“British Independent Craft Beer is in high demand on the global marketplace,” states the Society for Independent Brewers on their web site. The same can be said for the US. According to the National Beer Wholesalers Association, the United States Alcohol, Tobacco, Tax & Trade Bureau (USTTB) announced there were 7,190 brewery permits issued in 2016. This represents an all-time high for the US beer industry. Just how big is the US beer biz? The Brewers Association, based in Boulder, Colorado reported the market is valued at $105.9 billion of which Craft beer carves out $22.3 billion. That’s up 16% for Craft in dollar share growth while representing a 12.2% volume share of the category.
So what’s hot in the US craft biz? IPA’s still dominate with as much as a 35% share in major metros like San Francisco. The consumer “craft indoctrination process” typically begins with domestic/mainstream beers then evolves to higher quality craft lager or hefe. They quickly graduate to amber then to pale ales. Once they taste the hops found in pale ales, they are addicted and climb onto the IPA bandwagon. From there they try double IPAs, “citrus-forward” or West Coast style IPAs (the rage currently) and even triples. The same evolution is taking place in the cider market.
But with so many breweries coming on line, how will all these beers get to market? This will be the challenge due to finite Off Trade retail shelf space and limited open handles in the On Trade. The battle will be an interesting one in 2017 as some craft brewers are either gobbled up by international mega brewers or join together to achieve production and distribution efficiencies.
Once established, I advise the small-regional brewer to consider a “Castle Keep” strategy. This focused concept restricts distribution to a manageable geography or “selling perimeter” where brand awareness and sales pull are strongest amongst consumers, retailers, the On Trade and wholesalers. Under my castle keep theorem, the geography is adequately defended by experienced brewer sales representatives who have cultivated long term relationships which continue to serve the brand franchise. These relationships are the life blood of the brand and the brewery. Think of them as the supply lines to the castle. The brewery should also invest significant capital into a showcase tasting room where new beer samplings take place and account buyers are invited for new product kick offs and entertaining. Picture this as the Castle’s Inner Ward or “Bailey.” The sales reps use the bailey often which reinforces the brand’s local relevance and freshness. Being “local” is a high priority for US consumers and retailers.
The castle keep’s territory perimeter is dictated by the brewery’s distribution network reach and by its On and Off Trade sales personnel coverage. Imagine your wholesalers/distributors as your knights on horseback. How far can the knights ride and still get back to the Keep by nightfall? Now think of your sales team as the archers – how far can they fire their arrows and still hit their targets accurately? Overextending either of these vital brand assets would certainly jeopardize the strategic foundation of the castle keep tenet. Lastly, imagine that the width of the Keep’s moat directly reflects the relationships that your sales team and wholesaler reps have with local accounts. The wider the moat, the tougher it is for competitors to poach your handles or to take your Off Trade real estate. Conversely, the more narrow the relationship, or more shallow the moat, the easier it will be for competitive encroachment.
The goal of the castle keep is for the brewery and brand to remain ingrained within the community fabric – thereby solidifying ties with loyal drinkers/supporters. This brand strength also acts as a deterrent, or “moat” to competitive brands searching for new distribution territory. This competition may include a multi-national brewer or distant craft brewers seeking to expand volume through real estate expansion.
Some brewers are investing in tasting room restaurants in major metros - away from their breweries. The tasting room, which requires a special license, serves as a trial/sampling mechanism while positioning the brand as a local beer in the mind of the target consumers. Sort of a, “hey we are local too, just a bit further up the road than some of the other brands you may be drinking.”
These tasting rooms are used to introduce new beers which help to maintain the brewer’s craft/micro position and relevance within the savvy consumer mindset. The room is often used by sales reps to sample account buyers in a tasting-friendly environment but also represents a competitive threat acting as a “research scout” evaluating new market potential.
So, how do interested British craft brewers succeed in the US? Marketing and distribution are key as your brand must have a “key differentiating advantage,” a concise positioning, a detailed launch plan, and be supported by financial and managerial investment. Come to think of it, who invented the IPA?
Mark Colburn, author of, “Craft Beer Marketing & Distribution – Brace for SKUMeggedon” has been in the beverage alcohol business 25 years and possesses a master’s degree in Marketing. He worked 7 years for the British Trade & Investment Office as their “Lead Post” on the US Food & Drink sector and was a speaker at the International Food Exhibition. While working for the BTIO, he was interviewed by the BBC for his research on the US cider industry. He is also Cicerone certified, has been published by the American Marketing Association and is a winner of the American Association of Advertising Agency’s Advertising Excellence Award.