"This Is Why My Brewery Shut Down"

There's also this comment which I thought was worth knowing about:

"I think a lot of people start breweries because we love beer, and we’re just going to make beer and people are going to love it. It’s not like that anymore. You have to have a plan.”

Part of the way the world has changed seems to be that without a good Business Plan...

(This BTW is one of the reasons why some start-up small businesses fail in their first 5 years--lack of a good Business Plan.)

A growth market can sustain many things that are not sustainable in a saturated, slow or no growth market place.

 

I'd agree. The smaller operations that are depending upon putting beer on the shelves and on tap are going to have a hard time competing against Big Craft and Big Beer owned craft.

Again, I would agree. Locals that are selling most, if not all, of their beer out of their doors are taking sales away from somewhere. I'd wager that somewhere is mostly other locals and not so much larger national and regional craft breweries.

 

If you're interested in more reading on the subject of closures, we covered the topic back in 2014: https://www.beeradvocate.com/articles/10390/flameout-breweries-come-and-go-even-in-a-growing-market/

 

Flattened growth you say. That is why I like the Russian River model. I see so many breweries working at capacity and then spend millions to invest in a bigger setup, which may take years to get back. And that cycle continues. It's mentioned by the man behind Cigar City too.

In the restaurant sector, you often dont see these little restaurants who may have hour long waits on the weekend and nights branch out and open up more places.. Some do. But most often, they are set with that "limited growth" and working at capacity.

The growth argument sounds more like something investors would be scared to hear about. But if a place can make net profits every year, why wouldn't the owner be happy? I want to say its human nature to be greedy and want more of the "pie".

Flat growth isn't bad if you didnt go for the HR hit and invest millions into expansion.. Expansion isn't for everyone. No sympathy for some of these goof balls. I see it locally too. Way too much expansion and money being spent. Everyone trying to strike while the iron is hot. It's a losing concept 5-10 years down the line IMHO.

Mr. Evans talks about lack of space being the issue and bad overhead. That's just bad management if you are at capacity and aren't making money. In almost every other sector out there, that's your ultimate goal. To be a well oiled 100% efficient machine

 

This is a VERY important aspect that I don't think many brewery owners think about in the start-up phase. Where is the sweet spot of maximal profitability for my business model? Not everyone needs to get huge to be very profitable. Russian River has a great reputation and has very high demand for their product, so they can remain small (relatively - they do make 16K bbl a year) and stay maximally profitable for their size.

 

While profitabilty is a consideration that can't be ignored, the major reason Russian River hasn't expanded beyond it's present capacity is that the owners (husband and wife) have no desire to have to change their life style in the ways required to have and run a bigger operation.

They apparently have discussed it several times and blogged a bit about it, but always wind up choosing to stay right where they are, in the sweet spot of the life style they prefer--making reasonable profit, making beers they want to make and both making business decisions and running the brewery themselves.

 

That's kind of what I meant even though I didn't say it. More a "what's comfortable or ideal for me" versus "what's maximally profitable". Thanks for rephrasing that for me.

 

When a large part of the audience thinks that people are only motivated by greed and money, it never hurts to reinforce these things.

 

Agreed. FWIW, I don't see Vinnie and Natalie selling out to ABI any time soon.

 

@drtth @EvenMoreJesus
Did you miss the RR expansion plans?
https://sf.eater.com/2017/1/11/1424...ing-co-s-new-brewery-will-be-state-of-the-art

 

I knew about the new facility outside Santa Rosa but didn't realize before now that the brewing capacity was to be increased. So yes I'd missed the fact there was a brewing capacity expansion involved once the move had been completed. I'd thought it was only an increased size of brewpub facilities to better accomodate the crowds they get for the brewpub. Thanks for the link.

Edit: Do you recall their current brewing capacity before the move?

 

They are selling the old production facility, so that will take them up in bbl, but not up 35k bbl.

Edit - I heard Vinnie talk at the 2009 NHC, about signing the loan papers for the production brewery, and how the big numbers made him think twice. I can't remember the figure, but it was much less.

 

Unfortunately the question is not "how good of a beer can you make?"

It's "how much beer can you SELL."

Breweries who are focused on building and promoting their brand will often outlast those who are simply focused on the beer.

 

Fortunately, that isn't true anymore. Maybe there's some truth in that statement for midsize and large production breweries that rely on volume sales, but for small guys it can easily be all about quality.

 

I'd guess it isn't true for midsize and large breweries either. From what I've seen, while building brand recognition may sell the first glass or bottle of a beer, it is quality and enjoyment that sell the repeats.

 

This has been a hot topic for a while with a few of my friends that work in sales. I've argued basically the same thing and they argue that marketing is the most important thing. It's the never ending brewer vs salesperson debate. I actually believe it's possible to start small, focus on quality, grow organically, and have weak branding or marketing as long as the beer is good and the reputation started from the beginning. If a brewery takes their first year of existence to figure things out, then they've dug themselves a tough hole to climb out of and then marketing becomes important as you try to get people to re-try the beers. Unfortunately, the online ratings also matter and it takes a long time for averages to change when you have thousands of reviews and those can act as a deterrence for many potential consumers.

 

Here's a bit of ammunition.

Next time you have that discussion ask them to explain these to you:

http://blog.marketwired.com/2014/08/26/top-10-marketing-fails-time-can-learn/

and how those examples demonstrate the "superiority" of marketing and advertising over quality and what people want.

For example, the Edsel Ford failure was one of the most expensive, heavily advertised and marketed brand of automobile ever at its time. Yet it wasn't what the customers wanted to buy. It's failure damn near put Ford out of business and created a major management shake up at Ford.

 

Another consideration is the particular segment of the craft beer market the brewery is targeting. If the brewery is small and it targeting the beer geek (e.g., BA) segment than quality is of great importance. If instead the brewery is somewhat larger and is targeting the more casual portion of the craft beer market (e.g., beers like Fat Tire) than proper marketing & sales is needed.

Cheers!

 

I'm thinking the life stage of the brewery is important as well as market segment being targeted.

If the brewery is new and hasn't yet got an acceptable level of quality dialed in, the marketing sales won't help much and might even damage customer trust for the future. Once the brewery have a line up of beers people enjoy, then marketing and sales becomes a more critical part of the growth equation.