Article

Passion and Planning: A strategic pause

It is a time of chaos. Rogue yeast cells, led by the treacherous Lord Brettanomyces have infiltrated the Brewers’ home base of Cylin’droconica in an attempt to depose their rightfully elected Queen, Saccharomyces. Yet hope remains in those few who remain loyal to the cause of the brewers, those champions of craft who harness their passion for better beer for all. Those tireless artisans, standing ready on their brew decks, steeling themselves against the waves of disorder all around caused by the COVID-19 outbreak, are poised to resume their essential work once more.

Okay, so maybe we’re not quite heroes worthy of story and song and action figures, but this time of interruption is an important one nonetheless. These moments of abnormality and hardship give us pause — a glimpse into the relative effectiveness of our previous considerations of a worst-case scenario. While few, if any, could have prepared for this kind of situation, we can distill from this disarray the key factors of distress for business: Sudden loss of revenue; forced closure or limitation of operations; and as almost always the lynchpin of success, cash flow, or more specifically in this case, cash reserves. I will not pretend to be an expert in business finance (thankfully we have Audra Gaiziunas to lean on for this — I recommend checking out her May 9th podcast appearance on CraftBreweryFinance.com, as well as her September 2020 issue column about cash flow statements). So instead, I will examine how we can address the above through a critical examination of what makes our industry work, in theory, practice, and merging these two, praxis. While the lessons of 2020 may be hard learned, they are incredibly helpful reminders that we may use to guide us towards emerging from this time stronger, more focused, and ready to succeed anew.

Section 1 – Theory

While we often consider a business to be something impersonal or incorporeal, it simply cannot exist without people — people with a shared mission and purpose towards achieving something. In this way, a business is an expression of an idea. That idea, in our industry anyway, is that beer is something we care a great deal about, and want to convince others to care about with similar fervor. Without a belief in your product and your ability to make it something worth paying money for, your business and any plans quickly unravel. Fortunately, one thing I have found time and again in overwhelming quantity among brewers is belief — belief that beer is good, and that their beer contributes positively to the incredible selection available to us. The next step is effectively, and consistently, communicating that belief to your target audience. In “Marketing and Branding: Understanding the core components,” (May-June 2020 issue) I reviewed several strategies for creating a brand message based around your company’s ethos. One of the most important points of this examination was the process of developing your brand’s positioning in your market using a value matrix. This technique helps to focus that passion we all have in abundance, and direct it towards an effective marketing strategy.

While nobody could have predicted 2020 to be so hard on many nanobrewer’s business models, now could be a time to clean house and reimagine your brewery to get you on the right track. Photo by Christian Lavender

Passion is important, but in order to organize these ideas into something actionable, we must proceed to our next topic: Business planning. You’ve likely heard it enough to make you roll your eyes at this point, but a business plan is a critical element of any operation’s success. This plan is a tool by which you make informed decisions; examine your past, current, and future states; and evaluate your successes and failures. But more simply put, a business plan is an evolving story of your company — a narrative of sorts, like a journal, but empowered by data and driven by critical analysis. Perhaps you never fully fleshed out yours or it was pushed to the side by more immediate tasks. Or maybe you diligently created a detailed document in order to secure your initial funding from a bank.

Wherever in this spectrum you might fall, this time of operational pause is a perfect time to review or construct your plan. Simplified to its most basic components, a business plan consists of the following: A description of you/ your business/ your product, an examination of your market and strategies for addressing it, and a collection of financial data, both current and projected. While I will not attempt to review how to compose a detailed business plan in this article, many free resources exist to aid you in this work. I have found the SBA’s (Small Business Administration) website to be a wealth of usable information and templates.

Section 2 – Practice

So we’ve reviewed our business plan, possibly editing a section or two, and reminded ourselves of the importance of collecting and reviewing objective data in order to inform our decisions and measure our relative success. Let’s now talk a bit more practically about what can be accomplished during this downtime — let’s look at operations. When I say operations, I simply mean anything that involves or directs your daily work at a brewery. These are usually referred to as SOPs, or standard operating procedures/practices. You can think of SOPs like the business plan equivalent of your day-to-day best practices. They’re a set of standards that not only instruct new people on how to do certain tasks safely, which is often why they are written and emphasized in our industry, but they are also a reminder to more seasoned employees of a formalized method of ensuring quality and consistency. Indeed, this consistency is what defines a product line, and moreover, the brewery putting that product out. Sam Adams’ founder Jim Koch regards the nature of adherence to SOPs as they relate to the customer’s experience with the end product, “The operational definition of quality is conformance to specifications. Typically those specifications are consumer expectations. So quality, in one sense, is meeting or exceeding consumer expectations.” SOPs force us to leave ego aside and focus on the practical . . . the everyday menial tasks. For example, when is the last time you pulled spears from a selection of your kegs? Are you absolutely sure your keg washing practices are maintaining your standard of cleanliness inside of those vessels that we so seldom see? How about the vessels whose insides are easier to see, but aren’t often looked into, like your hot liquor tank (HLT)? So many of these tanks are heated by electric elements, which can very quickly become coated in layers of carbonate. This can cause them to overheat, crack, and fail (ask me how I know).

The small-scale craft brewing industry is an interesting anomaly in the business world. We are small and flexible enough to often get away with thinking, and even acting, like homebrewers. But at the end of the day what we are trying to achieve is a successful business. In order to be a successful business you have to maintain your quality, most importantly in the eyes of your customers, and quality can quickly falter when we allow ourselves to get used to inconsistencies. But cleaning house is a pretty obvious suggestion during slow times. Many of us probably work this into our slow seasons as it is. And cleaning, despite how thorough you may want to be, can only occupy you for so long. During a slow down such as this, it is also helpful to review your practices of selling your product. At our small scale, it is often rather easy to simply skate by, making enough money to pay the bills and letting the idea of growth and development be for the “other guys.” But that kind of complacency in business strategy is akin to complacency in cleanliness — it only takes a bit of sloppiness to ruin the whole batch. Your brewery can quickly slide from the hot new name in town, coasting on the laurels of “newness” and small-batch uniqueness, to give way to reviews of inconsistency or trend chasing that so often bogs down our industry, not to mention our tank space.

Section 3 – Praxis

So let’s look at merging these two concepts, the theory and the practice — the reason for our business and the ways and means of our business. In philosophy, this is referred to as praxis, but in the brewing world it seems to me to be more appropriate to think of it as the product in the glass. It takes more than a great idea to make a business effective, just like it takes more than a simple recipe and heated kettle to make beer. That beer, specifically one being served over the counter to a paying customer, is the fulfillment of your theory and your practice. It is an expression of yourself, your business, and your ethos. We put together theory and practice to create something unique and expressive of ourselves, and in the case of a business, we hope people like it enough to pay for it — and keep paying for it. Nanobrewing, and any small business operation, depends on a mutual belief in the product on the side of the creator and the patron. But belief by itself is not enough — behind that belief must be a well-conceived strategy.

During a slow down such as this, it is also helpful to review your practices of selling your product.

To better explain the critical nature of strategy in business, I will lean upon my friend Dr. Sam Holloway, Associate Professor at the Pamplin School of Business at the University of Portland. Together with Dr. Mark Meckler, Sam outlines business strategy as being composed of three key overlapping elements:

  • The strategy itself: What are we doing to add value and utility to the business?
  • Innovation & creativity: How will the strategy be implemented (new technologies, approaches, or techniques required)?
  • Leadership: Why does this strategy matter, and how will it be communicated in an actionable way to employees?

Laid out simply, it is easy to see that strategy in business is akin to praxis — it is a critically analyzed synthesis of theory (the why of the strategy) and practice (the how of enacting the strategy). To illustrate this concept, Dr. Holloway has a diagram he graciously shared. You can find the diagram below. He suggests using it as a worksheet when making any important decisions regarding your business plans, filling in the what (strategy), how (innovation), and why (leadership) in order to ensure your decisions are driven by critical analysis, and incorporate a plan to enact and measure your success.

Image created by Dr. Sam Holloway and Dr. Mark Meckler

Section 4 – Q&A

And now we’ve come again to my favorite segment, the industry Q&A. I get the chance to pick the brains of those either more successful, more experienced, or better looking than I; and this time they’re all three! Today, you’ll have the pleasure of learning from the following brewers: Charlie Johnson, Founder/Brewer of Ronin Fermentation Project (Graeagle, California) and Head Brewer of Gweilo Beer (Fo Tan, Hong Kong); Thomas Croskrey, Founder/Head Brewer of Emrys Fermentations, Liberty Lake, Washington (opening 2021) (previously Co-Founder/Head Brewer of Bellwether Brewing, Spokane, Washington); Nathanial Senf, Founder/Head Brewer of Lightheart Brewing, Vancouver, British Columbia.

  1. What lessons of brewing and small business has the current state of closures reminded you of, or taught you anew?

Charlie: Craft brewing is all about community. I really believe in being grateful for every sale and interaction with customers, thanking them for their time and remaining positive with everyone.
Thomas: Adaptation while maintaining your identity is the key to long-term success. Whether it’s cultural shifts, regulatory changes, or anything else that can be thrown at a small business, adapting to that (in a profitable manner) is absolutely critical. One thing this does not mean is wholly losing your brand identity. It’s rarely the case that adaptation requires an abandonment of self . . . adapt and adjust, but keep the thrust that made the brand interesting to begin with.
Nathaniel: Business is an evolve or die world. The breweries that have managed to change their model to package/delivery have managed to survive.

  1. In your opinion, what are the most important aspects of operating a successful small craft brewery during times of hardship (e.g. COVID-19, hop shortage, mass market consolidation, etc.)?

Charlie: Quality, branding, and quality. Investing in QC lab equipment really has been something that has helped us a lot.
Thomas: 1) Adapting — creating exciting products, campaigns, live streams, and other ways to engage with your customer base. 2) Transparency in communication — being honest about the hardship without seeming whiney or entitled, while presenting your solutions and calls to action clearly. 3) Collaboration and philanthropy: Ideas, beverages, events . . . these automatically generate a sense of camaraderie and community. It shows engagement and care for the community, which improves your reputation, creates a stronger network of collaborators, and provides the foundation for “think tank” tactics with other business/non-profit owners.
Nathaniel: The old saying of “mind your nickels and dimes and the dollars will start to make cents” comes to mind. It’s all about the small victories to win the battle.

  1. In the “post-COVID” world, what do you believe will set apart a brewery that simply survives, from one that thrives?

Charlie: Quality will set people apart, but also embracing your concept. I think it’s harder these days to be a brewery that makes everything. Jumping to a trend just makes your brand conception weaker in my mind. Cash flow and keeping your debt low I think is really important. If you’re a newer brewery, or thinking of opening one, hire a consultant and reach out to others (in the industry).
Thomas: It’s hard to say if the public will still remain abundantly cautious in regard to disease and sickness, and what that “abundant caution” would look like. I think the desire for strong takeaway options is here to stay, so that will be important to bolster, as will desires for extra cleanliness and touchless sales systems.
Nathaniel: Breweries are all about innovation, logistics and relationships. Finding new ways to keep your costs in check, keep track of your kegs/accounts payable, remain relevant and still remaining on good terms with your customers is the challenge.

Section 5 – Conclusion

During this time, let’s all continue to work to support each other in maintaining and strengthening our industry and our belief in our work. Craft brewing is far more than the wonderful liquid we create. We may have gotten into it because we enjoyed the buzz, but what has sustained us and kept us striving and growing over the past several decades of craft beer growth is a different kind of buzz. The hum of conversation in the taproom; the din of a late-night gathering over a shared last bottle of your favorite batch; the uproar at a beer festival when that rare and anticipated beer is finally tapped; the explosion of excitement when the brewery’s name is called at the podium, whether in a five-person homebrew contest or a five-thousand-strong national event. We have passion — we have it in excess. But passion without direction is chaos. Let’s temper the chaos we find ourselves in these days with critical examination, renewed vigor, and collaborative support of the industry, the product, and the people that brought us all together on this crazy adventure. Cheers, fellow brewer!