Growth and Sales

The defining trend over the past several years is that microbrew sells. And sales are robust. I’ve been telling potential investors, banks, friends and clients that the greatest challenge startup breweries face is their ability to accommodate growth. 2012 again saw double digit growth. The data from the Brewers Association reflects this:

“In a year when the total U.S. beer market grew by one percent, craft brewers saw a 15 percent rise in volume and a 17 percent increase in dollar growth, representing a total barrel increase of almost 1.8 million.

With production at 13,235,917 barrels in 2012, craft brewers reached 6.5 percent volume of the total U.S. beer market, up from 5.7 percent the previous year. Additionally, craft dollar share of the total U.S. beer market reached 10.2 percent in 2012, as retail dollar value from craft brewers was estimated at $10.2 billion, up from $8.7 billion in 2011.”

What we are seeing is a market vacuum being filled. Because of the complete eradication Prohibition had on small community breweries, and the subsequent national movement toward homogenization of products, we are just in the past decade seeing an overall cultural trend back to valuing local artisan craft products.  This cultural shift, combined with better technology, ingredients, and knowledge available to small breweries has led to a period of astounding growth – even in an economic recession.

My feeling is we will continue to see aggressive growth until we hit 10% of overall beer sales. And then we will see slower but still steady growth.

The challenge for startups then is smart planning. Many startups have had to upsize their brewhouse size dramatically within a couple years of startup. A good problem to have, perhaps – but product quality can suffer. And with so many new SKU’s coming into the marketplace every day  from so many excellent new breweries, a lapse in quality can be damaging to your brand.

As a result, we have seen many startups eschew the more modest 7 or 15 BBL systems and jump directly into a 30 BBL or 50 BBL system. And judging from recent conversations with fabricators, this trend is continuing. My concern with this is that at some point, when we march toward an inevitable slow-down, an equalization of demand with production, startups with large systems will have to sit on much unsold product. This will not only harm their profit projections, but diminish the quality of their beer and limit their ability to brew multiple styles.

A strategy startup breweries may want to consider is downsizing the size of their brewhouse and upping the efficiency. A four-vessel brewhouse – with a dedicated mash, lauter, kettle and whirlpool, can produce several brews in a single day. This maintains a favorable economy of scale while maintaining the flexibility to produce multiple styles and brew interesting, experimental brews.

One project I’m working on now is targeting a four-vessel 5 BBL brewery.  (Actually a five-vessel. There will be a dedicated, sealable mash tun for sour mashes and gelatinizing raw barley and other cereal grains) There will be several 20 BBL fermenters so that there can brew back-to-back double brewdays for a single batch of the expected main products. (IPA, Helles). Or small batches of experimental recipes can be brewed without having to store so much product.  We are leaving a footprint in the building for a future four-vessel 30 BBL brewery, when the need arises to expand, the 5 BBL system will stay in use for small boutique and pilot batches. This way growth can be accommodated, without potentially diminishing quality and maintain the flexibility to brew new and interesting styles that has become the hallmark of the microbrew revolution.