Category: Brewery

Exploring Brewing & Astronomy with John Harris of Ecliptic Brewing

Cyndi
customers waiting on their order

By: Becky Garrison

Upon meeting John Harris, one might not realize that this soft-spoken man is, in fact, a legend in the world of craft beer – not to mention a seasoned astronomer. Chris Crabb, Director and Or-ganizer of the Oregon Brewers Festival, calls him “a warm, wonderful soul” and says she is “honored to call him a friend.”

  Harris has been a seminal figure in the Oregon craft brewing scene for over thirty years. “He’s the only brewer that has brewed a beer for every single Oregon Brewers Festival, representing three different breweries during its 32-year run,” says Crabb. “The festival often coincides with John’s birthday, so he has one of the largest birthday parties thrown in his honor every year.”

  Steven Shomler, author and culinary storyteller, reflects on Harris’ stellar course. “John has gone from home brewing and following Fred Eckhardt’s book ‘A Treatise on Lager Beers,’ to apply-ing for his first professional brewing job at the Hillsdale Brewpub, to being the very first profes-sional brewer in Bend, Oregon, to running his own successful venture: Ecliptic Brewing.”

  Harris’ interest in home brewing began in the early 1980s, just as microbreweries started popping up in Washington State and Oregon. For over thirty years, he worked as a professional brewer, working with some of the Pacific Northwest’s biggest brands. While working with the McMenamins brothers, he was the first brewer to make Hammerhead in its all-grain formulation. His accomplishments at Deschutes Brewery include devising the recipes for their Black Butte Porter, Mirror Pond Pale Ale and Obsidian Stout beers. During his 20- years at Full Sail Brewery, he ran their Brewer’s Reserve program, where his formulations included Slipknot, Hop Pur-suit and the Sunspot Series. After the brewery eliminated Brewer’s Reserve in 2012, Harris felt the need to move on.

  So, he found a former body shop located at 825 North Cook Street in the Mississippi district of  Portland near Widmer Brothers Brewery. He oversaw the shop’s transformation into a 15-barrel brewery, replete with a taproom featuring a 145-seat restaurant and a patio in the parking lot. In October 2012, Ecliptic Brewing was incorporated, and then, on October 20, 2013, it opened for business.

  Harris knew that his brewery needed to have an astronomy name and theme. His interest in as-tronomy was rekindled when he saw a Sky and Telescope magazine on an airport newsstand while traveling for work. He bought a copy, and the astronomy bug was back.

  When asked what prompted his interest in astronomy, Harris points to his uncle, who gave him a telescope when he was a child. From there, astronomy became a hobby that he got in and out of over the years. A year after spotting this magazine at the airport, Harris bought a new and bigger telescope and began going to star parties.

  Initially, Harris had another working name for his brewery, but it was already taken. The Eclip-tic, the astronomical term for the plane of Earth’s orbit around the sun, kept popping up and eventually became the name for the brewery. A 25×25 foot mural of an Ecliptic plane, created by Loey Hargrove, graces the restaurant’s bar wall. Spaced themed label art, marketing catchphrases like “Pour some space in your face,” and signature beers such as Ecliptic Starburst IPA and Phaser Hazy IPA give the feel of a brewery founded by someone with their eyes clearly looking upward at the stars.

  “In hindsight, there is no better name than Ecliptic, as this ties into our seasonal beer and food we make here at our brewery and restaurant, as we go around the sun on planet earth,” Harris says.

Signature and Seasonal Beers

  Ecliptic’s beer names represent more of a marketing decision than coordinating a release follow-ing the seasons. For example, during the 2017 solar eclipse, they got some national press for hosting eclipse-themed events and releasing their Chromosphere Blonde Ale. This special release eclipse beer was made using Amarillo and Cascade Hops and had a citrus nose and flavors with a light yellow color that resembled the summer sun.

  For the 2019 Oregon Brewers Festival, they brewed LIGO Key Lime Gose. This beer, named after the world’s largest gravitational wave observatory, featured Ecliptic’s house lactobacillus strain and key lime purée. During this festival, Ecliptic was selected as the host for the 13th an-nual Oregon Brewer’s Brunch and Parade, and LIGO Key Lime Gose was the first official keg tapped at this event. OBF was canceled in 2020 and 2021 due to the Covid 19 pandemic, with plans to resume the festival July 27-30, 2022.

  Their other Cosmic Collaborations included Blood of Jupiter, a Belgian-style Tripel. They teamed with Umpqua Valley’s TeSóAria Winery, with the base beer brewed by Ecliptic, and then aged in Sangiovese wine barrels furnished by TeSóAria.

  Customer demand for IPAs has led to their signature Ecliptic Starburst IPA, as well as Vega IPA and Phaser Hazy IPA. However, Harris’ creativity includes brewing darker beers and sour beers, which are appearing in greater frequency on their taproom menu.

  Most patrons frequent Ecliptic for the craft beers and space vibe. However, for those bent toward astronomy, Ecliptic hosts occasional star gazing events on their patio for amateur astronomers. Their menu also describes the meaning behind names like Capella (a bright star in the constella-tion Auriga), Phobos (the Martian moon that circles the red planet), and Oort (the mysterious re-gion of our solar system that breeds comets). In addition, they occasionally offer astronomy triv-ia via their social media channels.

Pairing Food and Beer According to the Seasons

  While pairing Oregon’s wines with locally sourced food has always been considered standard practice in the Portland dining scene, beer tends to be treated as a stand-alone beverage.

  “Portland is such a foodie town, and yet there was no brewery that was taking food seriously,” Harris says.

  From Ecliptic’s inception, Harris wanted to create a brewpub that could be on the list of Port-land’s 100 best restaurants. Their menu continues to play off Ecliptic’s name, emphasizing sea-sonal ingredients and beers.

  They continue to host occasional food and beer pairings, such as the Cosmic Brunch, held as part of their “5 Beers for 5 Years” series, commemorating the brewery’s fifth trip around the sun. At this brunch, held on February 3, 2019, Harris and Brooklyn Brewery’s Brewmaster, Garrett Oli-ver, released their Tangerine Farmhouse Ale collaboration along with a five-course meal and several beers from each brewery. They gave away signed bottles of the collaboration beer to each attendee. Other similar collaborative dinners include Firestone Walker Brewing Company (Hazy Double IPA), Breakside Brewery (Nectarine Sour Ale), Bell’s Brewery (Juicy IPA) and Russian River Brewing Company (Belgian-Style Hoppy Golden Ale).

Working at Ecliptic Brewing

  Harris’s history and reputation in the beer industry enabled him to bring on employees like sales manager Erin Grey Kemplin. She met Harris when she was the on-premise rep for Full Sail’s distributor. During that time, she got to know Harris.

  “I was able to not only drink John’s creations but also get to know him as a friend,” Kemplin says. After Ecliptic opened, she frequented the brewery nearly every week. “When he decided to build out a sales department and came to me about the role, I knew the answer had to be yes.”

  She stays at Ecliptic due to the delicious beer, the staff and a boss like Harris. “He is the kind of boss that will support you through thick and thin, but also help you figure out solutions when you are stuck without talking down to you.”

  Like Kemplin, Alisha Goddard, Ecliptic’s human resources and business manager, got to know Harris during his tenure at Full Sail, where she felt drawn to his friendly and fun energy. When she heard of an opportunity six months after Ecliptic opened, she jumped at it. “I had worked at a large operation for a while and wanted to be a part of something smaller that felt more tangible and community-oriented,” Goddard says.

Looking into the Future 

  During the global pandemic, Ecliptic Brewing, like other Portland food and drink establishments, found themselves at a crossroads. When possible, they would offer indoor seating, outdoor seat-ing on their large patio, with beer and food-to-go.

  Pre-pandemic, the brewery hosted a couple of events each month, usually celebrating the release of a new beer. On October 1, 2020, they hosted their first event since March 2020, when they teamed with the Oregon Museum of Science and Industry to offer a sold-out Star Party. OMSI set up a large telescope on a projector, showcased various celestial bodies on the screen and handed out different learning materials. This social distanced event took place outside with all tickets pre-sold. During the event, people could order food and beer from their regular menu along with a special dessert for all attendees.

  Moving forward, Shomler sees good things for Harris and Ecliptic Brewing. “John continues to sharpen his own skills set, and he has the foundational capabilities needed to have a successful brewery: the ability to brew great beer, lead a terrific team and successfully run his business. Many breweries fail due to deficiencies in one or more of these three mission-critical areas of expertise.”

  Currently, Ecliptic’s beers are available in Washington, Oregon, Idaho, Colorado, North Caroli-na, Canada and Japan. To learn more about Ecliptic Brewing, go to http://eclipticbrewing.com/

2021 Beverage Trends

Cyndi

By: Tracey L. Kelley

No producer wants to feel like their business is simply dictated by trends and not backed by individual vision and a solid plan. However, if 2020 taught us anything, it’s to be strategic, targeted and, most of all, flexible.

  To understand what consumers want in 2021 and beyond, Beverage Master Magazine gathered some trend data and talked with Holly McHugh, marketing associate for Imbibe, a beverage development company focused on the formulation, customization and commercialization of cutting-edge beverage products that provide a “bolt-on R&D function” for companies without R&D or that need to expand in this area.

So—What’s New?

  Taking stock of the past year and establishing aspects of revision is still a personal and professional journey. Still, maybe some of these indicators will resonate as either extensions of current practices or sparks of innovation.

People are Eager for To-go and Online Options

  “The pandemic changed the way we shop, socialize, entertain and more,” McHugh said. “This created a need for CPG (consumer packaged goods) brands to offer products that provide an escape from the mundane but can be enjoyed at home.”

  In December 2020, Forbes reported that “total eCommerce penetration experienced 10 years of growth March through May 2020.” It cited research from IWSR that stressed “online sales of alcohol in the U.S. alone are expected to grow by more than 80%” in 2021. The IWSR analysis indicated that “beverage alcohol eCommerce value grew by 42% in 2020,” and the forecast is that the U.S. will overtake China “as the world’s largest beverage alcohol e-Commerce market by the end of 2021.”

  Quite simply, customers are fond of the convenience and expanse of options online ordering provides. In major and secondary market areas, consumers use platforms like Drizly to browse various selections and receive their purchases within 60 minutes. Many local producers also have access to DoorDash and other delivery services, regulations permitting. “Ghost bars” — extensions of virtual or cloud bars or restaurants often accessed only through third-party delivery services — also saw an increase in consumer interest as producers found new ways to lower overhead but expand product offerings and brand awareness.

  Do-it-yourself kits, mixology classes, premium bar selections, unusual or over-the-top experimental selections and other experienced-based offerings continue to drive consumer interest in 2021. They also still desire personal connections with makers.

Non-standard Products Continue to Rise

  Hard seltzer, cider, tea, kombucha and beer tap into consumers’ desire to balance healthy libations with beverage-driven exploration.

  For example, pandemic purchases of hard seltzer, in particular, rose significantly in 2020, moving beyond previous limitations of seasonality, and there’s no stopping point yet. Nielsen reported that “Hard seltzer-correlated ready-to-drink cocktails drove $120 million in U.S. off-premise sales in the 52-week period ending June 2020, while growing at a 127% rate compared with the previous year.” That growth, Nielsen states, “opened the doors to an even broader array of new and bolder flavor options accompanying the base liquid, and it’s allowing manufacturers to expand the limits of what ‘hard seltzer’ means.”

  Zero-proof spirits, especially those enhanced with adaptogens – herbal substances that promote wellness – botanicals and CBD also have growth potential.

  As regulations shift, CBD- and even THC-infused products are positioned for a meteoric rise, according to a 2020 report by Grant View Research. “The global cannabis beverages market size is expected to reach USD 2.8 Billion by 2025 at a CAGR (compounded annual growth rate) of 17.8 percent.” While some consumers might opt for THC’s “therapeutic effects along with the euphoria it provides,” Grant View Research indicated, people consider CBD products differently.

  “Lack of psychoactive effect in the CBD drinks is widening its scope for usage of the drinks in medical purposes. Many consumers are considering CBD drinks as a wellness and anti-inflammatory products, such as kombucha, a probiotic drink. This drink can potentially be used for treating chronic pain, anxiety, substance use disorders and central nervous system diseases. These factors are expected to boost the adoption of the product, resulting in the growth of the segment,” the report outlined.

Health is Front and Center

  “Since the onset of the pandemic, improving physical and mental health has become a top priority for consumers,” McHugh said. Imbibe’s trendspotting indicated a sharp uptick in non-alcoholic wellness beverages and other forms of “permissible indulgence.” While this doesn’t seem to align with alcohol initially, it presents opportunities to consider communications and branding that acknowledge aspects of a healthy lifestyle.

  Spirit-forward classics, which celebrated resurgence in 2020, aren’t slowing down in the new year and might provide another way to acknowledge the balance of responsible consumption that focuses on taste and experience.

  Combating stress with beverages, otherwise known as mood boosters, that allow for clarity, relaxation and sleep is another trend for 2021, similarly to non-traditional offerings.

There’s a Greater Awareness of Ethical Practices and Cultural Appropriation

  In addition to a greater interest in immunity and mood-boosting beverages, McHugh said there’s an increased demand for global products and flavors — with a caveat.

  While culinary tourism is at a high, panelists at Bar Convent Brooklyn last fall stressed that consumers would continue to share dollars and social media influence with businesses that are more progressive when addressing workplace inequalities, sexism, racism and other societal concerns. They want inclusion and diversity, but from the originators. For example, tiki bars are replaced with nautical or tropical themes; an introduction to popular new tequila includes cultural history from someone in the Latinx community; and a closer examination of whether the producers’ table includes people of color and women, especially when it involves other rising spirit trends such as sake, soju, South American spirits and Japanese whiskey.

Value and Safety Still Prevail

  While this really isn’t a surprise, it’s simply a reminder that we can’t move into what was once normal just yet.

  “Economic uncertainty created demand for value, which we anticipate will be evident through increased sales in multi-use and multi-pack products and private label innovation,” McHugh said. “Safety is something we always think about in the industry in the sense that we don’t want to sell a product that could be dangerous to the consumer, but concern about safety has been heightened by the pandemic. Consumers are purchasing groceries online now more than ever, paying closer attention to product packaging and checking what safety precautions food service establishments are taking before eating out or ordering in.”

Up Your Consistency and Repeatability Game With Quality Testers and Meters

Cyndi

By: Gerald Dlubala

Testers, meters, monitors and probes make it possible for craft alcohol producers to raise their standards and improve their craft. The overall move from older, unreliable, visual-based testing to greater process control with more accurate and precise analysis means repeatable sample measurements and more product consistency for reporting purposes.

Quality Control and Analysis at Your Fingertips

  “Measurement and meter use within the distillery are critical for quality analysis and quality control,” said David Zavich, Applications and Technical Support Manager for Mettler Toledo. Mettler Toledo is a leading provider of precision instruments and research and development-related services, quality control and production across numerous industries.

  “At the very least, the distiller should possess a quality pH meter and density meter for help in making informed decisions throughout the production process, and know if and when to intervene and make any needed adjustments. The best way for a distiller to know when the mash is within the acceptable pH range – 5.2-5.8, 5.4 being optimal – for the enzymatic activity to convert starches to sugars is with a quality pH meter. It also helps monitor the critical fermentation activity of a distiller’s beer, when pH should decrease to 4.0-4.5 as yeast metabolize ammonium ions and excrete organic acids. A pH remaining above 5.0 indicates a lack of activity, and pH below 4.0 may indicate the presence of undesirable bacterial contamination.

  “Benchtop density meters are invaluable for determining the proof and quantity of distilled spirits for TTB reporting purposes,” said Zavich. “Handheld versions can determine mash extract efficiency before fermentation, measure distiller’s beer to ensure fermentation is complete, calculate alcohol by volume, and measure proof during the distilling process that aids in making cuts.

  “To measure density, the distiller has three available options,” said Luke Soposki, marketing specialist for Mettler Toledo’s Analytical Chemistry division. “They can use a hydrometer, which is inexpensive and offers several industry measurement scales, but they are fragile, dependent on the user for results and have longer measurement cycles. Pycnometers are also inexpensive and can achieve a level of accuracy, but they require a higher level of training and have limited measurement scales available. The best choice is a digital density meter. They are more expensive but easier to use, more consistent and reliable, and have a shorter measurement cycle. They cover a wide density range, have automatic temperature compensation, and are available in a variety of models to meet the specific needs of the distiller.”

  “Density meters are quite durable,” said Zavich. “Benchtop units are quite self-sufficient with a suggested yearly preventative maintenance. They have an expected lifespan of around 10 years, but we’ve seen operational units well beyond that mark. Handheld units have no specified terms of use but are equally self-sufficient and expected to last many years under normal use.”

  “The main thing is to ask questions before purchasing,” said Soposki. “Mettler Toledo offers a full suite of testing solutions that include density meters, refractometers, titrators, spectrophotometers and pH meters. We can also talk about automation and multi-parameter options when needed. Distillers’ needs are always evolving, and we know that they are still looking for an easier way to release product after testing, specifically with TTB approved handheld density meters. Ask specific questions about the instruments related to your process applications. Ask for a demo, either onsite, virtually, or even in a try-and-buy program when available. Look for manufacturers that can support you across your business needs and offer service and support beyond just the equipment purchase.”

All in for Peace of Mind

  Or, you could go all in and buy the Rudolph Research Densitometer, the same machine that the TTB uses to send off samples for auditing. That’s what Greg Pope, Master Distiller of Missouri Ridge Distillery, did when he opened his distillery in Branson, Missouri.

  “It was pricey for sure,” said Pope. “At the time, it was a huge investment, around $6,500, plus another couple of thousand in training costs. It easily outpaced the cost of other densitometers, but it’s the one piece of equipment I thought was worth it based on time value savings, and in our case specifically, the frequency of the breakage factor of common hydrometers. I use it every day for my spirits as well as my beers, so for me, it’s a quality investment.”

  Accuracy and repeatability are always priorities in the distillery, and Pope told Beverage Master Magazine that he’s tried all the gadgets, getting hands-on experience at American Distilling Institute conferences and conventions. With the Rudolph Research Densitometer, he proofs a barrel in 25 to 30 minutes versus the 24 to 36 hours needed using traditional proofing methods.

  “When I got audited, and the agents saw that we have the same equipment that the TTB uses, we were already in favorable standing for trying to do the right thing,” said Pope. “This one piece of equipment holds all of our historical data that is time-stamped, properly labeled as tester batches, bottling runs, etc. and is transferable to a thumb drive for easy auditing. It’s designed for upgrading rather than obsolescence, saving money in the long run. We added the refractometer package when it came available for true and corrective proofs on our line of cordials.”

  Pope said that the training was an intensely monitored, two-day affair, but by the end of those two days, he was comfortable using the equipment for all of his applications and performing all necessary tests independently.

  “The only hiccups I’ve had with this equipment has honestly been because of human error,” said Pope. “Our machine is set to give us a recalibration reminder every Monday at midnight, and we can’t do any further testing until that recalibration is completed. The process is easy, and then we’re good to go for another week. This densitometer also has international settings, and because we export our bourbon to the U.K., we can provide their required test results.”

  Pope said that he also helps other distillers by testing and auditing their samples, providing another way to grow and support the distilling community.

Quality H2O: Good Water Equals Good Beer

  “That’s what brewers will tell you, and it’s certainly a good rule to follow,” said Mike McBride, marketing, IT and social media manager for Industrial Test Systems, a leading American manufacturer of instruments and chemistries designed to test water quality parameters. “It’s just a fact because beer is over 90% water, so it follows that good water makes for good beer.”

  Industrial Test Systems offers their popular eXact iDip Smart Photometer and their eXact pH meter to help brewers stay on top of their water parameters.

  “Visual testing only gives the end user a baseline guide or range versus digital testing that is much more precise and provides exact, repeatable results,” said McBride. “Our meters bring those types of laboratory quality results to you, and that’s important because of the many different tests performed on the water within a craft brewery. One example is testing for water hardness because different beers require different levels. Dark beers require harder water, while lighter beers use softer water. You have to have an accurate, quality test to determine what type of water you’re using.”

Brix and pH Meters: A Brewer’s Best Friend

  “Measuring pH and Brix levels in brewing is essential,” said Jason Brown of Milwaukee Instruments. “Both units are a must because those measurements ultimately determine the type of beer you will brew, how the flavor will turn out, and what percentage of alcohol the brew possesses. To measure alcohol content with a meter like our MA871 digital Brix refractometer, you take an initial Brix reading of the unfermented wort and then a follow-up reading once fermentation is complete. Those values are plugged into a conversion chart to determine the percentage of alcohol in your final product. Taking pH readings on a meter like our MW102 within the brewing process takes place from the beginning of the brewing process to the end, using it for multiple applications and processes.”

  Brown told Beverage Master Magazine that brewmasters typically already have basic knowledge of pH testers and refractometers. Still, even if they are new to the game, Milwaukee Instruments provides user-friendly equipment, with complete YouTube tutorials instructing the user on the operation, maintenance, storage and calibration of the meters. Most units come with a two-year warranty on the base unit and six months on the electrodes. Their bench meters offer data logging that is an advantage over comparable handheld units.

  “It’s recommended that both types of meters be calibrated before each use to maintain accuracy across all samples tested,” said Brown. “Our units can be calibrated by the end-user with no issues.”

Steam & Water Flow Measurement: Going with the Flow

  “Given the need for accuracy, consistency and repeatability, brewers should always choose the highest quality meter they can afford,” said Marc Bennett, regional sales manager for McCrometer, Inc., worldwide providers of precision flow meters for liquid, steam and gas applications. “Flow metering is all about optimizing production to give the brewer consistent and reliable results through understanding the precise temperatures, pressures and flow being used.

  “The best way to measure steam is through equipment like our V-Cone Meter. It helps a brewer understand the precise temperature, flow and measurement of their team processes, allowing them to optimize their consistency,” said Bennett. “We know craft brewers are frequently tight on space, so our V-Cone Meters are designed for tight fit and retrofit applications while handling most operating environments. Some of the largest, most well-known breweries use V-Cone meters for steam measurement, but they are very applicable for smaller brewers as well.”

  McCrometer also offers a line of electromagnetic flowmeters (MAG) for accurate water flow measurement. Their pumps rely on velocity and pipe diameter information to determine flow over wide ranges with high precision accuracy. Their SPI MAG measures everything from in-flow water through wastewater, including industrial flow processes involving potable water, slurries, sludge, cooling water and pulp stock.

  “Whatever the choice, brewers should always choose U.S. manufactured meters,” said Bennett. “U.S. manufactured meters are often more readily available and more quickly shipped than the non-U.S. manufactured counterparts. If you choose a high-quality meter with a long lifespan and U.S.-based support, you’re getting a great return on your investment. The last thing you need or want is to have your brewing process impacted or even halted because of support issues.”

  Bennett told Beverage Master Magazine that McCrometer meters have great attributes, including the aforementioned long lifespan and support. Perhaps one of the best advantages of both their MAG flow meters and the V-Cone DP meters is the advantage of having no maintenance or repair schedules.

  “That’s a big load off of a brewer’s calendar and his mind,” said Bennett. “Our new ProComm converter on the MAG meters is available with built-in verification that uses stored data to check a meter’s operation against its baseline. That’s true peace of mind. Our V-Cone Meters have been around and studied in applications that are a lot more rugged than what the typical brewery would put them through and have shown no shift whatsoever in their calibration coefficient.”

Proper Filtration Finds the Sweet Spot Between Art and Science

Cyndi
filtration equipment

By: Gerald Dlubala

When the correct brewing process is paired with time and gravity, the result will generally be a great brew. When a brewer speeds up that process, corners get cut, and compensation has to occur. Proper filtration methods are one way to do this, but the methods depend not only on the type of beer brewed but how and when that beer is consumed. Brewery filtration is a carefully constructed combination of art and science that, when done correctly, results in a beer with all the intended flavor and aromas.

Process Should Fit Application: Aftek Filtration Technologies

  “Consistency with stability is the name of the game,” said Jim Russell, regional sales manager of Aftek Filtration Technologies, a provider of filtration systems and processes for many industries, including the craft beverage market. “Too many try to fit a certain process into an established application when they should be looking at the application first and then finding the right process to fit that application. With the proper filtration process, you’ll have usability with consistent and repeatable results without the chance of biological instability. If you’re a brewpub that mainly sold crowlers or used an in-house draft service, a different level of filtration may be necessary if, due to the ongoing COVID situation, you’re now canning or bottling most of your beer and getting it to market using a distributor. Packaging their beer has become one of those decisions forced upon breweries, with more now using mobile canning or co-packers to offer to-go products and widen their distribution. More attention has to be given to shelf life, distribution methods and spoilage awareness. As a brewer, you want your finished product to resemble your original brewpub pour and retain as much flavor as possible without allowing any sludge, unwanted haziness or off-taste entering the picture.”

  Russell told Beverage Master Magazine that a brewer must get started with an initial, informed filtration choice to set a quality benchmark, then make adjustments based on the results.

  “We at Aftek go in, assess the needs and then find the right filtration to fit the product needs with minimal effects,” said Russell. “Some filtration naturally adds taste-affecting properties to your beer, and we want to minimize that. Some of those properties are recoverable through adjustments and additional filtration, but upfront awareness is the key. You can save from 25 to 50% of your flavor and aromas by simply making the proper filtration choice. For example, Diatomaceous Earth filters are economical and efficient, but they can be aroma and flavor scavengers, ultimately changing a beer’s character.  Pad filters can be backwashed, regenerated and reused, but if there is any remaining minerality in the pads, the chance of biological contamination increases. Proper filtration starts with awareness of detail and remaining consistent in using quality filtration media rather than the cheapest, which can be wrongly classified. This consistent and constant attention to detail is the only way to make progress on and obtain the ultimate goal of balancing consistent flavor profiles with optimal shelf-life.”

  Types of filtration include depth and surface. Depth filtration is a primary form and can be the only type of filtration used for many smaller craft brewers. Depth filtration includes frame, plate and screen filters that trap particles for removal. Surface filtration traps smaller particles on the surface of the material while allowing clarified fluid to pass through. Lenticular filters work similar to plate and frame filters, but the modules are enclosed and purged with CO2, decreasing biological instability and oxygen exposure. Regular physical filtration only gets particles that are in suspension. Russell suggests cartridge and microfiltration for finishing and fine-tuning the beer just before packaging.

  Russell told Beverage Master Magazine that seltzers present a whole different situation because of regulations. Malt-based products must retain a minimal amount of malt percentages. Seltzer makers want to create a malt base with as light of a concentration as possible before flavor blending, and carbon absorption filters can neutralize the base. Russell said there are other products and ways to filter seltzers, but no matter the choice, brewers should neutralize before blending. Like beer, the end goal is drinkability with no aftertaste, which is unachievable if using improper filtration methods or processes.

  “The bottom line is that you want to preserve drinkability and bring your product to the consumer with no issues,” said Russell. “Within your brewery and specific situation, you have to consider capital costs versus consumable costs to help determine the type of filtration equipment needed and to make sure you don’t under or oversize your filtration systems.”

  Aftek Filtration Systems meets all filtration needs from start to finish, from incoming water supply to outgoing wastewater treatment. They work by building a comfort level with their clients, including warranties on their products and available inventories of filtration media to help keep costs down while producing the desired continuity throughout the entire brewing process.

  “We touch base and sit down with our clients every few months to discuss concerns relating to business growth and future needs, or to just see how things are going,” said Russell. “We educate the brewer when needed and cover available options when they are ready for the next level of filtration, for example, switching from pads to centrifuges.”

  Centrifuge technology has traditionally been out of reach for the craft brewer, but it is becoming more affordable and attractive. Brewers see the cost-effectiveness and user-friendliness along with the reports of higher yields, better flavor and aromas, and increased shelf life. Additionally, unlike filter pads, they won’t become clogged or bogged down, causing downtime. Instead, reports show centrifuges save time, recover man-hours, increase run times, and streamline the tank turnover and brewing process.

  “We’ve seen the size of the entry-level centrifuges drop into the $100,000 range, making them a little more affordable,” said Russell. “I see more and more brewers in the 20,000-30,000-barrel range getting into centrifuges, but making the jump has to be based on an informed decision. It’s one of the topics when discussing return on investment, including consumable savings, labor, quality, product savings versus loss and dissolved oxygen uptake.

  “The biggest bit of advice I can give to brewers is to put thought into and select the proper professionals to work with and advise you, and then get the proper equipment to reach your goals and specifications. Whether you’re talking about filtering through chemistry, pads or labor only, the whole process is a flavor versus filtration issue. There is no magic wand that can do it all. Talk to your business neighbors and see what they use and if they’re happy with it. Have they used it for at least a year? What about the service aspect? Filtration in the brewing process is finding what works the best at the best cost while retaining consistent results, preferred shelf life and optimal drinkability.”

Reliable Utilities Filtration for Reliable Outcomes: Donaldson Filtration Solutions

  “Admittedly, in any brewery, there are numerous points in the brewing and packaging process where filtration can be critical,” said Scott Grimes, technical training manager for Donaldson Filtration Solutions, a global provider of filtration solutions for food and beverage processing.  “By starting with proper filtration for your primary utilities like air, water, steam and gases, a brewery is on track to not only produce a great product but just as important, to be compliant under FDA and industry standards. Those standards include important topics including hygienic design, allergen-free environment, integrity testing, and BSE/TCE statements certifying that products used are safe and free from harmful materials.

  “For these reasons alone, breweries should be working with experts to assess and size their filtration needs,” said Grimes. “Product filtration, in its simplest form, is simply keeping the undesired brewing remnants out of your beer, especially when producing bright or lighter beers. You do that by understanding a brewery’s demands, identifying where the utilities come in contact with the process or beverage itself, and then setting up the right filtration to help mitigate any possible micro-contamination. Trap filters, for example, are commonly used as post-finning agent filters because they are very efficient at catching the remnants of agents like Diatomaceous Earth from entering the bright tank. They also guard against any powdery remnants traveling downstream in the brewing process. Trap filters are regenerative, inexpensive, long-lasting, and ensure stable, contaminant-free beer that retains its characteristics and flavor profile.”

  “The utilities are an important place to start in implementing the right filtration for any brewer, no matter the size or output. Sterile air, free of any oils and moisture, is used in everything from wort aeration through the finished product packaging. It’s critical to effective and consistent yeast propagation and the proper facilitation of the fermentation process. Particulate-free, quality water is equally critical for use as an ingredient, in steam applications, and for process water,” Grimes said. “Feedwater can contain contaminants like pipe scale, sludge, organic matter, sediment or other suspended solids. Clean and sterile culinary steam is used in multiple situations, including steam distribution services necessary to retain heating efficiency in boiler systems, cleaning and sanitizing equipment in between batches, and sterilizing kegs before reusing or filling. Protecting your investment means making sure that your finished product is packaged and distributed in clean, sterile vessels.”

  The same holds for gases and their filtration needs. When using CO2 to push out a product, clean and sterilize processing lines, deliver CO2 for pipe aeration systems or purge cans or bottles before filling, sterile CO2 ensures the finished product is delivered in clean, sterile containers.

  Grimes told Beverage Master Magazine that presently, more than anything, market shifts like the recent move to widespread seltzer production are what affects filtration needs. Filtration processes respond to increased seltzer production by moving towards flavor enhancement protection balanced with shelf-life expectations of anywhere between three weeks to three months. Because more products are packaged for distribution, held in warehouses and delivered under less than ideal conditions, seltzer producers must filter out spoiling agents adversely affected by temperature fluctuations. Cold stabilization, an alternative to pasteurization, helps reduce the carbon footprint and improve shelf life without sacrificing the product’s sensory qualities.

  “Brewers can help themselves by performing regular and preventative maintenance on any equipment that is filtration related,” said Grimes. “You should always adhere to a preventative maintenance schedule following best practices and recommendations by the equipment manufacturer. For compressed air, it’s usually on a six to 12-month schedule. Steam filtration should be inspected and cleaned every 12 months or as needed. Product filtration is affected by the media used and its ability to keep spoiling organisms away from the yeast pad and be successfully regenerated. Adhering to a strict regeneration policy and using properly sized equipment, quality filter media can last months, saving money and time. When filtration systems are sized properly and maintained according to schedule, they all work in conjunction with one another along the brewing process path to ensure process integrity and produce the beer that the brewer intended.”

From Brewery to Brand

Cyndi

Canadian Breweries Are Crafting More Than Just Beer

2 women toasting

By: Alyssa Andres

These days, it’s not enough for Canadian breweries to just produce great beer. Canada’s craft beer industry is growing rapidly, with over 1000 craft breweries nationwide and more opening their doors each month. It is crucial that each of these breweries attempt to set themselves apart from the competition in order to establish a following and draw customers into their tasting rooms. From logos, slogans, packaging and merchandising to marketing, advertising and social media, each decision a brewery makes impacts how the public identifies with their business. Some of Canada’s most successful breweries have taken this notion and created their own personalized brands that extend way beyond beer and allow them to garner more interest in their businesses.

  Many of these breweries use original artwork to create more exciting brands and produce merchandise that sells out just as quickly as their beer. Some breweries use their brand identity to create a voice and speak to an important cause or issue. Others organize festivals, concerts or charitable events. Many incorporate local ingredients or use their unique location as inspiration for their brands.

The Grizzly Paw Brewing Company

  The Grizzly Paw Brewing Company in Canmore, Alberta, uses its unique Rocky Mountain location to create a diverse brand that appeals to locals and tourists alike. Established in 1996, Grizzly Paw has grown from a brewing company to a brand that extends from sodas and hot sauces to clothing, housewares and even soap. The brewery recognized the potential for a successful retail business early on, especially being a tourist destination, and started creating an array of branded merchandise to sell in their taproom.

  After launching The Grizzly Paw retail store, the brewery continued to expand its offerings. They added a line of handcrafted sodas to their repertoire in 2006, made with fresh water from the streams of the Canmore reservoir. This move allowed the brewery to expand its brand to include children’s clothing and goods. Sales and Marketing Manager, Kristina Cardinale, said the brewery developed a second logo to use for the sodas and used that logo to establish their children’s brand.

  “When it comes to the kid’s side, we’re not promoting kids wearing beer brands,” she said. “We always put the soda logo on the kid’s merchandise, so now we can hit all the demographics and age groups.”

  The brewery finds that many of its visitors want to take memorabilia and souvenirs home as a memory of their time in the mountains and aren’t necessarily just looking for a beer tasting when they visit The Grizzly Paw Brew House.

  The Grizzly Paw retail shop releases a new line of merchandise seasonally that includes lots of plaids, branded toques, hockey jerseys and even collector’s items like their Grizzly Paw “Thumberjack Throw,” a fleece-lined, red and black sherpa throw that retails at $75.00 CAD. Cardinale said they are looking to add floaties to the list of Grizzly Paw merchandise this summer. While brewing great beer remains their focus, their retail shop continues to be an important part of their business.

Blood Brothers Brewing

  Many Canadian breweries choose to expand their brands to include more retail offerings as the interest in craft beer continues to grow across the country. True beer drinkers love to sport their favorite beer brands, and they’re not just pulling these T-shirts out of a case of beer anymore. Consumers are willing to pay good money to showcase their favorite breweries, which creates a real opportunity for brewers to allow their following to promote their brand for them.

  Blood Brothers Brewing in downtown Toronto is an example of a brewery that has taken its business and developed a recognizable brand of street-style that can be seen all over the city. Owners and real-life brothers, Dustin and Brayden Jones, started with a simple logo designed by artist and close friend Meghan Kramer. They then started commissioning Kramer to illustrate all of their beer labels, using her unique style of artwork that is now easily recognizable as the Blood Brothers brand. The Jones come up with the name for the beer and share the backstory behind why they chose it, and from there, Kramer has complete creative freedom to interpret. These labels are then transformed into T-shirts, hoodies, posters and other merchandise to sell in the brewery taproom.

  The Jones brothers had no idea what the demand for merchandise would become. The glassware sales initially tipped them off to the importance of having a retail shop when they opened their taproom in 2016. Today, this paraphernalia is so highly sought after that it’s hard to get your hands on.

  Blood Brothers continues to expand its offerings, and today, their shop includes not only clothing and glassware but also pins, patches and playing cards. There’s even a bottle opener resembling a folding butterfly knife that the brewery can’t keep on the shelves. The brand appeals to a specific sort of hipster beer-lover and has become a signature look amongst Torontonians. Each new beer is an opportunity for a new piece of art and more merchandise in the Blood Brothers retail shop.

Collective Arts Brewing

  The idea of original artwork is pushed one step further by Collective Arts Brewing in Hamilton, Ontario. This one-of-a-kind brewery “fuses the creativity of craft beverages with the inspired talents of artists from around the world,” using a different artist for each piece of art that goes on their cans. Today, the brewery has commissioned over 1000 artists, showcasing each of them in their taproom in a gallery-style display of tall cans.

  Collective Arts also promotes musicians, not only on their cans but through live festivals and events. In 2019, Collective Arts released their first Audio/Visual Lager: a music-inspired beer featuring a record label, four bands and one visual artist on each can. The brewery threw a week of free concerts in Toronto to celebrate the launch. They also organize the annual “Liquid Arts Festival” to celebrate beer, art and music, featuring bands, live art installations, food and, of course, Collective Arts beverages.

  Recently, Collective Arts expanded its platform and now uses its brand to promote larger issues, such as tolerance and equality. They released their “Amplified Voices” series in 2020, using limited-edition artwork aimed at “provoking challenging topics and creating space for groups that are too often left in the margins.” The brewery raises money for various causes through their Collective More. charitable initiative, aimed at supporting community, creativity and equality. Their goal is to financially assist charities that do work “to bring more equality and better the well-being of people in their communities.” The Collective More. initiative continues to sell merchandise, screen prints and limited-release beers, with proceeds funneling back into their charitable initiative.

  For International Women’s Day, they celebrated by teaming up with the Pink Boots Society, an organization created to assist, inspire and encourage women in the beer industry, to create a grapefruit-elderflower IPA.

  Collective Arts believes that making beer is a platform, and they take it upon themselves to speak out about issues that matter.

Beyond the Beer

  These days, people are paying attention. Social media and the internet have changed the way that consumers interact with brands. Beer companies have a real opportunity to make a statement and engage with their audiences. They can speak directly to their consumers, something that wasn’t possible even a decade ago. Every new post is an opportunity to share a message, draw attention to their company and build anticipation for upcoming products and release dates.

  Craft beer is a thriving online community, and new breweries are joining daily. Brewing companies must not only consider the beer they are producing but also their overall brand and demographic. The most successful beer brands in Canada have a recognizable aesthetic that appeals to a specific demographic. Many have eye-catching logos and beer cans that border on fine art. These breweries bridge the gap between beer and brand by developing merchandise and apparel, funding live and online events and using their platform to deliver a message beyond “let’s party.”

  As social media and online communities continue to grow, breweries must understand the power of their brand and the voice that comes along with it. Beyond the beer, clothing and accessories, breweries have the opportunity to share a message, often to a large audience. It’s important to take this opportunity and use it to create positive change.

  As the world continues to evolve through a global pandemic, enormous human rights movements and an onslaught of technological advances, it is more important than ever to create brands that inspire good. Whether they source local ingredients, support struggling artists, collaborate with other small businesses or donate to charitable causes, giving back is an integral part of creating a successful brand, and as consumers, it is a crucial thing to consider when choosing which brands to support.

Breweries: How to Price your Beer

Cyndi

Take advantage of our 50% Reader Discount off of the Craft Brewery Financial Training annual subscription. Visit http://www.craftbreweryfinance.com. Use the discount code “beveragemaster” at checkout to claim your savings.

I recently bought a book called Priceless, The Myth of Fair Value. The book is 300+ pages long and provides great information about pricing and the role of human psychology in how purchasing decisions are made.

While the book contains a lot of interesting stories, studies, and research, it doesn’t do much to help with the fundamental question: How should you price your products?

Ideally, to price your beer, you would determine the costs, add a healthy markup, and sell it to your wholesaler (or retailer) at a fat profit. Unfortunately, the market forces and your competitors have some influence here.

So, how do you price your products?

You can look at what everyone else is charging and follow suit. You can take a wild guess and hope it will work out profitably in the end. Or you can go along with what your beer wholesaler suggests for pricing.

Regardless of how you may have priced your beer in the past, today we’re going to talk about how you can price your products profitably for the future. To make the concepts easier to understand, we’ll use hypothetical pricing numbers and examples. And we’ll walk through a template you can use to make pricing easy. Best of all, you don’t have to read a 300-page book to find the answers.

Disclaimer: Since we are talking pricing, all examples listed are hypothetical only and used for illustrative and informational purposes. Prices, costs, and margins will vary widely based on market conditions and other factors.

How to Price Your Products

  • Pricing Terms: PTC, PTR, PTW
  • How Pricing Works in the Real World: Margin needed by the brewery, wholesaler, and retailer
  • Use the Pricing Model: Plug n’ play Pricing tool for your Beer

Pricing Terms

The typical beer sales cycle looks like this: the brewery sells to the wholesaler, who then sells to the retailer, who then sells to the end consumer.

At each stage in the sales cycle, there are different prices and markups that are charged. The Price to Wholesaler, or PTW, is the amount the brewery charges to the wholesaler. The Price to Retailer, or PTR, is the price the wholesaler charges to the retailer. Lastly, the Price to Consumer, or PTC, is the amount charged to the consumer. This is the amount listed on the store shelf for your beer.

You won’t be surprised to hear that the price the consumer pays for your beer is significantly higher than what you sold it to the wholesaler for. The reason, of course, is that each stakeholder in the sales cycle needs to make money. The brewery, the wholesaler and the retailer all have margins that they need on the sale of the beer in order to run their business profitably.

Those terms again…

  • PTW = Price to wholesaler
  • PTR = Price to retailer
  • PTC = Price to consumer

How Prices Work in the Real World

To properly price your beer, it may be useful to work backwards from the Price to Consumer. This is the price of the beer on the shelf at the retail account. If your competitor’s brand is selling for a hypothetical $12.99 a six-pack, you may want to price your beer accordingly.

The challenge is to figure out how much to charge your wholesaler, who then will charge the retailer, who then will price the beer at the $12.99 price point. How does all that math work? We’ll take this in small steps.

Here’s a hypothetical example. Let’s say you charge the wholesaler $25 for a case of beer. The wholesaler needs to make, for example, a 30% margin when they sell it to the retailer. To get a 30% margin, the wholesaler then charges the retailer $36 for the beer.

The math: $36 minus $25 = $11 Margin for the wholesaler. $11 divided by $36 = 30.5% Margin percentage.

Continuing the example, let’s say the retailer also needs to make 30% on the beer. Since they will sell it in six-packs, they markup the beer and charge the customer $12.99 per six-pack.

The math: 4 six-packs times $12.99 = $51.96 total sales to consumer for the case of beer. $51.96 minus $36 cost of beer = $15.96 margin.  $15.96 margin divided by $51.96 sales price = 30.7% margin percentage.

Each stakeholder needs to make their margins at each point in the sales cycle. This is what keeps the world going round, and the beer being sold. The numbers can get confusing fast. Thank goodness we have a Pricing Model that will do the math for you.

Use the Pricing Model: Plug n’ play Pricing for your Beer

There are many variables to consider when pricing your beer. You can break out the calculator, pen, and pencil, or you can use this Pricing Model spreadsheet. Below is a snapshot:

table showing how to price beer 2

The first step is to determine what your beer costs to make. These costs include direct labor, direct material, and overhead. Next, determine the margin that your brewery needs to cover operating costs and realize a net profit.

In the example above, the total costs of the package are $14.80. The PTW, price to wholesaler is $25, and the brewery margin is 40.8%.

The next step is to understand the required margins for the wholesaler and retailer and expected price to consumer.

table showing how to price beer 1

In the example above, the wholesaler sells to the retailer at $36 per case. The retailer then sells the case in four units (four six-packs) at $12.99 each. This is the price to consumer. 

The pricing model takes all the variables involved in setting the price and combines them into an easy-to-use spreadsheet. Simply enter a few numbers and you’ll have the information to get your beer on the shelf at a competitive price.

Wrap Up + Action Items
Read and understand the pricing terms – Price to Wholesaler (PTD), Price to Retailer (PTR) and Price to Consumer (PTC). Know that everyone needs to make money at each step in the sales cycle. The wholesaler needs to make their margin, and so does the retailer. Most importantly, so do you, the brewery owner.

Don’t guess or follow the herd when it comes to pricing. Use the pricing model to properly price your beer and achieve profitability. Your income statement will thank you.

You can download a copy of the pricing model at www.CraftBreweryFinancialTraining.com.

How to Improve SKU Management

Cyndi

Beer Business Finance

Financial Intel for Beer Distributors

“The more inventory a company has, the less likely they have what they need.” Taiichi Ohno

Inventory is the life blood of a wholesaler. Brands and products help define your identity as a business. However, if not properly managed, these same brands can bury you in expenses.

Purchasing inventory is the single biggest outlay of cash that your company incurs each year. In a $50 million company, more than $35 million is spent on inventory.

That is big dough. It’s also a big opportunity to enhance company financial performance by improving your portfolio management and SKU review process.

Managing inventory is a mixture of art and science. It’s a blend of subjective and objective information. There are the numbers (the objective information, the science) and then there’s your gut (the subjective information, the art) The idea is to combine the two and make the best decisions possible for your inventory portfolio and your bottom line.

The New SKU Management Course and this article will provide guidance and strategy on how to manage your inventory portfolio, monitor your key metrics and trim your un-profitable SKUs so that you can improve profit and cash flow.

The road to better SKU Management is just ahead. Let’s go.

SKU Management: Overview

  1. SKU Landscape – Then and Now
  2. Total inventory carrying costs, quantify the problem, fixed + variable, template to capture your costs
  3. The Inventory Scoreboard, Key Metrics
  4. SKU Management Fundamentals: Philosophy + Process
  5. How to identify under-performing SKUs and Fix, Sell or Close

SKU Management: Then and Now

It used to be a lot simpler. Just a few decades ago, beer wholesalers carried 100 SKUs on average. Today, the average is well over 1,000. A ten-fold increase in a short period of time.

In addition to SKU count growth, the number of craft breweries has increased five-fold in the last ten years from 1,500 to over 7,000.

The growth in both areas has created a phenomenon called SKU ‘intensity’ – the increase in package types per brand. In the past, a beer brand might be available in half-barrels and 4/6 pack bottles.

Today, beer is being packaged in 12oz cans, 16oz cans, 6packs, 12packs, 15packs, and so on. You might have five or ten different packages for the same beer. Now, that’s intense.

Non-beer SKUs are also being added to the mix: Wine, Non-Alcohol, and snacks for example. These fill up the delivery truck and can help get you more profitable stops. They also fill up the warehouse and create additional challenges to manage the inventory.

How did this happen?

You know how it happened…

Consumers demand a wide variety of choices. They want what’s new and what’s different.In order to keep up with ‘new and different’ you have to carry new breweries, new packages, and new styles.

New and different drives the growth of SKU’s in your portfolio. The simpler times of consumer brand loyalty is on a hiatus.

Distributors and retailers scrambling to meet the demands, sometimes managing by FOMO – Fear of Missing Out on the next big thing. As a result, distributors take on more brands, the SKU count goes up, and your cash flow goes down.

Distributor Evolution

In response to all this change, distributors have needed to evolve.

Specialized sales teams have been added to focus on craft. Sophisticated warehouse and inventory systems have been installed to keep track of all the new SKUs. And higher skills and new training for employees has been needed to keep pace with these new systems.

Change is nothing new for distributors, and the evolution of the business has been constant. The SKU challenge is just one more in a series of changes.

SKU Carrying Costs

So, let’s get into the nitty gritty: What is the cost to your business of these SKU increases?

In other words, how much more does it cost if you have 500 SKUs or 1,000? How about 1,500 SKUs or 5,000?

To answer the question, we’ll begin an assessment and calculation of Cost to Carry. This metric captures all costs that are included in managing, maintaining and holding your inventory.

Interestingly, studies show that 65% of companies don’t calculate carrying costs. If you don’t know your costs it is difficult to manage and improve them.

The main purpose of calculating your Cost to Carry is to identify controllable costs, and use this information as a basis for making decisions on managing breweries, brands and SKUs.

SKU Carrying Costs: Rules of Thumb

The average cost to carry inventory is 25% of inventory value. The number varies greatly from company to company, with percentages ranging from 18 to 75%.

The calculation works like this:

Add up all the expenses to manage, maintain and hold your inventory, then divide by the average on-hand inventory value.

Total Costs to Carry $500,000 divided by Inventory Value of $2,000,000 = 25%

SKU Carrying Costs: What’s Included

Below is a listing of costs that are typically included in the calculation:

  • Rent / Lease expense
  • Utilities
  • Wages: Operations Team
  • Wages: Admin Team
  • Breakage, Out of Code, Shrinkage
  • Destruction Costs
  • Insurance
  • Depreciation
  • Cost of capital (interest)
  • Transportation / Handling
  • Taxes

SKU Carrying Cost Template

To create your schedule of carrying costs, follow the steps below:

  1. List out costs associated with holding inventory. Use the list above, add/subtract based on the specifics of your beer business.
  2. Identify the basis for the cost – those factors that drive the cost. For example, hours and labor rates drive the wages, and square footage drives lease costs.
  3. Quantify the total annual cost for each item.
  4. Identify fixed costs and variable costs. Fixed costs are those that stay the same if you have 100 SKUs or 1,000.Variable costs will increase or decrease depending on the amount of inventory.
  5. Highlight those costs you can control/reduce.
  6. Calculate and input your average on-hand inventory value.

SKU Carrying Costs: Hard Costs vs Soft Costs

The items above are the Hard Costs, the actual dollars, spent on carrying inventory. There are soft costs to consider as well.

Soft Costs:

  • Opportunity costs: ‘the loss of potential gain when one alternative is chosen over another’. We have finite resources, so when dollars are invested in one brand or one SKU they aren’t available to invest in something else (other brands, other business opportunities, etc.)
  • Focus costs: The sales team can only handle so much, overload, distraction, and confusion costs money. Too many SKU’s and brands can become too much to focus on.

Soft costs are difficult to quantify, and don’t show up clearly on the income statement. But they do affect the price you pay to manage inventory.

SKU Inventory Metrics

Management of inventory can become a game of don’t run out, but don’t have too much on hand. Set proper expectations and use numbers to measure those expectations.

SKU Inventory Metrics help quantify what good inventory management looks like.

The Four Key Metrics of Inventory Management

  1. Days on Hand. Measures “Don’t have too much.”
  2. Out of Stocks. Measures “Don’t run out.”
  3. Out of Code. Watch and manage code dates.
  4. Inventory Variances. Count and safeguard your inventory.

Sign up for the New SKU Management course to get the presentation video, full Guide book, and spreadsheet templates. Your cash flow will thank you.

Yours in SKU Management,

Kary

How Your Intellectual Property Can Make or Break a Merger

Cyndi
intellectual property cover

By: Ashley Earle, Attorney, Dinsmore & Shohl

Like a good recipe, a good brand name for a beer, wine, or other beverage can drive sales. That recipe, distilling process, bottle design, or logo is all a form of intellectual property that helps define who you are in the industry. It can also be a defining and important part of any transaction.

  In today’s COVID world, breweries, wineries and distilleries of all types are doing what they have to in order to survive and one day thrive. Some are turning to mergers and acquisitions as potential strategies for survival and success. It’s important to know how your intellectual property (IP) can make a difference, good and bad, to a potential deal. Below are the five things you need to know about IP in a merger or acquisition. 

What Is IP?

  Before we get there, it’s important to quickly define the different types of IP that exist:

•    Trademarks: A trademark is the most common form of IP protection in the alcoholic beverage industry. It protects anything that functions as a source identifier, (product names, company names, logos like the NBC peacock, bottle or can designs like the Coca-Cola bottle, or even sounds like the ESPN tones). Trademarks can be registered and unregistered, though unregistered marks are limited in geographic scope.

•    Patents: This protects a unique invention (a brewing process, a novel distillation column), a unique design (bottle designs), or a unique plant (strains of yeast or grapes). Patents must be registered and issued to be enforceable, though pending applications will be relevant in an M&A deal.

•    Copyrights: Copyright protection arises automatically as soon as an original work of authorship is “fixed” into something tangible. Basically, once you draw the artwork for your bottle or can, write the code for your website, or draft up a piece of marketing material, it is protected by copyright. Registration affords several key benefits but is not required to claim ownership in a work.

•    Trade secrets: A trade secret is something that gives you value because it is secret. Examples include customer or vendor lists and recipes.

  Additionally, when you go through a merger or acquisition, you will often be asked to list out all of your domain names, social media, and in some cases, any software that is material to your business. It is important to make sure you keep a list of these assets in case an opportunity arises.

  Now that we’ve covered the basics, let’s dive into the top five things you need to know in a merger and acquisition when it comes to your IP.

What IP Do I (and They) Have?

  Start by taking an inventory of everything you have that is protectable – beer names, wine names, logos, artwork, packaging, unique brewing processes or recipes, social media accounts, and domain names – to name a few. This should include anything you registered, anything you are trying to register (like pending applications), and anything unregistered but material to your business. Disclosure schedules are used to list all of the IP and what is to be transferred in the transaction (if not everything). Be clear to fully disclose what you have without overstating.

  The same should be true of the other side. You should ask them to disclose all of their IP assets that will be a part of the deal, all the way down to their social media accounts and domain names.

  As you and the other side are pulling this together, you also want to collect all of your documentation to evidence the IP. This could include trademark applications and registrations, copyright registrations, patent applications, patents, email accounts, and social media accounts. You will also want to pull any licenses you have to use IP, independent contractor agreements regarding creation of IP, liens on IP (if applicable), and any documentation relating to disputes or claims of infringement involving your IP (if applicable). Make sure you have clear documentation of the chain of title (meaning who owned it at each point) from origination to present day.

Do Both Sides Actually Own Their IP?

  The next question you need to ask yourself in any deal is: Do we actually own that IP? The answer may not be as simple as you think. You need to be sure that all assets are owned by the company and not an employee, owner, or even a third party. A lot of companies don’t realize that if they hire an independent contractor to make something, whether a website, logo, or marketing materials, unless they have the contractor expressly assign the finished product to their organization, the contractor owns it. Employee-created works should automatically transfer to the employer, but it is still good practice to include an assignment in your employment agreements. 

  Ownership issues can derail or even terminate what would otherwise be a great deal. Make sure that the ownership of IP on both sides is clearly documented and validated as you move forward.

What Are We Agreeing to In the Deal Terms?

  Within the deal documentation, there will be a number of representations and warranties and indemnity provisions that relate solely to IP and the disclosures and transfers being made in the deal. This is why it’s so important to make sure you have your ducks in a row with your IP as you move forward.

  These reps and warranties will range from confirming ownership of the IP to promising your IP does not infringe the rights of others. You can also see reps and warranties that ask you to declare that your employees have not created any IP that is not owned by the company. Your legal counsel can help to finesse the reps and warranties to match your circumstances and protect you as best they can, but it’s important you ensure everything stated is accurate. A broken rep and warranty in a transaction can be expensive and arise after the deal is done.

  You may also be asked to indemnify the other side for any claims of infringement of the IP, even if you are selling your business to them and walking away. Typically, indemnity provisions should only last for a particular time period following the sale and have a few caveats of what does and does not trigger indemnity. It’s important to make sure you understand them and how they may impact you in the future.

  It’s also important that you understand what will happen to your IP or the other side’s IP after the deal is done. Who will end up as the owner? Who has control? Will any IP be left behind with either party? Are there any pitfalls with the IP that need to be addressed (like prior enforcement matters that resulted in Coexistence Agreements or liens)? Given the importance of IP to any business, it’s doubly important to understand what happens to the IP in the deal as you look to the future.

Were Things Done Right with the IP by Both Sides?

  While you want to believe all assurances a party makes in fostering the deal, both sides must do their due diligence. Did an employee copy and paste images from Google that are infringing someone’s copyright? Did you use unauthorized background music in a promotional video or advertisement? Did you see a great idea at a trade show and implement something similar, not realizing it was patented or trademarked? As the brewery, distillery, or winery grows and expands, so do the footprint and the risk for claims against you.

  Similarly, data privacy can be another pitfall. If any customer information is kept, such as names, birthdays, addresses, or credit card information, (or more abstract information such as IP address or use of cookies, beacons, and pixels), you have to be sure that this information is kept safe and confidential. Ensure there are no data breaches and never have been any breaches.

Likewise, if you are keeping any data, a clear privacy policy must be in place. Do not be tempted to copy and paste a privacy policy found online. The Federal Trade Commission (FTC) often comes down hard on businesses for having a policy that does not match what they are actually doing. Copying and pasting can lead to a policy that misleads consumers as to how you handle their data – and that’s a big problem.

A privacy policy can be fairly simple and straight forward: Explain what information you collect, where you keep it, how long you keep it, and how it is stored, and provide an option for customers to opt out (such as an email address to contact). The more information (and the clearer the information) the better – and when in doubt, ask for affirmative consent.

  With these five things in mind, you can approach a deal with confidence and find the perfect fit to expand and secure your brewery, distillery, or winery. When in doubt, consult your attorney – we’re here to help!

  Ashley Earle is an attorney at Dinsmore & Shohl who focuses on branding protection through trademark and copyright law. Dinsmore represents breweries, distilleries, wineries, cider companies and other alcoholic beverage producers in business, regulatory, intellectual property and litigation matters. Dinsmore attorney represent these entities in every stage of their business, from formation to operation to final sale or closure.  Ashley can be contacted at…513-977-8522 or ashley.earle@dinsmore.com

Brewing Social Media Success:

Cyndi

How to Use the ‘Gram to Maximize Your Craft Beverage Brand  

social media marketing

By: Chris Mulvaney, President (CMDS)

What three things do Tito’s, Blue Chair Bay Rum and Trillium Brewing Company have in common?  All three have mastered the ‘gram game and have boosted their brand success by putting out a consistent cross-formula of brand content, brand awareness and maximizing audience engagement across the ever-growing social media platform.

  Whether you are a craft brewer, startup spirit producer or global drinks company, your social media presence should be at the top of your priority list. But how exactly can crafters use Instagram to grow their business?

  Instagram is a visually appealing social media platform. In recent years, it has started to dominate Facebook in that it is not as overcrowded and expensive. The beauty of Instagram is that brands can still establish an organic relationship with their followers and can develop brand personas, becoming known for a certain tone, content and style. They can build their brand immensely just by being an active user. Also, the influencer market has never been so powerful for brand awareness.

Instagram Strategy

  Once you get a grasp of the platform, then you must define your social media strategy to gain the right followers and maximize engagement.

   This should include:

•   Increasing brand awareness.

•   Driving website traffic.

•   Increasing website engagement to generate leads and drive sales.

•   Increasing customer retention, engagement, and followers.

  How can a brand stand out in an increasingly competitive market?

•   Quality products, first and foremost.

•   Great marketing.

  After that, tell your brand story through photos, partnerships, video and human interaction. Think about what separates your product from others in the market. This isn’t something that’s achieved by one post, but over time, and means connecting your product to something much wider than the drink itself.

  For example, Mexican brand, Corona, understands the appeal of their beverage isn’t just the beer itself. A Corona and lime brings to mind vacations, beaches, relaxation and sun.

  They’ve fully embraced this as their brand, tying the image of plunging a fresh lime into a cold Corona to diving headfirst into the waters of a clear blue ocean.

Organic Media vs. Paid Media

  In the past, the goal of most marketers on Instagram tended towards growing a big following, then continuously publishing content that’s relevant to their brand and audience. One important point to realize, however, is that just because you have 1000 followers doesn’t mean every time you post all 1000 of them will see that post.

  In fact, the reality is a much smaller percentage of them will ever see your post and that’s where the term “organic reach” comes in.

Organic

  One of the most important things to understand about social media marketing is that the way companies can succeed on social media will be entirely dependent on whether they can create an organic experience for users.

  Organic reach determines how many of your followers will see your post without you paying.

This concept of organic reach is prevalent on Instagram since the algorithms used to determine who will see your content at any given time are based primarily on engagement.

  Tips to Get More Organic Reach:

•    Feed your audience with more value.

•    Upload at least two posts a day.

•    Make use of all the features (posts, stories, comments, hashtags).

•    Use attention-grabbing headlines.

•    Use paid sites like Sprout Social to understand the industry atmosphere and create an ongoing dialogue with your audience.

Paid Distribution

  Due to changes in organic reach over the years, companies have been forced to rethink their social media strategies, and in many cases begin exploring other avenues to reach their users on social media, specifically through paid distribution.

  Utilizing paid channels has a number of benefits because it can target users based on demographic information, behavior and interests. Because of this, marketers are able to drill down to specific audiences.

Seven Steps to Success

  Gaining followers and engagement isn’t about simply posting once a week and hoping for the best. In fact, a successful strategy on Instagram should include concrete goals, an ongoing content calendar, a scientific approach to who you’re trying to reach and how many people you expect to interact with.

  The following are seven important steps to grow your brand on Instagram.

1.  Be consistent:   It’s important to define a core strategy for your brand. It should be consistent across all channels and the narrative should be easy to follow. You’ll need to balance product content, campaign content and brand content to be most effective.

       How to maximize consistency on the Instagram platform:

•   Post stories often.

•   Like and comment on posts.

•   Run a contest.

•   Post engaging captions.

•   Offer free advice or information.

•   Post during active hours.

•   Use Instagram ads (paid distribution).

•   Have a strong visual brand strategy.

2.  Use clever alcohol hashtags:  Using clever alcohol-related hashtags can help get your brand trending online or inspire a sense of community with your customers.

        Studies have shown the optimal number of hashtags to use in Instagram consistently is seven. However, even more important is to define your hashtags, include them on packaging and don’t change them too often to make sure fans can refer to you easily.

3.  Use Influencers:   The influencer market has never been so powerful. There are hiring sites for influencers that will allow you to enhance your brand and vision through them. It’s a great way to promote engagement because it boosts brand awareness fast and increases your potential to go viral.

4.  Keep the “social” in social media:  A great way to inspire your fans is to use social media to inspire real world engagement. Your brand will get the most out of social media by catering to the interactive experience. It’s important to be part of the conversation around social events which will resonate with your market – both in terms of pre-planned campaigns and via reactive content.

       Just having a social media account is not enough. Successful brewing and spirit brands actively encourage their fans to engage with their accounts. Many have received some serious engagement by re-posting user generated photos.

       Whether you’re sponsoring a national event, or you can be reactive in a more local way, providing up-to-date content and being part of the conversation will help to keep your brand relevant.

5.  Offer a Backstage Pass:  Take your followers behind the scenes. Let your audience peek behind the curtain and see how their favorite drinks are made. Post photos of the start-up days, of the staff living life and having real experiences.

6.  Connect to a Cause:  Just as social media users don’t only care about likes and clicks, drinkers don’t care solely about their alcohol. More and more, consumers care about the ethics behind the products they’re buying. Remember, they are buying a brand.

       For example, New Belgium Brewing Company put meaning behind their message with their #FindingCommonGround campaign, which not only connects their outdoorsy aesthetic brand to a public land cause, but raised over $250,000 for charity.

        It’s worth the investment, on multiple levels, to put some of your efforts into giving back.

7.  Partner with other brands:   A drink is better with friends. Likewise, a brand is better in a partnership.

       Consider doubling up your power for promotions with a complimentary brand. Partnerships are especially good on Instagram for giveaways, allowing you to expand your offer and reach two different audiences.

       Make sure to find a brand aligned with your goals, and of similar size to get maximum value from a partnership.

Don’t Make These Common Instagram Mistakes

  Common mistakes brands can make on Instagram can hurt them exponentially. Here are some important ones to avoid:

•    Sharing more reposts than original content.

•    Taking too long to respond to comments.

•    Favoring quantity over quality.

•    Misusing hashtags.

•    Buying likes and fake followers.

•    Not paying attention to analytics.

Recap

Craft beverage companies have a product that is in demand, but they are working in an increasingly competitive market. Digital marketing allows them to stay ahead of the game through creative branding and audience engagement.

As a recap, here are some main social media tips as discussed above:

•    Get to know how the Instagram platform works.

•    Define your social media strategy.

•    Tell your brand story.

•    Utilize organic search and paid distribution.

•    Be consistent.

•    Use hashtags.

•    Use influencers.

•    Inspire real world engagement.

•    Take your followers behind the scenes.

•    Connect to a cause.

•    Partner with other brands.

•    Keep it going; don’t stop!

The Last Gulp

  If craft beverage companies hope to engage consumers and boost their sales in this competitive market, they have to adopt a social media strategy that ensures success. While there is no cookie-cutter formula to success on Instagram, there is a pattern that works across the platform if utilized properly.

  The realness is in the engagement and knowing how to maximize your followers and their engagement. So keep thinking: just how can you brew up a social media campaign as unique as your beverage?

Chris Mulvaney is a business developer, entrepreneur, and an award-winning creative marketing strategist. His extensive professional background includes working with some of the world’s leading brands – and personally helping clients refine their corporate vision and generate the kind of eye-popping results that too many companies only dream about. Visit… cmdsonline.com

Brewery Financial Resolutions for the New Year

Cyndi

As we turn the calendar to 2021, it’s time to make financial New Year’s resolutions for your brewery. Financial resolutions may include sales growth, margin improvement, or expense reductions, to name a few.

  However, during the Covid-19 pandemic your most important resolution may be to improve cash flow. During a crisis, the most essential asset is cash, and access to capital. Simply put, when you have access to capital you can stay in business and ride out the financial turmoil.

  Therefore, in the new year, resolve to build a financing plan for your brewery so that you always have access to capital when you need it.

  In this article, we’ll review tactics and strategies to build your brewery financing plan. We’ll cover loan terms, common brewery loan structures, and the details of what a bank will need from you in order to get funding. A complete and well-thought-out financing plan lets you develop alternate sources of cash and capital when emergencies happen. Like right now.

Brewery Loan Terms and Types

  One of the keys to success in business is to have a financing plan in place before you need the money. The financing plan may include a working capital line of credit, equipment line of credit, and commercial term loans. Each loan serves a specific purpose in funding your brewery business.

Here’s a summary of each loan type:

  Working capital line of credit. This is used for short term funding needs, seasonal, or temporary cash shortfalls. It may be open ended, or there may be requirements for re-payment at certain time intervals. For example, the line may need to be paid down to zero on an annual basis. This type of loan is generally secured by assets, such as accounts receivable and inventory, and may require a personal guaranty.

  Equipment line of credit. This line of credit is for specific asset purchases like a canning line, tanks, or warehouse equipment. The line provides for a pre-approved buying ability so that you can act fast if there is an auction on used equipment, for example. The line is open ended, available when you need it, and converts to a term loan which is paid down in monthly installments. This is a useful part of a financing plan as it provides flexibility, ability to act quickly, pre-planning for brewery equipment.

   Term Loan: This loan is secured by the equipment purchased and is paid down in monthly installments of principal and interest. Unlike the equipment line of credit, this type of loan needs to be reviewed and approved prior to funding, so it takes longer to get access to the funds.

A Typical Brewery Loan Structure Might Look Like This…

table showing example brewery loan structure

  In this example, the business has a working capital line of credit of $250,000 and has used (borrowed) $50,000 of this amount. Therefore, $200,000 remains available if future cash needs arise.

The equipment line of credit in the amount of $100,000 has been pre-approved and is available should the business need to purchase brewery equipment quickly. 

  Equipment Term Loans of $100,000 have been borrowed and are related to past purchases. This loan is being paid down, or amortized, on a monthly basis with principal and interest payments.

The working capital and equipment lines of credit can provide access to capital when you need it most. However, your financing requirements may vary, so be thoughtful about what you need now, and may need in the future.

What the Bank will Need from You

  At the heart of any good financing plan is a good financial pro forma. This document will demonstrate your funding needs and ability to re-pay the loans. Moreover, the pro forma shows your lender that you understand what they require to approve the loan. This provides credibility for you and makes the lender’s job easier.

  A typical financial pro forma will present three to five years of projected results. The information is presented in summary form, and shows sales, margins, operating expenses, net income, and EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization). The expected financial results are then compared to the projected payments on the requested loans. This comparison establishes the ability to make the required payments.

  Here’s an example of a summary financial pro forma:

table showing brewery financial pro forma summary

  In this example, the financial pro forma shows a summary of annual sales, margins, operating expenses, net income and EBITDA. The EBITDA is then compared to the expected loan payment to show the ability to re-pay the loan.

Loan Covenants are Promises

You Make to the Bank

  The financial pro forma presents expected financial results and demonstrates your ability to re-pay the debt. In addition, the bank will require regular financial updates to ensure the expected results are being achieved. This is typically done by sending monthly or quarterly financial reporting.

  Further, the bank will require that loan covenants be met. Loan covenants are additional financial promises that you make to the bank. Examples include the debt service coverage ratio and the debt to net worth ratio.  

  The debt service coverage ratio measures how well cash flow covers debt payments. Here’s an example:

• Debt Service (payments on the loan) = $100,000

• Coverage (cash flow or EBITDA) = $150,000

• Debt service coverage ratio = 1.5x

  n this example, the EBITDA of $150,000 is divided by the debt service of $100,000 and yields a ratio of 1.5 times. In other words, EBITDA (cash in) is greater than debt service (cash out) by 1.5x.

  A second loan covenant that is often required is the debt to net worth ratio. As the name implies, this ratio compares the total debt of the brewery to the net worth. Here’s an example:

• Debt = $150,000

• Net Worth = $300,000

• Ratio = 0.5x

  In this example, total brewery debt is $150,000 and net worth is $300,000. For the calculation, debt is divided by net worth, and the result is a debt to net worth ratio of 0.5x.

  The covenant requirements for each ratio will be set by your lender and spelled out in your loan documents. It’s important to understand how the calculations work and measure actual results against the financial promises (covenants) that have been made.

Wrap Up & Action Items

  In the middle of the Covid-19 pandemic your most important asset is cash and access to capital. The working capital and equipment line of credit provide access to cash when you need it most. The financial pro forma demonstrates your cash needs and ability to make loan re-payments.

  A financing plan provides access to capital so that you can stay in business and ride out the financial turmoil. As you set your New Year’s resolutions, consider resolving to create a solid financing plan for your brewery.

For more information, visit: http://www.craftbreweryfinancialtraining.com/