Brooklyn’s Eric Ottaway on Competition and 2013 Growth

After 25 years in New York City, the Brooklyn Brewery knows a thing or two about competition. So a little more doesn’t faze them, even if that little more is actually more than 1,300 breweries in planning.

“We have been competing against anyone and everyone since the very beginning,” said company COO Eric Ottaway. “We are used to the competition.”

Brooklyn is a top 15 craft player that will crank out 180,000 barrels of beer in 2012 – up from 140,000 in 2011. Ottoway calls it “controlled growth,” and said he prefers it to “runaway growth.”

Still, it’s hard to ignore the abundance of new players entering the category, many of whom are experiencing that “runaway growth” Ottaway referred to. And while Brooklyn may not be feeling the pressure from recently-established competitors quite yet, Ottaway said that the company is always looking forward and figuring out ways to stay ahead of the pack.

“It’s going to take an increasingly sophisticated business model to succeed going forward,” he said. “There are a lot of new dynamics and forces at work that weren’t present 10 or 15 years ago and you have to continually be challenging yourself.”

Ottaway isn’t worried about Brooklyn’s place in the market, but said he is concerned that many of the new entrants aren’t prepared to handle the distribution challenges he believes are looming.

“Is there room for another 1,300 breweries?” he asked. “I don’t know. I’m sure there is room for some more, but I don’t think it’s 1,300. Some of them will succeed but there will be a lot that don’t know what they are getting into and are going to have a hard time.”

Ottaway’s concern is that continued concentration within the distribution tier will limit some brewers’ ability to get to market.

“There are only so many craft breweries that a distributor can represent effectively,” he said. “Distributor consolidation will make it harder for new entrants to get share of mind and that is a major headwind new breweries face.”

It’s a headwind that impacts the Brooklyn brand to a much lesser extent and something Ottaway has prepared for by investing in new capacity. The company recently installed eight new 200-barrel fermentation tanks, adding about 25,000 barrels of additional capacity to its production facility in Brooklyn. Additionally, Ottaway said there is a “reasonable amount” of unused capacity at F.X. Matt where the company already makes over 65 percent of its beer.

But don’t expect Brooklyn to open any new markets in 2013. The company is steadfast in its commitment to grow deeper in existing markets before widening its overall distribution footprint.

“We’re growing quite well in the markets we are in already,” Ottaway said. “There is plenty of unmet demand, especially in the eastern half of the country.”

Brooklyn Brewery is charting 30 percent growth on the year and Ottaway said he’d be happy if the brewery continued growing at 20 percent in existing markets next year.

“It’s more profitable growth and more defensible growth,” he said. “With the number of new breweries coming on to the market, existing players are going to have to be careful not to overextend. That’s why we are investing heavily in existing markets and making sure that we have the capacity to produce the products that those markets are demanding.”

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