May 3, 2011

Business Models, the Dangers of Politics, and the Philadelphia Beer Market with Prism Brewing Co.'s Rob DeMaria

Some of you may remember a Session from months past where I was going to interview one of "the new kids" in my brewing area, Prism Brewing Co. As you may remember, that fell through.

Until now.

This weekend, I got the chance to do the slightly belated interview with Prism's Rob DeMaria. I found the conversation, which touched on everything from label requirements to business models to branding pitfalls, a fascinating look into the business of craft beer, which is often about things far less sexy than those of us outside it might imagine. Hope you enjoy it!

The first thing that jumps out in a conversation with Rob DeMaria is how thoroughly he has thought about the business of being in the Philadelphia area beer scene.

For one thing, he knows he's not alone.

"I love that there's a lot of us coming up," he says, comparing it to a new generation, "but some of us are going to make it and some aren't."

Part of that is the unique beer geography of Philadelphia and its environs, where established German heritage breweries collide with experimental nanobreweries and exotic imports to compete for shelf space.

"Philadelphia as a market is very interesting," DeMaria says. "The plus is the minus."

The plus, of course, is that the consumer is "educated, loves craft beer, and hungry for more beer... they have examples of the best, most stylistically accurate beers in the country." That's not just Philadelphia's great native beer scene, but the fact that beers from Russian River to the uncountable Belgian brands flow in from outside the region. That, of course, is its own downside, since a new operation  is "going up against not only the flavor but the brands of these breweries."

The other downside, though, is that this leads to "a rotational attitude in bars," where the bar owners and managers are compelled to keep rotating beer, leading to very unpredictable traffic and accounts.

Especially in draught-only breweries like Prism, where timely inventory turnover is vital, the delay in production time leads to what supply chain people call the "bullwhip efftect." If DeMaria has to have several batches ready to meet demand, he has to know that weeks ahead of time, when brewing begins, or else he might leave people thirsty, or he'll produce too much beer that will sit on a warehouse floor.

While some breweries use lack of supply as a tactic, DeMaria - like many startup breweries - has no desire to pass up thirsty mouths. That was part of why Prism contract brewed for a year or so before launching in their own space recently (the brewpub in North Wales will open soon). Despite the lack of control over beer quality, the ability to get to market was important for a brewery that wants to be a fixture in the region.
The next step is clear to DeMaria.

"It's about creating a brand,"  he says, and specifically means several brands. "The beers are the brands, not the brewery."

For many consumers, the specific beer is that which has the taste we crave, whether it is Dogfish Head 60 minute or Brooklyn Lager or even - gasp - Bud Light. DeMaria says the industry is rife with proof that the desire for a beer that pleases our palate is superior to any loyalty we might feel to a business. That, combined with a free spirit that leads Prism to go by the tag "Live Unfiltered," drives their creation of beers with innovative flavors and ingredients, but with a level of quaffability that could appeal to even the session lovers among us.

For Prism, a brewery so design-conscious that it is named for a light-refracting device, selling those beers will be heavily tied to a visual identity.

While the beer quality is first and foremost what will define the brewery, DeMaria acknowledges that "there's something to be said for the proper amount of marketing and how you present yourself,"

The artist Prism uses is North Carolina illustrator Pete McDonough, an old college friend whose concept drawings were so good, Rob said, that "I said I'm going to invest in continuing to [have him create new labels]"

Of course, even a brewery that thinks in terms of branding like Prism can be caught by the law of unintended consequences.
"I didn't even think it was going to be an issue," DeMaria says, shaking his head.

The original name for their light (5.5 abv), tea-infused pale ale was a long Chinese word for "celebration of tea," but DeMaria felt that the beer was neither big enough, abv-wise, nor "fancy" enough to fit a long, difficult-to-pronounce Mandarin word.

So being a history buff and loving the idea of fun in beer, they settled on "Tea Party."

"Tea Party" came from two things, according to DeMaria. The first was Philadelphia's history with the Tea Party (the original, Boston one, not the modern-day right-wing group). The marines who marched to Boston, the independence movement, and even the "Don't Tread on Me" flag, all have Philadelphia roots. Also, he noted of the people at Prism, "We're kind of nonconformists [and we try to keep things] a little bit revolutionary," so the name seemed like a good fit.

As one might imagine, not everyone picked up on the original reference. DeMaria remembers a tasting on Memorial Day 2010 where someone came out specifically for the Tea Party and asked to have a picture taken with him and the beer. While a little strange, DeMaria did not fully understand the breadth of the name's multiple uses until the next day, when he saw his picture on political nexus

I told Rob I have several friends who would not drink Prism beer because of the beer's name, which they took as a sign of support for the right-wing group, despite the fact that there is nothing to indicate that in the marketing. He said one bar that loved the beer sent it back to him, citing a disagreement with the philosophy.

For DeMaria, who is not in any way affiliated with the Tea Party of Sarah Palin and Pat Toomey, the potential loss of customers over an ideology to which he does not even ascribe, was too much.

"We changed the name because it was divisive," DeMaria said. "People saw it as a political statement, and it never was."
A few weeks ago, I went to a Philadelphia-area bar at 10:30 am and waited for 40 minutes to pay $6 for a 4 oz tasting of Pliny the Younger. I did this so that I would never have to do it again, but every time an ultra-rare keg makes its way to the environs, such lines are commonplace and even expected.

While he recognizes the marketing and monetary value of such scarcity-induced mania, DeMaria's vision for Prism's beer is very different.

"I don't ever want people to stand in line to get our beer," he says.

DeMaria had a blood orange summer blonde ale he was going to call Blood Light, and he envisioned the C-and-D letters from Anheuser-Busch - and the free publicity - that would follow.

"I could take this beer as a publicity stunt, or I could take this beer seriously."

Using many different ingredients and working with different flavors, DeMaria says he knows Prism must "be careful not to become a gimmick."

Part of working with the identity of a brewery that pushes the envelope is learning on the fly, according to DeMaria. That can be everything from recipes to understanding that describing beer identities in a way that people will understand.

"My beer doesn't really meet style guidelines," DeMaria says, and explains that federal regulations, of all things, helped him realized the value of description over style.

Whenever you use a different ingredient in commercial brewing, you have to submit a statement of process to the federal regulators, who tell you what to put on a label. That led to "Ale brewed with honey" that currently identifies the Bitto Honey style (previously, it was identified as an IPA).
For those expecting an American-style cascade hop bomb when they see "IPA," the Bitto Honey would be a very jarring beer. It tastes more like a Hopslam, with layers of flavor and hops balanced by the notes of honey. The new description directs drinkers to expect the right things, which means they are happier with the beer.

For example, the Prism beer My Love is Evil was first identified as a "Strawberry Jalapeno Brown Ale" until DeMaria realized that misled drinkers into expecting a sweet and spicy sip, rather than subtle flavors for which he had aimed. Now it's called a "brown ale brewed with strawberries and jalapenos."

"You learn these things as you go through the process," he says.

With a few brands launched, DeMaria's future focus is on a regional presence. He's resisted calls for beer that would take him outside of Prism's current focus area. With breweries that have overextended and either had to pull out of states or go under entirely, he's keenly aware of the dangers of ignoring manageable growth strategies.

For Prism, though, that has to do with demography in addition to geography.

"We're trying to grow the craft beer market," he explains. "If you're going to grow the craft beer market, you have to appeal to more than just craft beer drinkers."

That means walking a fine border between beers that please the core group of craft devotees and beers that can be enjoyed by someone who might prefer a Coors Light, a Sauvignon Blanc, or a Kambucha. 

"Are we going to do a double IPA? Yes, because you have to." But, DeMaria says. "We're really trying to ride that line."

DeMaria is quick to acknowledge that all of his views are a function of where he is now, and that in a year's time he may have changed them completely or be the one who did not make it in the new, competitive market. But speaking with him on topics from his MBA to GABF style guidelines, one gets the sense that would be unlikely.

Almost all brewers have passion for beer, and most have passion for making beer, but few have the obvious passion for customers that seems to define DeMaria's dream for Prism. As he's navigated politics, business models, new markets, and unpredictable distributors and bars, he remains fervent about the anti-elitist role for craft beer in America: "Beer is for people."

Long-term, any growth for Prism, according to DeMaria, would be a form of multi-domestic strategy, where new brewery locations would be added for expansion, rather than expansion of one site to leverage great economies of scale. This would allow more control over the beer's freshness, yes, but also an ability to be a part of whatever community Prism might inhabit, just the same way they plan to be a fixture in Eastern PA.

1 comment:

  1. Great interview! Really like what your blog is doing.