September 14, 2011

Craft Beer Entrepreneurs and the End of Amateur Breweries

Over Labor Day weekend, I had a couple of great opportunities to have discussions with some of the many people who aspire to make their career in craft beer.

The first was a chance I got to speak with Wim Vanraes of the startup Saint William Brewery. We met up at the Ship Inn on the Delaware River in Milford, NJ, where there was some excellent session beer. The Giggling Monk was a great 4.2% Belgian-inspired ale that was balanced and light with a lot of flavor, and the lightest beer offered was the 4.1% Chocolate Stout, which was a delicious dry and roasty brew. Wim actually got a chance to go talk to the brewer afterward, and you can read more about it on his blog.

Saint William drank beer from a bowl.
Wim is a Belgian who has been in the United States for 7 years, including getting his citizenship last year. He has a Masters Degree in Archaeology from the University of Ghent, and works as a freelance linguist and translator, since he speaks eight (8) languages.

As usually happens when I get together with beer people, we ended up in a conversation about beer, particularly the industry and its quirks. As a Belgian, Wim has an outlook on beer similar to the one I heard from Don Feinberg, which is to say more balanced and concerned with tradition than the average American craft beer drinker.

"Like cuisine, each [brewing] tradition has its own philosophy," Wim said. "You have to understand where it's coming from."

As someone who trained with a third-generation brewer in Belgium, that view is perhaps not terribly surprising. What was a little surprising to me, though, was his perspective on the issue of what defines a craft beer. While he acknowledged the political realities of a need for definitions, Wim said the production and ownership structure of a brewery generally do not matter to him.

"It's not about the size; it's not about who owns it in the end," he said "It's about do they respect beer?"

That in some sense reveals Wim's plan for Saint William, which is an ambitious and growth-focused one. As you've picked up by now, this post is about business models for breweries and, while I must of course respect confidentiality for b plans, I can say that Wim's is quite different than almost any I've seen in craft beer. While all business plans rely to some extent on growth, Wim's is one that takes a different approach, building in expansion plans from the beginning.

Of course, any such approach will require more significant investment upfront, but it does what few breweries have done, which is plan for the fact that most production breweries have much greater trouble meeting demand than creating it. Given the vast expansion plans and withdrawal from markets that we've seen from even larger craft breweries, one can't help but wonder if Wim's thinking will become more common. As he put it:

"I can't imagine that you'd start a brewery and say 'I don't want to grow. I don't want to be successful.'"

He noted that this "challenges the homebrew mentality" that we saw in the initial generations of craft breweries.
"Brother Adelbrecht, remember when we could make geuze without an MBA?"
That idea intrigued me. Last week, I was part of an informal meeting of some homebrewers who had aspirations of one day making a living in beer, from opening a barn farmhouse brewery to a brewpub to being a silent partner. Again, I have to respect some privacy, but the following things were all topics of discussion

  • One homebrewer will be entered in next year's GABF Pro-Am competition. All he had to do was ask a local brewery if they'd brew and submit with him.
    • He was told "we'd just never considered it before."
    • That beer required a decent quantity of an expensive ingredient. He got it donated from a large, recognizable company. All he had to do was ask.
  • When buying a former industrial facility (at least in Pennsylvania), we discussed the need for an environmental engineering firm to get the state to sign off on pollutants.
  • We had an attendant who had gone from a homebrewer to a bottling volunteer to a production worker at a nearby brewery. It mostly came down to a willingness to work slave hours for free, and then very little money, for extended periods of time.
  • Brewpubs, the consensus was, are easier in a sense, because one can crank out beer, put it on a tap, and then never make it again if it doesn't sell. On the other hand, they are also longer hours, because they combine the 70 hours a week it takes to run a bar with the 70 hours a week it takes to run a brewery.
  • Production breweries, on the other hand, are mostly a struggle to hit a moving target of sales demand from distributors and bars that are want everything immediately, but will never guarantee space or sales.
Then, Eric Steen posted two great videos on two models for beer - nonprofit and co-op, that seem to take the grassroots/community aspect of craft beer and go a step further (go watch them). The place where the above group met was a bar where the owner, an accomplished homebrewer, is doing exclusively extract brewing, another quirky idea that might have seemed crazy a few years ago. I have a Q&A coming with Bomb Lager, one of the new contract brewing beer companies that is focused more on marketing and price points than exotic hops and two-row malts. 


So what is the point of all this?

I believe the days of the amateur brewery are over. 

Even small outfits in craft beer today require a level of business planning and acumen that was absolutely not required ten years ago. Yes, the industry is growing, but competition is growing faster, and there is no room any more for a homebrewer just starting a brewery and winging it for a few years while he or she gets the hang of it. And before you protest: Yes, there were many. Many of them made it, cleaned up, and are big names now, a few did not.

The craft beer market is more crowded and sophisticated every day, and it flatly won't tolerate amateurish endeavors. When even groups of true amateurs get together to talk theoretically about going pro, and everything from production schedules to environmental engineering is on the table, we've left behind the days when Sam Calagione could open a brewpub and figure it out as he went along. It is not even just about beer quality (we can all think of breweries with quality beer that closed). The level of business acumen required to be successful in craft beer, it seems to me, is significant.

4 comments:

  1. Hey, thanks for the shout out. I think this was a fantastic post. I'm not sure though this means the end of the amateur brewery. I definitely believe it will become harder and harder for them as more and more people with brewing degrees fill the markets demand, but I do believe the amateur brewer can start a local brewery, one that you can walk to, and it will fill it's role in the local community. Until the market is saturated, but it's clearly not. At least here in Colorado breweries can't even keep up, many have had to pull out of some markets to fill demand at home. If you look at Portland, they have 50 breweries in the city limits and people still can't get enough. I think there's still a spot for them, but you are right in that it will just become more and more difficult and it will have to start pretty small.

    BTW, I think Russian River and New Glarus are examples of successful breweries that don't want to expand. I could be wrong though?

    Nice post, a great read...

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  2. Eric, I appreciate the kind words and the good thoughts. I agree there are breweries that do not want to expand production, maybe, but they do continue to expand profile and brand value.

    In any case, the statement is intended for new breweries more than existing ones. I think the one exception is probably so-called "nano-breweries" that are side businesses or retirement businesses or something), because the owner does not rely on them for income.

    As for Portland... I honestly wonder what that number will be in 10 or 20 years. Maybe there are some unique markets that, like Napa or the Finger Lakes with wine, turn it into an identity, but generally speaking I feel like lots of breweries and breweries in planning won't make it as the market grows more competitive.

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  3. Nice write-up, Greg! It is a very interesting dynamic, and I think you're spot on with your analysis that this describes new breweries, and that the 'nano-breweries' are somewhat a class apart, as they fill in a different niche, that of the very small brewery that does nor rely on sales perse to keep brewing, and that has very strong, very local ties.
    I am curious how this will develop in the next decade or so, as I expect these next ten years to shape a lot of our beer future.

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  4. Giggling Monk! No way. Just that alone made this article worth it. Great stuff man. It's great getting educated on something so awesome like beer.

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