2019 Expert Outlook

The explosion in the craft beer industry is apparent with upward of 7,000 breweries now stretched along the 50 states.
It used to be a goal for many breweries to broaden their reach each year. Growth takes on a different thought process now, though, for breweries that have opened in the past decade. Growing deep rather than wide is the norm. Establishing connections to their communities and servicing a taproom for max profits are standard.
In the past, Brewer has done its Expert Outlook with national and multi-regional breweries to look toward the future. This year, we talked with the next generation of breweries that have seen positive growth in the new sense of what that means now. It’s breweries that have opened in the last 10 years that saw shifts in the market and have adjusted or opened with a different way of running their businesses successfully.
Urban South Brewery opened in New Orleans in March 2016 as a 30-barrel manufacturing brewery with some ambitious growth plans.
“The market has shifted remarkably since then, but I think our timing was good in getting in ahead of the shift,” said founder and President Jacob Landry. “We produced 2,000 bbls in 2016, 5,100 in 2017 and should hit 12,000 in 2018, exceeding our initial volume targets.
“We’ve accomplished this by drilling as deep as possible into our home market. We’ve been approached by out-of-state distributors, but will not consider that route until we feel like we’ve gone as deep as possible in our own backyard.”
J.C. Hill of Alvarado Street Brewery opened their place in May 2014. Three years later, they finished an expansion that was supposed to fulfill a three-year plan — until the summer of 2020,
“We ended up using all the new capacity within the first six months,” Hill said. That brought a host of challenges, and only now are they feeling like they are fully staffed and operating efficiently.
“With that growth has come a better approach to beer making, and I feel the liquid is improving,” Hill said. He indicated that they have built a lab and added a full-time lab tech; installed a reverse-osmosis system that allows Alvarado Street to treat each batch with a specific water recipe; and implemented new equipment and improvements to their canning line, which has brought dissolved oxygen levels to a much lower level.
“We still have a lot to work on, but growth has certainly opened doors to making our beer better,” Hill said. “We’ve grown a lot personally, too, and are trying to be better to offset our carbon footprint and support charitable organizations that are environmentally focused.”
How newer breweries found success in 2018 and are planning for more in 2019:

Altered business thoughts

Nick Garrison of Foolproof Brewing said the Rhode Island brewery has shifted away from brewing more traditional styles of beer — like Golden Ale, Porter and English IPAs — to more unique (and at times, unusual) beers like a Peanut Butter Porter, Chocolate-Oyster Stout, Pale Ale with Blood Orange and Saffron or a Kettle Sour with Pineapples.
“The list goes on and on,” he said. “Also, I think our original vision of quickly growing to become a national craft beer brand has shifted a bit, particularly in response to beer becoming more and more ‘hyper local’ and the level of competition we’re seeing out there.
Flagstaff’s Mother Road Brewing is continuing with its “20 in 20” plans. Co-founder Michael Marquess and his wife, Alyssa, strive to sell 20,000 bbls in the year 2020.
“We are fortunate to have an excellent distribution partner in Hensley Beverage Company, who have supported us through the last six years and driven our growth,” Marquess said. “Their access to chains, venues, and resorts with KAMs has made our past and continued growth possible.
“I can’t imagine being a new brewery at present and trying to find market access with a reliable distribution partner. There are too many breweries for the available distributors and shelf space.”
Growth should be modest, and allow a company, like Alvarado Street, to not only make the product better, but also make the employee experience better.
“Everyone has to grow at a certain rate each year to keep up with rising costs and wages, but for us it’s important to reinvest in equipment and personnel to constantly improve quality,” Hill said. “Growth that happens too fast is a challenge; we’ve seen it firsthand. It would be nice to grow at a slower pace to allow us to put systems in place to facilitate growth, rather than hit the ground running and figure it out as we go”.
Planning ahead with calculated growth will be the brewery’s strategy.
“Making our business objectives line up with our environmental goals will be essential, such as reducing our water usage, supplying our own electricity (or purchasing from sustainable sources), and creating our own CO2 gas,” Hill noted.
Mother Road has a small tasting room at each brewery and they look at the potential of placing brewery and tap rooms in other cities.
“We could brew hyper-local beers with backup handle support from the main brewery,” explained Marquess. “In this way, we could share the Mother Road story in more local settings.”

Unintentional growth plans

Nothing with the way Marquess’ business plan for Mother Road went as expected or planned, he explained with a laugh.
“At first, we didn’t understand the production brewing process and how it worked with the distributor relationship. Or even how long it would take to build the volume to sustain a distribution brewery model,” he admitted. “We are getting better, but still learning as we continue 30 percent-plus growth for the third year running.
“We never stop learning.”
Marquess said the most surprising part of growth was the loyalty to the brewery’s original tap room and the revenues it generated.
“We would not have survived the lean early growth years without our guest loyalty and support of the beers and brand,” he said. “The tap room revenues allowed us the room to learn more about brewing and approach the 10,000 bbl mark this year.”
Bur Oak Brewing opened in 2014​ in Columbia, Missouri, after taking ​​longer than expected, said President and Founder Craig Stitcher.
​“Once we got open, I had thought that we would be crushing beer cans on a daily basis​,” he said. “Kinda like that AT&T commercial where the sales guy calls the brewer and says​, ‘​You better make more beer to keep up with demand​.’​
​“​Well, it was kinda like that, but not quite to our imagination.​“
Stitcher said that ​Bur Oak entered into a market that was on fire​.​ The reality was ​actually ​about 75​ percent​ of ​his ​expectations.
​“So, when you start out, you have no idea what is realistic for the industry or your territory​,” he admitted​. ​“We kept getting “that-a-boys” from our distributors, but I was frustrated that the numbers didn’t match my MUN (Made Up Numbers) reports.
​“​Taking a step back, almost ​five​ years into this, I have found a peace and pace that is founded on historical data for our own business and nobody else’s business. Our growth has been consistent 30​ percent​ growth year after year.
​“​That is a comfortable pace and a blessing.”​

Growth drivers for 2019

​Champion Brewing’s Hunter Smith said that the Charlottesville, Virginia, brewery is looking at markets that aren’t saturated for distributed growth and for continued retail opportunities. “Successful growth to me looks like steady, organic growth, happy employees, and supporting the communities that support us,” he said.
The brewery was surprised by the growth of their Czech Pils, Shower Beer as it has absorbed market share from larger breweries.
“Consumers desire to support local and ethically-run companies,” Smith said. “We’re excited about what our core brands can do in 15-packs as well as more broad-spread distribution of our variety 12-packs.”
In the Deep ​South, there are opportunities at both ends of the spectrum​, Landry said​.
​“Our two best-selling beers are a hazy, juicy IPA and an affordable light ​Lager​,” he noted​. ​“​We’ll continue innovating on both ends — for our mature craft beer drinkers and those that are just crossing over from macros.​“
​Urban South also makes a variety of beers that women particularly enjoy​, Landry added​, so continu​ing​ product development along that line as well​ is key​.
Growth over the next couple of years​ for the New Orleans facility​ should continue through continued product evolution and innovation and a focus on going deeper in ​their backyard​.
“​As we grow in volume, we’ll tighten up operations and gain efficiencies through new equipment and processes, which will also allow us to grow our profitability margin​,” Landry said. ​“Our current volume allows for the addition of next-level equipment, including a silo, centrifuge and rotary canning line​.
“​These upgrades will be installed in the coming months, and will increase our economies of scale and quality.​“​
Stitcher​ said that Bur Oak’s ​​development of label design has been integral in ​their brand recognition​ as they ​hire local artist​s​ to help with designs.
​​Also, having events at the brewery that create experiences for ​their customers​ is important​​.
“​This is not only centered on our beer, but rather, camaraderie with other brewery friends​,” he said, as he mentioned that new​,​ creative beers are always on the horizon.
​“​Although, keeping in touch with our customers and partners about our products and our vision continues to morph with new platforms of social media​,” he said​.​ “​We have recently discovered the benefit of a vibrant graphic design and photo assets.
​“​We have also started to toy with video production.​ ​These platforms will intersect where people follow and learn about brands they care about. This realization of a refreshing of our brand was made known as a need by our customers and paying attention what brands (​by ​competitors) were capturing the attention. We have been very pleased with our brand identity as of lately.​“​
Cans have been growing a lot for ​Seattle’s Reuben’s Brews​.
“We’re over 100​ percent​ up year on year with our cans as our capacity increases have been directed in that direction​,” said co-founder and Brewmaster Adam Robbings​.​ “Cans will continue to grow, and we’ll add a new year-round beer that will be fun​.​ We’ll also be able to brew more Pilsner due to the new brewery giving us extra capacity, which we’re excited about​.”​
Foolproof’s taproom has been instrumental in helping ​them deliver ​their brand message to guests and creating an alternative revenue stream for the business​, Garrison said​.
​“​This has been an interesting development, as it was essentially illegal to operate a taproom in Rhode Island when we first opened in December​,​ 2012​,” he said​.
​“​Thankfully, state laws have since changed for the better.​“​
​Garrison added he always has and always will view his employees as the brewery’s greatest assets.
“That continues to be my focus — not just finding and hiring new employees, but pushing our existing employees to grow, learn, and challenge themselves,” he said. “Of course, it’s always fun to talk about what shiny new piece of equipment we would like to purchase, but we’re not exactly swimming in cash.
“People remain my main focus in terms of the brewery’s assets.”

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