Brewpocalypse

The craft beer bubble is bursting.  Yes, you’ve probably read similar alarmist pieces by industry outsiders for years, but trust me on this one–it is happening, and it is going to be brutal.  Hopes and dreams are going to die, people are going to lose their jobs, and multi-million dollar operations are going to change hands or simply go under.  It is already happening.

This is the result of several factors.

  1. An open market that was not competitive enough.  There are many breweries started in the 90’s and 00’s by founders who may have been creative but were not good business people.  It was too easy to exceed, with double-digit sales growth every year.  Unfortunately a lot of people either made bad decisions with far-reaching consequences during the tail end of this period (2013-2015) or are unequipped to run a company in today’s ultra-competitive market.
  2. Over-leveraged breweries.  This ties into the first.  If you expanded production via debt, basing future payments on future growth, you are in a lot of trouble.  See Green Flash.  The worst situation to be in is to need to get more tanks to brew more beer to stay open.  It’s like burning down your house to stay warm.
  3. Too much beer.  Too many SKUs, not enough lines.  There is so much beer being produced, you simply cannot pump money into sales reps in order to sell your beer at this point.  It doesn’t work anymore.  Good representation just cannot win territories outside your home market anymore.  There are too many choices, and local is too powerful a force to fight.  You need to sell a certain amount of beer with no effort, and if you have a multi-state footprint, this gets extremely difficult.
  4. The advent of hyper-local breweries and brewery releases.  Smaller breweries are putting out fresh releases every week, with beer that is just plain better than lower-cost traditional beers sitting on warm shelves.  Together, enough of these make up a lot of bricks in a very hard wall to scale as a larger, distribution-focused brewery.
  5. The advent of New England IPA.  I haven’t seen anything written about how totally disruptive this has been to the beer industry.  In an instant, west coast IPA became irrelevant in the beer geek world.  Every brewery that built their house on west coast had the rug pulled out from underneath them.  I could write an entire post on this subject, but I made the decision to pivot to brewing hazy IPA back in 2016, the first time I tried a Tree House beer.  It’s a style with limited shelf life, expensive cost of goods sold, and is very difficult for larger breweries to pivot to.  As of right now, there is huge demand for it (sorry angry old heads, it’s not a fad) and it is here to stay as a sought-after style.

The first sign of the times was 2016, when Stone laid off a bunch of employees.  That should have been a glass of cold water in the face of many people.  But it’s far from over.  In the past year, three of my colleagues who worked for three different big breweries lost their jobs, when their entire sales forces were laid off.  Distributors are having down months, many for the first time ever.  You can’t spend a bunch of money to sell a product with slim margins.  The success of beer depended on the fact that it was relatively easy to sell, and turning up the heat in the market is causing those margins to evaporate.  The worst part of this is there are many jobs that are just not going to exist anymore, especially on the rep side, and good people who dedicated years of their life to an industry could be left high and dry.

OK, so you’re prepared for all this or none of those apply to you.  Great!  You should still be preparing to sell less beer.  When I say this, I don’t mean this month, this year, or next year, necessarily.  You may be in the middle of surging growth for your brewery, but for God’s sake, don’t make the same mistake that a lot of larger, older breweries made.  Recognize your growth for what it is, and take advantage of it now.  Sell as much beer with minimal effort as you can, while it lasts.

Why would it end?  It’s always going to, because beer drinkers are fickle, and novelty is fleeting.  Basically, when you’re new or expanding, your beer is sought after because it is new/new to the area.  You don’t need a rep beating down doors to sell it.  But inevitably, one of two things will happen.  The novelty will wear off and some new beer or brewery will become available, and you’ll lose volume.  Or you will up production/demand will decrease to the point that your product is no longer rare, which was its selling point to a lot of people.  See many many breweries/beers that used to be a huge deal.

What’s really amazing is that the IP/brands from larger, older breweries could be worth LESS in some cases than a new hazy IPA brewer that hasn’t even opened yet.  I was just looking at a brand new brewery on Instagram that already has 20k followers and is selling out of hazecans from day one.

The main thing you can do to prepare is to make hay while the sun shines and plan to shrink or stay flat in the future.  This applies to hyped up breweries, too.  Brewery can releases function because of the novelty and scarcity of the styles.  That is not sustainable.  The biggest mistake new breweries that are performing well right now could do is take all this for granted.  The more difficult and costly way to adapt is to control more points of sale.  You can already see this with Ballast Point’s burgeoning restaurants, and also with Veil and Other Half opening more locations.  I see beers on tap at bars that a year ago never would have had a prayer at getting a keg from the brewery.  The hype era is cooling down, but people still need to sell beer.  That puts even more pressure on older, larger breweries, as can release-focused breweries begin to sell their beer in distribution.

If you’ve read all this and think I’m exaggerating or you know better, I can promise you I am not lying to you.  We sell a small amount of beer in distribution, not even close to enough to pay the bills.  It’s easy to sell ten kegs a week, but it gets exponentially harder to sell more.  If you are a new brewery and can’t hit that minimum 75/25 split for taproom volume to distro, you are going to be in trouble.  We were 90/10 for a while, but since we increased production way beyond what we planned to, we’ve been hitting 75/25.

Let’s also talk about taprooms.  They are not the automatic cash cows people think.  They were three or four years ago, when all you had to do was exist and make passable beer.  Now, you need great beer, community involvement, events, good ambiance, great service, new can releases, and food.  All that costs money, and it’s a ton of work.  We’ve had six years to learn and fine-tune, but if you’re just entering the market, you have a nearly impossibly steep learning curve ahead.  Why is that?  Because you have to do the same or even better than established breweries.  Customer habits are getting set.  People didn’t leave Facebook for Google+, and they aren’t going to leave their preferred taprooms to go to new breweries unless the experience is better.

In a lot of aspects, I think I am extremely lucky to be in the position we are today.  Our slow growth protected us from making some very bad decisions.  We stayed small and have been able to adapt.  We didn’t get caught up in the distribution boom or can release boom, but have instead built a real income base that is unlikely to change over time because it is ultimately based on local people that like a good beer and taco.  Yes, we do can releases every week, but most of our customers don’t follow us on Instagram and just know that they like our place.  I believe this will continue, because we haven’t stayed complacent, and complacency kills businesses.

I have poured everything into this.  It’s not a retirement dream.  I absolutely need to succeed, because if it fails, so do I.  That’s why I will fight tooth and nail for it.  Whatever lies ahead, I hope to be prepared to weather any storm.

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Creating Quality Beer Events

We just had our five year anniversary party, and I think it went pretty well.  We definitely learned a lot, and to be honest, I am happy it’s over.  It was a lot of work!  With the lessons I’ve learned still fresh, I’d like to take a minute and talk about some ideas and suggestions I have on how to create, promote, and run a good beer event.  For my beer industry friends, these are just my opinions and ideas–please feel free to ignore them, or talk to me if you disagree with them!  You might feel offended, so fair warning, but it’s truth–my truth.

The beer world is, to put it lightly, inundated with events right now.  During festival season (pretty much April-October now) there are usually 3-4 festivals going on in a 30 mile radius on any given Saturday.  Not to mention all the tap takeovers, tastings, beer releases, etc.  With so many choices, the industry is slicing and dicing a pie that is mostly the same size now, and I think it’s very important to keep that in mind.

Ten years ago, the Northern Virginia Brewfest was one of the premier festivals in our area.  I was so excited for each one!  My friend and I would sign up to volunteer at every festival, fall and spring.  We’d have a great time pouring, and would often (but not always) meet a rep and chat with them, learning a little bit at a time when breweries were a big exciting mystery.  I loved pouring beer, and I enjoyed the volunteer shift just as much as the hours spent afterwards drinking beers at the festival.  Back then, you’d see a lot of west coast and northern breweries who were pushing distro in the area.  Mostly, everybody just brought their core beers, with maybe some seasonals here or there, but it was all kind of new and exciting.

Fast forward to today, and the Northern Virginia Brewfest is no more.  I remember the last one we went to as Crooked Run.  It was a bitterly cold October Day, and it was practically deserted.  Since I didn’t really have anything to do, I walked over to Millstone’s spot, which was lacking a tent, rep, and even volunteers, and helped myself to some of their Kriek.  On a personal level, it felt a bit melancholy, like adolescent dreams coming to an end.  C’est la vie.

Today, a lot of festivals are still stuck in the past.  For the past three years, as craft beer has really exploded in our area, festivals multiplied and multiplied.  Now, we’re still in sort of an awkward shakeout phase, as people are starting to realize festivals are not the cash grab they thought.  Things are going to get better, but we aren’t there yet.  What’s wrong with a lot of festivals from a brewery perspective?

  1. Inexperienced management.  Festivals are hard work, require lots of planning, and have a lot of moving parts.  Running out of ice or not scheduling enough volunteers shouldn’t happen a lot, but it does.  Stuff like this makes breweries not want to attend, and festivals need good breweries.  Also, treat your brewery folks well.  I’ve nearly walked out of some festivals due to the treatment I’ve gotten by management.
  2. Un-creative, boring experience.  Random breweries, random beers, some food trucks and live music doesn’t cut it anymore.  If you’re going to put a festival on, you should have some sort of angle.  Maybe it’s local breweries, or a charitable cause.  Maybe it’s food pairings, or an auto show.  Maybe it’s just really good beer.  Overall, it should contribute something to the scene.
  3. Scheduling conflicts.  This one can be hard to avoid, but scheduling a festival the same day as a bunch of others, or the same day as a longstanding event with a big following is obviously not good.
  4. Too big.  I’d much rather have 4-8 really good breweries pouring rare stuff, or one brewery running beer with some great bands playing, than a quarter mile of tents and a handful of people there.

If you have any doubts about putting on a festival, just don’t.  Seriously.  It’s a ton of work, you’re on the hook for a lot of money/beer, and there’s already too many going on.  I am not trying to sound negative, because if someone told me I didn’t have to put on a festival, I’d be stoked!  And you don’t.  You never really do.  It’s a totally optional thing, unlike opening your bar for the day or taking out the trash.  Life is complicated enough.

Festivals aside, there are a plethora of other events going on now, more focused on breweries trying to grow their brands, and bars trying to bring people in.  Beer tasting and tap takeovers can be great for everyone.  I’ll give you two really good experiences.  First was a tasting my friend Jason set up at the new Chantilly Wegman’s on opening weekend.  They had brought in Heart and Soul and Raspberry Empress cans.  In two hours I poured over 200 samples, and practically lost my voice from talking.  Most everyone I poured beer to had never heard of us until then.  We sold a lot of four-packs to a lot of new people!  That’s a win right there.  Second was a tap takeover at Alamo Drafthouse, a movie theater with a pretty awesome bar.  Our rep was there until 10:30 at night talking to people, and had a chance to hand out tons of merchandise, buy a bunch of beers for folks, and make some great connections.  We had five of our best beers on tap.  All the check-ins were very positive.

These are two examples of how to do events right: mainly, make it worth it for the brewery representative who is attending.  I have been to many events where I barely talked to anyone and sat around talking to the bar staff and nursing a beer until I felt like I had put in my time and could head home.  If I’m at an event, I am there to rep our brand.  I can sit around and drink any time.  If I am successful at an event, it’s not just good for me, but also for the bar.  If someone goes to a bar, meets the head brewer, has a great conversation and some free beers, and walks home with some merch, they are going to want to go back to that bar.

The problem is that many places either don’t market the event properly, don’t really care how it goes, or shouldn’t even do it in the first place.  I mentioned this last one concerning festivals as well.  If your customer base is not really into my brewery or breweries in general, a tap takeover is pretty much a waste of time for everyone.  The rep sits around doing nothing, the distributor had to make sure all the beer was allocated and arrived on time, and now you get stuck with five kegs…if it’s my beer, that’s not so bad.  If it’s some not-so-great beer, you could be trying to kick those for the next couple months.

Again, I am not trying to sound completely negative, because I think beer events can be great.  It’s just that most of the time, we’d all be a lot happier just selling some beer the regular way.  New accounts start talking about tap takeovers when no one in the area has had a chance to try our stuff yet.  Pick up a keg of Heart and Soul, run that for a bit, then we can put on some more interesting stuff, and once people have a taste, maybe try something out.

The corollary to this is the fact that in the world of higher end beer, festivals are totally different.  We are just starting to achieve a bit of recognition outside our area, but have been invited to a few high end events.  Free hotel rooms, pre-festival dinners, and other fun activities are offered.  These are giant parties with nothing but high quality beer, and the experience is quite a bit different from the way festivals used to be.  It’s the right direction–brewery folks are traveling to work for free and sending their best beer, so treating them well makes sense.  The old model of “do free work for the exposure and be happy about it” is going away.

I think it’s only a matter of time before events start downsizing, streamlining, and finding more niches to satisfy.  We have some fun events ourselves planned and I’m excited (and a little terrified) to get to work on them.  Hopefully we all have a fun time in 2019!

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Upcoming Beers

Here’s a look at what’s coming down the pipeline for can and bottle releases.  All dates subject to change, no guarantees.

6/15 Without You DDH IPA w/Ekuanot and Lemondrop + Raiden DIPA w/ginger and yuzu

6/22 Orange Empress sour IPA w/oranges

6/29 Cherry-Lime Double Vibes Berliner w/cherries, limes, vanilla, and milk sugar + Neapolitik imperial stout w/chocolate, vanilla, and strawberries

7/3 Special release: Young Americans DIPA w/Simcoe, Citra, and Mosaic

7/6 Rosé Empress sour IPA w/syrah grapes

7/14 FIVE YEAR ANNIVERSARY PARTY!  Noriega triple IPA w/pineapple, Starfire sour DIPA w/passionfruit, Glory imperial stout in bourbon barrels

7/20 Razzz sour IPA w/double raspberry, Only You DDH IPA w/Denali and Motueka, Katana DIPA w/cherries and vanilla

7/27 Blackberry Double Vibes + Mochi Orbz DIPA w/green tea and milk sugar

 

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Core Beer: Charm

charmFor day 5 of American Craft Beer Week, here’s a look at our year-round dark beer, Charm.  Charm is a robust milk stout.  Clocking in at 7% ABV, it’s got some bigger stout qualities, but is still fairly drinkable.

The idea for Charm began when we realized we really needed to have a year-round dark beer, but maybe not something over 10% like most of the stouts we were brewing.  The first batch of Charm did not turn out the way I had planned due to too much extraction on our dark grains, but after some retooling, it’s on the right track.

Charm has a big, chocolate flavor with pretty much zero roastiness.  The beer has a fairly thick body, with a heavy addition of milk sugar.  It’s like chocolate milk, but not sickly sweet.  When wintertime hits, we’ll start releasing some cans of this beer for distribution.

Today, we’re releasing cans of the first of the Charm variants.  For these beers, the can labels all get charming photos of people from our crew.  For each beer, the person on the can gets to pick a candy that we age the beer on.  For our brewer Ryan’s version, we used Reese’s peanut butter cups.  Mckinnen is Charleston Chews, Lee is Butterfinger, Brad is s’mores, Dylan is Heath, and I’m Twix.  We plan on running through our whole staff so everyone gets a can!

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Core Beer: Best Days

best daysIt’s day 4 of American Craft Beer week, and here’s a look at our thick, hazy hefeweizen, Best Days.  This beer is the newest addition to our core lineup!  Best Days has all the qualities of a classic German hefe, with a thick, sweet impression and opaque appearance.

Best Days was first brewed last summer.  I’m a huge hefe fan, and Weihenstephen hefe would definitely be one of my desert island beers.  Best Days uses the same yeast strain.  A little water chemistry gets us the body and haze we want.  The suspended yeast balances the sweetness of the beer, with a nice banana/clove flavor that isn’t too much.

I was pretty impressed with how much people have been digging this one.  A lot of our regular session beers get trashed on Untappd, which is pretty par for the course for those, but a lot of people seem to appreciate this one.  It’s sold really well in the taproom, and I’ve drank gallons of it.  When the heat is on nothing makes me happier than grabbing a pint of this beer.

Look for cans of this one either late summer or next year!

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Core Beer: Cruise Control

CruisePhoto(1)On day 3 of American Craft Beer Week, here’s a look at our year-round pilsner, Cruise Control.  Cruise Control is a full-flavored pilsner, with a robust malt profile and heavy dry-hop of Motueka and Wakatu.  It’s one of my favorite beers!

Cruise Control came about last year when we realized we needed to add a lighter beer.  Our Mexican lager, Carrera, was not moving as fast as we wanted–although a nice beer, it was a shade too dark to attract people that wanted a lighter beer.  Brad, one of our brewers, came up with a pilsner recipe.  Our first batch was exactly what we wanted, and it hasn’t really changed.

Cruise is a heavy pilsner.  The grain bill makes use of a lot of melanoidin malt, a German kilned malt that gives malty, maillard-reaction flavor similar to what is achieved via a decoction mash.  The malt is balanced with a near-IPA level of late addition and dry hops.  Motueka gives a nice lemon-lime flavor, and Wakatu gives a bit of noble hop spice.

We’re going to begin introducing Cruise Control cans in late July.  In the meantime, a pint of this beer is what a lot of us reach for when the day is done.

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Core Beer: Raspberry Empress

EmpressPhotoOn day 2 of American Craft Beer Week, I’d like to take a look at our year-round kettle sour, Raspberry Empress.  Raspberry Empress is a sour with Mosaic hops and raspberries.  Empress turned into a huge hit for us, but it was a bit of a sleeper.

The first time we brewed this beer was back in 2016.  We were first messing around with kettle sours back then and had just made a sour IPA base.  I split some off on some raspberries.  The resulting beer was nice–kind of like a raspberry mimosa.  Empress today is largely unchanged.  We sour using lactobacillus bacteria to achieve a pleasant level of lactic acid, and then boil.  The beer gets a whirlpool addition of Mosaic which contributes some bitterness and a Mosaic dry-hop.  Once we scaled up, we started using large stainless IBCs to sour the beer in before pasteurization, which has allowed us to brew large batches rather than just a single kettle full of beer.

I like Empress for a variety of reasons.  First, it’s not too sour.  It usually finishes at around 3.2 PH, with a mild perceived acidity and fruit flavor from the bacteria we use.  It’s a sour beer you can drink quite a few of.  Second, it’s very clean.  We’ve brewed a lot of this beer, and I’ve never had any issues of off-flavors that can creep up in quick-soured beers.  Lastly, we’ve created some cool variants.  A month ago, we released Orange Empress in cans, which did pretty well.  Next month, we’ll release Razzz, a double-fruited version, and after that, Rosé Empress with grape must.

Empress was really interesting for us in distribution.  Last summer when I was doing a lot of our sales, I didn’t have a lot of luck with Empress.  First, before we got our souring tank we couldn’t produce a lot of it, so it wasn’t available often enough for the people that wanted it.  Second, it was a hard sell to a lot of beer buyers.  They were not familiar with a fruited kettle sour, and were skeptical that it would sell.  It always sold really well in our taproom, and I was confident it would do well on tap at most bars, but it was difficult to convince buyers.  Things really changed as soon as warm weather hit this year.  Now we cannot make enough Empress!  In a month, our second souring tank will arrive and we can begin canning large runs of Empress!

Empress is available year-round in both cans and draught.  Look for it on tap or at some Virginia and D.C. bottle shops!

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