Hi, there. 

This is the first of four exclusive topics we’re covering here in our newsletter from our larger 2023 Beer Branding Trends report. 

We aren't publishing these insights on the main report, so if there’s someone on your team you think would benefit from reading these, please forward this email to them or have them sign up here.

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Craft Beer isn't dead!

But we are operating in a vastly different market than the 2010–2019 era. 

There are now 9,500+ breweries in the United States, debt has become more expensive, and consumers are embracing new categories and beverages with open arms.

Success is no longer a guarantee and new breweries today have far less margin for error as they come out of the gate.

We’ve worked with several breweries in planning over the last 12 months (and are slated to kickoff with several more this summer). Beyond these projects, we’ve talked with another 30+ other groups that we ended up not working with. I say that because it gives us a broad context for what models and concepts folks are using all over the country to launch new breweries today.

Here are a few recurring themes from our project fieldwork and these new business conversations: 

 

On brewhouse sizing 

Most of the startups we’ve worked with recently who are building a brewery (as opposed to contract production) are starting with much smaller systems than what we saw in the 2010s.

Contrast this to just 7–8 years ago when the thinking of the day was why start small now only to upgrade later? Just buy that 30 bbl system today and be done with it (this rocketship will never slow down!).

But that was when craft beer was still in ascendancy, we were spoiled with historically low interest rates and organic growth was easy to trip and fall into in the beer industry. 

We’re still seeing traditional brewery startups (brewery system in back with taproom up front), albeit smaller scale ones overall. There are still outliers who put in (and can justify) a 30+ bbl system and swing big (with a market- and geography-dependent competitive set) early on. 

But we’re also seeing a lot of 5–10 bbl systems on deck right now. And even when we work with a startup that does want to put in a larger 20 or 30+ bbl system, more often than not, we’re hearing that they’re also considering starting smaller now with medium term plans to just open another location with smaller (say, another 10 bbl) systems. 

Managing cash flow has always been important, but we’re seeing a more conservative approach to brewery build outs right now (i.e. I’m hearing less “we’ll build this plane in the air” and more “we’ll have a diverse portfolio that caters to the following specific audiences and we will try to build with cash as much as possible…”).

And I think this will serve these groups well as they come to market. They're set up to weather this (hopefully short) downturn and can grow more methodically over the next decade.

Packaging from day one (usually for carryout)

Out of the half dozen start-up breweries we’ve worked with in the last year, only two had plans to come to market without packaging.

This is a major shift from six or seven years ago where packaging was something a brewery grew into when demand and brand awareness was there (almost always with an eye towards retail and distribution.)

The interesting shift we’re seeing now is that a lot of breweries are investing in package design specifically as a carryout format from their taproom with no immediate intention of getting into broader off-premise or distribution.

This is interesting because packaging certainly isn’t cheap (granted, if packaging is for carryout only, your brewery isn’t also getting a haircut from a distributor and a retailer). But it is still more expensive than, say, filling crowlers for carryout at the start of each week. 

We’ve heard a few reasons for this:

– Growlers are out of fashion (in some markets). We can use Crowlers, but our consumers want more beer to take home in standard formats to drink when desired.

Quick aside here: We haven’t designed a growler in years. And personally, I haven’t regularly used one since, maybe 2018? Is anyone out there still regularly using growlers? Shoot me an email if you do and tell me where you are, why you use them and just how dirty your growler is. 

– COVID broke everything (habits, conventions, occasions, etc.) and now consumers just expect that you’ll have packaging. 

– It’s a cool chance to showcase your branding. 

– You want packaging because you’ve always dreamed of it. We’ve heard this sentiment a lot over the years, (and as a business owner myself, I never discount it). 

When you’re dreaming up your brewery and business plan, a big part of that visualization, for a lot of folks, is packaging. Seeing your can in a cooler or in a cold box somewhere is what makes your brewery "real." So even if it doesn't make complete financial sense, there may still be a drive to begin packaging just because you want to. 

– You plan to package your beer at some point anyway, so why not do it now?

At some point over the last few years, packaged beer became an important part of most new breweries' product mix. (Again, maybe this is attributable to the pandemic-induced shifts to our habits and expectations.)  

Whatever the reason, this trend appears to be sticky and we see no signs of it slowing down in our current project inquiries. So much so that I’m surprised when I talk with a brewery in planning that isn’t planning to package their beer out of the gate.
 

A real focus on hospitality & food service

A brewery that plans to be in business ten years from now has to get everything right: Better beer, better customer service, better hospitality, better financial management and… better food? It’s looking that way.

We’re working with a lot of brewery founders who either come from a hospitality and restaurant background, or, are partnering with someone from that domain to shore up that side of their concept.

We’re hearing that having a dialed-in food program (no, Hot Pockets don’t count) is increasingly important to attract customers because you can capture more of their business. If someone is going to go to a restaurant and grab a few beers later, or grab a few beers en route to a restaurant, why not offer both ends of that spectrum and capture a larger ticket?

This maps to another trend we’re seeing of breweries putting in real-deal restaurants and food concepts. This can be done via bringing in an existing food partner to run a business within their business in a way that benefits both parties. (But be wary of who you partner with. An unreliable operator can cause your brewery to permanently lose customers.)

It probably goes without saying that operating a restaurant is every bit as challenging as running a brewery, so don’t read this section and shift your plans without doing a whole lot of research. But if your brewery does include a food component, you may be better set up for the long term.

 

People are buying (and/or hermit crabbing their way into) breweries

We’ve worked with several groups, and talked with several more, that have purchased (or are planning to purchase) a brewery. 

We’ve seen so much of this type of engagement that we explored this trend in detail in Issue 25 of the Beer Branding Trends Newsletter as well as a popular companion podcast episode. 

I’m including this here because I think this is a great way for someone to get into the brewing industry. This approach isn’t for everyone, but if you’re an operator—i.e. you’re good at building systems and SOPs, you’re good at running off of a playbook, and you’re good at building a team—these turnkey brewery purchases can be an attractive play. 

And on a more negative note (or positive, depending on where you are in this equation), there will be a lot of breweries for sale over the coming year(s). So if this is an interesting idea to you, keep your ears open. Opportunities abound.

Filling out the map (where are people putting in breweries?)

In the last year, we’ve worked with startups in Brooklyn, Orlando, Cleveland and San Francisco. But we’ve also seen a lot of inquiries from smaller, overlooked markets, including suburbs, exurbs and downright rural markets. 

Quick note: We’re seeing this same phenomenon in our Canadian beer branding work. We’ve done a lot of work in Toronto over the years. But we’re also working with breweries in smaller cities, provinces and markets all across the country right now.

This could be a lagging effect from the 2020 remote work drive that saw tens of millions of folks leave cities for more far off locales. Or, it could be that there are opportunities to be found in these further afield markets (all those Millennials are settling down to raise families in the suburbs, so why not cater to them?).

No brick & mortar (contract brewing & lifestyle brands)

We’ve done a lot of consulting work and brand building this year for clients who don’t have a brick and mortar location (no brewery, no distillery, no tasting room, nothing). 

The flow goes like this: You start with an idea > hire a beverage development group to create the recipe(s) > find a co-packer to produce it (can be a dedicated co-packer or a brewery that will contract brew for you) > hire a design firm to develop stellar branding and packaging > sign on with a distributor to get it into retail > profit(!!!).

We predicted more of this in last year’s Beer Branding Trends Review—particularly the rise of lifestyle brands—and it’s looking like that’s proving to be correct. Based on our inquiries so far this Spring, it looks like this will be an increasingly common path to market for new breweries and beverage brands.

The following are two specific business models that we're seeing folks execute via contract manufacturing:

1. Lifestyle brands with a hyper-niche focus to stand out 

We’ve written before about how a lifestyle brand is hard to define and you kind of know one when you see it. But that’s not helpful advice to someone who is considering this sort of positioning and model when starting a new brewery or beverage brand. 

We've found a few key things that successful lifestyle brands have in common:

– They target a niche subculture exclusively

– They are aspirational (positioned as embodying a particular ethos or lifestyle)

– They go heavy on merch to foster in-group identification 

– They are generally digitally native (or contract produced for beverages) to start 

– And most importantly, the values that a lifestyle brand embodies are as important as the product itself because they allow a consumer to find belonging. This is the real magic that makes these plays work

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We think lifestyle brands will become an increasingly common strategy for launching new Bev Alc brands over the next several years.

The ability to start lean and create something that speaks directly to a well-defined, ardent audience may be a safer bet than opening yet another taproom in a city full of taprooms.

Not to mention the much, much leaner capital needed out of the gate vs. building a traditional brewery.

2. Heritage intellectual property brands

Heritage intellectual property (IP) work is a fun formula where someone obtains IP rights for a long defunct (usually pre-, or just post-Prohibition) beer brand and faithfully reproduces it—recipe, branding, packaging and all.

We think this idea is an enormous, untapped opportunity that we’re going to see way more of in the coming five years. 

This trend started years ago with the reemergence of major national brands like PBR, Miller High Life, Hamms, Rainier and Narragansett.

To give you a sense of this scale: There were 1,300 breweries in the United States before prohibition. And only 100 made it through that boondoggle. How many of these brands are still trademarked or owned by someone? And beyond that, how many breweries folded between 1940 and 1970? (There’s gold in them hills… if you know where to look)

This play can work well for a few reasons:

1. It brings instant provenance and story to the table. It’s an opportunity to lean into all that real authenticity and history to create a connection with customers. No myth making needed.

2. For the existing brewery, and from a portfolio and product mix standpoint, it's an easy way to create a strong one-off brand (or Sub Brand) to help bolster sales.

3. For the startup, you can bring it to market in a lean way. E.g. hire a branding firm to get all the visual and design assets squared away, and then have a brewery contract brew it for you. 

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We’re working on a dedicated series that will showcase some of the work we’re doing in this space and why we’re so excited about the opportunities these moves represent. Stay tuned.