Benefits of Expanding Into New Markets
Discover why expanding your business through entering new business markets is important in ensuring that you are continually adding value to your business and to your customers.
May 7, 2019
The craft beer industry has eclipsed the 7,400-brewery mark, with room to grow, at least at the local level. With the Taproom model being the biggest outlier, growing at 40%, it signals that there’s still a desire to appeal to ever-evolving tastes at a local level in an increasingly competitive market.
With increased competition, changing tastes, and the need to stay local, relevant and unique, many breweries are considering expanding into new beverage segments. Adding new beverages can have a variety of benefits including:
Finding new revenue streams
Optimizing your operating hours
Resourcing unused products
Capitalizing on existing equipment
Appealing to new demographics
For Creature Comforts Brewing Co. in Athens, Georgia, additional growth means looking at the equipment you already have to satisfy changing tastes:
I think people would be missing advice if they didn’t start look outside the brewing industry. Specifically, the really high growth ones like flavored malt beverages, things like that. You already have all the equipment. I think craft brewers are uniquely situated where they can put it forward, put a better niche into the market and really distinguish themselves from the mass–produced stuff that’s out there right now. I think that’s one of the big things.
Controller at Creature Comforts Brewing Co.
Expanding Into Hard Seltzer
In 2018, hard seltzer grew 169% overall to nearly $487.8 million, according to Nielsen. It led the flavored malt beverage (FMB) category, which increased more than 10.2% overall. Hard seltzers are a pretty big deal.
For newer beverage segments, you need to find the balance between recognizing the hockey stick growth of seltzer, that could fall off at any time if it is just a fad, and responding to what your existing audience desires. It's great to want to appeal to a broader demographic, but you do not want to lose your current brand image and customers. Creating craft beverages is both a craft and a business. Sometimes, the business side will inevitably convince you to craft something to keep up with current market demands and stay relevant.
I think we’d be remiss not to acknowledge that hard seltzer (has) a lot of opportunity. With Orchestrated’s understanding of where the market’s going as well and how that might dictate the way that they need to structure the program, gives us a lot of excitement too.
CFO at 2 Towns Ciderhouse
Keys to Achieving Success in Seltzer
Forecast your sales potential within the seltzer segment before investing in seltzer equipment
Ensure that hard seltzer is a natural fit with your audience
Perform a competitive analysis to discover opportunities within your local market which could help you develop a competitive advantage
Create your business and brand story that conveys your identity
Expanding into Coffee
According to the Specialty Coffee Association, “Only 9% of adults in the U.S. were drinking specialty coffee daily in 1999 compared to 41% by 2017,” which is a 32% increase over 18 years.
A prime example of a craft brewery taking on coffee production in recent years has been Modern Times Beer.
Coffee enables Modern Times to crossover between craft beer and craft coffee drinkers. It also allows them to expand operating hours during typically closed hours and maximizes their sales potential.
The café activates our space at a time when we wouldn’t otherwise be open.
Founder of Modern Times Beer
Breweries that have excelled in this arena are roasting and barrel-aging their beans, operating full-service cafés with baked goods or brunch available, packaging whole beans, and providing blended cans of coffee and nitro cold brew.
As a result, they not only have specialized beans for use in their imperial stouts; they also have a whole new operation that provides another source of steady revenue.
One of the things that’s been cool about our roasting is we’re introducing specialty coffee to a really receptive audience that doesn’t necessarily have a ton of coffee knowledge. Our base is a craft beer base, and they are really adventurous about finding and exploring flavors. Coffee lends itself to that.
Founder of Modern Times Beer
Keys to Achieving Success in Coffee
Research the types of coffees you want to produce, as this will help you figure out where to source your beans from
Nail down your customers' coffee preferences before going all-in on coffee
Create your business and brand story that conveys your brand identity
Consider how you'll manage the various coffee-related inventory and balance it out with your existing inventory
The benefit of having all these functions in one place, is not just brewery-specific because we also use it for our coffee production, is being able to have quick data sources that you can base your decisions. I think that’s been a huge benefit that we’ve seen through Orchestrated. It’s being able to make decisions based off historical data rather than assumptions.
Operations Manager at Modern Times Beer
Expanding into Cider
The cider market continues to grow annually. According to the American Cider Association (ACA) and NPR, the number of cideries in the US have more than doubled from 400 in 2017 to 1,000 in 2020, and cider sales themselves have grown 500% since 2011.
The big draw for breweries adding a cider line, other than accommodating different tastes, is offering a gluten-free option to your customers.
Breweries like MadTree Brewing in Cincinnati have recently pursued expansion into cider as of December 2018:
It’s something we’ve talked about for many years, but we didn’t just want to buy a 500-pound tote of cider from China, throw some yeast in there and say we made cider.
It’s key to utilize internal reporting to inform how much demand there is for your cider, helping you keep pace with those in your market.
Additionally, it’s important to note that you will need to attain a special license if you intend to add cider to your lineup, since cider is regulated by TTB. You’ll have to attain the same license winemakers get to produce wine.
Keys to Achieving Success in Cider
Join the American Cider Association as a "Cidery in Planning" to make your presence known and start conversations with existing cideries
Join a local cider club or take a cider making course to ensure you're dialed in on the quality standards you're looking to achieve
We recommend utilizing an all-in-one beverage management solution, like Orchestrated, to track your finances and have them tied to your production activities
Research what the cider market looks like in your local market and create a business plan that ensures you can develop a competitive advantage over your competitors
Expanding into Distilling Spirits
There's still incredible growth and innovation to be had within the spirits industry. The spirits market has grown 5.3% in 2019, according to the Distilled Spirits Council of the US (DISCUS), and the industry continues to grow, even within the pandemic itself, with new trends like canned cocktails.
According to a Mintel Report on Ready-to-Drink (RTD) cocktails, they are predicting that the sales of RTD cocktails in the US will grow by 9% in volume in 2021.
If you’re already canning your beer and have a successful line of distilled products, canned cocktails are a great way to diversify as a business. Creating a new line of distilled spirits is a complex endeavor, however. There’s new equipment to consider, needing more space than you’re currently occupying, getting more barrels, as well as developing your spirits brand.
Keys to Achieving Success in Spirits
Join the American Distilling Institute to become a "Distillery in Planning." ADI provides access to multiple business plans and spreadsheets that were used to start distilleries currently in business.
Determine your brand identity by creating your business and brand story
Determine your operation strategy. Will you be packaging in bottles and/or cans? Do you plan to serve onsite at your current location?
Address local, state and federal laws and all of their contingencies
Conclusion: What to Do Next?
We recommend you to make some pilot batches and test them in your tasting room before investing a lot of money into a new product segment. Understand your competition, understand your costs, and put a system in place to track everything throughout every step of production.
For Kim Maier, VP of Finance at BrewHub, it’s about looking ahead to see how a brewery expanding into multiple beverages will impact the brewery’s taxes and infrastructure:
We’re contacting the TTB and asking them questions on how taxes are handled and things like that. And then we’re looking into is there any infrastructure changes that we need to make to be able to utilize these types of beverages in our portfolios.
VP of Finance at Brewhub
No matter your venture, Kim always emphasizes the importance of being smart, doing research, and planning ahead:
Think about the end result when you’re setting things up. Know where you want to be at the end, so you can work backwards. Because I think a lot of the times, you start from the beginning and then you get to the end and you’re like, ’Uh Oh.’ I probably should have done this a little bit differently because this isn’t going to work in the end.
VP of Finance at Brewhub
Have more questions about producing new beverages and how to manage multiple product segments? Reach out to one of our industry experts today to learn how Orchestrated makes it easy to manage multiple beverages with your production, inventory, sales and finances being integrated in one place, providing a single source of truth for your operation.
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