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View Full Version : 10% is shooting too low



ZScardino
12-02-2014, 09:24 AM
I'm new to this forum and have just been taking some time to read and quietly get acquainted. Almost everything I do is in the beer industry, dealing mostly with the distributors, but I do deal directly with the craft breweries on occasion.

All that aside, the title of this subforum is actually silly. "Craft Beer - 10% Marketshare: Possible and How?" In some markets, especially as you scale down, craft beer is already there.

According to Jay Martin, General Manager of JJ Taylor Distributing in an interview with Brewbound, "Of the roughly 20 million cases J.J. Taylor will sell this year, 2 million will be craft brands".

http://www.brewbound.com/news/2014/the-three-ps-of-j-j-taylors-success-in-florida

That's a good read, by the way, and a well run company.

All I'm saying is that the craft beer sector needs to set higher goals than a measly 10%. If I told one of my craft distributors that my goal was to get them 10% of the sales in their territory I guarantee you they would not be dealing with me very long.

Cheers,

Zach Scardino

soia1138
12-02-2014, 11:30 AM
Most goals come with milestones along the way. 10% is a milestone that's all.

BeerBred
12-03-2014, 10:23 PM
And don't forget that when breweries such as Goose Island, Blue Point and 10 barrel get bought by big beer, they no longer qualify as craft brewers. Thus the numbers are removed from the... numbers..

nateo
12-04-2014, 08:08 AM
And don't forget that when breweries such as Goose Island, Blue Point and 10 barrel get bought by big beer, they no longer qualify as craft brewers. Thus the numbers are removed from the... numbers..

Craft beer is all about being cool, and once something becomes popular, it stops being cool. I think by definition craft beer will never exceed 10%. Jones soda will never replace Coca Cola, because premium products and (and prices) depend on scarcity and exclusivity.

soia1138
12-04-2014, 08:55 AM
I would have to disagree. Craft beer is not about being cool. It is cool at the moment because of what it represents. That is a change in the collective mindsets of a nation lost in a sea of mass marketing of mass produced, cheap low quality products designed for one purpose, to generate as much revenue as possible. It goes hand in hand with the nations food system which is also in the infancy of a turn around back to a more localized and fresh "real" food mindset. Jones soda shouldn't replace Coca cola, but thousands of jones type sodas could, that is the point. If you're in it because it's cool or you think you're going to make a million, good luck to you. We are already seeing a generation of beer drinkers that have never even tasted a bud miller or coors. Think about that. Prohibition caused a massive wrong. It's slowly being corrected. The "goal" should be to craft the best damn beer possible. The rest will follow.

ChesterBrew
12-04-2014, 09:01 AM
The light lager became popular in the late 19th century. It had nothing to do with prohibition. And we have to remember that consolidation of the industry happened in an era when TV dinners were considered progress.

nateo
12-04-2014, 04:04 PM
It goes hand in hand with the nations food system which is also in the infancy of a turn around back to a more localized and fresh "real" food mindset. Jones soda shouldn't replace Coca cola, but thousands of jones type sodas could, that is the point.

You need to be realistic about what your product and market are. "Good beer for everyone" is not economically feasible. It's a premium product and commands a premium price. So if you want to make money, you can go wide and try to convert Coors drinkers (dumb), or you can go deep and try to get more money from your current upscale customers (smart). We're already seeing a rise in the ultra-premium specialty brewers. Like all the limited release stuff for $20+ per 750ml. New Belgium has massively expanded their barrel-aging program and there aren't many of those products that are under $20 a bottle. More and more bottles are in the $40-ish range, which I honestly never thought possible a few years ago.

I agree rich people will drink lots of craft beer for the foreseeable future. Poor people will continue drinking beer that is cheap because of economies of scale. You can't have economies of scale without industrial beer production. Unless you can get a 30-pack of craft beer in the $15 range, local and "real" food will continue being exclusively for rich people. Since rich people are the minority of the population, craft beer will never be the majority of beer consumption.

I've posted this elsewhere on here, but you absolutely need to know who your customers are if you want to stay in business.

The percentages describe how much a certain factor can predict whether you'll buy the product in question. This type of research is too expensive for tiny breweries, so we'll use Sierra Nevada, which is probably broader in appeal than most tiny micros anyway.

Sierra Nevada stats:
M +62%
W -58%
Post-grad +60%
College +102%
High school -68%
Management/business/finance occupation +146%

Household Income brackets:
$150k+ +85%
$75-149k +74%
$60-74k +5%
$50-59k -50%
40-49 -47%
30-39 -46%
20-29 -62%
<20k -86%

White +21%
Black -95%
American Indian -100%
Asian +49%
Other -71%

Craft beer is overwhelmingly made by and for rich white men. SN seems to do a fairly good job appealing to certain minorities. But if the bulk of your customers are white, college educated men who make over $75k a year, good luck sustaining growth.

mmmatt
03-03-2015, 10:23 AM
There is one more major factor that is part of the forward moving appeal of Craft beer, and that is responsibility. People in my neck of the woods are pretty scared of OWI arrests and so many don't drink as many beers as they once did. The attitude is often different on what they will be drinking. A few really good beers instead of a couple of pitchers of gopher piss, and either way you are walking out of the bar with the same tab.

Matt

Brewtopian
03-29-2015, 09:16 PM
One thing that I think bodes very well for craft beer is we're just now starting to tap into the second generation of craft beer consumers. As we move further along and more children of craft drinkers reach drinking age the marketshare % will climb ever quicker. Its taken 33 years for us to reach 11% nationally but I suspect we'll hit 15% in the next 5 o 7 years.

I do agree that trying to compete at price point with light lagers is a fools errand and that focus should be on maintaining margins, especially in package but brewers should be cautious. $40 bottles and encouraging people to wait years to enjoy their new expensive bottle turns off more people than it turns on. If the bulk of the industry were to move in this direction we'd see our marketshare slip and with it our influence in accounts.

ZScardino
03-31-2015, 10:05 AM
"Good beer for everyone" is not economically feasible. It's a premium product and commands a premium price.

This is where the profit is. Find any industry with big players that dominate the market. Then, look for the under-served but well financed niche.


But if the bulk of your customers are white, college educated men who make over $75k a year, good luck sustaining growth.

Automobiles targeted rich white men. So did passenger airlines, computers, writing pens, video games, DVD players, designer clothing, and nearly all modern products that started out as a niche. It makes sense for a new category to grab the low-hanging fruit with money to burn, particularly since that segment has demonstrated the ability to incubate products before sending them into the mainstream. I think craft beer is a pretty main stream product now with an increasingly diverse body of faithful adherents. If I go to a tasting, I see black, white, Hispanic, and Asian. I will note that I don't recall seeing a significant Native American presence, which your data seems to explain.


Love these David vs. Goliath scenarios where the little guy eventually wins.

That's an interesting comparison to make. David did not want to be an underdog and he had little regard for "winning despite the odds". His foresight, planning, and dispassionate execution in the moment of truth is what made the difference. He practiced with his sling for years, turned down armor that would have thrown him off balance, found a dense rock, and put it through Goliath's skull from a distance while he was busy talking trash. David made up for his physical weaknesses by thinking ahead and embracing his few strengths. On the other hand, I have actually heard brewery owners say, 'I don't need sound financial fundamentals, a business plan, or retail advertising because we're a small, independent brewery.' God help me, I probably hear something to that effect at least once per week. There are awesome craft brewers that remind me of David but there are far more craft brewers that remind me of Jordan Belfort (in his "Wolf of Wall Street" days).

Acknowledging my bias, it's important for craft breweries to embrace their strengths and big beer's weaknesses the same way David did. Let big breweries pay to indiscriminately pummel the airwaves; let your advertising focus on the customers while they are browsing the beer aisle. When I hear that a local craft brewery spent thousands on a mass media spot I put my palm to my forehead. How quickly would those thousands have paid for themselves and started turning in profit if they were actually advertising to people while they were trying to choose a beer? Mass media is a heady game that serves long-term interests, like building brand equity, that few craft breweries should be worried about at this point. In contrast, retail advertising's only proper use is to sell product. Leverage your relationships with wholesalers and relevant industry experts to find out what works before you spend a bunch of money on things that don't move cases.


One thing that I think bodes very well for craft beer is we're just now starting to tap into the second generation of craft beer consumers. As we move further along and more children of craft drinkers reach drinking age the marketshare % will climb ever quicker. Its taken 33 years for us to reach 11% nationally but I suspect we'll hit 15% in the next 5 o 7 years.

That is exciting and you have a perfectly reasonable expectation. A market share of 20% would be optimistic but would depend heavily on what someone defines as craft beer. Expect major breweries to embrace the "craft style" of brewing and continue their acquisitions. In order for the craft beer movement to be sustainable it needs to maintain the high margins that motivate wholesalers and retailers and it has to experience some consolidation. I point to Oskar Blues recently acquiring Perrin as an example of something that the craft beer movement should be happy to see.


I do agree that trying to compete at price point with light lagers is a fools errand and that focus should be on maintaining margins, especially in package but brewers should be cautious. $40 bottles and encouraging people to wait years to enjoy their new expensive bottle turns off more people than it turns on. If the bulk of the industry were to move in this direction we'd see our marketshare slip and with it our influence in accounts.

You're right. The $40 bottles are definitely targeted toward a select segment. For example, I had a bottle of wine not too long ago that was north of $200. I'm not going to buy that wine on anything but a rare occasion and if all wine was at that price point, I probably would not drink much wine. As craft beer becomes increasingly mainstream, it's good to look toward niche product opportunities within the craft beer segment. A high-end product catering to well financed devotees is good so long as you don't disenfranchise your base by trying to force those margins on everyone.


Back to my original point, I maintain that "Craft Beer - 10% Marketshare: Possible and How?" is a silly line, particularly because craft beer may already be there. The better line may be, "Boston Beer Company - 10% Market Share: Possible and How?" Now, that's a conversation to have! Craft beer is undoubtedly capable of catching 20% of the market (revenue? volume?) on merit of the product and margins alone. There seem to be enough prudent craft brewery owners out there, too. When does possibility come into question? Maybe it's 30%, maybe it's 35%. My gut tells me that one day seeing close to half of all beer consumed in the US being craft beer is unrealistic.

Cheers,

Zach Scardino

mkunce
03-31-2015, 01:59 PM
Any level of purported market share is possible when you define the numerator. For example, last year Yuengling, August Schell, and Minhas were not part of the B.A.'s numerator - this year they are - voilą, 5 million more barrels.

TiminOz
03-31-2015, 03:05 PM
You need to be realistic about what your product and market are. "Good beer for everyone" is not economically feasible. It's a premium product and commands a premium price. So if you want to make money, you can go wide and try to convert Coors drinkers (dumb), or you can go deep and try to get more money from your current upscale customers (smart). We're already seeing a rise in the ultra-premium specialty brewers. Like all the limited release stuff for $20+ per 750ml. New Belgium has massively expanded their barrel-aging program and there aren't many of those products that are under $20 a bottle. More and more bottles are in the $40-ish range, which I honestly never thought possible a few years ago.

I agree rich people will drink lots of craft beer for the foreseeable future. Poor people will continue drinking beer that is cheap because of economies of scale. You can't have economies of scale without industrial beer production. Unless you can get a 30-pack of craft beer in the $15 range, local and "real" food will continue being exclusively for rich people. Since rich people are the minority of the population, craft beer will never be the majority of beer consumption.

I've posted this elsewhere on here, but you absolutely need to know who your customers are if you want to stay in business.

The percentages describe how much a certain factor can predict whether you'll buy the product in question. This type of research is too expensive for tiny breweries, so we'll use Sierra Nevada, which is probably broader in appeal than most tiny micros anyway.

Sierra Nevada stats:
M +62%
W -58%
Post-grad +60%
College +102%
High school -68%
Management/business/finance occupation +146%

Household Income brackets:
$150k+ +85%
$75-149k +74%
$60-74k +5%
$50-59k -50%
40-49 -47%
30-39 -46%
20-29 -62%
<20k -86%

White +21%
Black -95%
American Indian -100%
Asian +49%
Other -71%

Craft beer is overwhelmingly made by and for rich white men. SN seems to do a fairly good job appealing to certain minorities. But if the bulk of your customers are white, college educated men who make over $75k a year, good luck sustaining growth.

Tell that to the growing craft beer industry in Europe, China, India and Asia. Craft beer is growing because it is good!

BrewDude37
09-28-2015, 10:41 AM
The light lager became popular in the late 19th century. It had nothing to do with prohibition. And we have to remember that consolidation of the industry happened in an era when TV dinners were considered progress.

I'm late to this conversation, but I just had to respond to this. Light Lagers became popular because brewers, fearing prohibition, would first claim that beer was not evil, distilled spirits were, and would go on to claim that Light Lagers were better for you than Ales. So, indirectly, lagers came into fashion because of the same sentiment (Temperance movement) that created prohibition.

Dylan Greenwood
Master Brewer
Falls City Brewing Company
Louisville, KY

rdcpro
09-28-2015, 03:31 PM
I'm late to this conversation, but I just had to respond to this. Light Lagers became popular because brewers, fearing prohibition, would first claim that beer was not evil, distilled spirits were, and would go on to claim that Light Lagers were better for you than Ales. So, indirectly, lagers came into fashion because of the same sentiment (Temperance movement) that created prohibition.


I don't have any direct evidence, but I'd heard in a class I took many years ago at Cal Poly that while light lagers had been around since the late 19th century, they only became popular after WWII, when beer became commonly available in grocery stores, and women began purchasing most of the beer for the household. The practice supposedly came in part from a wartime custom where a serviceman on a date (and on a budget), would dilute a glass of beer from a pitcher with ice water. I've also read that the large number of women in the workforce during WWII contributed to the "lightening" of beer.

I don't know if any of this is true, but I've always thought it made a good story.

Prior to WWII, I think perhaps a lot of the beer consumed in a household came from a local pub. I've heard many stories of my Grandfather walking down Tamm avenue in St. Louis to a bar with his young son (my uncle). He'd fill up a tin pail with beer, and take it home (Grandma being very pleased that he didn't stay in the bar for a beer, as she didn't approve of such things). It sounded like a common practice in the city, anyway.

Regards,
Mike Sharp

Bainbridge
09-28-2015, 03:44 PM
It is true that there was a large push to exempt beer from Prohibition using the argument that "beer is not an intoxicating beverage if it is below a certain alcohol point". Fosdick and Scott put that number at 4% ABV, or 3.2% ABW, in their extremely important report Towards Liquor Control; the regulatory recommendations of which most states adopted when Prohibition ended. That's how we got "Three Two" beer in certain states after 1933, and even today. Here's wikipedia (https://en.wikipedia.org/wiki/Low-alcohol_beer#Low-point_beer)

ChesterBrew
09-29-2015, 06:12 AM
I'm late to this conversation, but I just had to respond to this. Light Lagers became popular because brewers, fearing prohibition, would first claim that beer was not evil, distilled spirits were, and would go on to claim that Light Lagers were better for you than Ales. So, indirectly, lagers came into fashion because of the same sentiment (Temperance movement) that created prohibition.

What you're describing took place in the mid 1800's, almost 70 years before the Volstead Act (it is true that temperance movements in the U.S. flared up and down throughout the 19th century.) Lagers were favored by brewers because they had a longer shelf life.

I highly recommend Maureen Ogle's "Ambitious Brew" for a very good account of the history of brewing in the U.S.