The 2017 Southern Brewers conference was well attended, with craft brewers wanting to know what is happening and what to do about it.
Our seminar was entitled “The Coming Shakeout in the Craft Beer Market”. We explored the growth of (former) craft brands that have been acquired by A-B, MillerCoors, Heineken and Constellation. These brands grew by 24% in 2016. Meanwhile, half of the top 50 independent craft breweries lost sales in 2016, while half increased, netting to growth of about zero.
We often read about another craft brewery selling out to the big guys. Mergers and acquisitions will drive the competitive landscape, as bigger companies compete for what is now a slow growing pie. This means more price pressure, chains carrying big company brands and corporate breweries opening their own tap rooms.
Independent craft beer is up 5% YTD thru June 30, 2017. So any brewery that is growing at a rate above 5% is taking share from everyone else. That’s just the way it is. And the way it has always been in the beer business with the exception of the fast-growth years of 2004-2014 when the growth was easy. Now it’s about competition. There will be winners, losers and survivors.
What can you do about it?
- Product quality – the beer must be great not just when it leaves the brewery, but when the consumer drinks it. How well does your beer hold up?
- The strength of your brand – the beer you drink is a statement of self-identity, like the clothes you wear or the car you drive. Your brand has to be a brand craft beer drinkers want to identify with. Otherwise, they will be with you for a short time and then on to the next IPA.
- Distributor selling effort – distributors are cutting back on suppliers and skus. But they respect hard working, engaged owners and sales reps. Be visible. And be buttoned up with your Annual Business Plans and promotional calendars. Keep your promises. Always.
- Cash – it’s your lifeblood. Without it, you bleed out and die. Tap rooms are a great source of positive cash flow. If your are bleeding cash, take action before it’s too late.
- Your advisors – when you are working as hard as you can to run the business, it is hard to look past producing and selling beer. The right advisors can help you think things through. There were challenges when I owned a craft brewery and later, a significant sized beer importing company. With the help of good advisors, I sold both successfully. What I enjoy most about the advice business is helping brewery owners be able to sleep at night, by taking on their hardest business problems. Which maybe aren’t so hard if you have already been there.