Craft Brewing Business is all about providing tips, techniques and insight for growing or improving your brewing operation. Whether you are a fledgling brewery or have decades of experience, there are always new decisions to make and opportunities to seize. One of the most-pressing business decisions for many brewers today concerns production: When is it time to expand? And how? And why?
In this great blog post, Kurt Althof, a business development and marketing professional who is a minority stakeholder in People’s Brewing Co., shared some of his thoughts on this critical decision-point. From the post titled “Growth Challenges”:
For the most part brewers are able to command their price and sell all the beer they produce. So the only way to increase sales, revenue and profits is to make more beer. The trouble is it is expensive to make more beer and going from a few hundred barrels of production a year to a few thousand is a major jump and not one that is easy to make. Another consideration is that to get to that next level even if making more beer isn’t the problem, you will be faced with the risk of opening new markets. This means you are either going to have to increase production and go for it, or you might have to take distribution away from your bread and butter markets, risking frustration, in order to test the market outside your comfort zone.
There are risks in any strategy, but Althof recommends the latter before jumping straight into doubling production, stating “I’ve found that scarcity usually increases demand so long as you don’t make them go to long without satisfying all the demand.” Althof also noted that People’s is attempting its first major increase in production, going from 3,500 bbls to nearly 6,000 bbls with the potential for more.
It will be interesting to see how well they are able to get through the extra inventory. If they stay on the sales pace they are currently on it shouldn’t be too hard and the next challenge will be what to do next because they are out of space at their current facility.
Nice article and insight on how a craft brewery needs to balance its inventory, production and sales.