Six Things to Consider for the Coming Year: Expert Outlook 2021

There always seems to be a lot of talk centered on how you can learn from mistakes and from the dips in life. Well, 2020 has certainly taught many breweries hard lessons and planning for 2021 has been a difficult chore as the global pandemic has made life-altering notions. Some situations had to happen day by day as city, regional and state mandates altered opening times along with what and when something could even be sold and in what certain matter.

Taking a step back and looking over what 2020 has delivered along with what 2021 could hold is something that needs to be done for each facility nationwide. Thoughts of growth may be guffawed upon as the mantra might just be ‘I just hope we survive the next few weeks.’ Yet, those discussions are going on and plans are being made, no matter how tentatively they may be over the next few months.

Brewer discussed points of growth for the future along with what experts in the industry have learned from 2020 and how it affects the immediate future and how it has altered business plans for 2021 and possibly beyond.

“2020 has certainly been an interesting year,” said Smartmouth Brewing President Porter Hardy, IV. “We’ve had to learn to be very nimble in our business model in the face of constantly changing regulations and customer behavior.”

WHAT HAS WORKED? WHAT WILL STAY?

The year has forced Scofflaw Brewing to think more about its product mix.

“As a brand, we have always focused heavily on draft. Historically it has made up almost half of our volume,” said founder Matt Shirah. “Package sales have certainly been much stronger than draft this year given the mess that is 2020.”

Shirah feels that package is even better if you can maintain product velocities in the trade and avoid shelf death. He also foresees that 2020 volumes are going to look much better than this year’s financial margins.

“Early in the year we expected to see retailers narrow their selection and focus on higher velocity products,” he said of the Atlanta-based brewery. “Then comes 2020 and throws a wrench into all the recent studies that point to consumer sentiment that there are too many SKUs.

“We think that the massive, unavoidable shift to package has only delayed a market-wide reduction in SKUs.”

Scofflaw’s short-term focus will be on driving down costs and working to identify other ways to improve margins. The brewery’s long-term goals remain the same though: focus on the on-premise and create an experience that draws consumers to the product in package stores and retail chains.

Hardy believes one thing that is coming out of this pandemic for Smartmouth — located in Norfolk, Virginia — that will probably live on is home delivery.

“It was an idea we had thought about but never really invested much time into until the pandemic,” he said. “Now, I think it will stay as a regular part of our business. Who doesn’t want beer delivered directly to their door?”

Ecliptic Brewing has seen an 11% increase in canned sales YTD for the Portland, Oregon brewery and Brewmaster John Harris feels it won’t change anytime soon. As a brewpub model, Ecliptic had to shift its way of thinking of serving food as well.

“It redefined our restaurant,” he said. “We were unclear on what was going to work.”

Ecliptic quickly set up lots of tables outside since reopening, but to keep its team working, Harris said they are making plans to move back inside as well.

“We installed air Ionic purifiers in the restaurant and are cutting table numbers to minimums,” he said. “We are also getting our outside tent covered and heated.”

SOME SUCCESS OUT OF 2020?

In 2020 Avery focused more of its attention on the off-premise trade. Founder Adam Avery feels that focus will have a lasting impact on the brewery’s off-premise/on-premise ratio.

“Instead of launching a lot of new beers, we also committed to brand building some of our current year-round brews,” he said. The brewery has also diversified by spending a lot of time developing Sparkle, its contribution to the craft hard seltzer market.

Shirah found it particularly interesting that we now see craft beer purists diving into the ‘sinful pool’ of seltzer production. Scofflaw began to develop its seltzer brand around the start of 2019 and found the ridicule entertaining as it launched a seltzer line in the Georgia market.

“If only we could produce enough to meet the demand of just one state,” Shirah said.

“A few months ago we were asked if this had damaged the legitimacy of our craft beer brand (we chose not to respond). Shortly thereafter we saw the Brewers Association marketing a book on seltzer production.

“As a brand, we still see outsized growth opportunities. Unfortunately growth capital is not as easy to come by as it once was.”

Ecliptic Brewmaster John Harris laments that as a management team they would have known the shutdown would have been so long and planned accordingly.

“We would have hopped on takeout and delivery sooner,” he admits. “[We] wish we knew there was going to be a can shortage of great magnitude.

“I also wish all breweries would suspend new products for 2021. That way maybe everyone could get cans. Big breweries are at an advantage here.”

SMART INVESTMENT PLANS?

One lesson Hardy feels that Smartmouth learned has been on the financial side and making sure that costs are under control while trying to find ways to do things more efficiently without sacrificing quality. “After years of talking about it, we managed to find a used centrifuge and are in the process of buying it,” he told Brewer in mid-September. “This should help on the cost side of things as well as contribute to increased consistency of our products. Putting investment in equipment may be a wise move as a possible shakedown of consumer choices may change and quality liquid is what can make a repeat purchaser. Finding those small possible weak links in your brand may provide a stronger foundation for the future.

Growth sometimes occurs so quickly that infrastructure cannot possibly grow as quickly as the top line, Shirah noted.

“When this happens, you have to slow down the raging machine and focus on process, quality, and people,” he said. “Safety, as it relates to each of these items, should be the first and foremost concern of any manager regardless of their position in the organization. There are many good consultants out there that are able to help get teams up to speed. They can help identify and address issues, operational and otherwise. I know it looks expensive, but it is almost always worth every dime.”

Scofflaw is focused on capacity bottlenecks. Shirah shared with Brewer in September that installing a new canning line was the newest priority, but growth always has a caveat.

“Remove one bottleneck and there is another, and another, and another,” he said.

NEW CONSUMER TRENDS

Shirah says that Scofflaw sees continued growth in the seltzer and better-for-you options.

“I am sure everyone sees this,” Shirah said.

Adam Hiner feels there is a generational shift away from the hegemony of ‘Beer, Wine, and Spirits.’

The co-founder of Boochcraft in Chula Vista, California said consumers coming of legal drinking age have different priorities and are rejecting tidy categorization.

“They are looking for something unique and perceived health benefits are increasingly important,” the hard kombucha maker said.

Also noted across the board is an immense shift to online purchasing in a way that had previously hit nearly every other consumer-facing industry apart from alcohol.

“I don’t anticipate that going away any time soon,” Hiner said. “The consumer purchasing habit we’ve encountered is the increased curiosity around corporate social responsibility — we get asked all the time for more information around our sourcing and our impact. We love this trend and we hope that consumers continue to exert pressure on companies and manufacturers to do the right things at all levels of the supply chain.”

PREDICTIONS FOR 2021

Right now, there is so much variety of great beer coming from every corner of the country,” said Surly Marketing Manager Bill Manley.

“It is important that we continue to surprise and delight our fans with new fresh beers that continue to excite drinkers,” he said. “That said, if 2020 has shown us anything, it’s that consumers need brands they trust, and we expect to see some shifts from the “what have you done for me lately” vibe of constant rotation and change that has been prevalent in craft beer over the past number of years, to focus on the consistent ‘go-to’ beers that are always there and always great.”

Surly always has several irons-in-the-fire in terms of innovative products and technology. Manley stated that they have seen good growth from its variety packages. Surly will be adding a second variety pack of “Supreme” tart ales into the market for the second quarter of 2021.

“We’ve had to adapt and adjust to changing orders, and shifting beer volumes for beers that typically show an otherwise steady volume,” Manly said. “In early 2021, we will be installing some smaller CCV tanks that will allow us to better tailor production volumes to hit specific market demands without trending too far over or under projections.

“Additionally, we’re investing in equipment to better preserve our hop-forward beers and will help ensure that our beer tastes ‘brewery fresh’ for longer in the trade. In terms of package innovation, we’ve been adjusting our specialty beer formats from what were traditionally 750mL bottle packages to single 16-ounce can packages which not only offer a better value for consumers but a more reasonable serving size for high ABV beers.”

Hiner said that for Boochcraft, innovation is in its lifeblood. This year it added its Liquid Art Laboratory, headed by Kyle Oliver, which is responsible for not just new flavor development but continuing to innovate in microbiology to drive quality in processes.

‘WORDS OF WISDOM’ FOR BREWERIES IN PLANNING

John Harris, Ecliptic Brewing — Portland, Oregon: “The only thing that is really working now is canned beer sales. As a new brewery, it will be hard to get them. Make sure you really have a line on them before opening.”

Porter Hardy, Smartmouth Brewing — Norfolk, Virginia: “My only words of wisdom to anyone who is still going forward with a new brewery would be to make sure you have a great ownership group (we are very lucky) and control your debt and monthly fixed costs. In a time like this, that can make a big difference.”

Matt Shirah, Scofflaw Brewing — Atlanta: “There are a couple of things that come to mind. The first is…don’t. The craft brewing space is not for the faint of heart. Competition is increasing and growth is decreasing. Over the past 15 years or so, price volume increases have quickly outpaced production volume increases. Rapid growth hides a lot of potential issues in companies and in the industry.”

Adam Hiner, Boochcraft — Chula Vista, California: “It’s thick out there and the headwinds are strong. The craft beer space is crowded with a high bar for quality, the own-premise model which has been a major profit driver for small breweries is shaken, and there is little opportunity in the hard seltzer market that isn’t already dominated by corporate brewers. Look at what you can do that is unique to you, innovate in an authentic way that will resonate with your community, and don’t be afraid to rush away from the crowd.”

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