Craft beer is big news at the moment. It would be difficult to miss the number of small breweries popping up all over these isles of ours. From furthest Fife to deepest Devon, micro breweries, craft breweries, artisan breweries are opening up their doors. And not just here, over in the U.S. there are now more breweries than before Prohibition (the illegalisation of alcohol in 1919). And right across Europe, from traditional beer nations like the Netherlands and Denmark to wine tippling nations like Italy and France, it’s happening too.
Despite this, the U.K and U.S. beer markets remain in overall decline, and the others are in such low single digit growth as to be just as well described as ‘stagnant’ as much as anything. But that of course, isn’t the point. The growth in craft beers is the manifestation of powerful behavioural changes going on amongst consumers. And look deeper into those numbers and a different picture appears. Take the U.S.. Industry commentators have been fairly dismissive of the overall impact of craft beer for almost two decades: but now craft beer is almost 8% of the total market. Whilst the total market is declining by almost 2%, craft beer is growing at 18%, with craft beer exports from the U.S. up close to 90% (witness Fuller, Smith & Turner, brewers of London Pride, taking on the brand rights for Sierra Nevada in the UK in the last 4 weeks). These are no longer market twitches at the edges which can be ignored.
So what can big brands learn from craft beer?
The balance of form and function. Whenever I see ‘New Recipe!” (or rather, “Great Taste, New Recipe!”) on a brand, I shiver. What this typically means is ‘we’ve found a way to reduce our cost of goods sold and need to ‘sell’ it to you, just in case you notice’. The successful craft beers retain their balance – to use the parlance of David Taylor, author of ‘Where’s the Sausage?’* – they balance their sausage and their sizzle. Take Brew Dog, the self-styled agent provocateur of craft brewing: they do engage in some frankly, questionable PR stunts but at the end of the day, their products are robust and exciting. In big companies it’s easy to become disconnected from the product and before long that savvy ‘cost optimisation’ programme is actually undermining your brand equity.
Trend and counter trend. What I love about the craft beers is that so often their contrariness leads to success. Beer getting lighter? Increase bitterness. Alcohol levels falling? Extreme brews. Everyone using cost effective hop oils? Use the whole cone. It’s just a lovely demonstration of trend hunting from the wrong end. If everyone is zigging, we will zag. Big companies often use the excuse that ‘there isn’t a commercial opportunity big enough there’. Well say that to Molson Coors, who persevered with their craft beer Blue Moon for almost a decade before *Boom!*, you’ve suddenly got the leading brand in the segment. Ask yourself: is this decline a result of consumer behaviour or is it more about our lack of attention to what the opportunity could be?
No more Vanilla Values. There’s a great book just out which I’d recommend to anyone in business. It’s a beer book, but the lesson is not about beer. The lesson is about where really, truly, running a company from your values can take you. It’s called ‘Beyond the Pale’ and is the story of the Sierra Nevada Brewing Company by their co-founder, Ken Grossman. Ken started his company out of dissatisfaction with U.S. beer at the time: but his response was to build a company where there were clear red lines. We won’t brew with adjuncts (forms of sugar other than malted barley or wheat which are cheaper to brew with). We won’t pasteurise our beer. We won’t leverage ourselves for growth if it compromises our brand. Surely these are just product guidelines? Actually, they summarise an attitude, they define behaviours and a business philosophy that is inspiringly powerful.
Know Your Friendemies. Of course, in big business there are very issues with perceived collusion and cartel behaviour yet what is singularly marked about craft beer is how collaboration is creating value. Real, edgy, collaboration. Collaboration on new products between breweries. Collaboration on new products with beer writers . Note: there’s no ‘Consumer Co Creation’. To say craft brewers are research-light is an over statement, rather they trust in their values and put out a vision of what the future could be that drinkers are attracted towards – or not. And this isn’t to say they don’t do research – it’s rather that everything is research.
Rhythm and pace: in all my dealings with the craft brewers, I haven’t heard the terms ‘Innovation Pipeline’, ‘Stage and Gate’ or ‘Volumetric Test’ once. Yet, these companies are prolific innovators. New ingredients, new processes, fusing traditional and modern, repurposing the past – it’s all there. A whole industry has sprung up around innovation which fundamentally is un-innovative. It’s about eliminating risk, increasing strike rates, extending rather than creating. And yes, there are a lot of failures, but in the main, they learn and move on – quickly.
Follow the Leader vs. Lead Your Followers. The bravery of many craft brewers is remarkable – the bravery to stand for something and project it out to the world to take or leave. One example: Mikkeller: founded by two Danish homebrewers, Mikkel Borg Bjergsø and Kristian Klarup Keller, they don’t even own a brewery. Rather they adopt a magpie or ‘gypsy’ approach and brew where invited or through the network of friendly brewers worldwide. Yet, their brand stands for breaking the rules, in their words, for “challenging beer friends with intense new tastes”. Oh, but they’re a one off, I hear you say. You can’t replicate that in a big business. Why not? Mikkeler turnover over $4m a year and a regularly rated as having some of their best beers on the planet**
At the end of the day you still have to sell – of course, of course. And with scale so it gets easier to deliver a consistent quality product, sure. There are a handful of craft brewers who have made it truly big: take the now publically listed, Boston Beer Company. The largest US craft brewers (at a total portfolio level) yet, still brewing tasty, challenging, interesting beers from good quality ingredients. Will it last? Who knows? But it’s possible. And take Brew Dog: moving crowdfunding to a new level in order to fuel their growth through their Equity For Punks scheme.
It is possible to be a big business and have real values: and craft beer is teaching us how.
David Preston is founder of The Crow Flies, a research, strategy and innovation company that discovers and maps the direct route to success for categories and brands. David is also a beer writer at http://www.beertintedspectacles.com and advises small and start up drinks companies on business strategy. Contact firstname.lastname@example.org to find out more or call the Crow Phone on +44 (0) 7885 408367
*David Taylor, ‘Never mind the sizzle…Where’s the Sausage’, Capstone Press, 2007
**Beer Geek Brunch Weasel anyone? See http://mikkeller.dk
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