National beer launches are dead.
My career in the beer industry has allowed me, in a privileged sort of way, to see the rise (and fall) of many of our country’s greatest breweries. The recent closing of Bridgeport Brewing in the pacific northwest, a potent chapter and powerful footnote in the annals and history of American craft brewing, is a sign of the times and illustrates the rapid evolution of today’s beer consumer as breweries duke it out over a relatively stagnant consumer base. The lack of growth in the category can be dispiriting in many ways, but I’m truly delighted to have seen such a healthy beer category develop over my lifetime, starting in the late 70’s and early 80’s with the daring pioneers that put flavorful, locally brewed beer on your radar, and ending with today’s rapid proliferation of the business model itself.
Beer, as a locally consumed product, is coming back to its roots, so to speak, defying the homogenization that consolidated our country’s alcoholic backbone in the 20th century to a select few producers of relatively flavorless light lager, and instead moving toward the consumption patterns of the hyper-local past, where beer was consumed locally out of necessity, rather than choice. Education around the product itself is at an all time high, and as such, the discerning customer requires more from their products to satisfy their needs, and their purchasing behavior. Breweries are responding in kind, upping their proverbial game and pushing a progressively faster evolution of what makes American brewing truly unique and wonderful.
In light of that comment, and the increasing locality of this lovely libation, along with my normal penchant for pontification and overly opinionated dross, I’d like to present a preposterous new marketing concept that will, no doubt, cause a few eyes to roll: The age of launching a beer across an entire national distribution footprint is dead. Long live local.
LOCALITY + BRAND = SALES
My experience as a marketer and educator in beer informs a lot of the rhetoric in this post, and I’ll caveat everything you read below with a simple statement: I do not have anything close to a robust set of empirical data to suggest that this should be read as gospel, or anything close it. What I do have is expertise in the category, a gut check, and enough anecdotes to make this all seems very interesting and worthwhile. I’ve seen it at the brewery I work for (Guinness), and I’ve certainly seen it at other breweries over the years, both from direct experience and my close observation of the industry. Nobody bats a thousand, and I certainly don’t pretend to know the path forward.
Good Beer Hunting, which continues to provide a necessarily critical and incredibly well-written voice in the beer world, released an op-ed of sorts in 2017 when they featured a post from Bill Covaleski, one of my personal favorites in the beer business and a co-founder of Victory Brewing Company. The thrust of his post revolved around the need to keep yourself entrenched in the community’s that helped you get to the size you are today…in his case it was Pennsylvania and the surrounding states that have patronized his brewery and purchased his beer for over two decades. Victory is distributed in roughly half the United States now, but as Bill so astutely points out, the majority of that cashflow comes from the areas closest to home, fading noticeably as the radius increases. This sentiment remains potently true, and even more relevant, in 2019, when we’ve seen what amounts to a total cessation in beer category growth across the country. Success factors remain present, but the dynamics have changed, and thus the go-to market strategy for a brewery looking to find a big win with their next beer has to change as well.
GO TO MARKET
The concept of having a “go-to market strategy” is relatively simple in its conception and blindingly difficult in its execution. Regardless of that, having a clear strategy is always going to be a success factor when releasing a new product at scale, and more importantly, being able to roll with the punches and iterate on the feedback you receive from that strategy. I won’t go into the minutia around that strategy as I see it, but regardless of the industry, it should always be iterative, customer-focused, and specific. You cannot “hope” your way into a nationally successful beer brand, and you certainly need to maintain an evolving perspective as you seek to understand how to fulfill your customer’s needs.
A NATIONAL BEER LAUNCH - THE APPROACH
I mention that basics around having a go-to market strategy because it helps define the reasoning and positioning exercise that a brewery must go through if they’re going to launch a new beer for their entire distribution footprint, regardless of that footprint’s size. Very broadly speaking:
First they look at the category and it’s growth potential (look at hard seltzer right now and then look at how many breweries are trying to cash in on the category…if you don’t believe me).
Then they look at “brand fit” and their brewery’s core competencies. Does it make sense, given the category, for us to participate in that space? Simply making a beer at scale “because we can” amounts to a massive shot in the dark, which will soon turn into a massive waste of money in most scenarios.
After they’ve gone through all those thought experiments and have done the proper market research, they make the beer they hope will make sense to the consumer, frame up the audience they’re targeting and do their best to market and sell it to the right people.
This is straight out of the playbook of every domestic producer, international import, and larger regional craft brewery in the U.S, and it’s generally a great way to frame up new product development and launch in general. It can be thorough and detailed, and can occasionally yield a notable and enviable amount of commercial success. All hail.
I was a vocal critic of this beer when it was first launched by Sierra Nevada. Not the beer itself mind you, which was well made and as delicious as anything you’d expect from Sierra, who has literally never produced a bad beer. As I saw it, it amounted to chasing a category trend that was growing but unproven, and I did not like that Sierra launched it to the entire country all at once. I had other reasons as well, and regardless of those reasons, I was wrong. This beer now represents a core offering from Sierra and is, by far, their largest growth vehicle at the brewery in 2019.
THE PROBLEM
But mostly…and this is a key takeaway here, mostly, national beer launches are failures. They’re a losing proposition if you sat at the betting line and eyed the bookie for a wager. Brand new beers launched at scale have a relatively low hit rate, and brand extensions on successful core brands don’t pass the litmus test of longevity as often you might think.
I spoke about the go-to market approach because it highlights the technique that a brewery would normally use to set themselves up for success on the national stage…and therein lies the rub. Regardless of the research, and the strategy, and all the incredibly talented people who put the plan together (and I know a lot of incredibly talented people in this business)…regardless of all these things, you’re still just making an assumption.
You are. It’s an assumption. It’s full of risk and doubt and uncertainty. You’re essentially defending your thesis statement to a national audience and hoping that the ends justify the means…mostly through commercial success and the positive, margin additive recurring revenue that comes afterward. The KPIs are clear, but there’s nothing clear about how to get there.
Now…I understand the dynamics of what success looks like and the sort of fruits it can yield when innovation is done correctly. In the mid 1950’s, through a lot of trial and error, the Guinness Brewery invented a piece of technology that fundamentally changed the course of the brewery. They created a method of dispensing beer using nitrogen gas…what we call Nitrogenation (vs Carbonation…which uses carbon dioxide gas). This was a bold leap into the unknown for a brewery that was celebrating 200 years of international success and a potent pedigree built on the principles of brewing innovation. It turns out that it’s the most important invention that ever came out of the Guinness Brewery, and that’s saying something for a 260 year old company.
But the world is a different place than it was in 1959, and our consumers are remarkably different. Breweries that hope for national success, all at once, are mostly wasting their money in an age of incredible market complexity and customer diversification.
TRIAL AND ERROR
One of my favorite TED talks of all time is from Tim Harford, who espouses the principles of trial and error beautifully using both historical and commercial examples to illustrate his point. It’s completely worth the 18 mins, trust me.
His point around trial and error does seem remarkably simple, and yet we still see companies attacking their next sales challenge with an absolutely absurd level of tenacity and an unnecessary level of financial investment. I applaud the effort, and I envy the level of coordination it takes to bring that product to market so quickly…but I do not envy the results. I do not think we should build a brand through a national level of trial and error in today’s beer market, and I think there’s a lot of evidence that backs me up.
COMMERCIAL VIABILITY - LOCAL BREWERIES VS NATIONAL BREWERIES
Local breweries and national breweries have, what looks like on the surface, to be the same business model…right? They produce beer and sell it to their customers via distribution channels for a specific price.
But, in reality, that’s where most of the similarities stop. Local breweries embrace a nearly-completely different set of customers, and a completely different go-to market strategy when it comes to product iteration and that oh-so-critical feedback loop that is necessary to iterate yourself to success.
Local breweries usually have tap rooms. Locally breweries have low overhead, and modest sales goals, and can harness the “locality” as a brand driver very quickly. They can use their taproom as a powerful feedback mechanism and build their market equity slowly and carefully. They can hire strategically and engage in marketing practices that don’t need to resonate with a national audience. They can stay mission focused and leverage that mission to drive sales. They can stay right f$%king next to their customer, which is where every single person who works at a brewery should be standing anyway, regardless of role. You absolutely have to know, intimately, who’s drinking your beer.
Huge breweries, in comparison, have a large bank account. They have a talent pool, and they have massive brand equity, and historical significance, and a large cohort of highly loyal consumers (I’m generalizing to point out of the juxtaposition, clearly). They have distinct advantages, and I’m not certainly not demonizing them in any way, but the one thing they don’t seem to have is the ability to engage in the process of trial and error over the proper amount of time. Perhaps it’s an irresponsible practice because their shareholders demand short-term success…perhaps they’re ok with the risk as long as there’s a big return eventually. This is the business model of venture capital firms. Most startups fail, but then there was that one time we invested big in a company called Google…this is, quite distinctly, the epitome of trial and error strategy.
Perhaps, if you’ve got the deep pockets to launch a beer nationally, you do so to keep your wholesaler network engaged and happy. You need to feed the beast, after all, and you need to keep those wheels greased. It’s a distinct concern and likely motivation for any larger brewery.
Perhaps…perhaps. The reasons for making one business decision over another are legion, and while most end with a focus on profits (which is generally a good thing), the amount of time it takes to find the success, and the way in which you go about finding it, can look quite different from one company to the next.
I’m also curious - If you’re a national brand hoping to find success with your next gigantic launch, why do you think you’ll be able to do it at scale? What piece of data tipped you off? The size of the market? The growth of a particular category within your industry? I’m genuinely interested to know.
SLOW IT DOWN
Bringing it back to beer, I cannot possibly sit here and tell you exactly what consumers are thinking about when they peruse the beer aisle and snag a 6’er of one brand VS another. I can’t really pin down that one thing that influences purchasing behavior either…it’s a confluence of a million factors, at best.
But what I can tell you is the amount time it takes to build a beer brand at scale, and the invidious nature of scaling too quickly can start to create unnecessary drag on your internal culture, cash flow, and customer base. Understand that you don’t know what you don’t know, and embrace the basic idea that your best guess is going to have to be good enough. Sometimes it is good enough…most times it’s not.
Great breweries stand the test of time by leaning on pillars that build generations of consumer loyalty. Quality. Integrity. Consistency. Community service. And yes…continuous innovation. But that innovation shouldn’t cost you more than it needs to, and your next legendary beer (almost certainly) won’t happen because you made a 50 million dollar gamble. It might happen because you put your best effort forward, and did so deliberately and slowly, to a small portion of your audience, and learned and listened, and made it better, and did it again, and did it again…until it was perfect and you couldn’t possibly find another person to drink your beer that didn’t already love it.
Maybe that’s the right strategy. Maybe not. But it wouldn’t hurt to try.
