It’s no secret that in today’s market, smaller craft breweries are getting pinched. Industry stats make this point clear and draw to attention the stark contrast between supply and demand for beer. The number of breweries in the United States now totals about 7,500, with more than 1,000 brewpubs and microbreweries entering the space year over year. Despite this growth, in 2018, the Brewers Association reported that overall beer sales volume was down 1%. Exclusive data released from the National Beer Wholesalers Association (NBWA) and Fintech in 2020 showed that sales-to-retailers beer shares in the United States are down .22% in the off-premise segment and down .2% in the on-premise segment. So, when you compare volume stagnancy to the number of new entrants in the category, you start to wonder – how can breweries survive, let alone thrive, in today’s market?
Line up these statistics against market share data and it gets even more concerning. According to NBWA, the top 10 suppliers account for 94.2% of all volume sold off-premise, and 90.4% of all volume sold on-premise. But when you drill down into this data, the sales for these top suppliers are actually down .8% off-premise and down 1.7% on-premise over the previous year. Conversely, the other 7,500 craft brewers are up in sales, .6% and 1.5%, respectively. Cue the financial justification for the top 10 suppliers to start buying up the little guys.
The perfect example comes from industry giant, Anheuser-Busch InBev, which now has a majority stake in more than 12 craft breweries that were previously leaders in the segment, and that doesn’t include their other stalwart high-end brands. Last year alone, there were 38 acquisitions involving the likes of Dogfish Head, Craft Brew Alliance, New Belgium, and Founders. And already in 2020, there is an impending deal for Molson Coors to acquire Atwater Brewing, among other transactions. Given the hyperinflation of competition in the industry compared to the stagnation of the category, it’s easy to see why these craft brands would forgo independence for a bit of financial security. If you’re a brewery who aspires for longevity and growth, there are tremendous advantages in the distribution and internal resources that come with joining the industry goliaths who are continually looking for innovative ways to defend their market share and expand their reach.
So, what does all of this mean? How does hyper-competition, market saturation, volume stagnancy, and an extreme skew in distribution by supplier, affect the operations of breweries today?
Mainly, it means every day you must put renewed focus on efficiency in order to protect your margins, foster stronger partnerships, and get the most out of the resources you have. Fortunately, just as the number of breweries in the U.S. has grown substantially over the last decade, so too have the tools available to them. From educational content to market data and sales technology, solutions are now available to smaller breweries that were previously only accessible by major brands. The key to surviving in this industry going forward will be how you leverage these resources.
In an interview with Lilypad, now a Fintech company, Neil McCormick, formally of Yazoo Brewing, poignantly stated, “If breweries resist adapting to the vast amount of information that’s available to them right now and put 20 reps into a market but aren’t being strategic about where they’re spending time, money, and resources, then they’re just throwing away money for no reason.”
To Neil’s point, one of the most common mistakes made by breweries with growth aspirations in the craft beer boom has been a poorly executed sales approach to the market. Once breweries are confident that they have quality liquid that can compete and a tight production process to match, it is tempting to throw reps at a sales problem. Look no further than Brewbound’s dedicated page for industry layoffs for examples of this pain point in the industry. That’s why it is crucial for breweries today to think critically about the investments they are making in their sales reps and the tools they can use to coach them.
“You’re already making an investment in these sales reps, and for just a little bit more, you can have high documentation and high accountability.” This quote from Jason Ingram, national sales director at Left Hand, is referring to sales enablement products that breweries today can take advantage of to manage their teams. These same types of tools and CRM platforms have been used to drive revenue initiatives, manage customers, and create accountability in other industries since the original tech boom, and only in the last five years have become relevant to businesses in alcohol’s three-tier system. Now, this technology helps breweries get more from smaller teams through tools like route planning, account targeting, and depletion visibility that point reps in the right direction.
“It’s harder and harder to sell beer, so not as many people enjoy it. But I think part of mitigating that is to have a structure like Lilypad – technology makes your life easier,” Ingram said.
As we noted at the beginning of this article, selling beer in today’s hyper-competitive market is harder than it has ever been and only exacerbates other problems that breweries have always faced, like employee turnover and accountability. Thankfully, these same technologies bring a data-driven, centralized approach to these challenges, and add reliable data that can be leveraged for other operational improvements.
For chain initiatives, leveraging data is a necessity when creating strategy and pitching to high-level buyers. Jason Ingram from Left Hand recommends using any tool in your arsenal to help large retailers make the best decision for their stores. “You really want to use a broad spectrum to put your best foot forward. Rely on whatever data you have access to.” Jason not only takes advantage of internal data he captures from his reps performance in the market, but he also leverages consumer data through Armadillo Insight, a company that crowdsources IRI data, to make a case to his biggest clients. “That’s a much more price manageable way to gain access to all this data that you would never be able to afford on your own. That’s been really successful and a game-changer for us to be able to access that.”
Companies like Armadillo Insight and Lilypad give breweries who would have never been able to afford these tools 10 years ago an edge – no matter their size or where they’re located. As the market tightens, identifying the unique technology stack that will drive efficiency for your team will be paramount to profitability and scale. Chad Atherton, director of marketing development for Founders Brewing, summarized this point best when he shared, “I really think that importance lies in the ability to be nimble and evolve the way that we do things and not be scared to try new techniques.”
In today’s changing market, the suppliers who will succeed will be the ones who adapt. Finding new ways to coach your team, make smarter sales decisions, and create efficiency gains through technology are the only ways breweries will survive and thrive in an evolving beer industry.
Ready to learn more about tools and technologies that can help your brewery in this competitive market? Visit Fintech.com