Category: Brewery

How to Disrupt the Beverage Industry with New Marketing Strategies

Cyndi
Jorge Olson headshot

By Jorge Olson — Co-founder & CMO of Hempacco and Green Globe International, Author of “Build Your Beverage Empire”

The beverage industry is growing rapidly, with innovators entering the space year after year touting the next big idea. The global beverages market is expected to grow from $3.56 trillion in 2023 to $4.39 trillion by 2028 at a CAGR of 4.26%, allowing room for disruptors to enter the space, especially considering two of the largest growing categories in the beverage industry are hemp beverages and mushroom beverages.

If you are set on being one of those disruptive entities in the beverage industry, you will want to devise some novel marketing strategies that will set them apart from the competition. Those entering the beverage industry or seeking to retool their marketing approach need to consider several factors, including budget, target audience, and branding.

Entering today’s beverage industry

The beverage industry comprises a litany of products, from ales and liquors to flavored seltzers, hard teas and lemonades, and more. As consumer demand grows, innovators in the beverage space churn out an abundance of ever-expanding options, and as markets continue to grow, more opportunities arise for beverage companies to get a foothold.

With over 2,000 beverage companies in the United States alone, effective marketing is more important than ever before. Marketing builds awareness of your brand and is especially integral to launching and growing new businesses within the beverage space.

The cost of launching and scaling a new business — especially one tied to a physical product — can be high. If you are seeking to disrupt a long-standing industry with a new product idea, you must be savvy about your marketing budget to have the greatest impact and bang for your buck.

Every marketing strategy begins with a great idea that should be formed with consideration to what consumers are seeking but not finding in the current market. The beverage’s formula should be consistent before being unleashed onto the market, and the opinions of experts and stakeholders should also be considered. Being thoughtful about your actions before launching can help you avoid costly (or embarrassing) mistakes.

The beverage industry is incredibly competitive, but with the right product and the right marketing strategies, your product can make considerable waves.

Innovative marketing approaches

In an industry that can be as crowded as the beverage space, new businesses will be required to think outside of the box concerning marketing approaches. The old standard marketing strategies will not likely garner enough engagement to disrupt such a massive industry.

Savvy marketing can also help consumers create an emotional connection to your brand. Many beverages can be connected to moments or memories for consumers — that bottle of Coca-Cola they shared with their dad on a fishing trip or their very first beer when they turned 21. Tapping into these emotional markers can help elevate a brand and solidify the brand’s story within the current culture.

There are several innovative marketing strategies that your beverage company can leverage, but your chosen strategy (or strategies) should depend on the market you are targeting, your specific product, location, budget, and several other factors. The thoughtful pre-planning discussed in the previous section will help determine the right strategy to meet their goals.

Social media marketing

Social media marketing is nothing new, but it is constantly changing. It seems that with every introduction of a new platform or a change in an algorithm, the goalposts for marketers are moved.

Today’s approach to social media marketing utilizes a variety of platforms for a diversified strategy. TikTok is still going strong as the platform of choice for many Gen Zers, but older generations may still prefer Facebook or Instagram. This means you can capture a larger slice of your target demographic by splitting marketing among the various popular platforms.

Social media is still suitable for quickly sharing content with a large number of people and is still the best way to create a personal connection with your target market. By engaging with people across the platforms, answering questions, and sharing content they want to see, you can grow your social media following and brand recognition.

Even though social media is not a new marketing tactic, it is constantly changing and creating new hurdles for business owners. Remaining aware of changes and best practices will allow you to get the most out of social media use.

AI and new technology

It seems like everywhere you look; artificial intelligence (AI) is taking over. For marketers who know how to harness its power with predictive analytics, AI could revolutionize how products are created specifically for consumers. Through AI technology, consumer products like beverages can be designed to exactly what customers want and marketed to the market at large based on what they want or need.

Through AI-enabled packaging creation, specific segments of a market can be targeted and catered to. Branding, ingredients, feel, and culture can be considered — allowing businesses to elevate their new product above other products in the market.

AI also allows companies to gather data on consumer reactions to marketing campaigns quickly and accurately. With this data, businesses can quickly assess whether a campaign is working — or if they need to shift focus.

High-quality content marketing

The best brands are not just products on a shelf. They are entities with which people develop connections.

To help foster those meaningful connections, businesses should focus on creating high-quality content around their brand. This can include blog content that shares brand-related stories or learning opportunities. It can also include video content showing behind-the-scenes making your beverage product or people enjoying it in real-life scenarios.

The focus of your content marketing should be quality and engagement, so take a look at what your competitors do with their own content marketing and strive to do something different. Quality content marketing can drive new sales, create new customers, and help you unveil new products.

Paid advertising

Like social media, paid advertising is not a new approach but is being approached in new ways. As we enter the new year, video is still ruling the internet, so incorporating video content into your paid online ads will allow your ad to stand out over the ads that feature only static images or simple copy.

When approached correctly — and with your target market always in mind — paid ads can be incredibly effective. In fact, recent studies show that paid YouTube ads are 84% more likely to capture viewer attention than traditional TV ads, which can be far more expensive.

The way people consume media is always changing. Targeting the most viewed platforms with your paid advertisements will ensure better reach and engagement.

Seize the season

It’s an oft-repeated marketing myth that the Coca-Cola company owns the “rights” to Santa Claus. While that is not true, the company did have a hand in creating some of Santa’s most recognizable features for a 1931 marketing campaign. The white beard, the rosy cheeks, and twinkling eyes combined with Coca-Cola’s red and white branding became solidified in the cultural zeitgeist, forever connecting Coca-Cola and Christmas.

Beverage companies are positioned well to seize seasonal marketing opportunities. The dog days of summer go well with a crisp lemonade, while the dead of winter leaves many craving a hot cocoa or hot toddy.

Beverages are a part of gatherings, milestone moments, and seasonal celebrations, no matter the time of year. By connecting emotion with brand recognition, marketers can use seasonal positioning to further their reach.

Brand partnerships

With our hyper-connected world, forging brand partnerships is easier than ever before. Beverage companies have created some famous brand partnerships over time, such as GoPro and Red Bull, or Bonne Bell and Dr. Pepper.

With a brand partnership, a mutually beneficial collaboration is formed. New products can leverage the popularity of the established brand, and the partner company can have something novel to share with its audience. Brand partnerships can also allow a beverage company to create exciting new taste combinations or product ideas.

If you are interested in finding another company for a brand partnership, consider their target audience and brand identity. That potential partner’s goals should match your own to forge a successful collaboration.

Engaging events

When a beverage hits the scene, the creators often host a launch event to introduce the beverage to the market. This marketing strategy is still valid, but beverage creators seeking to disrupt the status quo should put a lot of time and effort into making their event stand out among the competition.

Knowing your audience lets you know who to invite to your event to get your new beverage in front of the right people. The proper venue and the right theme can also help elevate your event from just a simple launch to a night no one will soon forget. However, hosting elaborate launch events can be pricey, so an ROI analysis should be performed before you go all-in on the “event of the century.”

The goal of any marketing campaign is to increase visibility and engagement surrounding your new product. If you aim to disrupt an industry as long-standing and — let’s face it — crowded as the beverage industry, your marketing approach will need to be thoughtful, well-researched, and novel if you wish for it to make the intended impact.

By considering emerging marketing approaches and developing new takes on old marketing standards, a new beverage business with a great product idea can thrive.

Barrel Storage Tips for Breweries and Distilleries

Cyndi
stack of barrels in a warehouse

By Alyssa L. Ochs

Breweries and distilleries use barrels for aging, to achieve oxidation and charring and to add distinctive flavors to their products. But an important factor to remember is how you store the barrels because storage can affect flavors, textures and the length of the brewing or distilling process.

To learn more about this issue and how modern producers approach barrel storage, we connected with a few brewers and distillers to discuss common challenges, best practices and expert advice.

Where to Store Barrels

One common place to store barrels is a racked warehouse, also known as a rickhouse or rackhouse. With this method, craft beverage companies typically hold barrels horizontally on racks with room for air to circulate around the sides and ends. Racked warehouse buildings are made from brick, wood, tin or concrete and may be subject to seasonal fluctuations due to a lack of climate control.

Barrels on lower racks have more consistent yearly temperatures, and the racks are usually six to nine barrels high per floor in a multi-story structure. Getting the barrels in and out of the racks can be labor-intensive. So, some producers use single-story or rickhouses up to four stories tall instead for greater ease and more consistent aging.

Another option for beverage producers is palletized warehouses, where employees place barrels on large, wooden pallets, usually four to six barrels per pallet. Employees can store them vertically with pallets on top of each other to save space and labor. Then, they can move multiple barrels on pallets at a time with a forklift, usually six high per floor. Since restricted airflow may alter the aging process, companies may need to install large fans in the area. This method works best in cool and humid climates without extreme temperature changes. However, there is a greater chance of leaks with pallets stacked on top of each other in a palletized warehouse.

Meanwhile, dunnage warehouses are a well-established form of barrel storage tied to old Scottish traditions. A dunnage warehouse is a single-floor warehouse that offers a beautiful display and consistent maturation over many years. This method is commonly used for old and rare whiskies. The warehouse walls are typically made from stone or brick to prevent large temperature swings that could affect the flavors.

The Importance of Barrel Storage

It is helpful to understand the various methods of barrel storage so that your business can improve flavor profiles and add in flavors like oak, vanilla and fruit. Part of the barrel cleaning and maintenance process also involves checking and cleaning the inside and outside of barrels received, checking for leaks, making repairs and using heat or chemicals to treat them before the first fill. For example, staff members can light a sulfur burner inside a barrel to preserve it and ensure no mold growth, but not if the barrel previously aged spirits. You’ll need to close the bunghole quickly, avoid breathing in the toxic sulfur dioxide and then store the barrels in a cool and dry place, checking them occasionally because gas tends to escape within a few months.

Alternatively, producers can use a citric acid solution to protect barrels from microbial growth for six months or longer to keep the barrels moist. Another vital thing to remember is that storage racks and warehouses must be built with noncombustible materials, such as reinforced concrete, masonry or fireproof steel. Also, electrical systems should be at least five feet above the top of the highest storage level for safety purposes.

What Works for Distillers and Brewers

Matt Cunningham, founder and proprietor of Old Glory Distilling Co. in Clarksville, Tennessee, told Beverage Master that his company palletizes all of its barrels. Old Glory Distilling opened in 2016 and specializes in small-batch Tennessee whiskey and bourbon.

“We use four barrel pallets designed specifically for the storage of barrels to be able to stack them six high in columns,” Cunningham said. “We use a system in our warehouse of rows and columns for organization and safety. We have used some racks before where barrels are laid down, but the amount of space those racks took up and the difficulty handling them didn’t make sense when we built our 10,000-barrel barrel house and made plans for a second one.”

Cunningham said that they plan to take a similar approach to their second barrel house. He also said that the most important thing to keep in mind about barrel storage for spirits is ensuring airflow around the barrels and not enclosing them in a space that does not have any airflow.

“As those barrels are breathing, you don’t want them to become stagnant,” Cunningham said. “This is something we found out and paid heed to some people who used storage containers in the past because they were cheap and readily available. While you can store barrels in them, just make sure they are ventilated and not sealed up. If you are going to use those and your jurisdiction allows for it, you need to ensure good air flow.”

Bryan Smith, the master distiller and owner of Hard Truth Distilling Co. in Nashville, Indiana, told Beverage Master that his company also stores barrels in a palletized barrel warehouse. Hard Truth Distilling began distilling spirits in 2015. It produces over 20 premium spirits and quickly outgrew its original production facility. In 2017, Hard Truth moved into its current 50,000-square-foot building with a state-of-the-art Vendome Copper & Brass distilling system. Its wooded, 325-acre destination campus in Brown County, Indiana also serves as an artist colony and tourist destination surrounded by natural beauty.

“Storing the barrels vertically and on pallets makes our ability to pull barrels for sampling and for blends far more efficient and safe,” Smith said. “Safety is the first consideration, followed by environmental conditions favorable to shape the whiskey to the flavor profile. While monitoring temperature and humidity, for us, a one-story barrel warehouse gives us more consistency over time.”

Many breweries around the U.S. also use barrels and must plan ahead for their storage needs. One example is Alpha Michigan Brewing Company, located in the smallest village in America with a brewery: Alpha, Michigan, which had a population of 126 at the time of the 2020 census. Alpha Brewery prioritizes community involvement and brews to support local organizations, hosting fundraisers and sourcing ingredients from local farmers.

Mike Bjork from Alpha Michigan Brewing Company told us, “We store full barrels in our walk-in cooler and empty, clean barrels in the office with limited space.” He said the most important thing to remember about barrel storage is to “keep the clean and dirty barrels separated.”

The Biggest Issue with Barrel Storage

The biggest challenge that Old Glory Distillery has faced with barrel storage relates to space concerns and a lack of storage space.

“When you start off, you have a designated space where you’re going to store your barrels, but next thing you know, it’s full,” Cunningham from Old Glory Distilling said. “Make sure storage is in excess of what you need because it’s going to fill up.”

Space has also been an issue for Hard Truth Distilling in recent years.

“Our biggest challenge has been our rate of expansion and being able to keep up with our storage needs,” Smith from Hard Truth said.

On the brewery side, Bjork from Alpha Michigan Brewery shared with Beverage Master that space has been his brewery’s biggest challenge, as well.

Advice About Barrel Storage

Brewers and distillers may be interested to learn about companies offering barrel storage solutions, such as B.R. Distilling Company, which provides bonded warehouse storage on four-barrel pallets and charges a monthly storage rate, plus handling fees. Some barrel storage specialty companies offer additional services, including lab analysis, logistics, sampling and TIB registrations.

Some interesting trends in barrel storage are happening now, such as distilleries moving away from traditional rickhouses and using palletized storage instead. This approach generally makes it easier for employees to move barrels and check on the aging process. Also, the industry has increased awareness about how metal roofs and thin walls can make flavors change when seasons change. Craft beverage companies may consider storage-saving designs in which a rack can be compressed into a stack when empty. Meanwhile, barrel storage walls at distilleries can serve decorative purposes by providing attractive photo backdrops and conversation pieces for guests.

One major piece of advice for brewers and distillers is always to keep the barrel storage warehouse clean and dry. Our experts provide additional tips and advice to guide new businesses and those amid operational transitions.

Cunningham from Old Glory Distilling shared with Beverage Master that his advice is to “allow for more space than what you initially need because you’ll eventually need it later.” He also advised,” You don’t need a bung in the staves if you are going to palletize them, as it creates a possibility for those barrels to leak.”

From Hard Truth Distilling, Smith advised, “Do plenty of research on safety and regulatory requirements in your area, first and foremost. Take into consideration your planned operational space and ability to be able to access barrels, as well as the time you plan to age and the flavor profile that you were targeting. And finally, make sure to build more capacity than you think you might need.”

Bjork from Alpha Michigan Brewing Company’s advice to breweries is similar and follows a common theme throughout the industry. He simply advises new and growing breweries, “Ensure you have sufficient space for all barrel storage.”

High Performance Counts

Cyndi

Experts Supply Craft Brewers and Distillers with Pumps That Set Products in Motion

two men working on pumps outside of a distillery tank

By: Cheryl Gray

Choosing pumps for breweries and distilleries requires consideration of several factors, perhaps none more important than technology. That technology is what propels the liquids that create a successful product for the beer and spirits industries.

When it comes to the ever-changing line-up of products, advanced pump technology is taking the lead in which products find their way into brewery and distillery production lines.

Ampco Pumps Company is one of the manufacturers providing state-of-the-art technology in its pump products. An ISO 9001:2015 Registered Company, Ampco is a spin-off from the original firm, founded in 1914 and headquartered in suburban Milwaukee, Wisconsin, where it manufactures products. Ampco has regional offices throughout the United States and also an international sales, assembly and light fabrication plant in Germany. Additionally, as part of The Krones Group, Ampco Pumps Company has leveraged its position as a member of a global team serving the food and beverage industries.

Ampco Pumps Company has been providing quality centrifugal pumps and positive displacement pumps worldwide for more than 70 years. It is committed to manufacturing quality products, providing excellent customer service and competitive pricing to its customers. It has become the preferred pump provider for some of the most recognized companies across the globe.

For breweries, Ampco says it focuses on maximizing efficiency and portability by engineering pumps that have been incorporated into Ampco carts. The company explains how its carts are tailored to each customer’s specifications and can accommodate any Ampco centrifugal pump, positive displacement pump or blender. It also boasts a wide variety of products to meet the challenges of small and mid-sized craft breweries.

Bob Garner is the engineering manager for Ampco. With more than 30 years of engineering experience with C Series and centrifugal pumps, Garner is very familiar with the challenges that craft breweries face.

“Ampco was hearing from craft brewers about a common leaky pump issue when pumping hot wort,” he said. “They were all using a standard C Series, and it did not matter the brand of pump. So, I looked into the issue closely to find a solution. The result was the development of the CB+ Craft Brew pump, which solved the problem.”

Garner describes why Ampco’s CB+ is so popular among its craft brewery clients.

“It was designed to solve a problem that no one else in the industry was working on,” he said. “The CB+ solution reduces lost product, is easy to maintain and has proven to have longer seal life than a standard C Series, which saves money in the long run. There are also conversion kits available to convert standard C Series to the CB+. The response from customers has been overwhelmingly positive.”

Ampco touts its high priority on pre- and post-sale customer service for its clients. Garner adds that the company’s reputation in this area plays an important role in its growth.

“Providing superior customer service is part of our mission,” he said. “Quick response times from knowledgeable representatives and trained engineers in real time is part of the advantage of working with Ampco. It has been an important part of what put us on the map and how we continue to grow.”

Many of Ampco’s products can be customized to ensure accuracy when it comes to mixing and blending applications. One of those products is the ZPI Positive Displacement Pump. While the product is manufactured to meet the needs of wineries, the company touts it as tough enough for the demands of breweries, including spent yeast with hop material. The ZPI can also handle product handling for harvesting yeast, propagation skids, feeding a centrifuge and cone-to-cone transfer.

FLUX Pumps is another industry leader. FLUX Pumps made its mark when the first electric pump was introduced to the marketplace in 1950, and the name bore the moniker FLUX. Soon after, the company launched the first explosion-proof drum pump for use in hazardous areas. In the decades since, FLUX Pumps has paved the way as one of the frontrunners in drum and container pumping technology.

The company has its headquarters and manufacturing plant in Germany. It has global ties that include six subsidiaries and a comprehensive roster of distribution centers that give FLUX the ability to service clients in more than 100 countries. FLUX Pumps also operates corporate offices in the United States, Belgium, India, Thailand, the United Kingdom and France.

Glenn Mulligan is the president of FLUX Pumps North America. He explains how pump performance helps keep production lines running efficiently. He says his product advice is the same for all craft breweries. Product longevity and performance play important roles because the duo increases productivity by shifting tasks that used to be done by hand to automation.

Recent product releases by FLUX Pumps include the VISCOPOWER product line. These pumps phased out the company’s F550 and F560 pump models.

The newer design was created for easier assembly and dismantling, a change that reduces cleaning and maintenance while simplifying the pump design. VISCOPOWER pumps are designed with a modular configuration that allows for streamlined spare parts, while at the same time, offering a customizable pump design.

FLUX Pumps also offers flow meters and control panels, which can turn a standard drum or tote pump into a one-touch batching/metering system. This technology eliminates the guesswork of dispensing the right amount of product. As Mulligan explains, adding just a few components to a pump can help FLUX Pumps customers come away with an accurate, repeatable dosing product that saves clients time and money by reducing costly mistakes. 

Distillers have some of the same challenges as brewers when it comes to choosing the right pumps to get the job done. Todd Thrasher is the founder and owner of Potomac Distilling Company, located in Washington, D.C.’s waterfront District Wharf. In business since 2018, the industrial distillery is the headquarters for Thrasher’s signature Thrasher’s Rum, which is sold in island-inspired flavor profiles, such as white, spiced, coconut, green spiced and gold.

Thrasher knows a thing or two about what pumps and accessories he needs to create his products, while at the same time ensuring a work environment that is both safe and productive.   For transferring high-proof spirits, Thrasher’s Potomac Distilling Company prefers the SimpleSpirits 49 Air Diaphragm Ethanol Transfer Pump.

“I purchased this pump first because I knew it would handle high ethanol spirits,” he said. “It has been a great piece of equipment in the distillery. I made this specific selection upon research and other industry recommendations.”

The pump is manufactured by Versamatic, headquartered in Mansfield, Ohio. One of Versamatic’s key suppliers is TCW Equipment, which is in California’s Sonoma Valley. In business since 1966, TCW Equipment is a supplier to multiple areas of the beverage industry, including breweries and distilleries.

The SimpleSpirits 49 pumps are ATEX-rated, which means that, when used as instructed, they comply with all safety regulations that govern atmosphere explosive devices. The pumps are equipped with EPDM diaphragms, which are durable and compatible with ethyl alcohol. In addition, the pumps run entirely on compressed air, therefore reducing the threat of static discharge from electrical equipment that could cause fires when encountering flammable vapors. Finally, the pumps can be connected to a ground source in the distillery, ensuring that any naturally occurring static build-up is discharged into the ground.

For low-proof spirits, Thrasher looks to McFinn Technologies out of Kenosha, Wisconsin for its 22060, a self-priming, multiple-speed and reversible-flow direction pump with a standard wireless remote control. 

“This pump was purchased shortly after Potomac Distilling Company opened as I realized that another pump was needed – this is made to move wash that isn’t overproof,” he said. “And it gets used before spirit runs to move the fermentations over to the still.”

The pump’s three-horsepower version features a 1750 TEFC motor and NEMA 4 VFD with a standard stainless-steel cart. This model also features voltage options. Additional pump models by McFinn Technologies include the 20035, 20035CC and the 30080.

There are multiple choices for distilleries and breweries when it comes to choosing pump products and accessories. The decision-making comes down to price, productivity and safety protection in the workspace. Expert companies with years of engineering and scientific knowledge can help. Combining that knowledge with years of experience working with clients in the production of spirits and beer can go a long way toward helping breweries and distilleries make the right moves to move their products to the market.

Flavored Malt Beverages: Origins and Applicable Federal Regulations

Cyndi
6 bottles of different beers lined up on a table

By: Brad Berkman and Louis Terminello, Greenspoon Marder

There is a strange concoction that lurks within the bowels of the brewer’s tank. It is formed with malt, but is not beer, it is something other whose mere mention may frighten beer aficionados to the essence of their being. This mysterious liquid soon slithers through tubes and to the bottling line where 12oz bottles are filled with this ethereal liquid. The bottles make their way to the grocery shelf where it is soon removed from its cold box perch to the refrigerators of eager consumers. There the potion rests until its top is popped and it’s brought to the lips of the drinker. A first sip and this bottled creature metamorphizes to a glorious nectar, causing a love affair that is reflected in astounding Nielsen numbers. To the disappointment of any beer geeks, the flavored malt beverage or FMB is a darling of the brewing industry, not for its purist nature but for the sound of jingling coin that comes from the brewer’s pocketbook after each batch is made and sold and drank and asked for more of. The FMB is a clear consumer favorite.

  The FMB as a category, has an Alcohol and Tobacco Tax and Trade Bureau (TTB), codified definition. Before we get there, however, the reader should be aware that the style of drink isn’t a new phenomenon. The drink made its way first on to the shelves of certain European countries in the late 1990’s, among other places, and caused quite a bit of controversy for its generally sweet flavor profile, small bottle size, and perceived target audience.

Of course, it bears refreshing the memory that these drinks were and are offered as beer alternatives. They are meant to be, in most iterations, a light, flavorful alternative to traditional beers. Initially, they were referred to as alcopops, and now are more commonly called Ready-to Drinks or RTD’s (there are many drinks formulas that fall into the RTD category, including spirits based and non-malt based (see hard seltzer), but certainly FMB’s are a leader in that general category. Another publication reports that beer RTD’s “make up the vast majority of overall RTD’s sales with 42.7% of RTD dollar sales coming from FMB’s.  

  Some early precursors to contemporary FMB’s, the reader may recall, were Smirnoff Ice, WKD and Hoopers Hooch. In fact, this writer recalls from his prior career in “the industry”, travelling to the UK and witnessing the small cold-boxes stationed below virtually every back bar and thinking that the English will drink anything and wondering how long it will take before these drinks make their way across the Atlantic to the shores of the United Sates. Woe is me, if I only had bought stock.

  Well, the answer to the above question is, arguably 1993 with the introduction of Zima by the Coors Brewing Company. Buffs of the history of the drink will clearly remember Zima, (and the pun is intended), as the first clear, citrus-like malt-based beverage to make its way onto the beer shelf. Offered as a light alternative to beer, it had a modicum of success at introduction, but its popularity faded quickly (it was in fact re-introduced in 2017 but sales quickly sputtered out).

  The origins of RTD’s likely stemmed from restrictions on the activities permitted on the brewing premises by federal law. Creative brewers looked to unique formulations using permitted brewers’ ingredients only. A driving force behind limiting ingredients and production processes at a brewery is to ensure that tax revenue generation is not jeopardized. As the reader likely knows, malt is taxed at a different rate than wine which is taxed at a different rate than spirits and never shall the thrice be combined.  I point the reader to the following section of the Internal Revenue Code (the IRC):

26 USC 5411:

  The brewery shall be used under regulations prescribed… for the purpose of producing, packaging, and storing beer, cereal beverages containing less than one-half of 1 percent of alcohol by volume, vitamins, ice, malt, malt sirup, and other byproducts and of soft drinks; for the purpose of processing spent grain, carbon dioxide, and yeast… and for such other purposes as the Secretary by regulation may find will not jeopardize the revenue.

  As we see from the above the purpose of the brewery premises is limited to the production of beer and storing certain brewing materials. Also, the code section below has arguably a more profound limiting effect on the materials permitted on the premises. But here, I caution the reader to pay careful attention to subpart (b) of the following and different code section. It is here that lays the codified origin of the FMB.

 § 25.15 Materials for the Production of Beer

(a) Beer must be brewed from malt or from substitutes for malt. Only rice, grain of any kind, bran, glucose, sugar, and molasses are substitutes for malt. In addition, you may also use the following materials as adjuncts in fermenting beer: honey, fruit, fruit juice, fruit concentrate, herbs, spices, and other food materials.

(b) You may use flavors and other nonbeverage ingredients containing alcohol in producing beer. Flavors and other nonbeverage ingredients containing alcohol may contribute no more than 49% of the overall alcohol content of the finished beer. For example, a finished beer that contains 5.0% alcohol by volume must derive a minimum of 2.55% alcohol by volume from the fermentation of ingredients at the brewery and may derive not more than 2.45% alcohol by volume from the addition of flavors and other nonbeverage ingredients containing alcohol. In the case of beer with an alcohol content of more than 6% by volume, no more than 1.5% of the volume of the beer may consist of alcohol derived from added flavors and other nonbeverage ingredients containing alcohol.

  The above code section limited the amount of alcohol from flavors and nonbeverage ingredients containing alcohol to 49% but that didn’t stop brewers and drinks makers from creating unique products with malt base and taxed at the beer rate, making for a competitively priced product on the beer shelf. In fact, TTB permits the use of mixed cocktail names such as Margarita or Moscow Mule on malt-based products that resemble these cocktails. Many brewers have done a fine job of emulating these mixed drinks flavors under the FMB rubric. Of course, that hasn’t stopped consumers from bringing civil actions against producers arguing that these drinks have been mislabeled and are untruthful but that is a topic for another days.

  I’m sure it’s obvious to the reader that the hard seltzer craze finds its origins in the FMB category, many of which, but not all are malt based. The bottom line here is that this category of malt beverage finds its roots in three factors; consumer demand for variety of taste profiles, the brewer’s ability to create these brews within the confines of government tax revenue regulations and using ingredients that do not jeopardize revenue collection w maintaining the desired shelf price. This writer for one looks forward to watching how consumer demand for unique flavors pushes brewers to come up with creative FMB formulas which surely will lead to greater excitement in the category.

How Bars & Restaurants Can Protect Themselves Amid Heightened Violence

Cyndi
photo of man in bar holding down another man on a table getting ready to punch that man and a women is trying to stop that man from punching

By: David DeLorenzo

Rising violence is an unfortunate reality around the world. It’s happening close to home, too. Bar and restaurant owners are experiencing incidences involving weapons or shootings in and around their establishments on a more regular basis. This is a sad situation and a dangerous one. Bar and restaurant owners need to know what to do in the aftermath of a weapons incident. Even more importantly, they need to know how to protect themselves and help prevent incidences from happening in the first place.

  Unfortunately, many people don’t realize that it’s becoming more common for firearms exclusions to be included in insurance policies. These prevent an insurance company from having to pay out any monetary compensation to not only the insured but also victims of an incident. That means beyond any monetary compensation, these exclusions ensure the insurance company would also not have to cover other items such as risk assessment, business income lost if the establishment had to temporarily close or was hit with a lawsuit or post-counseling services for those involved. Just one incident could put a bar or restaurant right out of business. It’s important that they are aware of what their policies do and do not cover — and to protect themselves from scenarios like this.

  In the current state of the industry, and at any time, being informed is essential. Bar and restaurant owners should check their policies to see if weapons are excluded from their commercial general liability coverage. If these exclusions exist in their current policies, bar and restaurant owners should add stand-alone coverage to their policies (or purchase them separately). These will protect them in the case of active shooter and deadly weapons incidents.

  As with being educated, being proactive in preventing an incident is key. Bar and restaurant owners need to protect their businesses, their livelihoods, their staff and their patrons. That’s a heavy responsibility — one that should not be taken lightly, especially amid heightened violence situations. There are a few steps owners can take.

  First, simply posting “no weapons” signs at the entries of the establishment, on the building and around the premises (such in the parking lot) can help. If the bar or restaurant owner suspects a violent incident could occur or has noticed aggressive behavior, they could heighten security measures by hiring a door person as well as additional security personnel, preferably those who have previous law enforcement or nightclub experience.

  Proper staff training is another factor that can help bar and restaurant owners in the case of an incident (or hopefully in the instance of preventing one). It’s important for employees to receive on-going training for security as well as preventing overserving that could lead to aggressive behavior, a fight or a shooting. Servers should know how to spot an “obviously intoxicated” person and understand the establishment’s policies on how to address refusing to serve or no longer serving alcohol to an obviously intoxicated person.

  The California Department of Alcoholic Beverage Control notes: “The law states that no person may sell or give alcohol to anyone who is obviously intoxicated. Therefore, every person who sells, furnishes, gives, or causes to be sold, furnished, or given any alcoholic beverage to any OBVIOUSLY intoxicated person is guilty of a misdemeanor. A person is obviously intoxicated when the average person can plainly see that the person is intoxicated. In other words, the person looks or acts drunk.”

  Because weapons incidences are often a result of too much alcohol, staff should be trained on how to spot the signs of intoxication so they feel confident in assessing whether or not they should serve that patron. Restaurants can actually be slapped with a lawsuit if a fight breaks out on their premise. In today’s world where people become easily triggered and too much alcohol, a recipe for an incident is brewing.

  Ideally, an intoxicated person (or a person carrying a weapon) shouldn’t make it past door security — another reason to create a position for that very important role if the restaurant doesn’t already. If a staff member notices that a person is becoming intoxicated, they need to halt their alcohol service immediately.

  In addition to door security, security cameras are an excellent resource to help protect bar and restaurant owners in the case of a weapons incident. Good quality security video footage with timestamps can help catch the details of an incident, limit liability and hopefully absolve the bar or restaurant of any fault in the case of a weapons or shooting incident at their establishment.

  Keeping weapons out of the establishment is crucial, but oftentimes these acts of violence are happening around the establishments or in their parking lots, not actually inside. This is where the addition of cameras and security around the perimeters and in their parking lots can also prove helpful.

  Weapons exclusions are becoming mainstay on policies with carriers not wanting to cover violent acts with a weapon that happen on the premises of bars, restaurants and other businesses in the hospitality industry. However, with these types of instances on the rise, businesses need to ensure they are protected — as well as their employees and their patrons.

  In addition to weapons exclusions becoming more common, assault and battery exclusions as well as sub-limits on policies stating carriers don’t want as much liability on violent acts between partners and or employees are becoming more frequent. Liquor liabilities are also an issue. Liquor liability sub-limits no longer cover the full limit of an establishment’s lease.

  I was recently part of a team that worked to change the law when it comes to establishments that serve alcohol in Arizona. While it’s legal to serve alcohol to adults, establishments can literally get a claim filed on their record and get a letter from an attorney if they so much as think a person stepped foot onto their premises and had a sip of one drink. 

  The burden has been for the establishment and their insurance carrier to prove that they didn’t do something negligent. The problem with this is a combination of many things — one of them being that wording of “obviously intoxicated” mentioned earlier. This phrase has taken on whatever meaning it needs to in order for whatever party suing the establishment to make their case.

  Together with some very influential people in the Arizona hospitality along with the Arizona Licensed Beverage Association (ALBA), which was a major player in this effort, an Amicus Curiae brief was formed. With this decision by the Supreme Court being held, there should be some changes to the way establishments are sued and how insurance companies underwrite risks. This is new to everyone involved and it will take some time to see changes occur, but overall this is a win for the Arizona hospitality industry.

  Finally, it’s important that bar and restaurant owners stay in communication with their insurance agents and up to date on any changing policies. Spending some time ensuring an establishment is properly covered provides safety and peace of mind for all.

  Out of his passion to serve the restaurant and hospitality industry, David DeLorenzo created the Bar and Restaurant Insurance niche division of his father’s company The Ambassador Group, which he purchased in 2009. For more than 20 years, he has been dedicated to helping protect and connect the hospitality industry in Arizona.

For more visit: barandrestaurantinsurance.com

Top Sustainability Practices for Breweries and Distilleries

Cyndi
2 beer mugs full of beer in front of a sunset

By: Alyssa L. Ochs

Protecting the environment and conserving resources have been topics of increasing interest and importance in the craft beverage industry lately. Although these considerations may take a little extra time and effort for business owners and staff, implementing eco-friendly practices has many long-term benefits, such as attracting like-minded consumers, saving money and contributing to a healthier planet.

  Some sustainability practices appeal to craft beverage producers more than others because of their ease of setting up, affordability and projected impact. Review these ideas and examples with your team to discuss a new and improved approach in the new year and to determine whether they might complement your future brewing or distilling practices.

The Importance of Craft Beverage Sustainability

  Unfortunately, the traditional processes of brewing and distillery are not inherently eco-friendly. It takes significant water, energy and other resources to make just a single batch of beer or spirits. Yet there are ways for producers to get creative and offset their costs while being responsible community businesses, too. This concept is critical because the continual production of high-quality beverages depends upon reliable waste elimination and efficient resource utilization.

  In addition to simply feeling good about the beverage production process and attracting consumers who care about the environment, sustainability can have unexpected effects in a craft beverage setting. Producers can increase profits and protect supply chain ingredients by conserving resources and reducing waste. Sustainability measures can contribute to a safer work environment if fewer potential toxins are in workspaces. Additionally, breweries and distilleries can minimize their usage of natural resources, add value to the local community and partner with environmentally conscious groups to create a greater culture in the community around sustainability.

Ideas for Your Brewery or Distillery

  Following the examples of other craft beverage producers and brainstorming your own ideas, there are many ways to take an eco-friendly turn in production for the new year. For example, producers can upgrade their packaging systems to use biodegradable six-pack rings for cans. They can prioritize using local ingredients, reuse waste water and inquire into the costs of solar panels. Waste reduction projects, water-saving technologies and land stewardship programs can promote sustainability in a distillery or brewery. A couple of ideas that incorporate sustainability, philanthropy and community involvement are donating spent grain and hops to feed local livestock and participating in a tree-planting effort.

  Brewers and distillers work with various vendors and suppliers in the course of regular business. Therefore, one idea is to vet all companies about their internal sustainability guidelines to address the broader impacts of packaging, transportation, water and emissions. Distilleries can focus on sourcing local ingredients by purchasing barley and rye close to home, partnering with local farms to send spent grain to feed cattle on nearby farms and installing closed water systems that recirculate water to operate stills. Including a page dedicated to sustainability on your brewery or distillery website can help consumers learn more about the eco-friendly efforts you are working on and connect with your brand on a more personal level based on shared interests.

  Here are some additional ideas to inspire your internal conversations about becoming a more sustainable producer:

•    Train staff how to read the water meter and about water usage

•    Monitor groundwater with annual water quality testing

•    Check for plumbing leaks regularly

•    Install a closed-loop cooling system for the fermenter

•    Use low-flow toilets and auto-flush sensors in taproom bathrooms

•    Use a nitrogen generator to clear hoses and lines instead of carbon dioxide

•    Utilize low volatile organic compound (VOC) paint, flooring, and furniture

•    Use LED lighting throughout the brewery or distillery

•    Install energy-efficient windows, doors and skylights

•    Install insulation jackets on hot water pipes and water heaters

•    Recycle as many materials as possible during production

•    Offer employees incentives for biking, walking, or using public transportation to work

Examples of Sustainability Practices

  One example of a producer prioritizing sustainability is New Belgium Brewing in Fort Collins, Colorado. This prominent producer was the first brewery to join 1% for the Planet and commit a percentage of annual sales to environmental causes. It also became the first carbon-neutral-certified major brewer and is a Certified B Corporation, a designation that holds organizations to high environmental and social standards. Another notable Colorado brewery is Mountain Tap Brewery, which has worked to lower its carbon footprint by buying malt and hops from local growers so that ingredients don’t have to travel as far to reach them.

  Meanwhile, Beerburg in Austin, Texas, is committed to responsible sourcing ingredients through partnerships and land conservation. Beerburg’s beers feature ingredients foraged from its own land. It also has committed to creating a zero liquid and solid waste facility that provides its own water and energy. Some breweries, such as Alaskan Brewing Company in Juneau, Alaska, have used CO2 recovery programs to address the issue of carbon dioxide produced during the production processes. To promote the oceans and waterways around Alaska, this brewery donates a portion of its Icy Bay IPA to water and coastline cleanup efforts across the markets it serves.

  Moving across the country, many breweries and distilleries in Virginia have added eco-friendly practices into their operations. For example, Lickinghole Creek Craft Brewery sources its water onsite, contributes to river cleanup efforts and collaborates with organizations to build wells in other countries with water supply issues. At Virginia’s Catoctin Creek Distillery, a large percentage of electrical usage comes from solar energy, and excess solar power generated goes back to the local grid to support other homes and businesses.

  The Appalachian Gap Distillery’s sustainability efforts extend to utilizing a solar array and donating liquid stillage and waste grains for cattle feed on local farms. Located in Middlebury, Vermont, Appalachian Gap became America’s first climate-neutral distillery and also promotes sustainability with its insulation, windows, doors, heaters and water conservation process. Other producers that serve as sustainability models include Bozeman Spirits Distillery in Montana, which sources water from the local snowmelt, and Five & 20 Spirits and Brewing in Westfield, New York. Five & 20 is the state’s first combination brewery/winery/distillery. Industry leaders have recognized the producer for combining stillage, spent grains and wash water byproducts with wood chips to create a protein source to feed various types of fish. There’s also Frey Ranch Farmers & Distillers in Fallon, Nevada, which practices a 100 percent farm-to-glass model. Frey Ranch sustainably grows 100 percent of its whiskey grains onsite and offers behind-the-scenes tours for visitors to learn how whiskey is created from these homegrown grains.

Sustainability Resources for Producers

  If your brewery or distillery is interested in trying out some new sustainability practices, numerous companies, government agencies and consultants are available to help. For example, the Connecticut Department of Energy & Environmental Protection is committed to assisting statewide breweries with their interests in reducing pollution, promoting energy efficiency, lowering greenhouse gas emissions, minimizing waste and using less toxic cleaning products. The agency offers a free and voluntary Connecticut/New England Environmentally Sustainable Craft Beverage Program that extends beyond just Connecticut and involves partnerships throughout New Hampshire, Maine, Massachusetts and Rhode Island. Local government resources are also available to learn about preventing pollution, applying for small business energy saving programs and free assistance for reducing waste in a brewery or brewpub.

  The Brewers Association, a nationwide nonprofit trade organization, is a source for craft beer research and service grants to help breweries improve their sustainable growth. Specific sustainability priorities for its industry grants include the following:

•    Understand best practices and payback in hop and barley production, which enhance soil sequestration of greenhouse gases

•    Innovate packaging materials, including reduction of plastic, materials collection or recycling and reusable containers that reduce greenhouse gases

•    Benchmark malt house water and energy utility intensity rates

•    Develop new materials and compare the quality outcomes of hops packaged and stored in recyclable alternatives to Mylar foils over time

•    Study climate resiliency of North American hop and barley production, especially as crops broaden and diversify into minor growing regions and breeding efforts that address climate adaptation

•    Research environmentally safe alternatives to current clean-in-place chemicals commonly used in the brewing industry

•    Identify areas of efficiency improvements for small-scale carbon dioxide recovery and direct air capture

  Meanwhile, the Distilled Spirits Council of the United States is an Energy Star partner and offers member-spearheaded environmental sustainability efforts through a taskforce focused on advocacy and policy reform. This organization’s current strategies include land stewardship, responsible water use, energy reduction, circular material syncing, waste reduction and evaluating transport burdens.

For further assistance with “going green” as a brewery or distillery, you may want to look into these resources to make a connection or find inspiration:

•    First Key, consultants to the brewing and beverage industry

•    Green Brewery Project, a nonprofit sustainability consulting venture

•    Lueders Consulting, expertise for the brewing industry

•    Cornell Sustainability Consultants, sustainability-focused student group

•    Heather Paulsen Consulting, sustainable business consulting

•    Campden BRI, brewing environmental services

•    Pure Water Brewing Alliance, dedicated to brewing beer with recycled water

•    Brew Recruit, brewing and beverage manufacturing consulting services

Is Your Tweet an Advertisement?

Cyndi
photo of someone holding a cell phone up to a glass of beer to take a photo

By: Brian D. Kaider, Esq.

Members of the alcoholic beverage industry should be aware that TTB regulations require certain mandatory information and prohibit some practices and statements in all advertising of alcoholic products and brands.  But, what constitutes advertising may be broader than some members realize.  Specifically, how the rules apply to the expanding realm of social media may be a bit of a surprise.

What is an Advertisement?

  “Advertisement,” as defined in 27 CFR Parts 4, 5, and 7, for wine, spirits, and malt beverages, respectively, includes any verbal statement, illustration, or depiction that is in, or calculated to induce sales in, interstate or foreign commerce, or is disseminated by mail.  The regulations further provide that the requirements for such advertisements apply regardless of the means of dissemination.  Some of the specific examples listed in the regulations include: radio or television broadcast, newspaper, periodical, publication, sign, menu, book insert, or by electronic or internet media.  The TTB considers “electronic or internet media” to include all forms of social media.

Required Information

  All advertisements must include the responsible advertiser’s name and either its city and state or other contact information, such as a telephone number, website, or email address.  If the advertisement refers to a general line of products (beer, wine, or spirits) or all of the products by the company or brand name, then no more information is required.  If the advertisement refers to a specific product, however, then it must also include a conspicuous statement of the class, type, or distinctive designation to which the product belongs.  This statement must match what is on the product label.  For example, if the product is labeled as a “Rum with natural flavors,” an ad that identifies the product only as “Rum” would be non-compliant.  Further, in the case of distilled spirits, the ad must also include a statement of alcohol content and, if applicable, the percentage of neutral spirits and the name of the commodity from which such spirits were distilled.

Prohibited Practices

  The list of prohibited practices in the advertising of alcoholic products is too long to be inclusively presented here.  However, as a generalization, an advertisement cannot: be false or misleading in any respect; be inconsistent with the product label; contain inappropriate health-related statements; or contain representations, flags, or symbols that give the impression of endorsement or sponsorship of the armed forces or any government.

Applicability to Online Media

  Most breweries, wineries, and distilleries have a website to advertise their products and/or overall brand.  The TTB views a website and all of its subpages collectively as a single advertisement.  The required information, therefore, only has to appear in one part of the website to be compliant.  The information, however, cannot be hidden; it must be conspicuous, readily legible, and apparent to persons viewing the advertisement.  While the TTB does not require a specific location on the website, it recommends that information be presented in the place consumers would typically expect.  For example, name and contact information is typically found in the “about,” “profile,” or “contact us” section.  Class, type, and alcohol content for specific products would be expected to be found on the “shop” or “products” page.  One potential problem occurs with mobile versions of websites.  They are often structured differently from their desktop counterparts and are, therefore, considered a separate advertisement and must independently be compliant with the regulations.

Social Networks and Media Sharing Sites

  Social Network Services, such as Facebook and LinkedIn are treated very similarly to websites.  Viewed as a whole, they commonly contain required name and contact information on a main page or “about” section.  In that case, individual posts may not have to contain the mandatory information.  There are exceptions for shareable content, however, as discussed below for Media Sharing Sites.

  Media Sharing Sites, such as Instagram, YouTube, Pinterest, Instagram, etc., allow companies to share photographs, videos, gifs.  As with websites and social network services, the TTB views a company’s media sharing site as a single advertisement. So, if the profile or about section of the site contains the required information, the company is generally compliant.  However, if the posted media content can be downloaded or shared by viewers, it is considered to have been disseminated by the advertiser and the content stands on its own as a separate advertisement.  So, for example, if a brewery posts a video introducing a new product and that video can be downloaded or shared by viewers, the video itself must contain all of the mandatory information.

Blogs and Microblogs

  Blogs allow a company to post stories, commentaries, images, videos and other content.  They are commonly included in a section of the company’s website and, if so, may rely on the mandatory information presented elsewhere on the website.  If the blog stands alone, separate from the website, or is electronically disseminated, then it is a separate advertisement and must independently be compliant.  Microblogs, such as Twitter and Tumblr, are different because they have a maximum character number that makes each post very short.  Because of these limitations, the TTB recognizes that the mandatory information cannot be included in each post.   Instead, to be compliant, the advertiser must provide the information either on their microblog profile page or use a descriptive link that directs the viewer to a separate webpage containing the information.

  Outside Links

  Advertisers will often include links and QR codes that direct viewers to sites outside of the original advertisement.  Similarly, a product label may allow viewers to access an augmented reality video or image.  So long as such outside content is only accessible using the product label or other advertisement that already contains the mandatory information, nothing else is required.  Otherwise, the content would have to be independently compliant.

Social Media Influencers

  Building a large following on social media can be difficult, especially for small, local businesses.  To broaden the scope of brand awareness, some turn to others who already have a large following to help promote their products.  These social media influencers may post content created by the company or may create their own content on the company’s behalf.  If the TTB determines that the post was published or caused to be published by the company or that the company compensated the influencer for publishing the content, it will be treated as an advertisement by the company and it must be compliant with TTB regulations.  The mandatory information may be provided through a clearly marked link to the company’s website, for example.

Beware the “Like” Button

  One of the benefits of social media is that the user does not have to create all its own content.  Posts created by others can be shared or “liked” by a company, which allows that content to be viewed on the company’s own page.  Doing so helps to build a following as a third-party whose content is shared is more likely to reciprocate, broadening the reach of company’s own content.  However, because shared or liked content then appears in the company’s feed, it becomes a part of the company’s advertisement and must, therefore, be compliant.  This is typically not a problem with regard to the mandatory information, because that is already included in the company’s profile.  However, the shared content must also not include any prohibited practices.  For example, if a distillery comes out with a new product that is a “rum with natural flavors,” and they share or like a user’s post in which they refer to the product only as a “rum,” they could be viewed as being noncompliant, because the ad is inconsistent with the product label. 

Conclusion

  The rules for advertising an alcoholic product or brand on social media really are not any different from the rules for advertising in more traditional media.  Issues may arise, however, because social media enables new and different ways of presenting information and it may not always be obvious that they are advertisements.  Further, because of the ease of disseminating content, it can become detached from its original source, which would take it out of compliance if it does not contain the mandatory information.  Having an attorney periodically review social media content and/or train marketing staff may help to avoid compliance issues. 

The information presented in this article is based upon TTB Industry Circular 2022-2 and the regulations contained in 27 CFR §§4.60-65, 5.231-236, and 7.231-236.  Review of those materials is recommended.

  Brian Kaider is the principal of KaiderLaw, a law firm with extensive experience in the craft beverage industry. He has represented clients from the smallest of start-up breweries to Fortune 500 corporations in the navigation of licensing and regulatory requirements, drafting and negotiating contracts, prosecuting trademark and patent applications, and complex commercial litigation.

2023 – Quarter Three Lender Update on the Craft Brewing Market

Cyndi
Man standing by brewery tanks holding up and looking at a glass of beer with foam

By: Adam Stump – Managing Director at Hilco Valuation Services

Since our previous Craft Brewing article published back in mid 2020, fear of mass closures in the craft brewing industry has subsided, and the industry as a whole seems to have largely recovered.

  As of 2023 – Quarter Three, we have seen microbreweries faring somewhat better than brew pubs when comparing openings vs closings. This can be largely attributed to the higher food cost and lower margins associated with the pubs. The labor market, which continues to present challenges across all areas of customer service, also remains an impediment to brew pub operational efficiency and profitability.

  Closings of small breweries rose in 2022 as compared with 2021, but were only around 3% of the market, which is relatively low and further signifies that the industry is maturing. Meanwhile, the overall U.S. brewery count increased from 9,384 in 2021 to 9,709 in 2022.

  U.S. beer volume was also down just over 3% last year. While craft volume was up slightly, it is worth noting that total Craft volume stood at 21MM BBLs in 2014 and has grown by only 3MM BBLS over nine years to reach a level of 24MM BBLs in 2022, with quite a few ups and downs in between. Many in the industry and across the associated supply chain had hoped and, in some cases, banked on more significant growth.

  Year-over-year craft beer production volume was relatively flat in 2022 when compared with the previous year, while draft and distributed sales were down somewhat. We expect that this will require breweries to refocus on stronger brands and geographies while still innovating new products moving ahead.

  Craft breweries have continued to diversify their portfolios in an attempt to reach a broader audience via a variety of beverage offerings. These include items such as seltzer, canned cocktails, hard kombucha, and other creative options designed for today’s palate. Most are targeted at those who do not regularly drink beer, producers’ core offering. This year we have also seen greater numbers of operators with excess capacity more proactively seeking out and providing contract brewing services to third parties. While this practice can help generate necessary cash flow in the short term, it can have the unintended consequence of stalling out an operator’s longer-term planned growth strategy. In some cases, both in this and other industries, we have seen this lead to a lack of investor confidence and cascading funding issues.

  These factors, combined with the nature of a maturing industry with increased competition, make for an environment conducive to acquisition and consolidation. Accordingly, a number of deals have taken place recently. Already in 2023, Stoup Brewing acquired Optimism Brewing and Lucky Bucket was bought back by its original co-founder, now the owner of Brickway Brewery and Distillery. These transactions follow other notable sales that have taken place over the past couple of years, including the Bell’s Brewery sale to Australia/New Zealand-based Lion, a division of Kirin Brewing Company and Stone Brewing’s sale to Sapporo Breweries.

  As always, Industry-backed engagement with state regulators and legislators has been active this year. The emphasis of these efforts now is on further loosening laws such as those for differentiating malt-based and spirit based tax rates, direct-to-consumer shipping and self-distribution, as well as sports and entertainment sponsorships that result in near exclusivity. These are important issues for many operators that stand to directly affect their market share and profitability moving ahead.

Photo of 4 different beers in glasses with caption saying by 2025 47% of spending and 25% of volume consumption of beer will be attributed to bars, restaurants, and breweries

  While supply chains have continued to ease, enabling faster access to new equipment, the cost of acquiring those new assets has risen notably as a result of inflation, the tight labor market, and higher raw material costs. Additionally, a continued CO2 shortage has impacted the industry. Because brewers use CO2 to purge oxygen levels during certain critical processes and for pressurizing tanks and moving beer through lines, some have taken to recapturing the gas during the fermentation process, for later reuse. The good news is that overall, import shipping and delivery costs have decreased by nearly 50 percent since the peak of the pandemic-driven commercial transportation crisis and fewer manufacturers are reporting cancellations on existing orders.

  With government assistance well behind us and capital harder to come by, producers and marketers across the beer market are having to refocus their efforts on their best performing brands. We are seeing this play out in many ways, perhaps most notably with Constellation brands which first signaled its exit from craft beer via the sale of Ballast Point to Kings and Convicts Brewing in 2019 for a fraction of its purchase price, and more recently with the divestiture of both Funky Buddha Brewery and Four Corners Brewing, presumably also at a significant loss.

  Lastly, it is important to point out a variety of trends that have been pervasive in the craft beer industry over the past year. Some of the most notable of these are summarized below:

•    Sour beers have continued to gain popularity, transitioning from niche to mainstream and driving impressive sales for many of those brewers who have embraced the trend.

•    After being largely disregarded on the craft scene, lagers are enjoying a healthy resurgence alongside dominant IPAs.

•    The rise of CBD’s popularity has resulted in many craft breweries experimenting with CBD-infused beers targeted at those likely to appreciate their relaxing properties.

•    Appealing to those who prefer or frequently drink wine, the wine-like notes of rosé beer are growing in acceptance and popularity.

•    Greater access to hops is allowing more breweries to produce fresh hop beers that are generating solid enthusiasm from customers.

•    Hazy, fruity beers are continuing to thrive, attracting first-time and experienced beer drinkers to their ranks.

Concluding Thoughts for Lenders with Industry Exposure

  Because craft brewers specialize in regional, unique beer styles such as ales, stouts, and wheat beers, these smaller enterprises tend to encounter certain challenges that are unlike those faced by their large scale, mass production brewer counterparts. For example, craft breweries rely heavily on local water quality, which affects the flavor of their beer. The specific mineral content in water is also crucial for certain varieties. Importantly, for every gallon of craft beer produced, up to seven gallons of water may be used. This makes access to pure water sources critical and any disruption to that access potentially catastrophic.

  While craft beer aficionados appreciate a variety of flavors, brand loyalty can be fleeting. To remain relevant and successful, craft breweries must constantly be innovating and introducing new offerings. The cost of this type of constant innovation can be significant, particularly when the market does not respond well to one or more of a brewer’s releases. In addition to the industry lobbying efforts referenced earlier in this article, the Brewers Association is actively supporting pending legislation that would allow craft brewers and others to immediately deduct research and experimental (R&E) expenditures in the year these costs are incurred.

  Additionally, with thousands of players vying for market share, attracting skilled employees and standing out from the crowd has become difficult, particularly given the shortage of applicants that this and many other industries have been facing since the pandemic.

  With these thoughts in mind, we encourage lenders with exposure to the craft beer market to remain in close contact with, and provide guidance to borrowers. From margin pressure to inventory aging, it is important, as always, to understand the many distinct challenges that those borrowers now face– only some of which have been outlined here. Doing so can help build a strong, mutually beneficial relationship while serving to help limit downside risk.

  Hilco has engaged with multiple craft brewers and suppliers over the past year and we welcome the opportunity to share the many insights we have gained through those efforts. Accordingly, we encourage you to reach out to our team to discuss any current or imminent needs you may have. We are here to help.

  Hilco Valuation Services is the world’s leading provider of asset appraisals with a proven, decades-long track record of providing the most accurate appraisals across all asset categories. The scope of the valuations we deliver ranges from a single asset in one domestic location to millions of assets located around the world. We are able to affirm current asset value through proprietary market data sourced from the collective worldwide asset disposition and acquisition experiences of Hilco Global over time. In contrast to the aged data relied upon by others in the industry, access to this cumulative, real-time information ensures delivery of the most reliable valuations for our clients. From brewing, distilling and chemical processing, to aerospace, financial services, retail, energy, healthcare and technology, we have delivered valuations for all industries. Additionally, the breadth and depth of our team’s expertise enables us to provide services ranging from Lending and Financial Reporting to Enterprise Planning and Litigation Support.

  Adam Stump is a managing director at Hilco Valuation Services and has been active in the auction, liquidation and appraisal industries since 1998. He frequently consults with financial institutions on asset-based loans and recovery, and over the past 12 months has been instrumental in delivering appraisal and advisory pertaining to dozens of craft brewers. During the course of his career, Adam has conducted or managed thousands of valuations across a wide spectrum of M&E categories including Metalworking, Fabricating, Plastics Manufacturing, Production & Assembly, Packaging, Distribution, Fulfillment, Food and Beverage, Chemical Processing, among others. He also has testified as an expert witness in numerous litigation cases. He is an avid home brewer as well. Adam earned his Bachelor of Science Degree in Computer Sciences from Bowling Green State University and his Associate of Arts Degree from Colorado Mountain College. Contact Adam at 847.849.2953 or astump@hilcoglobal.com.

Real World & Digital Marketing Beverage Trends-2024

Cyndi
marketing trends seen in 2 monitors

By: Hanifa Sekandi

The beverage race requires a lot of grit and stamina. It is about the long game and certainly not short wins. Although, every brand aspires to be the viral brand of the moment. What the alcoholic beverage industry learned in 2023 is that not all trends are beneficial to your bottom line. Also, your consumer values quality more than social acclaim. Let’s be honest: online growth is integral to modern marketing success. Although out-of-home (OOH) marketing is still viable, it must be coupled with innovative digital marketing strategies.

  So, where do you start in your next marketing cycle? Now that you have wrapped up your holiday marketing campaign, a new year brings endless opportunities to become a standout brand or to keep your current notoriety.

Where the Real World Meets the Digital World

  Subliminal marketing will never get old. Although some consider it to be an archaic marketing strategy, it is not. Have you ever walked or driven by a billboard of a chicken sandwich by a popular food chain and then later that day see the same ad while you scroll through social media? By the end of the week, when that hunger strikes, it is likely that you will find yourself either making a chicken sandwich with a recipe you stumbled upon on TikTok or firing up your food delivery app to order one.

  Traditional marketing still works, although it is hard to measure the return on your investment with tangible metrics. Remember, before the digital world took over, advertisers spent a lot of time creating campaigns for magazines, billboards, benches, buses or anywhere they could display. It worked, and it still does. What digital advertisers understand from this method is that the more people see something, the more likely they are to gravitate toward it when they are browsing through beverage options at the store. Something new is always worth a try when it is familiar.

  A notable example of this is when Red Bull filled garbage bins with empty cans of Red Bull. They also had empty cans placed outside of London’s popular clubs while at the same time distributing their beverage to DJs. Simple but amazingly effective.

  Another fitting example of this is Taiwan Beer’s use of Honey Beer Drones to deliver complimentary six packs of Honey Beer, the brand’s new beverage, to those who registered on their website. As a result, within just 10 days, 15,000 people subscribed. This interactive guerilla marketing strategy worked well because it highlighted the use of honey in the beer and added a visual effect that people could see, film, share and talk about. It also added another great component: delivery through drones, and tech aficionados approved of this creative delivery tool. Both brands understood that real-time marketing strategies allow consumers to feel connected to the brand.

  As you look ahead at your marketing strategies, keep in mind that people are expecting more than just digital strategies. Also, the assumption that your consumer only exists in the digital world is erroneous. With that said, digital marketing does matter. It is up to you to do the research to discern what digital strategy will best position your beverage in this competitive landscape. Hopefully, your brand mission and messaging clearly define your “why” – why your brand was made just for your intended consumer, and your “who,” – who your consumers are. How does your brand complement their lifestyles and their buying decisions when they purchase an alcoholic beverage?

Beverage Marketing in the Digital World

  Welcome to the modern digital world. It is not old, but honestly, it feels new since every day, there is something new on the horizon. Currently, AI technology is said to disrupt modern-day advertising. As you begin to adopt some of these tools, do not get carried away. Remember, these tools are meant to enhance your digital marketing strategy and, in some cases, streamline processes so you can spend time on other tasks. So, what are digital trends to implement into your next marketing cycle in the new year?

Video Marketing: Creating compelling visual marketing is no longer an afterthought. Companies need to invest in the talent and tools to create videos, both long and short-form clips, to highlight online. Consider these videos as mini commercials that can be uploaded to your social media channels or used as strategically placed ads. Your marketing team should perform A/B testing on the desired platform to see which videos are worthwhile paid ads. You may find that some videos perform quite well on Instagram as a reel, while others perform better on TikTok, YouTube or Facebook. Many great and easy-to-use marketing tools allow you to create videos. The benefit of these tools is that they allow you to create a lot of visual content and allocate your marketing budget effectively. Video marketing should also include testimonials by real consumers.

Curated Marketing: As you know, it is a numbers game, so your company must understand analytics to develop marketing campaigns that target specific consumers. Email marketing campaigns fall short when you do not invest the time to understand your customers. Paired with mobile marketing, having a good grasp of analytics and using this data to create personalized marketing campaigns will improve your open rate and engagement. For example, some consumers prefer to receive newsletters that feature sales and discounts, whereas others enjoy reading blogs that are informative while also displaying your product. There are many CRM tools for marketing now. Finding one that works for your team should top your list as the new year approaches. For example, HubSpot and Klaviyo are great tools for segmented marketing campaigns.

Real World Beverage Marketing

  Once you have a digital marketing strategy, devise a real-world marketing strategy to enhance and complement it. You may also choose to start with OOH marketing strategies before you delve into digital ones, but the two are needed for a complete package. In addition, you cannot assume that your digital strategy is the only golden ticket to success. If your goal is to be in the alcoholic beverage sector for the long haul, it is best not to rely solely on one strategy. Although spending time online has become the modern-day norm, it does not account for the real-time moments that people experience in their daily lives. Endcaps at grocery stores, miniature bottles placed by the cash counter or free samples or coupons handed out on the way into a store create real-world experiences for consumers. Earned marketing builds trust. Other than advertising in magazines or utilizing display ads, what are other ways to market your brand in real-time?

Experiential Events: Create experiential events where people can taste your beverage. This is a common strategy by agencies when marketing to the press and influencers. Instead, invite your consumer to these events! Partner with bars and restaurants to create events such as tastings or food pairing menus that highlight your beverage. Most hotel bars and restaurants have happy hours. Offer to sponsor a happy hour. Not only does this encourage these establishments to carry your beverage, but it also creates a fruitful partnership. They are also more likely to recommend your drink to customers, as well.

Think Outside the Box, OOH Marketing: The more you are seen, the more likely you will become an option. Some brands have cut down their marketing budgets in this regard. Understandably, digital marketing appears to be the most viable strategy. Do not get lost in the idea of going viral. It is nice to have, but consider it as luck of the draw. Just make a high-quality product and build authentic, evergreen marketing strategies. Reserve some of your expenditure for OOH Marketing. Oddly enough, these ads make their way into the digital sphere if they are buzzworthy.

  A splendid example is Corona’s billboard display in Brighton, Great Britain. When Corona wanted to highlight that their beverage is made with natural ingredients, they painted a wall with their brand’s classic yellow and placed the signature Corona label in the center. At a specific time, when the position of the sun changed, between 6:30 p.m. and 6:45 p.m., a bottle overlay of beer appeared along with text that said, “made from the natural world.” During this time, people could view the classic Corona bottle. Now, this is not only something to talk about but also a great intersection of digital marketing via social shares. 

Make 2023 Holiday Beverage Sales a December to Remember

Cyndi
Photo of different bottles and glasses and cans of beer and spirits hanging from branches

By: Neeraj (Raj) Tulshan – Founder of Loan Mantra

It’s the most wonderful time of the year. The Holiday season is in full swing so it’s time for one and all to get out of the house. Celebrating the holidays looks different for many people whether that be shopping for friends and family, attending parties or making a toast with a good cocktail or beer. And it’s a peak time for restaurants and bars.

  Festivities can bring more customers into your restaurant as they spend more time eating out with friends and family. Plus, there’s always a lineup of Christmas parties, concerts and winter festivals, so many people don’t have time to cook at home.

  It’s the perfect time for a promotional strategy to kick into high gear. Holiday marketing campaigns capture the joy of the season and encourage valued customers to indulge in a special meal, dessert and/or drinks. There are a variety of options to help your establishment standout. Here are some thought starters:

●   Sponsor a Charity Nigh: Choose a charity of your choice (Toys for Tots, Make a Wish, or a local charity) and select a night or two during the month to donate a portion of your sales to that program. If you can, a local charity is much more likely to draw in more customers, as people flock to support their community. Make sure you market which date you are choosing to do this, and when it’s over, update your customers on the total amount raised. Fun fact: According to National Giving Month, 31% of annual giving happens in the month of December.

●   Offer Gift Cards: The National Retail Federation (NRF), surveys consumers on their spending on holidays and seasonal events throughout the year. Over the last decade, consumers have been kicking off their holiday shopping early in order to spread out their budgets and avoid the stress of holiday shopping. Continuing the trend this year, 60% of holiday shoppers started browsing and buying by early November. Having gift cards available makes it easy for consumers to grab a gift card, apply money to the card for their loved one/friend and stuff it away until their holiday for a present or a stocking stuffer. So, what gift made it to the top of the wish list? It’s gift cards!

●   Add Holiday Spirit to Your Online Presence: Use holiday-themed stock images, Create holiday-themed social media posts using free online templates as a guide on sites like Canva, Ripl and PosterMyWall. Use festive images to engage your audience and update your social media graphics to quickly freshen up your accounts and help boost engagement.

●   Host A Fun Event: Draw people in by hosting fun, quirky events such as an Ugly Sweater Party. This is sure to get everyone in the holiday spirit. Anyone who’s wearing an ugly sweater, enters the contest. From there, an ugly sweater fashion parade is a must. A few possible categories: most festive, most original, just plain ugliest etc. Winner of each category gets a free shot/drink of choice.

●   Holiday-Inspired Drink Menu: Spiked eggnog, peppermint cocktails, holiday-inspired shots, all these drinks help capture the essence of this loved season. With minimal risk and utilization of current inventory, launching a new drink menu is a no-brainer! Seasonal drink menus appeal to new customers and build intangible relationships with your restaurant’s loyal guest base by reinforcing brand concepts and generating spontaneity within the restaurant. This operation, if done efficiently, provides a foundation for increased profit margins.

●   Host a Tasting or Pairing Event: The National Restaurant Association research indicates that the sale of alcoholic beverages can be a key driver to restaurants. Eighty-four percent of adults who drink wine, beer, or cocktails say that restaurants are a good place to learn about new alcoholic beverages while 82% of these consumers say they trust the staff at their local restaurants to make good recommendations when it comes to alcohol beverages. These facts present a great opportunity. Why not host exclusive tasting events for VIP customers? Or hold tasting events which pair the perfect cocktail or beer with the perfect starter, meal or desert? In addition, 70% of beer drinkers, 69% of wine drinkers, and 67% of cocktail drinkers are more likely to say the availability of alcoholic beverages makes them more likely to choose one restaurant over another.

●   Neighborhood Bar Crawl: Feeling collaborative? Team up with nearby bars and restaurants to host a bar crawl. A successful bar crawl is often organized with a predetermined route, listing a selection of bars to visit within a specific timeframe. Oftentimes, bar crawls follow a theme, like a polar bear crawl. So have your bar themed out and guests dressed accordingly! A bar crawl can do wonders for your business. Bar crawls not only bring a flood of new customers to your bar but also creates an atmosphere sure to attract more customers. It’s a great mix of entertainment and growth for your business. Organizing a bar crawl, or getting your bar included in one, requires strategic planning. Partnering with other local businesses, advertising the event, and creating a fun and welcoming atmosphere are all key to a successful bar crawl.

●   Make a Seasonal Favorite: Create a themed drink or special brew that is only offered once per year – think McDonalds Shamrock Shake and Starbucks Pumpkin Latte to get customers talking. Keep the customers’ senses in mind – what visuals, sound and texture can be incorporated to highlight the experience? How will the customer interact with the brand (via server, bartender, store pick up)? How can the presentation be kicked up to give it a little more sizzle as it’s being served? What elements could be included to help recreate the ultimate customer experience each time? 

  Holiday marketing can help you boost revenue, solidify relationships with current customers and gain new ones this holiday season to help make this sales season a December to remember.

About the Author

  Neeraj (Raj) Tulshan is founder and managing member of Loan Mantra. Connect with Raj: https://www.linkedin.com/in/tulshan/, Raj@loanmantra.com or 855.700.BLUE (2583), Ext. 101.