Fortune Magazine published a story by Chris Morris May 14th that is getting a bit of attention, posing the thoughtful question: Is craft beer in a bubble?. The New York Times published Craft Beer Is Booming, but Brewers See Crossroads asking the same question on February 4th. I am now getting this question quite frequently from my friends both inside and outside the industry. I’m in Chicago at the National Restaurant Association Show #NRASHOW and this was a hot topic last night over cocktails.
It is particularly relevant given the amount of new outside money (many of my YPO and friends from other industries are investing in local breweries and increasingly distilleries.) I read the statistic that there is a new brewery opening on average every day in the US this year. In Fortune, they increase this by end of year to every 12 hours. This statistic is a bit alarming on face value, but let us dig a little deeper. To answer the question, one must answer two others:
1. Market Growth: Where is the market going – meaning is the growth in craft share going to continue and to what level?
2. New Capacity: Given the market assumptions from #1, can the size of the market absorb the growth in total capacity?
Market Growth: First, a little perspective: In craft beer boom 1.0 (circa mid 1990s), Chris Miller correctly points out there was a slow down in late 1997 and then flat to low growth for more than a decade before the current much larger boom. My company at the time was actively investing in and building multiple craft beer brands both on the distribution front in Chicago (Goose Island, Sierra Nevada, Pete’s, Bells) as well as regionally/nationally (Goose Island, Rogue). Fortunately, we also had a healthy import business (Grolsch, Staropramen, Tennant’s) that continued to boom during the slowdown. At the start of the current boom, we helped Flat12 start-up in Indianapolis and acquired Napa Smith Brewery in 2009 (sold in late 2012). There is very little comparison this time around from the 1990s. The degree of craft beer penetration into the beer market is fundamentally different. It is much deeper and wider, and is touching every market in some way. That said, the current level of craft sales as a percentage of the beer market is still quite small nationally (11% of volume according to the Brewers Association) vs in select highly developed craft beer markets (Portland, Seattle, San Francisco, Denver). That number has roughly doubled in the past 5 years. I predict craft beer sales will double again and exceed 22% of the US beer market by 2020. This mean approximately 22 million barrels of new craft sales on top of the existing 22 million.
(NOTE: one aside/caveat: craft beer is narrowly defined as independent brewers excluding cross ownership by larger companies in the alcohol industry. This is more political than it is any reality with consumers. Therefore the current share is actually a bit larger than 11%, adding in brands from companies like Goose Island and Craft Brewers Alliance (ABI). My 22% number includes craft taken over by larger brewers).
New Capacity: This is where the “new brewery every 12 hours” statistic is not the most relevant one. The important question is how much new capacity is actually being added to existing breweries combined with new breweries? 95% of the new breweries (and existing breweries) are more like restaurant businesses with a touch of manufacturing, than they are breweries. They will never sell any meaningful volume outside their four walls of the tasting room. There is nothing wrong with a local brewpub being a go-to stop for local people and there is clearly a market for this form of on-premise account. The real question is how much capacity are the production breweries adding and how many of the start-ups actually believe they are going to sell beer outside their four walls. This is where the true competitive dynamic in the marketplace will come into play. Most new breweries that intend to go to market through distribution and retail will fail. This is not because they have bad beer (some might but will die quickly) but rather they cannot make their brand relevant to the consumer in such a crowded field. This lack of differentiation and branding will prevent them from having any meaningful distribution and retail penetration.
The lack of experience in running a full service brewery with a restaurant, attached to a major manufacturing operation, attached to a distribution business, attached to a consumer marketing company will be the downfall of many. Here at the NRA, the 1000’s of operators can attest to the competitive nature of the restaurant aspect alone. There are a lot of smart investors in restaurant companies that have leadership teams with deep experience fighting hard for their share of the consumers’ purchasing dollars. Breweries that want to scale must both run a brew pub that competes with them and figure out how to sell in their beer to a limited number of tap handles available.
My conclusion as of today: The market can absorb many more breweries and capacity than exists today. The ones that remain focused on serving their local clientele will have the best chance of success. The ones that enter the fray of production and distribution will enter one of the most competitive and tough businesses that exist. Those that do not bring an experienced team, significant capital, creative and compelling branding and distribution to the table will fail. There is a bubble of inexperienced entrepreneurs combined with inexperienced investors who are entering the market. I look forward to the shake-out and the opportunities it will create for those prepared. In the meantime, I love capitalism at work and entrepreneurial spirit the craft beer market is demonstrating for all to see.
Hot Tech Topics to Include: Explosive Growth of Mobile Apps, Home Alcohol Delivery, Next Gen Cloud Commerce, Security Breach Impact, Central Role of Big Data in Marketing
(NAPA, Calif.) – Wine Industry Technology Symposium (WITS) has announced the keynote speaker line-up for the 11th annual event set for June 25-26, 2015 at the Napa Valley Marriott in Napa, California. An action-packed series of keynotes, as well as focused round tables and in-depth breakout sessions, will cover a wide range of tech-related topics critical to the wine industry today including: mobile e-commerce, data breach and security, breakthrough marketing, supply chain innovation, leading edge hospitality systems, new on-premise kegs and product tracking.
“After more than a decade of great conferences, the Wine Industry Technology Symposium has grown and evolved along with the rapid evolution of tech integration in the wine business. This year’s high-impact keynote presentations reflect the dramatic changes in the wine business driven by the millennial generation of consumers and step changes in technology enabling new business models!” said J. Smoke Wallin, founder and co-chairman of WITS.
“Our 2015 program reflects the insight and direction inspired by the Winery Chief Information Officer (CIO) Forum which WITS has hosted for many years,” said Lesley Berglund, co-chairman of WITS and co-founder and chairman of the Wine Industry Sales Education (WISE) Academy.
The Keynote Lineup Includes:
- What’s In Store, 2016: Game Changers – Laurie Rains, VP Retail Consulting and Analytics Group, Nielsen
- Social Media & Legal Regulations – John Hinman, Rebecca Stamey-White & John Edwards – Partners, Hinman & Carmichael
- Are You Ready for the Future? Exploring Futurist Technology & Its Impact on Wine– Dr. Liz Thach, Professor of Wine Business & Management, Sonoma State University & Joe Rosenberg, Strategic Partner Manager, Emerging Business Development, Google
- Art of the Possible – Unlocking Digital for the Wine Industry – Bob Pearson, President & Chief Innovation Officer / W2O Group & Paul Mabray, Group Director / W2O Group
- The Pinterest for Wine? – Linking Wine Discovery With Purchases – Brad Rosen, CEO, DRYNC
- Observations & Predictions: Dynamic Food & Beverage Trends – Michael Pavone, President & CEO, quench
- Clarity in the Cloud – Inderjit Bains, Cloud Consulting Director, Oracle
- Digital First: Why Marketers are Shifting to Data-Driven Advertising – Max Kalehoff, Chief Marketing Officer, SocialCode
- How the Power of Information can Override Emotional Decision Making in Price and Promotion – Clay Wallin, Director of Sales, Vistaar
- Bringing Together the Three-Tier System Into One Sales and Educational Funnel – Brian Rosen, Managing Director, Rosen Retail for Adult Beverage
- How Technology Is Influencing and Winning Over Wine Consumers – Joshua Saunders, Founder & CEO, Uncorkd
- Security Trends: Data Protection – It’s all about the Data – Richard Rice, Sr. Security Architect, WaveStrong
Registration is now open with early bird pricing available only through Friday, May 29, 2015. Attendees can view the entire two-day program and register at www.wineindustrytechnologysymposium.com.
The Wine Industry Technology Symposium® (WITS) is the focal point for thought leadership in the strategic and tactical use of technology in the global wine industry. WITS was created in 2005 by a group of wine industry and technology professionals to advance innovation and to address the unique information technology and service needs of the wine industry. The 11th annual WITS will be held June 25 – 26, 2015 in Napa, California. To learn more, join WITS on Youtube, Twitter, Facebook, and LinkedIn
For more information, contact Kathy Archer of the Wine Industry Symposium Group at 707-666-2525 or firstname.lastname@example.org. For sponsorship and registration, contact Waunice Orchid of the Wine Industry Symposium Group at 707-666-2525 or email@example.com.
I had the opportunity to participate in Entrepreneurship @ Cornell last week. Besides it being enjoyable to get back to campus after a 15-year hiatus, I left feeling inspired by the people I met. This included my fellow speakers, attendees, the faculty and most importantly the Cornell students. Anyone worried about the state of America today and the next generation of leaders need only spend a week like mine to gain a renewed sense of optimism. More than anything, the drive to create new enterprises to solve new and old problems with innovative approaches and the sense that “no one can stop me” I got from so many individuals was gratifying. Cornell seems to be doing a better job than most university systems in coordinating across the various schools to support and encourage entrepreneurship. As Director of Entrepreneurship @ Cornell, Zach Shulman said, “I have 13 bosses. I report to all 13 Deans and they all support our activities.” The ability to cut across schools as diverse as Agricultural, Business, Hotel, Engineering, Industrial & Labor Relations, Law and support would be entrepreneurs regardless of their chosen field is powerful.
Jay Walker ‘77, a keynote and founder of Priceline.com and Walker Digital put the entrepreneurial bug in perspective by calling it a “disease”. Do you have it? If you do, you can’t get rid of it. He also made a great point that you don’t build a company with a group of people who ALL have the disease. That would not be successful. You need a team that can build processes, and get things done. That certainly fits my experience. As I said to some of the classes, we are glorifying the entrepreneur this week and it is a great thing. However, one does not build a business with all entrepreneurs. One builds a business with a team of people with complimentary skills and ability to execute. Every visionary who can articulate the future and see what no one else sees, needs someone pulling back asking the questions: that sounds great, but how do we DO that? What needs to be in place to make it work? What about these problems? One must have a balance and the how do you actually do what is being proposed way of thinking is critical.
Jay went on to identify 10 ‘superforces’ – Jay Walker shares 10 ‘superforces’ of the business future. At the opening night banquet, the superstar Mayor of Ithaca, Svante Myrick addressed the group. Mayor Myrick is truly a remarkable leader. He called all entrepreneurs the “annoying” people without whom, nothing would change. When I commented to Jay Walker that I’d like to see Mayor Myrick in higher office, he said something with which I immediately agreed… “We need fresh leadership doing good things at the local level. Let him do that now.” In the excitement for how good I think he is and his potential on a larger stage, its easy to forget that we need a whole bunch of Svante Myricks doing exactly what he is doing locally in this country. The Mayor and I got into a little twitter exchange after his talk above.
Leading into the celebration, I had the privilege of participating on the CHR Technology Entrepreneurship Roundtable at the Cornell Hotel School. This roundtable was of the highest caliber and I really enjoyed learning from and debating the latest developments in hospitality and how technology is affecting everyone’s businesses. There are several people I met through the roundtable with whom I will remain friends far into the future. I presented the case for why today is better than any other time for new brands to reach their audience, which led the group to a discussion of the asynchronistic nature of startup/new brands vs large established brands. This applies to hotels and to beverage brands. The bottom line is using today’s technology, a new brand can communicate with its core following or “Tribe” directly, something that in the past was nearly impossible or cost prohibitive to do. Larger established brands have a much harder time competing at that level and by their very definition, cannot micro market as easily.
I also really enjoyed sharing stories of our entrepreneurial journey on the CEN panel on Friday with Panelists:
Jamey Edwards ’96, MBA ’03, CEO, Emergent Medical Associates
Carl Forsythe MBA ’82, President & CEO, Globe Composite Solutions
Smoke Wallin ‘88, CEO, Taliera
Jamey and Carl both brought great perspectives as we took turns telling stories and engaging with the audience.
The Pillsbury Institute for Hospitality Entrepreneurship hosted two panel/socials that promoted a group of entrepreneurs interacting with students. Both of these were a lot of fun as I enjoyed the panels and students!
Finally, I’ve had a half dozen follow up calls and discussions with student entrepreneurs since last week. These folks are pushing ahead with their various new ventures and represent the future of our country. I am pleased that I can play a small role in giving them input/guidance on their respective journeys.
I’m really looking forward to next week’s Entrepreneurship @ Cornell University! The energy building up to this is incredible as I’ve begun to interact with my fellow speakers and attendees.
Right now I’m thinking about my topics and the most important take home value I can deliver to the students, entrepreneurs and attendees.
Before I get to Ithaca, I’m attending the 72nd Annual Wine & Spirits Wholesalers of America (WSWA) convention in Orlando, FL. Since I’m launching a new brand project, it will give me an opportunity to further discuss packaging, branding, sourcing and overall strategy with some of the brightest leaders in the industry. Last year at WSWA I kicked off the pre-launch of Sugar Skull Rum.
This is a cool brand that unfortunately got stopped in its tracks by certain partners before we could get beyond kickoff in a few markets. Time will tell where it ends up, but the early response was terrific! There are lessons in this one I will certainly share at Cornell.
Finally, although I rooted for Wisconsin at the Final NCAA game last week, I am looking forward to hearing Mike Krzyzewski- better known as “Coach K“- head of the legendary Duke University Blue Devils basketball squad, address our group on Monday morning. Not a Duke fan generally, but definitely hold Coach K in high regard and interested in his message on leadership and winning.
Here’s an outline of my upcoming Cornell visit:
Tuesday/Wednesday – participate in and speak at the Pillsbury Institute’s
Technology Entrepreneurship Roundtable, Chaired by: Mona Anita Olsen, Ph.D. Assistant Academic Director of The Leland C. and Mary M. Pillsbury Institute for Hospitality Entrepreneurship, Visiting Assistant Professor of Management & Organizational Behavior, Cornell University
I’m looking forward to my session with Cornell classmate Joe Tagliente, President, Lenrock and a fellow YPO’r. Our panel is called “Brand Activation Through Social & Mobile Apps and Development of A Social Mobile Company” The full program is here.
It will be catching up with fraternity brother (Sigma Nu) Zach Shulman, who I found out after committing to my visit is Director of Entrepreneurship @Cornell! Very cool!
Thursday/Friday are jam packed with the Entrepreneurship @Cornell Celebration.
In this I’m joining more than 1,000 alumni, students, faculty, and staff for two days of on-campus events including:
- Symposia on a wide range of topics including family business, social entrepreneurship, health administration and more!
- eLab Demo Day
- New Business & Emerging Technologies Showcase
- BIG Idea Competition and Cornell Venture Challenge finals
- Recognition of the Student Business of the Year
- Networking opportunities …and more!
I have the opportunity to speak with Dr. Olsen’s class called:
a topic with which I am intimately familiar!
Following class, I’m participating on a panel of distinguished entrepreneurs in what is dubbed a
The the rest of the day includes a keynote by Jay Walker (one of America’s best-known business inventors and entrepreneurs, has founded multiple successful startup companies that today serve more than 75 million customers in 15 different industries) and the banquet with special guest Svante Myrick ’09, Ithaca Mayor
On Friday I’m joining two other entrepreneurs in a celebration talk:
In between all this I’m visiting the Viticulture and Oenology department, with Prof. Gavin Sacks to learn about what Cornell is up to in the wine world and also to see what we can do to tie them into our 11th Annual Wine Industry Technology Symposium (WITS) in Napa in June.
Finally, I’m paying a visit to the Friedman Wrestling center and Coach Rob Koll, 4 X NCAA champion Kyle Dake and first time champion Gabe Dean… and later meeting up with my old wrestling coach and Athletic Director, Andy Noel... this will entail its own post after we meet up!
I look forward to writing about my experiences and all the interaction with new and old friends! Cheers!
March 31, 2015 Contact: Lisa Adams Walter firstname.lastname@example.org
(NAPA, Calif.) —The 11th Annual Wine Industry Technology Symposium (WITS®), the premier event showcasing the strategic use of information technology and services for the wine industry, has been set for June 25-26, 2015 at the Napa Valley Marriott Hotel. www.wineindustrytechnologysymposium.com
Executives from wineries, breweries, distributors, retailers and restaurants gather annually at WITS, the only annual conference designed exclusively to foster education and debate around technology solutions for the wine and beverage industry. The 2015 WITS program will include:
- Educational Tracks – Sessions on Technology Leadership, Small Business, Consumer Direct, Trade Sales & Marketing and Vineyard & Winery Operations
- Speed Dating – WITS created “speed dating” for winery and brewery CIOs and technology companies. This will provide opportunities for quality one-on-one time with key decision makers and thought leaders.
- Plus Beer, with BITS – WITS has united leaders in the craft brewing industry to add the Beer Industry Technology Symposium (BITS™) track that runs concurrent with WITS.
“The rapid proliferation of craft brands in wine, spirits and beer is creating unique challenges for all industry participants,” said J. Smoke Wallin, WITS Co-Chair. “WITS is the only place where winery, brewery, distillery, retailer and distributor leaders can sit side by side for a day of learning and discussion to tackle these challenges with CIOs and technology leaders from across the industry,” he added.
The WITS Steering Committee, comprised of technology and business leaders across the wine, beverage and technology industries, is currently finalizing panel topics and keynote speakers. Past speakers have included the CEOs, CIOs and other leaders from Amazon, Facebook, Groupon, Gartner Group, garyvaynerchuk.com, FedEx Office, Nielsen and 1800-Flowers, as well as experts from IBM, Oracle, Cornell University, UC Davis, Sonoma State University and many others.
Attendees and sponsors are encouraged to register early, as space is limited and expected to sell out quickly. Registration will open May 1, 2015. For more information visit www.wineindustrytechnologysymposium.com.
About The Wine Industry Technology Symposium (WITS)
The Wine Industry Technology Symposium® (WITS®) is the focal point for thought leadership in the strategic and tactical use of technology in the global wine industry. WITS was created in 2005 by a group of wine industry and technology professionals to advance innovation and to address the unique information technology and services needs of the wine industry. The 11th annual WITS is June 25-26, 2015 in Napa, CA. For the 2nd year, WITS also includes the Beer Industry Technology Symposium™ (BITS™) track. Join WITS on Youtube, Twitter, Facebook, and LinkedIn to learn more.
For more information, contact Lisa Adams Walter of the Wine Industry Symposium Group at 707-666-2525 or email@example.com.