Business Management: Are you Crappy, Scrappy or Deluxe?

An interesting discussion took place at the Indiana Craft Brewers Conference recently. Doug Dayhoff, the president of Bloomington, Indiana’s Upland Brewing Company spoke in a business management session called “Expand or Die or Expand and Die” about how brewery management has to take a step forward, either in expansion of physical growth, like brewhouse size or territory reach; or else in expansion within what a brewery already has.

Dayhoff noted that a sales call for his brewery costs $75 if you total what comes from having a sales person’s time and the material it takes to get them there. If only one keg is sold at that sales call with a margin profit of only $50, then the brewery is losing money even while making a sale.

“If you are not growing, does your brand lose relevance?” he asked. “I am guilty spending money on sales people that don’t pay for themselves.”

The questions that breweries need to ask is:

– Are market conditions right for profitable growth?

– Can you succeed where others may fail?

– What is important to you: short term brand relevance vs. long term company viability

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When it comes to long term viability, Dayhoff said there are two ways to grow, by building the physical part of the company (facilities and equipment) along with building the human side (the personnel).

He showed it on a “crappy, scrappy or deluxe” graphic. It can all be charted — building, equipment, and the staff you hire — with these terms.

“The crappier you are, the higher your operating risk, and the harder it is to have control to make great beer,” Dayhoff said. “Risk comes down as you work on being scrappy and deluxe.”

At some point, he warned, a brewery can get so “deluxe” that it can get sloppy and lazy.

“And the team thinks money is easy to come by and you lose something,” he pointed out. “We make decisions on where we want to be on that scale. This answer is we all hit those lines in different aspects, it’s not a single answer for how we make all decisions. Some decisions are made on cost and some are on quality.”

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