BA Chief Economist Bart Watson insists there’s more behind the craft beer slow down:
“As the industry matures and moves into the mainstream, slower growth is a natural part of that maturation,”
The facts behind the “craft beer slow down”
We all know stats can create inaccurate perceptions if you don’t investigate the numbers. The numbers in this case were swayed by a few big players:
“Certainly having some fast growing brewers wholly or partially exit the data set did affect growth,” Watson said.
Brewbound confirmed that recent acquisitions played a role in the soft figures:
“Breweries that sell to beer companies the BA does not consider “craft” are not counted in its annual report. As a result, production amounts from large companies like Lagunitas, which sold to Heineken, and Ballast Point, which sold to Constellation Brands, were only included for the months prior to their sale.”
The “craft beer bubble” hasn’t burst, but it’s changing, which means it’s time to address ways to stay competitive in the choppy waters ahead.
We would be naïve to assume it’s all smooth sailing, so here are some recommendations breweries can consider to help stay competitive.
8 Ways Breweries Can Stay Competitive
*Quotes below taken from 2015 Industry Review in May/June edition of The New Brewer.
8. Embrace technology
“Greater integration of technology in retail could make it tougher on startups and the smallest brewers, as costs to comply become a larger barrier to entry.”
Love it or hate it, technology will continue to play a bigger role in the industry. Sometimes the business side of the brewery can become a tangled mess of various tools, spreadsheets and other generic systems. Consolidating these tools and systems into an all-in-one brewery-specific solution is one way to avoid these issues.
Remember: the cheapest tools are rarely the quickest route to saving the most money.
7. Anticipate growth, don’t over expand
“Breweries make investments in capacity based on their prediction for growth.”
“Capacity decisions gone wrong could be crippling for individual companies and add pricing and profitability pressures for many other craft brewers.”
6. Maintain consistent quality
“Quality will be a given…” Brewers who develop reputations for inconsistencies in quality likely won’t get a second chance from those who know and expect it.
As a result of the stringent QC protocols woven into day-to-day beer production, we created a QC Analysis Tool to provide a better grasp on everything QC, from grain to glass.
5. Experiment. Differentiate. Automate.
“…brewpubs offer consumers exclusive variety that may not be found elsewhere, an important form of differentiation in an increasingly crowded market.”
This can mean creating exclusive brands that are also a nightmare to track. Having a tool to automate the creation of new brands should be an important part of your experimentation arsenal.
4. Tasting rooms = margins
If a kitchen isn’t an option, there’s always the tasting room model. “For a new brewer, it is imperative you have a tap room,” says Lynne Weaver, Founder of Three Weavers Brewing. “You get your highest margin, but it’s also where we get our message, our ethos, and our values.”
Whether it’s a brew pub or a simple tasting room, tie it all together on the back end with a quality brewery POS system. You can integrate any brewery POS system with OBeer, which isn’t possible with QuickBooks.
Check out “Top 5 Tasting Room Tips”, for fantastic tap room tips ranging from sanitation and service to creating the right environment.
3. Buyouts & exit strategies
“Money will matter. Some will want out.”
Last year, some traded independence, brand control and a bit of solidarity with craft beer loyalists for access to new markets, raw materials, capital and a cash-out.
If selling is your goal, expect a rapid influx of cash from VCs to initiate a growth mode and prep for resale, “this could mean more turmoil for breweries funded this way.” says Watson.
Whatever your goal, having concise records and accurate brewery financial statements at the ready will best prepare you whether it’s a buyout or financing that new brew house.
2. Improve distributor relationships
“As retail chains flex their muscles, will shelf set policies squeeze out small and regional players who have enjoyed success in that channel?”
Improving relationships with current distributors and building a reputation for consistency can help earn that coveted shelf space.
1. Mind your business
“Competition will continue to grow fiercer in all planes of craft brewing and the industry.”
Everyone makes great beer. Now’s the time to hone the business side as well. Some good starting points include:
- Maximizing profit margins through accurate, dynamic beer costing
- Updating beer pricing tiers & promotions on the fly to remain competitive
- Making informed, calculated decisions based on accurate & timely reporting
- Streamlining procurement processes (e.g, hop contracts)
- Eliminating bottlenecks caused by employee turnover or “single-threaded” departments
“Craft’s strengths are its diversity, community focus, ability to adapt to local markets, changing beer drinker preferences, beer drinker perception of quality, and scrappiness that allows brewers to thrive in one of the most dynamic industries in the world.”
A rising tide lifts all boats…just make sure your boat is ready to weather whatever comes next.