). One stop shopping for the beverage manager of Deck 84... Nobody, and I mean nobody, over here in Florida (other than craft brewery owners) knows that Blue Point, Elysian, or Kona are AB/In-Bev investments. And that is just how they want to keep it.

What A Difference A Door Makes

Ben Engler - Member Expert, Brewer and Proprietor, Occidental Brewing Co.

When operating a new brewery, one likely employs used or re-purposed or undersized equipment. As the brewery matures and sales grow, steps must be taken to increase production and maintain efficiency. Obvious solutions like adding cellar capacity and labor are easy to understand, but these are only a couple of options among the myriad of choices you will face. Your goals may include brewing more beer, earning greater profits, or (one of my goals this year) spending less time at the brewery. Regardless, it is imperative to evaluate the entire business and the system of operations and internal linkages when deciding how to spend money and which opportunities to pursue.

Our first major expansion at Occidental included adding new and larger fermenters, an additional brite tank, a bigger glycol chiller, a real hot liquor tank (HLT) and a new beer cooler. Clearly, the additional tank space would facilitate brewing more beer, every growing brewery’s goal. It has turned out, though, that one of the most important components to this expansion was an unlikely one, the door to our new cooler. It reminded me of the CAS white paper, What Is Warehousing. In that paper, ‘space’ is touted as a critical resource within any brewery or brewpub. The size of our old cooler’s door simply didn’t have enough space.

Confronting Unforeseen Bottlenecks

Our first, very economically priced (old and cheap) cooler came only with a wide “man door,” through which a pallet would not fit. This meant all beer went in by hand truck and out by hand truck. We understood this would be an issue when we purchased the setup, but did not realize the impact it would eventually have. When you are brewing 20 bbls a month, such inefficiency is less obvious and easier to manage then when monthly production has increased to 200-plus bbls. The man door proved a painful bottleneck. If we were racking beer and there was not a distributor pickup that day, it all went into the cooler, one keg or several cases at a time. Then, when a truck was scheduled, all beer was removed, slowly, and restaged for delivery. There comes a point when even a team of Oompa Loompas would say this is too much. We learned our lesson and made sure the new cold box had a door fit for a real brewery.

The new cooler is only about 600 square feet larger than the original, but the key difference is the 8 ft. sliding door. Pallets are obviously superior to hand trucks for moving beer. Perhaps this is why I get so much pleasure watching my new 64 sq ft door open and close – it is oddly satisfying. Beyond making everyone’s lives easier, this door improved the brewery efficiency a measurable amount. The time we save in a given year because we are not stacking and unstacking kegs and cases currently stands at 300 hours of labor. Instead of taking 1 to 2 hours to stage small orders, it now takes minutes to stage even large quantities for multiple distributors. If you want to make the day of your finance department/person, illustrate to them how a non revenue generating piece of equipment can have an ROI of 3 years!

This type of operational efficiency is based upon the resources your beer business has (or needs to acquire). Resource efficiencies, even such low-hanging fruit as the size of a door, are everywhere in a small brewery. The hot liquor tank (HLT) we installed as part of this expansion is another simple example. Previously our HLT was a weakly insulated vessel with no method of heating. It required filling immediately prior to mash in, since it could not keep the water at temperature over long periods of time. It was also undersized and we were failing to capture as much water from the heat exchanger as we could. As sales grew, double brew days became the norm and we could clearly benefit from a larger tank that was better insulated and had a heating element.

Our new hot liquor tank, just like the cooler, has similarly proved extremely valuable. Reducing the water waste is nice, but the biggest benefit is the time savings. It used to require about an hour to fill the old HLT enough to mash in. I used to have to get to the brewery an hour earlier to heat up the water… Now, the brewday could begin immediately upon arrival, which saved us time. If we brew 160 days a year, that is 4 weeks of labor saved. Realizing these efficiencies is how we can continue to grow without adding a bunch of employees (cost, overhead, liability).

Look Ahead and Do Not Ignore Any Process

It is easy to watch demand outpace supply and begin calculating how many tanks must be purchased to fill all orders. Focusing on the fun stuff, without looking at all the linkages within your production system will bring headaches down the road. My hope is that my series of CAS papers will help other breweries see around corners and learn from our growing pains. Growth must be planned carefully and involves much more than a bigger cellar. Bottlenecks can occur throughout the entire brewing process. If beer is made faster than kegs can be cleaned, or there are not enough hoses to complete multiple tasks simultaneously, or in our case, your door is too small, all the tanks a building can hold won’t lead to more beer. Consider how you interact with all of the equipment throughout your entire process. What is keeping you at the brewery an extra hour each day or making you wake up an hour early? What slows you down? What delays the next task? You can’t buy more hours in a day, but with the right equipment and planning, you won’t need to.

Note from CAS: This public blog is the first installment of a series by Member Expert, Ben Engler. The remaining parts are for members-only. To join our learning community, sign up here.

Compensation Strategy

Andy Sherwood, MBA - Guest Expert, HR & Benefits

Note from President, Sam Holloway: Andy Sherwood, MBA is our latest addition to our pool of Guest Experts at CAS. Andy has a long history as a home brewer, plus extensive knowledge in finance, operations, and as benefits administrator and benefits auditor in large and small organizations. Andy’s MBA focused on the beer industry, where he conducted interviews of brewery owners across the country, producing an MBA thesis centered on benefits policy standards for craft breweries. We are very fortunate to have Andy and his ideas as part of a four part, member’s only blog series on “HR & Benefits Strategies for Craft Breweries” in 2015. ~Sam Holloway

Compensation Strategy: The Puzzle of Direct and Indirect Benefits

Many challenges await a growing brewery. Chief among these initial challenges is developing a strategy surrounding the compensation of employees. It is important to identify the elements that go into compensating an employee before developing a strategy. Planning effectively is hard, and there are many components of crafting a compensation strategy to consider. This blog entry will cover three important topics when developing a compensation strategy. First, we will review the difference between exempt (salaried) and non-exempt (hourly) workers. Second, we will take a look at how much to pay employees based on market ranges, and finally we will delve into utilizing total rewards packages to attract and retain the best people in the industry.

Exempt vs. Non-Exempt Employees

When working capital is scarce and cash flow is unpredictable, there is a natural tendency to do everything in one’s power to create an exact and predictable payroll budget. Many entrepreneurs accomplish this by putting everyone, from the part-time bookkeeper to the master brewer, on salary. While this makes it easy plan for payroll, it is ill advised. In particular, a blanket policy to salary employees could violate the Fair Labor Standard Act (FLSA). This federal statue, brought about by the Roosevelt administration as part of the New Deal in 1938, implemented many reforms including establishing a federal minimum wage and the forty hour work week.

The FLSA also defines who can be considered a salaried employee and establishes minimum weekly dollar amounts for salaried employees. The minimum amount a salaried employee can make is $455 per week or $23,660. If this annual salary seems to reside on the low end of the spectrum, then keep reading! A quick Google search will reveal that the Obama administration is hinting at an executive order that will bring substantial changes to this $455 a week minimum. Guidelines have been established by the Department of Labor to help employers determine which employees may be salaried and which employees must be paid on an hourly basis.

For instance, your brewmaster would most likely be a salaried employee under the DOL guidelines. Brewmasters’ work is creative in nature and requires advanced knowledge in a field of science; these characteristics suggest a salaried or exempt employee status. A shift brewer, depending on their duties, could qualify as either an exempt or non-exempt employee. Outside sales people are also considered exempt if they are regularly in the field making sales or obtaining orders. Your part-time bookkeeper is most likely a non-exempt employee unless their primary duty includes “the exercise of discretion and independent judgment with respect to matters of significance” (in the words of the DOL). That clause is one of the keys to determining the status of an administrative employee.

Finding the Range

Through my conversations with brewers and brewery HR professionals, I’ve seen variations on three different types of compensation philosophies:

  • This is how much we have: This is pretty self-explanatory, a budget-based approach and one that I am sure most breweries are familiar with. Essentially a budget is drawn up for a position based on available resources.
  • The wild west: Often times, retaining and attracting talent in craft brewing means “one upping” the competition in terms of salary, bonus structure, and benefits. This approach usually starts by asking the target how much they are currently making and then offering a substantial increase to motivate her/him to jump ship.
  • Data-based: As the industry matures, larger breweries are beginning to take an analytical, data-based approach to compensation. This is done by compiling salary survey data from peers within the industry and matching positions based upon duties. Additional considerations include compensation adjustments for knowledge, skills, and abilities - as compared to some industry standard. Salary surveys are compiled and published by multiple sources within the industry, including the Brewer’s Association.

Total Compensation

An entire blog post (or two or three posts) could be and probably will be devoted to the topic of indirect compensation for brewery employees. In fact, Sam Holloway has asked me to spend 2015 helping your learning community understand this complex and important decision. I am happy to do so!! For now, here is a quick summary. First, adding medical benefits and a 401k retirement plan is something that all brewers should begin thinking about the moment that they begin to add full-time staff members. Otherwise, you will undoubtedly find the perfect fit for your organization, and she won’t leave her current job because of insurance and retirement benefits concerns. For quick reference on how to get started in these areas, I recommend the following free sources:

By far, the most important and most difficult piece of crafting a compensation strategy involves these creative and indirect compensation vehicles. As you’ve read elsewhere within the CAS learning community, not everyone in your company is motivated by simple “carrots and sticks”, not everyone responds well to traditional bonuses, commissions, or monetary rewards. In fact, focusing too much on these can kill your company culture, and result in Harry Levinson’s “ Great Jackass Fallacy” overtaking your business. Keep your eyes out for my next blog, where I will write about how to balance direct and indirect compensation, to create a place where employees feel safe, inspired, and are ready to go out and help your community, one great craft beer at a time.

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