The closer that Nate and I get to opening a brewery (it’s still a ways off), the more questions we find ourselves asking. It seems like a natural enough progression, but various forks in the road could drastically shape the outcome. Specific questions that we have asked along the way relate to styles and flagship brews, etc. However, one question that I have really been considering with some depth is “How big should the brewery be?” Like so many other questions in life, the answer is “It depends.”
Long ago, I came to the conclusion that happiness is not about money. For most of us, this is aphoristic…at least on theoretical grounds. In fact, I take the “mo money, mo problems” ideological framework to ground most of my activity. Without expatiating too much, I’ll just come out and say that I simply want to make a living brewing beer. Yet, there is quite a bit more to it than that.
Granted, it takes money to make money (i.e., opening a brewery is not cheap by any means). But once a profit starts posting and your brewery gains more popularity, you have to decide what level of growth and profit you are targeting. Is it all about the Benjamins or is there something more at work? After all, there is a point when expansion after expansion is less about beer and more about larger market shares. I’m not one to tell any brewer to stop expanding or getting bigger. What I am saying is that it’s not for me.
I think a tale of two breweries might serve as an example: Sam Adams and (one of my favorites) Three Floyds. Sam Adams is pushing the barrel limit of craft beer status, a fact many of you know very well. They’ve even gone so far in the presence that they are getting into the meat market. Plenty of wealth and jobs of have been generated from Sam Adam’s ever ambitious growth pattern, but other factors have come into play as well.
Let me preface what I am about to say by stating categorically that I have deep respect and appreciation for Sam Adams. I also want to be on record as saying that I genuinely like many of their products. However, they are, with the exception of a few brews, pretty pedestrian in their brewing practices. Sure, they have Utopias, are doing a collaborative brew with Weinhenstephaner, and have some unique stuff in their tap room. But they, for the most part, make the same products annually. Not that I’m denigrating the cycle of brewing that Sam Adams has, but it’s not for me.
This, it seems, is the problem with too much expansion. A beer starts as a creation that is fun and unique, then its popularity takes off. Then more beer has to be brewed to meet the demand of the expanding market. Then more people are introduced to the beer. Then it gains popularity in a new market. Then more beer has to be made. Of course the brewer is happy, but there is also, in my mind, a fundamental issue in regards to creativity.
At some point, the brew that was started as a creative spark becomes the very beer that stems future creativity. Like it or not, people are creatures of habit. Many people, once they try a beer they like, more or less stick to their tried and true beers. The problem is that expanding far enough into the market place dictates that brewers must make this or that beer and not something else. In a sense, and if the brewer wants to make a profit, they now have to brew certain beers. Breweries that grow are no longer brewing to create market demand, they are simply brewing to meeting it. When this occurs, there is much less freedom because of the financial obligations that come with expansion. In fact, they are often trapped by those expanding walls. This is okay if the brewer is okay with it. To be fair, occasional deviations from the cycle does happen, but in my experience, there is often not much creativity in the newly created product. The reason, or so it seems to me, is that they are still brewing it in the vein of their already known products (i.e., they are playing into their market demand). Again, there might be the occasion deviation to a beer that is unexpected, but it’s certainly the exception rather than the rule.
Once a brewery has gotten big enough, some creative control is invariably lost. Could it be otherwise? I doubt it. Even small regional brewers, while maintaining more autonomy, are subject to the flagship beer model. I wonder if expanding past a certain extent is beneficial for beer or just for financial reasons. You simply can’t please all of the people all of the time, certain arguments (“Well, they’re just trying to get their beer to people who can’t normally get it”) appear to some extent to be a smokescreen. The idea is illusory. Besides, who wants a bunch of giant craft breweries to take huge chunks of market share anyway? I know I don’t. Whether InBev or Sam Adams, market hegemony is never good.
The other side of the equation are breweries like Three Floyds or the Lost Abbey. I have visited Three Floyds on several occasions and have always been struck by its lack of size. It really is a relatively modestly sized brewery. Yet, they crank out a good amount of beer that finds a pretty narrow area of distribution. But look at the fame and clout they’ve achieved. It think it is precisely the counter-intuitive notion I’ve name above that has freed them to constantly brew new stuff and experiment while keeping their beer flying off the shelves. In fact, it’s hard for them keep it on shelves. Now, that’s a good problem to have as a brewer. You brew a few beers constantly, play the rest of the time, and people are dying to drink it up. These guys haven’t caved to continuous market expansion (and they surely could expand), they haven’t caved to making Dark Lord year around or putting it on shelves, and they’ve remained true to their beer montra, “It’s not normal.” By the way, the picture is from a crowded Dark Lord Day.
The above situation has allowed Three Floyds to open an on site brewpub, which is packed on a Saturday. Again, quality and experimenting has driven their mature internal expansion. My guess is they are doing pretty well and making a decent living brewing beer. What would be the rational behind expanding? I guess getting more of their beer out there and making more money doing it. But they seem to be content to have a very strong local following and a profoundly wide national recognition, especially considering their brewery size. If you can’t tell, I like these guys.
If Three Floyds is not a enough to convince you, a recent article on Beer & Whiskey Bros drives home another of my issues with over expansion. Don mentioned that Oskar Blues was pulling out of his (Don’s) market to meet the demand for their beer elsewhere. Of course, California is a bigger market, so the logic says that the sales and money will be there. Wait a minute. Last I checked, Idaho was a bit closer to Colorado (where Oscar Blues is located) than to California. The continued expansion seems to have dictated meeting a market demand in Idaho rather than Colorado.
One is tempted to say, “Well, that’s a good problem to have as a brewer. You can’t brew enough to meet the demand for the product.” Granted, simple economics says that this is logically true. Yet, one wonders if some alienation can be created by robbing Peter to pay Paul. Suppose one of your favorite breweries pulls out of your market to give to another. How would you respond? I would stop buying their product if they were to come back at some point. Again, one might tempted to say, “Well, it’s just a simple matter of economics.” Perhaps that is the real problem. It’s the dough, and not the grain, that is driving some of these breweries forward.
Far be it from me to mean this as an attack on any brewery. I have an appreciation for the products of Oskar Blues. What I don’t appreciate is expanding to the point that you have to take from one market to give to another.
Where is this all leading? I lived in Indy most of my life and there was this particular local commercial that I would always see on T.V. Don, from Don’s Guns, would talk about the deals he was offering and, without exception, would end his commercial with the same phrase: “I don’t like to make money, I just love to sell guns.” Whatever other views you have about guns or the merit behind the statement, it’s the adopted sentiment I have toward being a brewer. I don’t want to get rich, I just want to make beer. The kind of beer I can be proud of. The types of beer I want to make. The quality of beer that makes it noteworthy. I want my beers to be a find, not found everywhere.
So, if you’re wondering what my philosophy of brewing is…there it is. What do you think about the approach?
The right size is small enough to stay funky, but big enough to ship to New Jersey so I can have some.
New Glarus is a good example of a brewery that’s in demand and has chosen not to grow. They like their size and are standing pat. I think this is an important decision to make before it’s decided for you. Without a plan you could be lead down the wrong path.
Of course only you guys know the answer.
[Reply]
Man, this could go so many different directions…
…I think it is possible for a brewery to become large but retain creativity and their original passion, but it is extremely rare. I know that when it comes to which breweries I’d like to visit, I prefer the small ones. If you head up to Jolly pumpkin, you’ll be sure to end up in a conversation with Captain Ron. I’d bet the odds of sharing a brew on any given day with Greg Koch over at Stone are stacked against you. So both breweries have personality, but the smaller ones are more personable?
From my limited business experience, it seems the large you are the more “business” things you have to deal with…at what point could a large brewery,like Sam Adams, delegate all the time consuming minutia of business to consultants/contractors so that Jim Koch spend his days holding a mash paddle? It can be done. But money is addictive…even more so than beer. It’s extremely tempting to focus on quantity over quality.
@Jim…Of course only you guys know the answer. Of course. We are often embarrassed by how intelligent we are.
[Reply]
Nate,
I have to be honest and say that you hit it on the head. Being personable it one of my top issues with growth. I’ve got a proclivity against corporate alienation mentality that drives a lot of the way I think about subjects like this. Of course, you got it right when you you mentioned that the real idea is driving the article is creativity. If you can be a big brewery and remain creative, fine, but (like you note) that is a very difficult proposition.
[Reply]
I think you have to expand beyond the size of a startup brewery, but be careful to not over-expand. How can you tell? That’s the million dollar question for sure.
Some of the examples being thrown out don’t really work here though. Jim cited New Glarus, but they were #22 on the Largest Craft Brewers by Volume chart in 2009, bigger than Rogue, Great Lakes, Lagunitas, Flying Dog, and any number of widely available breweries. They’re by no means a small operation, but they are strongly ingrained into Wisconsin, and you’d have to work hard to find a bar up there that doesn’t sell their beer, no matter what kind of establishment it is. Three Floyds didn’t make the list (it only went to 50), but they recently expanded into Wisconsin and Kentucky, plus add a ton of new equipment to keep spitting out more beer.
No matter what your model, you can make money. Hair of the Dog seems to be one that refuses to expand, plus they rarely offer up a new beer, but people clamor to get whatever they release. They’ve also had more than their fair share of quality problems, yet demand far exceeds supply. Stone is constantly expanding, but they also have a new beer to offer fairly regularly, even if it’s just the anniversary ale and the Vertical Epic series. Their beer also has a tendency to rot on store shelves (I blame the customers, not the quality). It’s not hard to find Dogfish Head, and they do some of the weirdest things in a beer bottle.
You can retain your creativity and edge as a big brewery, you just have to focus on that instead of the bottom line. If you have to decide between making another batch of your popular IPA or some new experimental beer that might not sell, then you’ll know once and for all which way your heart leans.
[Reply]
In all honesty, it depends. Deschutes is one of the larger breweries according to a list I say recently, and they constantly produce high quality beer, including seasonals and specialty brews. They continue to be one of my favorites. Yet, I have had other negative experiences with similarly large breweries. Creativity can be retained in the larger brewing setting, yet it’s not always done successfully. There are tradeoffs you must consider with size. For instance… smaller breweries tend to be more personable.
Based on my time here, I see Nate and Mike as two guys that would tend towards the more personable venture. They seem to value the relationships and encounters with several different breweries. Those brewers/breweries that make an effort in connecting with their customers seem to be tops in their books. After all, they are beer people.
My preference, at least for my own future venture into professional brewing, is to be a local, regional brewery. Sure, I want success, but success for me is more than monetary. I want to be connected to the local community. I relish the idea of my brewery being in a small town.
One other tidbit with regards to expansion… sell deep, not wide. In other words, spread slowly, and establish a good name for your brewery. I mean, it’s a shame Oskar Blues is pulling out of Idaho (poor Don!).
[Reply]
Thanks for the responses guys. Agreed about New Glarus but, like you noted, they have a very strong state following but aren’t expanding everywhere. It certainly has grown but it’s not expanded to more and more and more markets of other states. Sure, they are certainly maintaining a good level of creativity, and, like you note, they are still pretty big. I certainly want to model the way I look at brewing the same way New Glarus does (ie strongly local). I guess part of the point is that they could expand and get even bigger but they aren’t. Personally, I think it’s the idea of creative ambition and not financial that is growing places like New Glarus. Same is true with Three Floyds who could have expanded to huge proportions. Although they grew, they grew very slowly so as not to insure a meteoric rise.
Stone is an example of brewery that comes out with new stuff but I don’t find it particularly creative, so I don’t find them to be a good example to counter what I’m driving at. In the end, I do have to agree with you Howard, you can maintain a creative edge as a bigger brewery but I don’t think it can be to the degree that a small guy can.
I think the idea of being personable is a good one. I could offer a couple examples here but I’m not going to run down the companies I have in mind. However, I’ve seen growth and success change personable brewers into jerks. I like the idea of slow deep growth.
One further point about deep roots in areas; Our beer market is ever expanding and awareness for local stuff is rising. Eventually (probably a long time from now), the market will be pretty saturated. I think the breweries that will last will be locally strong and not necessarily nationally represented. Anyway, that’s some of the backdrop for why I wrote this.
I appreciate all the feedback and I’m always happy when you guys leave substantial comments.
[Reply]