8 Key Success Factors Needed to Be Competitive in the Beer Industry
The craft beer industry continues to grow in 2018. In Brewers Association’s 2018 industry report, there was a 13% increase in the number of breweries in the US in 2018 compared to 2017. Compared to ten years ago in 2008, the number of breweries in the US has increased by 80% with 7,450 breweries open in the US in 2018 compared to 1,521 in 2007.
With incredible growth comes market maturation. There could be a chance that your brewery could be left behind without a sustainable competitive advantage. According to the Brewers Association’s 2018 industry report, 219 breweries closed in the US.
Bart Watson, BA’s Chief Economist, is not surprised by the closings: “The idea that every business is going to be successful is just not something that was going to be sustainable in the long run.”
At OrchestratedBeer, we want to make sure that your brewery is competitive in the market. We would be naïve to assume that achieving success will be smooth sailing. So, here are some key success factors we believe you should consider to ensure your brewery stays competitive:
*Quotes below taken from the Industry Review in The New Brewer.
8 Key Success Factors
- Embrace technology
- Anticipate growth, don’t over expand
- Maintain consistent quality
- Experiment. Differentiate. Automate.
- Tasting Rooms = Margins
- Buy-outs & exit strategies
- Improve distributor relationships
- Mind your business
1.) 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.
2.) 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.”
3.) Maintain consistent quality
“Quality will be a given…”
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.
4.) Experiment. Differentiate. Automate.
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.
5.) 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.
6.) 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.
Having concise records and accurate brewery financial statements at the ready will best prepare you whether it’s a buyout, financing that new brew house or other challenges.
7.) 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?”
There are measures you can take to help you make better promises and ensure your distributors have the freshest beer on the shelves.
Improving relationships with current distributors and building a reputation for consistency can help earn that coveted shelf space.
8.) 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
“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. Make sure your boat is ready to weather whatever comes next. With these 8 key success factors in mind, we believe that your brewery will be able to develop a sustainable competitive advantage within our competitive industry.