Expanding Your Brewery Through Entering New Markets
The craft beer industry has eclipsed the 7,400-brewery mark, with room to grow, at least at the local level. With the Taproom model being the biggest outlier, growing at 40%, it signals that there’s still a desire to appeal to ever-evolving tastes at a local level in an increasingly competitive market.
With increased competition, changing tastes, and the need to stay local, relevant and unique, many breweries are considering expanding into new beverage lines. Adding new beverages can have a variety of benefits including:
- Finding new revenue streams
- Optimizing your operating hours
- Resourcing unused products
- Capitalizing on existing equipment
- Appealing to new demographics
- Increasing tourism
For Creature Comforts Brewing Co. in Athens, Georgia, additional growth means looking at the equipment you already have to satisfy changing tastes:
“I think people would be missing advice if they didn’t start look outside the brewing industry. Specifically, the really high growth ones like flavored malt beverages things like that.
You already have all the equipment. I think craft brewers are uniquely situated where they can put it forward, put a better niche into the market and really distinguish themselves from the mass–produced stuff that’s out there right now. I think that’s one of the big things.” – Dan Herron
Expanding your brewery into Hard Seltzer
In 2018, hard seltzer grew 169% overall to nearly $487.8 million, according to Brewbound reports. It led the flavored malt beverage (FMB) category, which increased overall more than 10.2 percent. Hard seltzers are a pretty big deal.
As a brewery, find the balance between recognizing the hockey stick growth of seltzer that could fall off at any time, and responding to what your audience wants. It’s another opportunity to appeal to a broader demographic. Brewing is both a craft and a business. Sometimes the business side will inevitably convince you to craft something to keep up and stay relevant.
SeekOUT Real Hard Seltzer. Crafted 100% from real fruit + water (even the alcohol comes from 🍎). No refined sugar, no artificial flavors, #NoShortcuts, ever. Just a refreshing, easy drinking seltzer made from real ingredients 🍻✌️ pic.twitter.com/RJkrherG0Y
— 2 Towns Ciderhouse (@2TownsCider) January 4, 2019
“I think we’d be remiss not to acknowledge that hard seltzer (has) a lot of opportunity. With Orchestrated’s understanding of where the market’s going as well and how that might dictate the way that they need to structure the program, gives us a lot of excitement too.”
– Justin Vale, 2 Towns Cider
Expanding your brewery into Coffee
According to the Specialty Coffee Association, “Only 9% of adults in the U.S. were drinking specialty coffee daily in 1999 compared to 41% by 2017,” a 32% increase over 18 years.
IT’S GONNA BE MAY, which means it’s time for Black House Blend, Seven Caves Rum Barrel-Aged La Sirena, & Black Bag Kenya New Wethaiga to begin their voyage to our subscribed comrades in caffeination. If you’d like to be one, see here: https://t.co/BcPwpjSwmK pic.twitter.com/tTNhan40sc
— Modern Times Beer (@ModernTimesBeer) April 30, 2019
A prime example of a craft brewery taking on coffee production in recent years has been Modern Times Beer.
Coffee enables Modern Times to crossover between craft beer and craft coffee drinkers. It also allows them to expand operating hours during typically closed hours and maximizes their square footage.
“The café activates our space at a time when we wouldn’t otherwise be open.”
– Jacob McKean, Founder of Modern Times Beer
Breweries that have excelled in this arena are roasting and barrel-aging their beans, operating full-service cafés with baked goods or brunch available, packaging whole beans, and providing blended cans of coffee and nitro cold brew.
As a result, they not only have specialized beans for use in their imperial stouts, they also have a whole new operation that provides another source of steady revenue.
“One of the things that’s been cool about our roasting is we’re introducing specialty coffee to a really receptive audience that doesn’t necessarily have a ton of coffee knowledge. Our base is a craft beer base, and they are really adventurous about finding and exploring flavors. Coffee lends itself to that.”
– Jacob McKean, Founder of Modern Times Beer
Source: Daily Coffee News
Things to consider when sourcing coffee beans
- Do you already have a wholesaler in mind?
- Will you be roasting your own beans?
- If you’re not roasting, who will handle this for you locally?
- What specialty beans will you offer? Fair Trade, Organic, the locale, etc.
Much like the craft beer you’re already brewing, people want to know the story behind the coffee you’d be producing.
Nail down customer preferences before going all-in on your coffee and be sure to do a proper “cupping” before settling on which beans to use.
Lastly, consider how you’ll manage the various coffee-related inventory in your brewery to maintain ready access to data sources to make the best business decisions:
“The benefit of having all these functions in one place, is not just brewery-specific because we also use it for our coffee production, is being able to have quick data sources that you can base your decisions. I think that’s been a huge benefit that we’ve seen through Orchestrated. It’s being able to make decisions based off historical data rather than assumptions.”
– Ricky Adams, Modern Times Beer
Expanding your brewery into Cider
The number of cideries in America has more than doubled over the past few years, increasing from 403 in 2014 to 820 as of this January. While in many ways it’s mirrored the growth of craft beer, the number of breweries that produce it is still only around 85 as of January.
The big draw for breweries adding a cider line, other than accommodating different tastes, is offering a gluten-free option to your customers.
— Cincy Weekend (@CincyWeekend) December 12, 2018
Breweries like MadTree in Cincinnati have recently pursued expansion into cider as of December 2018:
“It’s something we’ve talked about for many years, but we didn’t just want to buy a 500-pound tote of cider from China, throw some yeast in there and say we made cider.”
– Mike Stuart, MadTree Brewing
Source: Cincinatti Business Courier
According to Blake’s Hard Cider’s tips for starting a Cider business:
“You may DOUBLE your production output 3 months ahead of schedule because of overwhelming demand, or you could be behind 3 months because of lack thereof.”
“The more competition there is in a specific area, the more likely your cidery will succeed IF you break through the competitive wall,” says Blake’s. “There’s going to be a fight for market share, so your product has to be ‘the best of the best.”
It’s key have internal reporting to inform how much demand there is for your cider, helping you keep pace with those in your market.
Additionally, it’s important to note that you will need to attain a special license if you intend to add cider to your lineup, since cider is regulated by TTB as is wine, you’ll have to attain the same kind winemakers get to produce wine.
Achieving success in cider
- Join the United States Association of Cider Makers as a “Cidery in Planning” to make your presence known and start conversations with existing cideries.
- Join a cider club or take a cider making course to ensure you’re dialed in on the quality standards you’re looking to achieve.
- Planning to have a system, ideally production software, by which to track your quality metrics?
- Research what the Cider market looks like locally and what brands they produce.
Expanding your brewery into spirits
If you’re already canning your beer and have a successful line of distilled products, canned cocktails are a great way to diversify as a business. Creating a new line of distilled spirits is a complex endeavor, however. There’s new equipment to consider, more space than you’re currently occupying, a high likelihood of more barrels, as well as new branding to consider.
Good News! You can now enjoy New Holland Spirits in a can! Three brands on shelves May 2018 – Bourbon & Cola, Blueberry Gin Lemonade and Holland Mule. Which one will you try first?
— New Holland Spirits (@NHspirits) April 18, 2018
New Holland’s President and Founder, Brett VanderKamp has this to say about ready-to-drink cocktails:
“It was a natural progression to look at ready-to-drink cocktails once we got our beer into cans, since canned cocktails can go anywhere beer can go. RTD packaging allows our consumers to conveniently and easily bring delicious cocktails on boats, to beaches, on the golf course, and to social events without having to pre-mix by hand.”
For New Glarus Brewing, one benefit of expanding the brewery into distilling was to utilize the “unsaleable” products. They can turn dumped beer into spirits or take “off brand” wine off the hands from local wineries and turn it into brandy for little to no cost.
Tourism is another driver for adding a distillery. New Glarus saw a distillery as a way to drive people to the brewery to create that destination brewery experience.
Conclusion: What to Do Next?
Make some pilot batches and test them in your tasting room first. Understand the competition, understand your costs, and put a system in place to track everything from grain to glass.
For Kim Meyer, VP of Finance at BrewHub, it’s about looking ahead to see how a brewery expanding into multiple beverages will impact the brewery’s taxes & infrastructure:
“We’re contacting the TTB and asking them questions on how taxes are handled and things like that. And then we’re looking into is there any infrastructure changes that we need to make to be able to utilize these types of beverages in our portfolios.”
No matter your venture, Meyer always emphasizes the importance of being smart, doing research, and planning ahead:
“Think about the end result when you’re setting things up. Know where you want to be at the end, so you can work backwards. Because I think a lot of the times, you start from the beginning and then you get to the end and you’re like,’Uh Oh.’ I probably should have done this a little bit differently because this isn’t going to work in the end.”
Planning ahead will always save you and your brewery headaches in the end. For more topics on expanding your brewery and planning ahead, stay tuned and subscribe to our blog.