Craft Brewing’s Internal Challenges

A recent article stirred the pot a bit in the craft brewing industry. Cheers Magazine interviewed Jon Taffer and asked him several questions about running a bar and/or restaurant business, one requesting his opinion on craft beer in 2016. His response was not all positive and Julia Herz of the Brewers Association disagrees with Mr. Taffer’s assessment and prognosis of craft beer.  At the crux of this disagreement are the numbers Mr. Taffer uses to amplify his opinion. Ms. Herz concentrates on defending such numbers and her points are sound.

maxresdefaultYet, concentration on such numbers overlooks key points in Mr. Taffer’s opinion on craft breweries: “They’re rookie-run. The problem is that people are now looking at craft beer as an investment opportunity. They’re getting into it to make money. Many people don’t get into it for the love of making beer.”  While the last sentence may be a stretch (“many people…”), he highlights very real issues, that could damage individual breweries and trickle up to the industry as a whole.  In short, brewing is a business and business people are not brewers–and vice versa. Doing one incorrectly can be disastrous.

This is, in my opinion, the biggest threat to the craft brewing industry. The marriage of brewing art and science with business operations and decisions. Other threats exist, and I will examine them in a short while. Each threat begins as a challenge that goes overlooked, ignored, misunderstood or is poorly managed. Over time, it grows, intensifies and starts taking a toll on the brewery: a missed infection here, a disgruntled customer there, and shipments of material start arriving late thereby pushing back production–the list could be endless.  Addressing challenges soon and effectively is one of the most important actions a brewery can take.

Ownership Friction

It is rare that ownership of a brewery rests in the hands of an individual. Whether it’s a family business, one built by friends, or a contract between brewer and investor, disagreements emerge. How these are managed is crucial to not only brewery success, but business survival.

It is common in many industries that disagreements exist between production and sales, finance and marketing, or management and staff. Craft brewing is not immune to such tensions, especially when they operate with a small team. Not everybody understands the science and art of brewing. And not everybody understands the intricacies and management of business. It is safe to say that, for the most part, brewers do not understand business, and investors/partners do not understand brewing. To make matters worse, often these misunderstandings are not evident to each party.  For example, a brewer may not understand why the partner wants to sell a diacetyl-laced batch, while the partner cannot see reason to dump it.

When these two areas combine to form a partnership, a new type of management is needed, or the business can fall apart. This new management requires a different skillset than the brewer and business partner possess.  One such incident of disagreement may seem like no big deal. Yet, when another round of disagreement comes up, the two sides intensify their message and perspective. Soon enough the misalignment between interests becomes a tension between people: It gets personal.  Positions entrench and communication breaks down just in time to allow another important issue, like staffing, slip between them.

Over time, an ostensibly trivial issue becomes germane to other issues that exacerbate tensions and erode the internal function of the brewery. It is imperative to identify disagreements and address them quickly and effectively, which can be tricky. Here are a few tips that must be considered when internal issues are discussed:

  1. Keep an open mind that you may have a hand in the problem. It may not be you or something you did, but to totally shut out that notion is a critical mistake
  2. Make a true effort to understand the other side’s perspectives
  3. Do not dismiss the other side’s perspective, try to genuinely understand it
  4. State your interests as basic as you can. Keep asking yourself, “why is this an interest to me?” to get to the root of your concern
  5. Do the same with the other side; “why is this of interest to you?”…but in a polite, non-accusative nature
  6. Be open to ideas, no matter how crazy they may seem. Sometimes those “dumb ideas” inspire good ones
  7. Do not hesitate to ask for outside assistance, like mediation and facilitation. If tensions have grown even somewhat rigid, internal meetings may not be effective, and can even make them worse. A third party can have many functions, such as a sounding board, target, communication liaison, and referee
  8. Understand that emotions will be prevalent and venting is necessary. Often, an outside dispassionate party can endure the brunt of venting to clear the air and get through to interests
  9. Be prepared to change. Third party mediators and facilitators look for opportunities for collaboration. While compromise is a lose-lose agreement that may work, collaboration can be a way to change behavior without giving up anything or even adding value to the situations