"This Is Why My Brewery Shut Down"

I see this on a micro level with one particular beer style of interest locally, the NEIPA. So many breweries are jumping on the backs of the high quality surrounding breweries, and put out a beer specifically labeled a "NEIPA" which has nothing in common with the standard-bearers (Tree House, Trillium, Alchemist, etc.) If the brew is not dialed in, calling it out as a NEIPA only creates distrust from the customers even if you do other styles well. Why not just label your beer an "IPA" and let the customers determine its quality in a vacuum amongst all types: East Coast IPA, West Coast IPA, NEIPA, etc.

 

The biggest argument I've made is: How many breweries that are highly respected in the industry for having a reputation for brewing quality beer have closed?

The other side of the argument that I will concede though is that at TBC, we have done a lot of blind tastings. Every batch of beer we brew gets shipped to a few different groups. They sample our beers side by side with the breweries that we consider to have the best examples of the styles (and we also take into account the online rankings in the case that we don't care for a beer but it is highly rated). We have done multiple types of tastings, but the one we do most frequently, the panel gets to try the beers 2 different times. The first taste, it is completely blind. After the first taste, they are told which breweries were involved (without knowing which brewery brewed which beer) and their asked to guess which brewery brewed which. The second taste, they know which brewery brewed which beer.

Our beers have always done very well in the blind tasting, then in the second ranking, we are always very low, and in the second tasting, we normally end up in the middle of the pack. Those results show that the quality of our beer is where it needs to be, but that our reputation and/or marketing are not where we want them to be. In our case though, I view local beer traders as being a bunch of independent distributors that are actively interested in promoting our brand, so the hope is that the longer we do this, the more our reputation will advance and the better our beers will be perceived. To keep those customers happy, all we have to do is focus on quality. So in a sense, we have a marketing strategy, but we are not paying for marketing or doing sales calls at bars and the result has been sky high demand. I think this is a sort of unconventional strategy and it is hard for a lot of people to believe that it will work.

One other interesting thing is that our beers that are just named after a style do not perform as well as beers that have a good name and back story.

This is certainly true, but I think it's more in regards to local distribution laws. When you can self distribute, you can brew any beer, any time, as long as the retailers want it. When you have a distributor, you brew what the distributor wants and you rely on high volume sales. To get high volume sales of the same beers over and over, you probably do need to do some marketing. I (and I think by most standards anyone would agree) consider TBC to be a small brewery (1,200 bbl production this year) and we having self distribution has made it very easy for us to get a good following. This month alone, I got more than 5 times the amount of orders that I could possibly fulfill. I know a couple breweries at the same, or similar, size in 3 tier systems that brew great beer and can't get noticed by their distributor, or their distributor keeps telling them that they'll only take one or two different beers from them. In those cases, it is very difficult to rely on beer quality alone.

 

One example that comes to mind is Catamount. They built a big new brewery, and didn't hire more sales staff to move it. The downturn in the late nineties hit, they couldn't service the debt load, and closed.

@jesskidden may have more examples.

 

Yup, and they made some pretty great stuff. There was an article on line a while back that said that they thought that the beer would sell itself, and they put pretty much no effort into marketing.

 

I wasn't around back then, but have heard lots of stories. Didn't they expand with a $3 million loan? Taking on huge debt and expanding rapidly is a recipe for disaster. It would seem especially problematic back then when such a small percentage of beer sales was craft.

 

Interesting.

Sounds to me like you have a marketing/sales crew that does understand what they are doing and why. I'd say you can safely focus on the quality of the beers and improving them as you see best and continue to engage with them as you have been and are.

 

Yeah, it looks like it was both lack of promotion and overdoing the expansion:
https://www.inc.com/magazine/20001001/20428.html

 

I'd add to that, reading between the lines, that there was a certain complacency associated with assuming that things will be in the future as they have been in the past. In my mind that's a poor mindset. One should always be doing futures planning because the world can change, sometimes quite quickly.

To put it a different way, I know folks who successfully do professional consulting for a living who follow what they call the 25% rule. Regardless of how much work there is that you could be doing, always spend 25% of your time developing potential business for the future. Otherwise you can expect to be riding a roller coaster cash flow as the current wave recedes and you haven't got any potential customers lined up.

 

This is the part in the OP's article that stood out to me, in that he seems to be speaking of the problems of this particular day and age in regards to the craft beer industry, from Big Al Brewing:

Unfortunately the 'one and done' crowd is having a sizable impact on the whole craft beer environment, and I really don't think quality matters a hill of beans to them, just something "new". This is where having a strong and in-touch marketing presence seems to be more important than the end product.

 

Yes, I don't know the debt amount, but it put them under when projected sales did not materialize, and they couldn't pay the loans.

 

Why is this unfortunate? As long as the rating is honest I find it to provide people with an idea of what the beer is like. Is it only unfortunate with beer? How about with cars, TVs, etc?

 

Personally, I don't like the model because I love Russian River beers but they're availability in my area is inconsistent. I can go months without seeing any RR but then all of a sudden they're present for the next month. But I believe RR's model of focusing on local business and not expanding too much is a wise business decision and they will outlast many other breweries that are expanding.

 

I did, indeed, miss that. Or forgot about it. Will more than double their capacity. Cool. Regardless, they'll still be a pretty small brewery, when looked at in comparison to their reputation, at least.

 

While common with a lot of places I'm sure, there is one in particular here in Ohio that has been open about a year and already planning a big expansion with a new facility. Going from a 3-bbl system to 30-bbl or so, want to start canning and all that other stuff. Their beer is just OK and gimmicky, but super popular in their immediate area/region of Ohio. I can't imagine they will be nearly as popular when they expand out... Just too much competition and lack of shelf space. Then Cleveland has two or three breweries now canning, so all that is sitting on the shelf too if they try to enter this market. Just seems crazy.

 

I'm also speaking on local experience. I have seen organic growth and expansion of high quality products. These guys didnt start canning/bottling until 1-2 years in, and even then, it was only their most popular product. A full lineup was years down the line. These guys really didnt miss a beat. Everyone wants to be these guys without the 5-8 years it took to get there

Then we have your brewery who didnt expand quite fast enough and is in the process of opening a destination production facility. Meanwhile they have their product contract brewed and canned so they dont lose people talking about them etc.. Quality of those products may be hurting them... Once they are up and running, it will be an uphill battle to sell as much as they intend to. They almost have to reintroduce themselves into the minds of the people.

Then we have the newcomers who are coming in hot. One was ready to can and distribute before even having a following. Followings can happen quickly if your product is amazing. But their beer is pretty average imho. They released like 6 of their products at once at one point in time. I think they have since lowered it to maybe 2 products. The other already has more of a following. I sense them wanting to can within the next 6 months. That's more of a growth process I can understand. Although, these sorts of places seem to have beer prices some $1-$3 than the more established places. Lesser quality for more $$$ only works for a short ticking moment imho.

My state does allow up to 3 taprooms for small breweries. Even so, I have seen quite a few mediocre breweries take on multiple taprooms in multiple cities. Overhead for a draft system must be small because I just dont see these places doing too well. Lots of slightly above average taprooms trying to see what sticks. It's a good test though. If you cant sell out of beer at multiple tap rooms, why would you assume that you can can or bottle products? If both places are packed all the time, it may be time to ramp up. Anymore, it seems like breweries lack patience and are scared of that "bubble bursting."

Local for the sake of being local means nothing anymore. People have either found their mediocre gimmicky product and will stick with it, or the breweries need to make a beer that is vastly superior and go for a different demographic. In competitive markets, there is no magic formula anymore. I have heard of some smaller breweries opening up around the state in smaller towns. Competition there will be zero, but you are competing with the BMC crowd for sure. The grocery store/small gas station crowd. People may not be so eager to drop $5 on a pint of mediocre beer.

Overall, I think we have too many who think they are HR hitters and not taking it slow enough. Its like they know the slowdown is coming and want to strike right away, with or without a solid product. Anymore, theres no right or wrong answer. Its fun to see how this will unfold.

Deserve is a strong word and I wish no ill will towards any brewery but some definitely deserve what's happening to them (in a lack of sales sense).

 

Larry, there is no doubt a number of segments of the overall craft beer market.

A few years ago there was discussion about a beer marketing study that was associated with Boston Beer Company (they paid for the study?). In that study they defined a number of the craft beer segments. I really wish I made a copy of that write-up; in subsequent web searches I came up empty. From memory (read - take this with a big grain of salt) two of the segments were defined via "beer geek" and "casual craft drinker". Maybe the aspect of locavore was not defined then since it was at that time a considered segment? There is certainly a locavore aspect in today's (2017) craft beer market.

Cheers!

 

100% agree. Everyone loves doing local stuff and supporting their local businesses. Even if they aren't the best, at least they're "theirs". This can certainly give the business false perceptions.

 

I wouldn't say that it means nothing, but as more and more small breweries open, it is starting to mean less and less.

You certainly have to have a USP to survive.

I would agree.

They certainly do deserve what is happening to them, as, chances are, it is because of a lack of planning.