The November/December issue of The New Brewer arrived today. I really enjoy most of the publication. You can always count on some good insights regarding business operations, supply chain, regulations, and distribution. I haven’t even finished this issue, but wanted to comment on Bart Watson’s article “The Market is Slowing: Now What?”
As usual, Bart provides an insightful and well-written piece. His main point is that brewers need to recognize that business challenges change in a slow growth market (which craft beer is experiencing this year). A brewery that had been facing rapid growth challenges (not able to brew fast enough, hops supply challenges, or growth financing issues) might now be facing brand new challenges (increasing profitability, finding additional distribution avenues, or deciding which beers to remove or add to the rotation in the coming months).
So what should a brewer do? Bart pointed out that “a well-known Harvard Business School case study of stagnant manufacturing industries found the ROI was highest in low growth, high product quality industries.” In other words, do not pull back on investing in your brewery, but you need to be smart about where to invest. The “smart investment” is going to vary by brewery. In some cases, that will mean improving logistics, investing in marketing and/or branding, pursuing export markets, or finding efficiencies in your manufacturing process. In other cases, it might mean pulling certain beers from your line-up, developing new beer sub-segments that are popular elsewhere, or finding better sources of ingredients.
The craft beer industry growth is slowing slightly, but that should give brewers a chance to catch their breath, review their plans, and take a hard look at where they can improve and invest. A result of the rapid growth of the industry is that beer drinkers have more options and even great beers get overlooked and hidden among the choices out there. The fact is, brewing great beer is no longer enough for success. Long term success requires brewing great beer and running a great brewery. More to come on that!