What do hand-crafted beers and credit unions have in common? More than you would expect. Micro- or craft beer sales grew at 11.3 % for 2006 versus the overall beer market at 2.0%. Over the past three years, sales of beer from these breweries have grown 30%. A look at some of the most successful Davids in a land of Goliaths provides insight into how credit unions can accelerate their growth too.
Lesson #1: "Dude, you're obsessed"
Successful microbreweries were founded by people obsessed with making a better product for the consumer, often provoking such comments as above. The craft beer craze began when Fritz Maytag bought a failing Anchor Brewing Company in San Francisco, CA. He, and now hundreds of others, had a vision of a better product than those produced for the masses and were determined enough to share that passion with others. Recognizing that the big brewers catered to the bottom line "profit" by creating beers using fillers and the cheapest possible ingredients (corn, rice, plain white sugar), microbrewers differentiate their offering by using historical ingredients of barley and malt. In addition, these craft brewers focus on pull marketing "educating the consumer about the value they offer" rather than pushing large volumes through distribution channels and then spending billions on marketing to convince the consumer to drink their product.
Lesson #2: Passion is contagious.
Passion at the top isn't enough but it's a great start. Successful microbreweries also spread the same passion throughout their company, often through unique mission and branding statements that drive corporate decisions from what ingredients to use to what markets to target. Sam Calagione, founder of Dogfish Head Craft Brewery, describes the process this way: "Your products are just a different format of a business card that work to tell the story of what your company is all about. If you do not have pride in the products you offer, it will affect your ability to sell it successfully." The company's employees make all decisions under the motto "off-centered stuff for off-centered people," a mission that both guides and limits what the company will do. Another example is Anchor Brewing, which focuses on "authenticity." When confronted with a large order from a new customer, the company made the difficult decision to say no rather than trust a contract brewer when they did not have enough current capacity to brew in-house.
Lesson #3: Local is the new global.
By definition, most microbrews are regional and they measure their success locally. Not all businesses are founded to be giants, but that does not mean they cannot experience solid growth and profitability. To do this, microbreweries often create strong ties with their community. Brooklyn Brewery, a craft brewery founded in 1987, is credited with helping to create a renaissance in Brooklyn, spurring further economic development through their strong community involvement. In San Francisco, Fritz Maytag keeps a low profile but focuses his community involvement around the concept of a brewery as a "sort of civic center" a place to go and have meeting. Using this concept, he opens the brewery for special events and fundraisers to help local non-profits. Dogfish Head Craft Brewery was founded as a brewpub in the small town of Rehoboth Beach, DE, where it could be a new and vital business in a small beach community.
Lesson #4: Collaboration breeds success.
Choosing a good microbrew is a lot like choosing a good wine - the more educated you are about the product, the better. Therefore, the more microbreweries spreading this knowledge locally, the faster all microbreweries can grow. And with microbrews holding less than 4% of the total US beer market, there is more than enough market share for every microbrewery to capture. When competitors to Anchor Brewing came on to the scene in the early 1990s, Maytag helped them develop rival products. When Tom Potter, co-founder of Brooklyn Brewery, started his own entrepreneurial odyssey, he and his partner Steve Hindy visited most of the breweries on the East Coast in order to learn more about the industry. When establishing their distribution strategy, they included competing microbrews even when their business advisors questioned this decision. Today, the distribution arm of the company is twice the size of the brewery itself. The founder of Dogfish Head just published his second book sharing not only the business secrets to his success, but also some of the very recipes he used to get started.
Lesson #5: When life gives you lemons, brew beer.
While some believe that size can be an obstacle to growth, microbreweries have found success by turning this disadvantage into an advantage. Dogfish Head had only 10 gallon brewing tanks when it first launched its brewpub. The founder brewed three batches a day five days a week in the early years, leading to continual innovation and experimentation. Their most popular brew was even invented using a vibrating tabletop football game bought from a secondhand store! Anchor's Maytag made the decision to stay private (and thus smaller) in order to retain complete control of the product and not be subject to the demands of Wall Street for wider profit margins. Small also means you are closer to your customers. As Dogfish's Calagione writes, "At what point does a company see enough interest in repeated feedback to take action? I'm willing to bet that the bigger the company the slower they react. When you are small you can react a lot more quickly. Your reaction will show your customers that you care."
Lesson #6: Different business models work.
In researching the many different craft breweries for this article, one common lesson stood out: there is no common business model. Each of the breweries made different business decisions in their quest for sustainability and growth. Go public or stay privately-held? Brew in-house or contract out to others with excess capacity? Start a standalone brewery or build a brewpub with dual income streams? Control distribution or outsource through third party distributors? For questions like these and others, successful breweries made the decisions that best matched their mission and vision for the organization. What they share in common is their passion for the consumer experience, the desire to make good business decisions, a recognition of the necessity to differentiate and innovate to beat the competition and the ability to embed themselves in the community around them.