By Chris Furnari and Max Rothman
The beer business is getting frothy: restaurants and bars are expanding their beer programs, retail shelves are sagging from the weight of all the new craft SKUs, and while rising demand for full-flavored beer makes the present an excellent time to sell, to ensure their futures, startup craft brewers will have to sharpen their business skills.
To hone the approach, detailed stories of craft brewery branding, innovation techniques, investment strategies and portfolio management were revealed at the May 2 Brewbound Session, held at the Revere Hotel in Boston, where executives from both large and small craft breweries helped to educate an audience of 150 entre-beer-neurs. The day featured presentations from Boston Beer Company founder Jim Koch; Craft Brew Alliance President, Andy Thomas; Harpoon Brewery co-founders, Richard Doyle and Daniel Kenary; Pretty Things Beer & Ale Project co-founders, Dann Paquette and Martha Holley-Paquette, among others.
It was a day of extremes. One speaker compared his product to a BMW. Another said he’d never even been inside of one. Say this for the craft brewers who graced the stage though – they definitely made for a mixed assortment.
“Gypsy Brewers” Dann Paquette and Martha Holley-Paquette said they don’t think much about the future. Similar to paying the rent at the end of the month, they’re aware of its existence, but they don’t let it bother them much in the day-to-day. Instead, they revel in the joys of, as Dann said, their “Mary Poppins kind of thing.”
Then there was Simon Thorpe, president and CEO of Duvel Moortgat USA & Brewery Ommegang, who represents the other end of the branding spectrum. If Pretty Things is a workmanlike product with an egalitarian feel, Thorpe styles his approach more on the House of Windsor. Brewery Ommegang targets the luxury market of craft beer, he said, aiming to be the very finest, from the liquid to the packaging to the staff.
Both brands succeed in their own ways because they understand their identities.
Duvel Moortgat, which is the corporate parent of Brewery Ommegang, is an independent, Belgian family-owned brewery producing about 700,000 barrels per year with about $180 million in revenue. Thorpe said much of his brand’s success can be attributed to a significant cultural shift, the idea that regular people are looking for the occasional luxurious experience.
Duvel taps into this demographic by identifying other successful luxurious brands, such as BMW, which projects an image of supreme class yet also offers affordable options for more standard consumers. Thorpe said that Ommegang goes for the same kind of consumer, one who hopes to elevate their entire experience, from picking up the bottle to pouring the beer.
“They need to feel so good about a luxury brand to justify the price,” Thorpe said.
The Paquettes, on the other hand, don’t seem to care about luxury, or any image for that matter. They just enjoy making beer, and this passion indirectly creates its own image.
But no matter the image, the need for innovation emerged as one of the day’s thematic takeaways.
When asked to explain the secret to craft brewing innovation, Jim Koch, head of the country’s largest craft brewery, had a rather simple response:
“I get bored easily,” he said.
Beer in hand – despite the early hour – Koch, the chairman of Boston Beer Company, gave the opening address to the conference. He discussed the humble beginnings of the Samuel Adams brand and a creative process that, over the years, has helped the company grow to around 2.5 million barrels of production annually.
Koch explained that true innovation comes from those with a desire to explore the unknown.
“To me, it has to come from the same place that the entire craft brewing movement comes from,” he said.
That place – one of passion, curiosity and pride – is what Koch believes will push craft brewers to continue innovating as their businesses expand.
“In 12,000 years, there has never been so much creativity, innovation, new styles of beer and new brewing techniques,” he said. “It has never happened before and will not happen again.”
But innovation itself won’t stimulate the kind of success many fast-growing craft brands will need if they want to survive long-term. Craft brands hoping to turn their regional success into mainstream acceptability heard from CBA (Widmer Brothers, Redhook Brewery, Kona Brewing, Omission Beer and Square Mile Cider) president Andy Thomas. He provided attendees with a glimpse of the CBA’s approach to a national profile and offered strategies for smaller brands looking to expand their own distribution territories.
“If you are going to be national, I think it is important to understand that ‘national’ means ‘national,’” he said.
Examples of truly national craft breweries are hard to find; CBA, with its portfolio of distinct offerings, is one of the few that approaches its business with a nationwide network of Anheuser-Busch wholesalers in mind.
“It has to start with a point of view,” he said. “You have to have a perspective on what you think is happening in the market.”
That perspective – in Thomas’ eyes – includes having a clear vision on how to seize opportunities, understanding what it will take to realize that vision and recognizing a ‘trueness’ to brands and their capabilities.
Thomas encouraged attendees not to fear the road less traveled when establishing an identity.
“You aren’t going to be able to look to a lot of folks for advice, because they haven’t done it,” he said. “They haven’t had the testicular fortitude to do what you are trying to do.”
It’s that kind of fortitude that Dave Engbers, the co-founder of Founders Brewing Company, needed when his company was on the brink of bankruptcy.
In the early days, Engbers said, he thought that he should make the same beers as everyone else. He also said that he didn’t understand the politics of the three-tier system — that some retailers don’t work with some distributors, for example — and he repeated the word “naive” throughout his presentation.
“Making money never really entered our business plan,” Engbers said.
He thought he’d produce about 2,000 barrels in his first year, but he did about 400. He said they currently do more than 2,000 barrels in a day, but they had to smarten up first.
“We really needed to focus on who we are,” he said.
They did, and they did it fast. Founders’ original location was 6,000 square feet. Their current location in Grandville, Mich., after a few levels of expansion, will be 76,240 square feet. The brewery started with three employees and now boasts a staff of 138. Founders is currently in 25 states, mostly east of the Mississippi River, and has accumulated a growth rate of 73 percent from 2008-2012, with a projected growth rate of 86 percent for 2013.
While these numbers would encourage most craft brewers, Engbers said that it all happened because, instead of going under, Founders defined itself and stuck to it. A number of staffers, from the CEO to daily brewers, gathered around a table and described the people of the brewery: they’re passionate, genuine, unconventional and “bad-ass.”
Engbers credited much of his brewery’s success to strengthening relationships with distributors, retailers, consumers, employees, financial institutions, suppliers and, especially, the local community.
“You can never turn your back on your backyard,” he said.
Excerpts from the May 2 Brewbound Session may be seen online at Brewbound.com. The next Brewbound Session will take place on Dec. 5 at Paradise Point Resort & Spa in San Diego. For more information, please contact Mike Vassallo, the Brewbound account executive, at firstname.lastname@example.org or 617-231-8827.