September 2, 2010

The Session #43: The New Kids

So, this was supposed to be a post about Prism Brewing Company.

The Beer Babe is hosting this month's Session, with the challenge being:
to seek out a new brewery and think about ways in which they could be welcomed into the existing beer community. How does their beer compare to the craft beer scene in your area? Are they doing anything in a new/exciting way? What advice, as a beer consumer, would you give to these new breweries?

Take this opportunity to say hello to the new neighbors in your area. Maybe its a nanobrewery that came to a festival for the first time that you vowed to “check out” later. Maybe it’s a new local beer on a shelf on the corner store that you hadn’t seen before. Dig deeper and tell us a story about the “new kids on the block.” I look forward to welcoming them to the neighborhood!
A good, interesting, different challenge, indeed, and one that was right up my alley. I immediately thought of the relatively new Prism, located in the Philly outskirts. They have three beers, all doing interesting things with blending flavor, and there seems to be a vague political tinge (my former life as a politics blogger was intrigued). They have a gorgeous Web site, they've asked for design advice on their Facebook page and Twitter, and their very name is evocative of a visual element. What could be a better fit? It was going to be an awesome profile, full of stuff about branding, decisions about design, and the unique roadblocks to a craft brewery in fairly rich market. I would have loved it, anyway.

By now you've gathered, of course, that that didn't happen. I made email contact with one of the owners, they seemed into it, I offered to meet them at a place halfway, they didn't respond, I tried to find a time to call them... and the interview never happened.

Now, a snarkier and more self-serving blogger might suggest that one piece of advice one might give is to never ignore an opportunity for free advertising. But that would be disingenuous, and it would also be totally wrongheaded and contrary to the point of the Session.

In order to understand why, one has to understand a little bit about the financial issues of a craft brewery. In case you're new to the craft beer scene, every craft brewery (except maybe the very largest ones, like Sam Adams) is a small business, and runs like one. That means technical things like fewer than 50 employees, but it also means that, if they go out of business, it's not the way Lehman Brothers goes out of business. Large corporations balance many millions of dollars in assets and expected income sources against liabilities and predicted expenses, all based on valuations and numbers that aren't guesswork, but aren't exactly what you or I would call money, either. That's why even the largest ones can find themselves filing for bankruptcy when it turns out some assumptions about value or predicted expenses were wrong.

Small businesses like craft breweries don't fail like that. They fail because of cash. One day, there's just not enough money to pay bills, and then you're out of business. It seems silly, but a small business could have millions  of dollars worth of stuff, a loyal and committed clientele, and a first-rate product, but quite suddenly find themselves broke. In brewing, it's actually worse. In addition to the equipment (which is a big capital expenditure that usually comes with a debt load and significant ongoing maintenance expenses), there's also huge need for cash upfront (on ingredients), during production (water and electricity), and at the end (bottling, licensing and shipping all that heavy beer). Then bars and stores have to buy it, and the distributor has to then pay the brewery back, all of which takes time and contributes to what MBAs call a longer cash cycle. It could well be three months before even a well-run brewery gets their return on a dollar they spend on grains. That may not sound like much, but next time you go to the bar, ask them if you can pay in three months, when your customers pay you. They'll say yes (if you have a credit card), but it's not free (which is why interest rates on credit cards are high). Now try doing that on a $10,000 shopping run, while you have balances on your credit card, mortgage and car, and you have a sense of what a small brewery faces.

Oh, and if a batch is out of spec, they might have to throw it out, which means the money is basically wasted.

So for small breweries, there's not enough cash. There's also not enough time. Having worked with craft breweries for a few years, I can confidently say they are family-and-friend enterprises, where everyone has multiple jobs and not enough time. Taking a look at the financial constraints, we can understand why they're unable to hire more people, and why relatively small paychecks for a lot of work are the norm. Why would anyone do this? Well, you do get to make beer for a living.

Thus, when a brewery like Prism doesn't have the hours in the day to get back to a blogger who wants to talk about the challenges with branding, it's not because they're too cool for school. It's more likely because they're busy trying to stay solvent. And, truth be told, as much as this blog focuses on the marketing end of the process, most breweries sell all their beer. The problem is capacity; it is making enough beer to cover all of the expenses, keep their drinking consumers happy, and do it fast enough to pay bills. Breweries like Prism might like more exposure, but they don't need it. They need a bigger line of credit, and as I may have mentioned, I'm not exactly well suited to help them on that front.

I stole this image idea from The Beer Babe.
The reality is that while we love the excitement of seeing a new brewery, discovering its character, and tasting the way it approaches the medium, a lot has to happen for us to do all of that. And it's easy, sometimes, to see guys in overalls drinking beer and think the job is easy. We fantasize about working for a brewery, or owning our own, and all the different beers we would make. We get frustrated when our favorite breweries change a recipe or pull out of a market, and we swear we'd never do that if we were in charge. But we never fantasize about how it would feel to set specs for a light golden ale on a production scale, spend a massive amount of time brewing to those relatively uninteresting specs, or know that you quite literally can't afford to throw out substandard beer. We don't think about all the tired conversations with our over-entitled hardcore fans who demand more big IPAs and stouts, when what pays the bills is that light golden swill more people buy. We never dream about the tough choices of where to put the beer, or the tough work of fighting a byzantine, crowded distribution system. And we definitely never imagine having tough conversations with a bank or lender who knows nothing about brewing, but feels strongly that our prices should be higher.

I hope I'll finally get that interview with Prism and have some cool stuff about design and branding a startup for you. But if it falls through the cracks for a while, I hope you all can understand why. For every scruffy guy cleaning out mash tuns or experimenting with hops, there's someone in the brewery poring over numbers of in and outflows who makes sure the power comes on tomorrow. Sometimes, it's the same scruffy guy.

So for all the new breweries coming onto the scene, welcome to the party. I'm the guy who will pay way too much attention to your label art. But I'll do my best to remember, if you ever produce an uninspired design, it's probably because you had something a little more pressing on your mind.

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