In this episode we talk about the business of craft beer. NWA is seeing a lot of new nano breweries opening and we will more than likely continue to see more open in the coming months and years.
History of Beer and Beer Business
The craft beer business includes nano-breweries and micro-breweries.
Northwest Arkansas is the home of a lot of very tasty craft breweries.
Samuel Adams, one of the biggest brands in US craft brew industry, resurrected the movement towards beer with taste in the late 1980s. The millennials are aging into the stage where their interests are on things that are hand-crafted and not mass produced so the growth in craft brewing has increased while the overall mass-produced beer market has flattened out.
The Business of Beer
The brewing business is not easy. Having a qualified brewmaster is part of the equation and this is so because in all cases, the beer has to be great.
Craft beer can be a high margin business but understanding the brewing process, and the numbers that drive the operation are essential.
For example one in every five or six batches has to be tossed because it did not work right. Beer brewing involves chemical engineering process and it pays to have a smart business person, the brewmaster, and even a chemical engineer to ensure efficiency.
The Demand for Beer and Development of Beer Business
The penetration of craft brew particularly in the southern United States is low but the demand is there. So as the demand increases, more and more craft breweries are expected to open.
Innovations in unique flavors have also kicked in (e.g. putting in chilli peppers and chocolates in beer) and it is working.
Canning. Many craft breweries are canning beers because it actually keeps the beer better because it keeps the beer from being exposed to ultraviolet light that could contaminate the beer.
Brand Labeling. The childlike, cartoonish designs of beer logos indicate that the designers may have gone too far on designing the labels. Brand labels must be improved to easily differentiate the brands. The traditional retail competition for shelf space sorts itself out for this micro booze.
Venture Capital on Beer Business. It is a growth sector, it has an 11% annual growth rate whereas large and established national breweries or brands are flat and declining. Consolidations are expected and it is better for the large players to buy out brands that are bigger rather than risk in coming up with something new.
Capital Expansion, Strategy and Distribution. The approach and level of regulatory complexities are different per each state and even locally within states. This makes expansion across state lines a tricky proposition.
Words of Wisdom/Tips for those who would want to venture into the Beer Business
Be an APPRENTICE. Go find a solid craft brewing operation and work for them for 6 months to a year. Understand all about the business - how to brew a great beer, how to be compliant with regulatory issues, and what point of sale system is best. Being an apprentice sounds like a big commitment but it will save a ton of headaches and possibility of failure. The timeframe of being an apprentice will help a new operator see what is bad or good about the business and if it is really a good fit.
Be an EXPERT. Craft beer is a hard business but it can be profitable with solid research, customer development, attention to detail, and focus on quality..