2018 is a very interesting year for craft beer all around the country. In some instances, breweries are growing like crazy and local markets are just getting started. Usually there was an antiquated state law that was preventing the craft beer market from thriving. Local folks lobby to get the laws updated and bang – a new-age craft beer market exists. We saw this in Minnesota a few years back when the state updated their laws to allow for the existence of functioning taprooms that support start-up breweries. Here in Wisconsin, our laws are not completely restrictive but they also need to be updated to help sustain a healthy market looking forward.
In most other instances the craft beer scene is a bit saturated. Super-regional and national craft breweries are changing the dynamic in local markets. At the same time, the local producers on average either do not have good enough liquid, a clear enough identity, marketing or business systems to compete as well as they would like. This leaves the consumer very torn when staring at the shelf or the tap list… They have 8 million choices and it is hard to know which ones are worth purchasing. They know the beers they like but they feel guilty about not buying local or maybe they judge themselves because they have not been adventurous enough lately. Maybe they judge themselves because they have only consumed local and they feel ignorant. I fear that most of the time the average consumer feels exhausted by the choices and will look for the path of least resistance. That could be a “blow-out” floor display, the coolest packaging, the most local brewery, the first beer they ever drank, wine, spirits, weed (in some markets)… Consumer fatigue is not a sign of healthy market performance and every brewer should feel personally responsible.
Today it is more important than ever for brewers to get their shit together. Have a “plan to innovate!” (push up glasses and snort). We must build breweries that we can afford within reasonable sales models. Becoming over-leveraged leads to horrible business decisions. We must make beer that people want to drink (i.e. it sells). If there is no velocity with a certain beer, then kill it. The market does not care about your feelings or your romantic connections to your brand. Be better. Do not clog up the system with bad or old or discounted beer. That hurts our entire beer ecosystem and is ultimately a disservice to our consumers. Fail smaller and fail faster. This is the only path to sustained innovation. Have a plan to iterate quickly so that you can figure out the best way to add value to our beer-drinking Wisconsin brethren.
Think small, act small and we will get bigger is our more fully developed credo at K4 for 2018 and looking forward. We started to design our calendar around this idea in 2017 and have taken a more deliberate step in 2018 to create a system that forces innovation but in a disciplined manner. The idea is that this structure will be a proving ground for new types of beers and new muses so that we can still be creative while systematically scaling the things that actually work in the real world. (Reference the product availability calendar below.)
The over-arching idea is that we will only have six total packaged beer brands being produced at any given time. Four of those beers are core beers that are kegged and bottled year-round. These are the four highest selling beers in our portfolio and they provide brand stability that is somewhat required during the multi-year effort to get our products onto all of the available retailers’ shelves. The first seasonal tier is a rotating flagship which generally means that it is the same price as the core four and we expect to sell a little more volume of it than the premium tier. The rotating premium tier is a more expensive tier where we push for bigger beers and smaller quantities. Finally we have a small batch, keg only tier. This is one of our best testing grounds for a new beer and this year we are focusing on these beers being extra special.
All of the seasonal beers have been allocated, market-by-market, for the entire year while the core four beers are made-to-order. I went through the sales of all of our previous seasonal beer sales in every market and tried to determine how much we would sell in about 4 weeks. Then I made each seasonal beer period 2 months long and offset them between the tiers so that every month we have a new bottle release. If the allocations are correct, then the beers should sellout in the market in time for the next beer to replace it. The idea is that we could have 12 seasonal packages occupy only two shelf spots throughout the entire year. The goal is to make our space on the shelf the hottest real estate for every retailer. We are not seeking urban sprawl on the shelf. We are looking for 4-6, revenue dense placements. I would much rather be a case short than a case long on the supply of any seasonal…
The immediate caveat is that we have already failed in this effort. Getting the allocations right is a big “if” and some lessons from late 2017 are still burning us today as we transition into the 2018 production calendar. Last year we over-produced Champagne Tortoise based on a large chain store program that never materialized. Luckily Tort is a beer that performs great in the bottle and should be sold out within a few weeks. We will skip Champagne Tortoise in 2018 to help make sure we have cleared the market. Another example is Silk Scorpion Black IPA. We thought we produced a small enough amount of Silk at the end of 2017. We still have 200+ cases left of Silk that we are trying to get rid of around the state when the plan was to be done with it by February. Adjustments are immediately being made to our product allocations to make sure future packages stay tight while Silk trickles through the market. We will also likely replace the December 2018 Silk Scorpion season with something new. We cannot be romantic or emotionally attached to beers that have proven to struggle. Silk Scorpion was our first and most successful seasonal early on, now it is not. So be it.
My expectation is that we will be wrong many times throughout 2018 but it is my duty to make those errors smaller and make your beer bellies happier. We owe this level of effort and pragmatism to our distribution partners, to our peer brewers and to our customers. We must always strive to give more than we take from this beautiful Wisconsin market.