Category: Marketing

Advice from Beyond the Grave: Distribution for Small Breweries

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By: Eric Myers

When Mystery Brewing Company closed in 2018, it was difficult to articulate to people outside the company where things had gone wrong. We looked like a successful company from the outside; we had a well-attended pub and restaurant, we frequently won awards for our beer in both local and national competitions, and in general things looked great.

  We made the mistake many small businesses – particularly small breweries – make in having a debt load that outsized our resources. We were stretched too thin. It took months of introspection after the business closed for me to understand where things had really gone awry.

  What you’re missing in that picture is distribution. At our peak, we were distributed throughout our state of North Carolina to hundreds of grocery stores, convenience stores, bottle shops, bars, and restaurants. When we closed, we were self-distributing mostly draft beer in a 75-mile radius from the brewery.

  I now put the blame squarely on my own basic misunderstanding of what to realistically expect from my distributor, as well as their fundamental misunderstanding of what we needed and, what’s more, their misunderstanding of what they were actually offering us – or anyone.

  With the help of our distributor, we saw success in distribution into large grocery store chains in our state. Unfortunately, as a small brewery, we couldn’t handle the demand from those grocery stores. We picked up a loan to help meet that demand, but before we were able to put the pieces in place, we lost our placement in those grocery stores. We were weighed down with debt without a market to sell the expanded volume we had put into place. We could never recover those lost sales and ended up closing our doors in the face of rising costs – in ingredients, rent, and the cost of distribution – when we got to a point where we could no longer service our debt.

  It all tracks back to our relationship with our distributor.

Distributors As Sales Companies

  For years after Prohibition, beer was sold exclusively through the three-tier system: the mandated split of manufacturing, delivery, and retail sales of alcohol. The role of each tier was very clearly defined, and as beer manufacturers consolidated through the 20th Century, the role of sales could be taken on by distribution partners whose portfolio was primarily comprised of one brewery’s products. Distribution partners could essentially function as a brewery’s sales force: a mid-sized middleman industry built to act as logistics handlers between a large manufacturer’s output and the thousands of widely distributed small retail outlets.

  Enter the craft beer industry – a ragtag gaggle of creative innovators that disrupted traditional sales channels. From the first brewpub in the country, Bert Grant’s Yakima Brewing Company in 1982, to changes in distribution and franchise laws around the country, to the onset of the current popular “taproom-only” model, small breweries have been in the business of changing how beer is sold almost constantly.

  When Mystery Brewing Company opened in 2012, we were on the early end of the “taproom-only” trend. Because our local laws allowed it, we opened on a plan of self-distribution in our local area and selling what we could through our own taproom. At the time, I considered it a hybrid model between Production Brewery and Brewpub and it worked! We saw distribution success that quickly outgrew our ability to deliver on our own given our level of resources, and so before long we started looking at distributors to help shoulder the load.

  When I was contacted by the first distributor I worked with – an independent distributor (ie, not affiliated with either Anheuser-Busch or MillerCoors, primarily imported beers either from other states or other countries) – the title of the person that I talked to was “Statewide Sales Manager.” Her previous job was “Southeast Regional Sales Manager,” and she later went on to work for another distributor as “General Manager of Sales and Marketing”. After Mystery closed, I would often wonder how I was so confused about the role of distributors in the beer marketplace, but looking retrospectively suggests to me that the distributors were equally as confused.

  Later, when the relationship with that distributor soured and I moved onto the next, much larger distributor, we frequently met with the Sales team to train them on our products. We had Sales Goals in place. We had brewery reps on staff that would interface with those Sales Reps, but we weren’t allowed to do our own sales. We were required to turn over any potential customers to the distributor for their reps to handle and close the deal.

  Here’s the problem. Distributors don’t do sales. They do logistics.

Distributors are Logistical Experts

  According to the Brewers Association and the National Beer and Wine Wholesaler’s Association, over the course of the last 40 years the number of breweries in the country has gone from just over 70 to just over 7,000. Over that same time, the number of distributors has fallen from just over 4,500 (64 distributors per brewery) handling, on average, around 100 – 200 SKUs each to around 3,000 (.4 distributors per brewery) handling, on average, well over 1,000 SKUs each. The idea that any distributor rep working could know and sell any more than a small percentage of their portfolio is laughable.

  Distributors, on the other hand, are incredible logistics companies. Our primary distributor, through most of the life of our business, was a statewide distributor that handled thousands of SKUs across North Carolina and in most cases (ie – except for really rural customers), would perform overnight delivery anywhere in the state. They had one central warehouse that stored the majority of their products. That warehouse would send trucks to each of its 7 branches every single night based on orders put into the system each night. Those trucks would arrive at each location and loads would get broken down into individual delivery trucks that would go out from those branch locations and delivery every day of the week. It was breathtakingly complex.

  Distributors are experts at off-premise sales. Over the course of the past 70 years, grocery store chains have come to rely on distributors to both stock and manage their beer sections from product selection to daily stocking of shelves. Distributors don’t so much sell to grocery stores so much as they ensure that the grocery stores always have something on the shelves to sell. It is incredibly difficult for self-distributing breweries – small business partners that only represent one product – to compete with the efficiency of a distribution company in a grocery stores.

  If not for distributors, it’s hard to imagine the national craft breweries that we have today even existing. A startup in the 1980s, building a brewery out of cast-off dairy equipment had no way of possessing the knowledge, much less the resources to create or satisfy demand for its beers over the breadth of the country that was required at that time.

  It’s why it’s so seductively simple for small breweries to fool themselves into think that distributors inhabit the same role they used to. It’s the way they’ve been taught to think of distributors – and it’s the way distributors think of themselves.

Breweries Drive Sales

  This all might seem obvious to large breweries with wide distribution networks, but the majority of breweries in this country are small – they are 400bbls annually on average. Many are undercapitalized and understaffed, stretched thin, barely making payments on outsized debt. It’s easy to look to a distributor for relief, to take work off of your hands, but that’s not what they’re there for.

  In my current role, managing Tavern Operations at Durham’s Fullsteam Brewery, I work with 7 different companies to manage cider, guest beers, wine, and other non-alcoholic beverages. The only ones that sell to me – that approach me with new products and attempt to make a sale – are self-distributing breweries, cideries, and wineries. The distributors are order-takers and delivery-makers. That has become their role as their portfolios are too large to know and as their customer base is too wide to service personally.

  Learn from my mistake: As a small brewery, you are your own best asset when it comes to representing your brand. Use a distributor to increase your reach, but do so knowing the extra cost – that they will take a portion of your income AND require extra brewery staff to manage sales. More than that, set that expectation up front with your distributor so that you both agree what their role is, and yours. Distributors can manage off-premise and chain accounts for you in a way that can be transforming and positive, but they have no incentive to manage your supply, only deplete it, so be sure that you can handle the demand – or grow safely to meet it – before you take that step.

  Distributors are not your friends and they’re not your sales force. They’re a tool in your toolbox. Use them wisely.

Beer & Food Pairing Dinners: Upping the Bar for Craft Breweries

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By: Nan McCreary

Oenophiles have long known that wine dinners — where wine is selected and paired with a variety of foods based on complementary tastes and styles — can elevate the dining experience. Now, craft breweries are opening that door to customers who want to expand their culinary horizons with the plethora of flavors and styles of beers available on the market today.

  “We’ve been doing beer-food dinners for years, and they’re great fun for everyone,” said Ben Edmunds, partner and brewmaster at Breakside Brewery in Portland, which opened in 2010 as a restaurant and pub brewery. “The events introduce customers to a wide range of beers, plus we have an opportunity to reach a different audience than we usually have.”

  Indeed, according to the National Restaurant Association, food-and-beer pairings were listed as a top beverage trend in its “What’s Hot 2018 Culinary Forecast.”  This isn’t surprising, considering that beer — with its broad range of flavors, aromas textures, and styles — offers endless possibilities for pairing with food.  Whether it’s a light lager with a spicy Asian dish or an IPA with loaded fries and a decadent burger, the right pairing will deliver a flavor nirvana that far surpasses the flavors of each component. Ask any aficionado, and they will tell you: food makes beer better, and beer makes food better. It’s that simple.

  Like wine and food pairing dinners, beer and food events typically go through a progression of four or five courses, sometimes more if the occasion is more extravagant. Each course is paired with a different beer, depending on the strength, flavor and style and its compatibility with the food.

  According to Edmunds, each beer serving in Breakside’s dinner is five and eight ounces. The event, he said, is informal and educational. “We always have a brewery representative at the dinners to talk about the beer,” he said, “and we ask the chef to come out and introduce the food. It’s a fun way for customers to experience our beers, and from our end, we get to present our beer in an entirely different format.”

  While many customers are die-hard beer drinkers, Edmunds told Beverage Master Magazine the dinners often appeal to a wine-drinking crowd. “These events offer wine drinkers an opportunity to see how diverse and food-friendly beer can be.”  

Recently, Breakside featured wood-aged and acidic beers with lots of fruit flavors, components that are similar to those in wine. “It was a good way to challenge preconceived notions of what beer is and how it should be consumed.”

  Breakside’s dinners may seat as few as 10-to-15, or as many as 70-plus. Prices range from $35 to $120, depending on the number of courses and the complexity of the menu. The average for an all-inclusive dinner, said Edmunds, is $65 to $85. Breakside has sponsored events ranging from introductory beer pairing at gastropubs and bars, to more elaborate affairs at fine dining establishments. This year during Portland Beer Week, Breakside paired with renowned Icelandic chef Ólafur “Óli” Áugústsson, the culinary director for Portland’s forthcoming KEX hotel. The dinner featured aged and sour beers selected to complement local seafood and produce.

  Pairings, Edmunds explained, are a collaboration between brewery personnel, the restaurant’s chef, and others, such as a bar manager. “The dynamic that works best for us and leads to the best results for the consumer is for us to invite the restaurant people to our brewery and taste through a wide range of beers,” he said. “We’re lucky because we make many different styles of beer and aren’t limited to three or four options. We ask them to find the beers that inspire them, and we talk about food pairings.”

  Edmunds said that the collaborations always start with selecting the beer and then choosing a food pairing, rather than vice versa. “Once a beer is done, it’s done, and you can’t modify it. It’s easier to design a dish to a beer that’s already finished than to make a beer to complement a specific dish.”

  While the brewery generally does not interfere with the chefs once a menu is selected, occasionally they will use their expertise to “nudge” them one way or the other. For example, Edmunds said he is very particular about pairing desserts. “Even with a sweet beer, the dessert is likely to overpower it,” he told Beverage Master Magazine, “so I’ll ask the chef to do something with a savory element, like a cheese plate.”

  For Edmunds, whose interest in food preceded his interest in beer, the pairing dinners are a natural fit. “The two go hand in hand,” he said. “We also have three locations for our brewery, plus two restaurants, and we regularly do pairings when we release a new beer. The multi-course dinner is a natural extension of that.

Not Just for Breweries

  While breweries like Breakside typically collaborate with different restaurants to introduce their beers, some restaurants host regular beer and food pairing dinners to showcase the skills of their chefs. One such restaurant is the Session Room and Beer Garden in Ann Arbor, Michigan. With the theme, “Real Food, Craft Beer,” the restaurant focuses on fresh ingredients sourced locally and serves 70 rotating beer taps.

  Since opening three years ago, the restaurant, under the guidance of Executive Chef Traver Lucas, has offered pairing dinners every month or two, always featuring beers from Michigan breweries, including Bell’s Brewing, Founders Brewing Company, and Perrin Brewing Company. Like Breakside’s dinners, the Session Room pairings are a team effort, where the chef meets with the brewery’s personnel and tastes the beers, then decides what to cook. The beer dinners are inspired by French cuisine, with the food selected to complement the beer.

  According to Event and Marketing Director Jessica Smith, the Session Room dinners are very elaborate, with four courses and a beer to match each course. “The cost is $50 plus tax, so customers get a lot for their money. Generally, 30 to 50 people attend the dinners,” said Smith. The menus are not released ahead of the event, so the dinner is always a surprise. “That’s part of the fun,” Smith added.

Festival Pairings

  As competition among craft breweries heats up, many breweries and beer festivals are upping their game with pairing events to attract more visitors. Last year, at the California Craft Beer Summit, a “Brewed for Food” event featured specialty brewed beers from 12 breweries paired with specially crafted food from as many restaurants. The objective, said the advertising, was for “teams to partner to create the perfectly balanced bite that elevates the flavor profile of the beer.” The 2019 Portland Beer Week featured four pairing events. “Bean to Bar,” was a chocolate-and-beer festival hosted by Xocolatl de Davíd chocolatiers and Ruse Brewing, spotlighting 10 local chocolates and the beers paired for each one. “Mussels From Brussels,” featured four local brewery’s takes on the classic pairing of mussels and frites.

   At the “Brewer’s Burger Brawl,” four Oregon brewers served a carefully selected beer alongside a slider-sized burger to determine the best pairing. The “Nordic + Northwest” event was the event held by Breakside Brewery and Portland’s future KEX hotel.

Everyday Pairing

  “Culinary Brewhouses” are making waves across the country. In these establishments, brewmasters are applying culinary skills to create beers that showcase flavors and aromatics, and chefs create foods that transcend pub fare like burgers and chicken wings. Chicago’s Band of Bohemia, noted for “infusing culinary flavors into house beers and pairing them with global plates,” became the first brewpub to be awarded a Michelin star within its first year of opening. 

  Moody Tongue Brewing Company, also in Chicago, has classically-trained chef Jared Rouben at the helm as brewmaster. According to Moody Tongue’s website, Rouben “draws on his culinary training to forge this connection between the kitchen and our brewery, building recipes for our beers in the same manner a chef would for a dish.”

  Clearly, beer pairing beer and food is a hot trend throughout the country, and it shows no signs of stopping. According to the 2017 Nielsen Craft Beer Insights, 71% of consumers look for complementary foods when choosing a craft beer at restaurants and bars, and that isn’t about to change. If anything, the number is likely to increase, as more and more beer lovers become exposed to the wonders of the beer and food match-up. Stay tuned…as the market continues to ramp up, the best may be yet to come for the thirsty consumer with a discriminating palate.

Forward-thinking Marketing Is About Looking Back

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By: Jim McCune

HefeWheaties is a new beer from Fulton, which collaborated on the brew with another Minneapolis company, General Mills.

Many beer brands have recognized the value of “nostalgia marketing” by tapping into our fondest childhood memories to sell more.

But What is Nostalgia?

  It’s a human emotion defined as “a sentimental longing, or affection for the past”.

  As we grow older, we develop fond memories of our younger days. From the food, candy, and ice cream we ate, the events we attended, the music we listened to, the video games we played, the clothes and sneakers we wore, to the TV shows we watched. 

  Your experiences from your past, form your personality and identity today.

  Scientific research has proven that nostalgia is a powerful feeling that provides a pleasant effect to both mind and body, and the natural phenomenon is sometimes referred to as the “warm and fuzzies”.

  It seems the more we move into an age of technology and innovation, the more we enjoy revisiting a simpler past and the joyous memories that come with it.

  Nostalgia can be activated at any given moment by any of our senses. A certain sound, scent, or color can trigger a nostalgic episode. Nostalgia can appear as a flashback, a vivid memory, or a wave of seemingly out-of-place emotions.

  One of the reasons we love Netflix TV show “Stranger Things” is because of our desire to look back fondly on our own formative years. This show really nailed the time period of the eighties and allows viewers to relive certain aspects of their past that they enjoyed.

  Nostalgia triggers emotion, and emotion activates purchase. This is why nostalgia is smart and effective marketing tactic.

  Breakfast cereals, vinyl records, candy bars, gaming systems, ice cream cake, and literally everything in between. Brands are engaging beer drinkers by tapping into their positive memories from decades past in fun, innovative new ways.

  Retro tactics have found their way into most marketing channels. Throwback Thursdays hashtag across social media, Facebook’s “On This Day”, and apps like Timehop now account for hundreds of millions of new photos linked to personal memories.

  In a series of experiments conducted by the Journal of Consumer Science, they found that consumers who thought about “the good old days” were more willing to spend money. In contrast, less likely to spend bucks when thinking about “the present or future”.

  The research study examined how nostalgia evoked feelings of connectedness and community due to childhood memories being linked to friends, family, and a sense of trust.

  Other interesting findings from the study is that nostalgia is experienced at least three times a week by persons of all ages, and across all cultures.

  It was also determined that most persons see their nostalgic event “through rose-colored glasses,” meaning they were revising history in their favor.

  Additionally, and most interesting, persons who were exposed to extreme heat or cold found relief and comfort from these adverse states when experiencing the joy of nostalgia.

  The emotional component of your brain is far more advanced than the logical side.

  80% of your decision-making derives from emotion rather than logic. This is why most consumers make their purchase decision at the beer shelf based on what they see and feel.

  But, 64% of this group admitted they would change their mind at the last second if “something else better” caught their eye.

  Smart brands are successfully using the timeless marketing strategy to attract new drinkers by elicit the stopping power and emotion in their branding. The results have been extraordinary with the GenX and Millennial aged groups.

  If you peruse the shelves of your local beer distributor, you’ll quickly see how evident, and brilliantly, nostalgic marketing is being employed by many beer brands.

  Why does nostalgia resonate so well with these marketing segments?

  Mainly because childhood for them during the 70s, 80s, and 90s (commercially-speaking) was all about them, and chock full of awesome. So, looking back on these days, there’s bound to be a lot of great memories.

  Children born mid–1960s to 1970s were considered the first generation of children to be directly advertised to. They would be known as “Generation X” and marketers discovered that this segment was impossible to define.

  Advertisers eventually discovered that although GenX children were not the purchaser, they could use them as “parental influencers”.

  If they could get a kid super excited about their product, they would eventually get to the mum. Many parents reported being pestered by their children for products they saw on television. This new marketing tactic was termed “pester power”.

  The result was an onslaught of exciting new youth products advertised directly to kids during their Saturday morning cartoons, movies, comic books, video games, and beyond.

  The pester era was fueled by a major surge in birthrates during the 80s and 90s that ushered in the new marketing segment, known as “Generation Y” aka Millennials.

  Studies at the time estimated children spent an average of 28 hours per week watching TV and playing video games which exposed them to approximately 20,000 ads a year.

  During these 3 decades the youth market became expansive and accelerated economic growth around the globe to the tune of $250 billion today.

  Millennials were also a big part of the craft beer boom. Over the past eight years, as this age group reached legal drinking age of 21, the craft brewing industry experienced its most significant growth.

  Millennials were labeled the “Peter Pan Generation” due to their tendency to delay “Adulting” for longer than any generation prior.

  So, it’s no wonder, if a beer brand could leverage favorable memories from our childhood and evoke these warm–fuzzy feelings that allow us to suspend our disbelief for a few moments, that we’re actually adults … you’ve likely made the sale already.

  You’ll also forge a meaningful connection with this consumer at an extremely–emotional level that results in brand loyalty (a consumer quality that hardly exists in beer today).

  An alcohol watchdog group recently reported that consumer complaints were stacking-up. As increasing numbers of beer brands rollout nostalgia in their marketing, more cases are being upheld because their label “appears to be aimed at kids” or “encourages immoderate consumption.”

  It’s been urged that breweries, marketers, and designers tread more carefully with the design of their retro packaging that depicts candy, toys, and cartoons. Ensuring the alcoholic nature of their beverage is communicated clearly, and when appealing to one’s inner child, not going too far to inadvertently appeal to a child.

  Check out these 5 beer brands that did great jobs using nostalgic marketing:

1.  Captain Lawrence Brewing Company of New York collaborated with Carvel Ice Cream to make “Fudgie the Beer” a 6.0% ABV beer brewed with Carvel signature chocolate crunchies, fudge and ice cream from their famous cake. Fudgie the Beer has smooth creamy cocoa notes with a roasted crunchies finish. (https://fudgiethebeer.com)

      This innovative concept worked so well, Captain Lawrence Brewing extended the line with Cookie O’Puss St. Patrick’s Day Beer, and Cookie Puss Birthday beer.

2.  Virginia-based brewing company Smartmouth is releasing a “magically delicious” IPA with all the warm and fuzzies. “Saturday Morning” is a throwback to the early mornings in front of the TV watching cartoons in your pajamas eating your favorite cereal. Smartmouth brewed with Lucky Charms-inspired marshmallows. (https://smartmouthbrewing.com/beers)

3.  450 North Brewing Co. of Indiana is pushing the envelope with an extensive line of mouth-watering retro packaging. Peanut butter cups, ice slushes, fruity and cocoa pebbles, firecrackers, French toast sticks, rocket popsicles, marshmallows, Nintendo games, tacos, and anything else you loved as a kid is represented. (https://www.instagram.com/450northbrewing)

4.  Two of America’s iconic beverage brands, Harpoon Brewery and Dunkin’ of Massachusetts collaborated on a limited-edition 6% ABV Coffee Porter. The co-brew combines the taste of Dunkin’s Espresso Blend Coffee with Harpoon’s famous craft beer for a balanced and smooth brew offering robust and roasty notes. (https://www.harpoonbrewery.com/beer/dunkin-coffee-porter)

      Harpoon and Dunkin’ just released a bright, summery follow-up brew with “Dunkin’ Summer Coffee Pale Ale” at 5% ABV.

5.  California’s Altamont Beer Works has an extensive line of cool–looking brews. They left no childhood stone unturned with their heady, and retro plays. Catty Shack, My Little Pony, Grand Theft Auto, NKOTB, Crunch Berry Cereal, to The Dude. (https://altamontbeerworks.com/1/beers)

  Nostalgia is a positive emotion. It’s more than a passive flashback to our yesteryear, it has strong implications of our future. It temporarily alleviates discomfort of our present and provides much needed motivation to head into our future.

  Like any trend that’s rediscovered and overused, nostalgia marketing will eventually be met with skepticism and quietly fade away, only to return again when today is tomorrow.

  Jim McCune is director of the Craft Beverage Division of Melville-based EGC Group.

Reach him at …

jimm@egcgroup.com

(516) 935-4944

Burning Questions From the Craft Brewers Conference (Part 2)

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By: Jack McCraine – Firm Director, Baker Tilly

Continuing with part two of our Q&A from the Craft Brewers Conference from Denver, with additional follow-up questions to our panel of experts. It was clear that times are tough and brewers are feeling the pressure from every aspect of their business. Innovation and disruptive solutions to engage consumers and capture retailer interest were top of mind during our discussions.

  Consumers are using their disposable income on more than just beer, with consumption patterns and drinking occasions changing constantly. Generation Y and Z are entertaining spirits, RTD’s and wine as well as new and emerging industries in seltzer and cannabis (medical and recreational). Minimum wage pressures are challenging employee recruitment and retention, forcing pressure on engagement and culture. Virtual distributor models and companies like Amazon Prime are making distributors rethink and retool their sales and service strategies. 

  Diving deeper into your business plan and implementing a detailed strategy to scale your business to be more effective and efficient is a must do for brewers who want to enjoy continued success in the future. Here are some additional questions from our audience and answers from our Baker Tilly team of subject matter experts:

  Question: There’s a lot of data available and I don’t always have time to utilize it. How can I better use my data to run my brewery?

  Answer: Knowing what to track and having a process to capture and interpret the data is 1/3rd of the challenge. Another 1/3rd is knowing strategies and tactics to deploy that will correct or accelerate performance. The final 1/3rd is sharing the information beyond ownership and Sr. Management to really get your team moving in the right direction. At a minimum, record your own historic information to allow for benchmarking and variable pay opportunities that can be used to incentivize and motivate team members to accelerate performance. Here are a few good reports/charts to run:

Sales:

•   Pareto charts: They help identify the most frequent factor that you can count or categorize. Distributors, brands, SKU’s, reps, etc. These reports can be created at any level and visualize what’s helping or hurting the business. Brewery reps should spend half their time calling on these accounts.

•   Rate of sale: Measures how quickly volume is moving through a given account. This is very important to improve and an indicator of brand health.

•   Simple distribution: Number of buying accounts divided by total account base will show penetration of a given brand, SKU, etc. in a given territory.

•   Weekly time series (current and previous year): This can help identify significant events from previous years and allow you to prepare for them as they come back around in the current year.

Production:

•    Packaging efficiency such as yield target on loss: This is deeper look at breakage, low-fills and mislabels against a target/goal.

•    Yield target on loss: Hitting yield targets in total barrels filtered (by style). This shows tank utilization vs your target.

•    Reduce controllable production cost per BBL (by style, etc.): Your P&L should capture controllable COGS compared to last year.

Financial:

•   Gross profit trend lines before allocated costs: The overall percentage is important, yes, but the trend line is most important in this view. The reason you want to view prior to allocated overhead is to measure your real costs including labor. Utilization of your production facility will affect cost per BBL with allocated or overhead costs imbedded. This will allow you to forecast new brand costs, pricing and profitability.

•   Labor costs: Labor should be tracked not only to real production volume on a cost/BBL, but also as it relates to sales, overhead and management. This should trend down as your overall volume grows and efficiency improves.

•   Brewhouse and tank utilization: For obvious reasons, you need to set baselines for each of these and track overall utilization. It will allow the long-term forecasting of sales, capex planning and cash flow management.

  Question: When measuring break-evens (ROI), what is acceptable? How do I measure success? How many months/years?

  Answer: It depends. A loss isn’t a bad thing if your intention wasn’t profit but rather impressions. Creating a detailed business plan by department is the first step in understanding ROI’s. Each department should have KPI’s established that tie into the achievement of the plan/budget. Agreed upon actions and required resources should be identified, tracked and measured to achieve the KPI’s. Frequency of measure really depends upon what you are tracking. From a production standpoint, it could be by brew, by monthly/quarterly budget, etc., sales by month or distribution by quarter. These are good measures, but recouping profit only tells part of the story.

  Breakeven analysis is a great way to understand what is at stake or what you need to get back your investment. A standard percentage return is not always the best approach, but can be a good way to begin the discussion. There will be some things you can and should make more or less on depending upon the intent of the offering. You can put a breakeven on manpower, brands/SKUs, special events, etc., but all shouldn’t be the same ROI.

  From a timeframe standpoint, it would vary. People and equipment tend to have longer tails with ROI so those could scale quarters to years. Products and special event breakeven could be achieved overnight. It’s best to categorize the opportunity, apply a timeframe and capture it with a tracking/measuring system for future benchmarking.

  Question: How do you balance the setting of aggressive goals vs. selling correctly to the right accounts?

  Answer: Aggressive but realistic goals are great for any organization’s sales team as long as you have the following clearly outlined:

•    Variable pay: Compensation over the target so your team doesn’t stop selling after the objective was achieved in the 3rd week of the month. A threshold also needs to be set so you aren’t paying for easy layups too. 80% of achievement before 40% of payout is realized, or something of that nature. 

•    Standards: What does execution look like at retail? How many cases actually qualifies for a legitimate display? Is it the same for cans and bottles? Should there be a price on it? Pre-printed or handwritten? There are a number of things that beg to be defined. Salespeople want targets so they can be marksmen with their achievements of the objectives. You get what you ask for, so be specific in your standards with a document comprised of pictures and words.

•    Tools: Such as a POCM (point of connection material), account level data, profit calculator and a toolbox/kit with protocols for inventory replenishment:

           1)  POCM example:

•   11 x 17 accordion folder or box which includes the following:

A) Case cards and posters

     1)  Brand specific

     2)  PTC specific (all available pre-printed PTCs)

B) Sell sheets for all brands (core, seasonal, etc.)

C) Brand calendar

D) Brewery stickers

E) Tap stickers

F) Shelf strips

G) Tear pads (if applicable)

•   Coasters (where legal)

•   Case of glassware (where legal)

•   Tap handle (example)

•   Metal tacker (example)

•   Focus calendar – current quarter or year (wholesale sales rep distribution)

•   Brand matrix chart

•   Copy of retail standards

•   Bin displays (min of 1-2 per rep. for key account opportunities)

1)  Cooler with samples (ice)

2)  Tape

3)  Scissors

4)  Box cutter

5)  Zip ties

6)  Business cards

•    Structured selling process to clearly define, communicate and execute the critical actions of a sales call. The benefit is that standardization removes unnecessary steps and improves efficiency, sales productivity and focus of the sales team. The goal is for each salesperson to become a valued business partner with retailers and distributors through service, relationships, knowledge, collaboration and follow-through. Below is a brief example of a structured sales process:

  Our recommendation is to have the right goals set with the right accounts with the aforementioned in place instead of goals that don’t make sense for accounts and/or geographies that you are targeting based on your plan and budget.

  The goal of every good company is to plan for and achieve realistic business objectives that tie into all aspects of your business. The collaboration of departments into one business will help avoid pitfalls of silo development, which lead to mistrust within your organization and hinders the organization’s performance. As stated with these questions and answers, having a collaborated and efficient organization is the key. If everyone knows their role and targets (not just the sales team) then you can start to operate more effectively and efficiently as one company, tackling the industry together and scaling up efforts to drive elements of your business plan.

  Jack McCraine, Firm Beverage Director with Baker Tilly and leader of craft beverage services for the firm. He has more than 28 years of sales, marketing, consulting, training, revenue management/pricing, sales/service strategy, routing and training experience in the beverage industry. Jack specializes in accelerating client performance with sales and revenue growth, utilizing proven strategies and tactics to achieve business plans for wholesalers and brewers across the country. He has extensive experience with wholesaler distribution systems, compensation and incentive programs to motivate sales organizations.

For more information contact…

Jack McCraine

Firm Director, Baker Tilly

jack.mccraine@bakertilly.com

Enhancing your Beer Marketing Strategy with Partnerships

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By: Suzanne Henricksen

It can be hard to capture consumer attention in today’s digital age within the increasingly crowded and competitive craft beer industry. We live in a world of short attention spans, information overload, and the constant ding of gadgets begging us to look at something else. While there are many effective marketing strategies to help your brewery stand out in the digital landscape, sometimes it’s even more effective to bring a great marketing idea to life right at the shelf…particularly when it means partnering with another brand that your potential consumers already know and love. In these situations, one plus one can often add up to much more than two, benefiting both brands and helping your brewery grow in awareness and sales.

To do this, more and more breweries are starting to ink partnerships with companies to gain competitive advantage. Often, these collaborations involve parties that have nothing to do with beer, but everything to do with the brand’s values, character, and target consumers. These tend to be quite successful, partly due to the unique combinations of ideas. By success, we mean several factors: it could mean that both parties have profited from the partnership in terms of sales, or that the partnership has created buzz on social media or through publications, increasing awareness and consideration of the brands involved. Indicators such as likes, shares, comments, search queries, feature articles, increased production, and additional projects are used to gauge the reception and success of these beer partnerships. With that in mind, let’s look at a few examples of innovative campaigns that have helped craft beer brands stand out.

Muskoka Salty Caramel Truffle

Beer and ice cream…a match made in heaven. No? Well, this partnership between Ontario craft brewer Muskoka and ice cream maker Kawartha Dairy shows that it’s not as strange as it may seem.

This new brew was a bock-style beer inspired by Kawartha’s popular Salty Caramel Truffle ice cream. The beer had a milk chocolate flavor thanks to roasted malt, and was also infused with salted caramel for a unique taste. A can of this brew was only available for a limited time, which had Canadian craft beer fans scrambling to buy. The brand’s first Facebook post last February about the new product garnered over 500 likes, 118 shares, over 200 comments, and the attention of several publications in Canada.

Star Trek “Captain’s Holiday” Ale

Any product that is attached to a globally popular franchise has good odds of generating high sales. During the 2017 holiday season, Shmaltz Brewing Company launched its Star Trek themed ale, called Captain’s Holiday. The beer is tropical with hints of citrus. While the release was aimed to celebrate the franchise’s 30th anniversary, as reported in Food and Wine, it actually was not the brewery’s first Star Trek deal. Even before this release, they had already launched another Star Trek inspired beer called Symbiosis.

Both beer labels included images of the Starship Enterprise, which is one of Star Trek’s most beloved and recognizable icons. Even casual fans can identify the ship and franchise. This is why it’s often added to all sorts of Star Trek related media, for immediate recognition. This rule certainly applies to brands operating in niche markets, since they’ll be using the Star Trek name as a form of leverage. Suffice it to say, anything Star Trek touches seems to turn to gold. As of this writing, Shmaltz has released over six Star Trek-themed craft beers. Amidst their move back to a contract brewing model, they are most certainly holding onto this product line, which is a sure indication the partnership is lucrative for their brand.

Urban Underdog American Lager

Drinking for a cause? Great idea. Purina, the widely popular pet care brand is lending its name to one of Urban Chestnut’s brews called the Urban Underdog American Lager. Purina donated $3 to the Petfinder Foundation for every eight pack of the brew sold in St. Louis. To help market this partnership, Urban Underdog came up with a campaign called “Consider a Shelter Pet” incorporated into the brand’s packaging. The St. Louis Post Dispatch revealed that Purina planned to donate up to $50,000 so it could offer $50 subsidies toward pet adoption fees.

The campaign rolled out in August 2017 with Urban Underdog expanding distribution in St. Louis in 2018. With its continued distribution, it’s safe to say that the partnership is doing well for both sides. If you are looking for another reason to drink beer, you can consider finding a good home for pets a pretty awesome choice.

Are Partnerships Right For Your Brewery?

Depending on where you are in your brewery journey, marketing partnerships like the ones we’ve shared today can have a variety of benefits. For newer brands, they can put you on the map as a favorite new craft brewery. In these situations, make sure that you have a solid reputation for your own beers first and don’t jump into a marketing partnership too quickly.

For established breweries, partnerships can spread awareness to different audiences to bring in new fans. To find the right partnerships here, talk to your existing customers about what other activities and products they love. A rich pool of potential fans may be found enjoying a broad range of interest from hiking to a genre of movies or music to a certain style of food.

When thinking about collaborations with other brands, remember it is not only creativity and uniqueness that will get people’s attention; the partnership has to be relevant, in sync with recent trends, on brand, and have intrinsic value to your target consumer. As with all good marketing strategies, thinking about the 5Ws is critical…who, what, when, where & why. Then focus on how to actually execute the idea. Make sure you don’t overlook the power of partnering with smaller, local brands. We can’t all land deals with brands as big as Star Trek or Purina but, honestly, depending on your consumer base and brand, partnering with someone that big might not be the right move. So, make sure to focus on the potential value of the partnership for your customers and don’t get distracted by brand star power.

Pursuing these opportunities can be an effective and fun way to spread razor-thin craft beer marketing budgets to reach more people when done right. It’s also a great way to fund the innovative ideas that your brewer wants to explore and raise awareness for causes that are near and dear to the heart of your business. While this is only one of many marketing tactics to help grow brand awareness and sales, it’s an exciting one in today’s digital age since it comes to life tangibly at the point of purchase. And isn’t that what marketing is all about? Let’s raise a glass to working together so consumers find, buy, and enjoy more of your brews.

Contact Suzanne at The Crafty Caskor 510-316-4251

KNOCK, KNOCK! LIQUOR STORE AT YOUR DOOR IN 60 MINUTES OR LESS

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By: April Ingram

Don’t want to leave the party to pick up the missing ingredients to make your signature cocktail or to try a new recipe? Wish you had options to save time, or you don’t want to head out into the elements to go pick up your favorite alcoholic beverages? Canadians can now enjoy greater options for their alcoholic beverage home delivery, including a wider selection of craft beverage products with Drizly.

In Canada, liquor laws are regulated by each province individually, and some have permitted home delivery of wine beer and spirits for decades. The original alcohol delivery service, Dial a Bottle, was taking orders by phone and delivering bottles before apps or even the internet existed. Today, the home delivery marketplace is flooded with options that make home delivery of alcohol nearly as easy as Uber Eats, and the competition is fierce, leading to lower delivery fees and extra service perks. E-Commerce companies are working with the complete inventory of local, leading liquor retailers and delivering them within 60 minutes to adults of legal drinking age at their homes and even to their offices.

Amazon for Liquor

Drizly, a pioneer and the world’s first and largest alcohol e-commerce marketplace is now launching their services in the city of Vancouver, the province of Alberta, and throughout 26 U.S. states. They’ve been called the “Amazon for Liquor” or “Uber Liquor,” and their approval to operate in Vancouver has been noted as quite the accomplishment, considering that legislative regulation has so far prevented the actual Uber from being allowed within the entire province. Drizly has already been serving consumers in parts of the neighboring province of Alberta for over two years.

Drizly works with local retailers, including Liquor Depot, to bring adults of legal drinking age a wide selection of beer, wine and spirits, with delivery in under 60 minutes through Drizly.com and the Drizly app.

By providing access to inventories from local retailers in each market, the service gives customers a wide selection of beer, wine and spirits at reasonable market prices. In addition to a wide variety of adult beverages, Liquor Depot’s range of popular soft drinks, juices, ice and other mixers, are also be available on the Drizly platform. Customers schedule a delivery or in-store pickup. The Drizly’s mobile app and website are deep wells of information, offering cocktail recipes, pro tips and popular adult beverage trends.

Delivery in Vancouver is a flat $4.99, and customers have to purchase a minimum of $20 worth of products from Liquor Depot and Liquor Barn to qualify for delivery.

Simplified Age Verification

Alcanna, formally known as Liquor Stores N.A. Ltd., is North America’s largest publicly traded alcoholic beverage retailer and includes a chain of more than 240 stores operating in Alberta, British Columbia, Kentucky and Alaska, with both Liquor Depot and Liquor Barn under its banner. They carry a vast selection of craft beers, ciders and spirits, some of which are not available in provincially run liquor stores.

Although other liquor delivery services exist in the area, Drizly’s verification software ensures that liquor is kept out of the hands of minors. Age verification made the service even more appealing to Alcanna when it was looking for a platform to sell its products on demand.

“Vancouver has been thirsting for everything that Drizly facilitates, not least online access to our vast inventory, an intuitive shopping experience and the convenience of delivery in under an hour. It’s a win-win in every sense of the term,” Fran Coons, Vice President of Operations at Alcanna said in a press release.

By equipping retailers with technology that can verify age and identification, Drizly helps business owners protect their liquor licenses. Their retail partners are provided with a device to scan barcodes on official forms of identification. Drizly’s proprietary ID verification technology enables delivery personnel to verify IDs with accuracy that goes well beyond a manual review. The scans collect the customer’s name, date of birth and the ID expiry date, and the device can determine whether the ID is authentic. Once age and identity are confirmed, the scanned information is deleted from Drizly’s records, so there is no concern about collection or storage of personal information. Retailers aren’t required to use the device and can choose to use the scanner for every delivery or only when employees suspect the customer is underage.

Regulations

Provincial regulations alcohol delivery services are required to follow under their licensing agreement do not allow delivery services to store liquor themselves. Instead, they must take orders from a verified adult, then purchase the order from a retailer or general merchandise liquor store licensees such as Liquor Barn or Liquor Depot, and deliver the liquor to the adult who ordered it at a place where it is lawful to store or consume. The delivery service license in Alberta is considered a Class D liquor license and costs $200 annually. In British Columbia, licensed establishments are permitted to sell their products online and deliver them to customers only between 9:00 am and 11:30 pm and orders must be delivered on the same day they were placed.

Additionally, in British Columbia, anyone involved in the selling or serving of alcoholic beverages is required to complete “Serving It Right” training.  Serving It Right is British Columbia’s mandatory self-study course that teaches licensees, managers, sales staff and servers about their legal responsibilities when serving alcohol, and provides practical techniques to prevent problems related to over-service. This training is extended to and required for alcohol delivery personnel as well.  All Drizly delivery drivers are Liquor Depot and Liquor Barn employees, so they go through the same training as in-store staff, knowing how to recognize whether someone should not be served and when a customer may be a minor.