How to Sustain a Competitive Advantage and Be Successful as a Craft Brewery
Discover how to develop a sustainable competitive advantage within a maturing craft beer industry, so you can remain and be successful as a craft brewery.
July 27, 2018
The craft beer industry continues to grow in 2018. In Brewers Association’s 2018 industry report, there was a 13% increase in the number of breweries in the US in 2018 compared to 2017. Compared to ten years ago in 2008, the number of breweries in the US has increased by 80% with 7,450 breweries open in the US in 2018 compared to 1,521 in 2007.
With incredible growth comes market maturation. There could be a chance that your brewery could be left behind without a sustainable competitive advantage. According to the Brewers Association’s 2018 industry report, 219 breweries closed in the US.
Bart Watson, BA’s Chief Economist, is not surprised by the closings:
The idea that every business is going to be successful is just not something that was going to be sustainable in the long run.
Chief Economist at the Brewer's Association
At Orchestra, we want to make sure that your brewery is competitive in the market. We would be naïve to assume that achieving success will be smooth sailing. So, here are some key factors you should consider to help sustain a competitive advantage and be successful as a craft brewery.
*Quotes below taken from the Industry Review in The New Brewer.
How to Sustain a Competitive Advantage & Be Successful as a Craft Brewery
1. Embrace technology
Greater integration of technology in retail could make it tougher on startups and the smallest brewers, as costs to comply become a larger barrier to entry.
The New Brewer
Love it or hate it, technology will continue to play a bigger role in the industry. Sometimes the business side of the brewery can become a tangled mess of various tools, spreadsheets and other generic systems. Consolidating these tools and systems into an all-in-one brewery-specific solution is one way to avoid these issues.
Whether it’s compliance, brewery automation or keg tracking, don’t ignore technology as a means to automate processes, cut costs, minimize losses and stay profitable.
Remember: the cheapest tools are rarely the quickest route to saving the most money.
2. Anticipate growth, don't over expand
Breweries make investments in capacity based on their prediction for growth. Capacity decisions gone wrong could be crippling for individual companies and add pricing and profitability pressures for many other craft brewers.
The New Brewer
So, consider how you anticipate demand (accurately) and schedule production accordingly, because there is a risk in growing too quickly. Over-anticipating demand and taking more liability on to open more stores can be detrimental in your quest of being successful as a craft brewery.
3. Maintain consistent quality
Brewers who develop reputations for inconsistencies in quality likely won’t get a second chance from those who know and expect it.
As a result of the stringent QC protocols woven into day-to-day beer production, we created a QC Analysis Tool to provide a better grasp on everything QC, from grain to glass. It is more cost effective to focus and maintain quality control from the beginning of a brew than having to recall beer later on.
4. Experiment. Differentiate. Automate.
…brewpubs offer consumers exclusive variety that may not be found elsewhere, an important form of differentiation in an increasingly crowded market.
The New Brewer
Craft breweries who continuing to automate, differentiate and experiment are going to find it easier to maintain a competitive advantage and be successful in the craft beer industry. This was evident when shutdowns across the US occurred due to COVID-19. Breweries who were already selling via multiple channels were prepared when breweries found out they had to close their taprooms nationwide. Due to having a wide distribution net, they had a competitive advantage over craft breweries that focused on the taproom almost exclusively for sales.
5. Tasting rooms = margins
Especially when we have mitigated the effects of a pandemic, tasting rooms will still be as relevant as ever because your taproom is the place you get the highest margin and creative control since you are not relying on distributors, who take a portion of your sales for their efforts to distribute your craft beers.
For a new brewer, it is imperative you have a taproom. You get your highest margin, but it’s also where we get our message, our ethos, and our values.
Founder of Three Weavers Brewing
Whether it’s a brew pub or a simple tasting room, you can tie it all together on the back end with a quality brewery POS system in order to make it easier to track sales and inventory transfers between your warehouses and your taprooms. Luckily, you can integrate any brewery POS system with Orchestrated, which isn’t possible with QuickBooks.
6. Buyouts & exit strategies
While craft breweries continue to grow, some often trade independence, brand control and a bit of solidarity with craft beer loyalists for access to new markets, raw materials, capital and a cash-out.
If selling is your goal, expect a rapid influx of cash from VCs to initiate a growth mode and prep for resale, “this could mean more turmoil for breweries funded this way.” says Watson.
Having concise records and accurate brewery financial statements at the ready will best prepare you whether it’s a buyout, financing that new brew house or other challenges.
7. Improve distributor relationships
There are measures you can take to help you make better promises and ensure your distributors have the freshest beer on the shelves. Improving relationships with current distributors and building a reputation for consistency can help earn that coveted shelf space.
One way Orchestrated helps you improve these relationships is with our available to promise sales reporting. The software always provides you with a picture of the inventory you have in the warehouse, how much is already promised to customers and what you have available to promise. If you don't want your available to promise levels to decrease past a certain amount, you can set up customization alerts that alerts you of low levels before it becomes detrimental to business.
8. Mind your business
Competition will continue to grow fiercer in all planes of craft brewing and the industry.
The New Brewer
Everyone makes great beer. Now’s the time to hone the business side as well. Some good starting points include:
Maximizing profit margins through accurate, dynamic beer costing
Updating beer pricing tiers and promotions on the fly to remain competitive
Making informed, calculated decisions based on accurate and timely reporting
Streamlining procurement processes (e.g. hop contracts)
Eliminating bottlenecks caused by employee turnover
Craft’s strengths are its diversity, community focus, ability to adapt to local markets, changing beer drinker preferences, beer drinker perception of quality, and scrappiness that allows brewers to thrive in one of the most dynamic industries in the world.
The New Brewer
A rising tide lifts all boats. Make sure your boat is ready to weather whatever comes next. With these 8 key factors, we believe that your brewery will be able to develop a sustainable competitive advantage that will help you weather any economic storms and continue to be successful as a craft brewery.
Attend our demo to discover how Orchestrated can help you ensure that your brewery develops a sustainable, competitive advantage by providing a single source of truth for your entire operation.