Posts Tagged ‘craft beer’

I guess this makes it a Good Beer Year

May 9, 2012

Melbourne is about to celebrate Good Beer Week – a festival of beer-related events showcasing the output of Australia’s burgeoning microbrewing industry (plus some folks across the from NZ, the US, Japan etc).

Microbrewing startups are popping up across Australia in startling numbers, introducing a much welcomed diversity of flavours, styles and business models to our decidedly bland duopolistic beer market (I find myself uttering that duop_ word far too often around here).

One considerable barrier to even more entrants (and their subsequent growth) has been some nasty excise (i.e. taxation especially reserved for such vices as alcohol) imposts that impact most severely on small brewers. Here’s a pretty comprehensive explanation of the problems faced (courtesy of RMIT student TV – head to about the 3 min point for the specifics):

Put simply, small brewers pay a huge whack of tax (in the vicinity of 25% of value) at the point of production (indeed, within 7 days of brewing) rather than sale.  This is a huge cashflow constraint on these businesses. The very small brewers have had some minor relief whereby up to $10,000 per annum would be refunded (but only to a production threshold of 30,000 litres).

Last night’s Federal Budget finally saw a move in the right direction, with that refund increased to $30,000 per annum and the eligibility threshold removed. This will make some small difference in terms of the capacity of such craft breweries to expand and achieve something like minimum efficient scale.

You may have noted that the RMIT vid is from 2007.  The battle has been a long one for these guys, and the concessions relatively minor. Last November, a national industry association was finally formed, and perhaps this helped get some movement in Canberra (it’s worth noting this change costs a paltry $2.5m per annum in government revenue).

I’d love to see the Aussie Craft Beer Industry Association become as wide-reaching and influential as their US counterpart (especially because they gather some excellent data on sales growth and relative scale that is sadly missing in Australia). This small win speaks to the import role of lobbying (case in point: small wine-makers in Australia have had much more appealing rebates for years – perhaps it helps to be in rural seats and to have no shortage of owners from the legal community?).

Most importantly, I hope this excise shift fuels even more growth in the diversity (and success) of local brewers… so this Spectapular can be even larger next year.


Could Yellowtail ales be Blue Ocean brews?

February 16, 2011

While Australia’s largest brewer slowly tears apart its less than successful attempt to also run a wine empire, one of our most internationally competitive (and innovative) winemakers is stepping into the beer business.

Casella Wines, who have grown extremely fast off the back of the game-changing Yellowtail wines (see this short case study for a sense of this success story), are advertising for a head brewer (see the ad here), and intend to brew “probably a few million litres a year” from a new facility at the Griffith, NSW winery site.

The firm’s wine brand has been lauded as a classic example of a Blue Ocean Strategy.  The central contention of Kim & Maurborgne is that:

“Casella created a social drink accessible to everyone. By looking at the alternatives of beer and ready-to-drink cocktails, Casella Wines created three new factors in the US wine industry – easy drinking, easy to select, and fun and adventure. It eliminated or reduced everything else. [Yellow tail] was a completely new combination of  characteristics that produced an uncomplicated wine structure that was instantly appealing to the mass of alcohol drinkers.

The result was an easy drinking wine that did not require years to develop an appreciation for. This allowed the company to dramatically reduce or eliminate all the factors the wine industry had long competed on – tannins, complexity and aging. With the need for aging reduced, the working capital required was also reduced…

In July 2001, Australia’s Casella Winery introduced [yellow tail] into this highly competitive US market. Small and unknown, they had expected to sell 25,000 cases in their first year. In fact, they had sold nine times that amount. By the end of 2005, [yellow tail]’s cumulative sales were tracking at 25 million cases.  [yellow tail] soon emerged as the overall best selling 750ml red wine, outstripping Californian, French and Italian brands.”

While the winery has made no claims that it is adopting such a strategy in its entry into beer production, it does raise some challenging questions:

What characteristics of beer are holding back new customers? Could Casella remove some?

The taste? The big name brews (think Bud, Miller, VB, Stella etc) tend towards the bland, but there is a lot of variety in the second tier (think wheat beers, stouts etc).  Certainly there are gains to be made in explaining such options in clearer language to neophytes, but a simply “this is beer message” doesn’t necessarily seem the best option. I will be very surprised if Casella if can stumble upon a clearly communicable alternative taste that is an inoffensive entrée into beer-drinking. Bitterness (i.e. ‘hopping heavy’) has become a big fave of craftbrewers, but that tends to play towards those already enamoured with beer’s dominant characteristic. Casella could perhaps go down the sweeter, more malted path… or, more courageously,  the fruity flavoured path (e.g. radler, kriek etc).

The fizz? Certainly the big name brews (think Bud, Miller, VB, Stella etc) have been reluctant to make non-gaseous product. Reductions in bubbles would match up with exploration of less typical styles of beer.

The overtly male/working class associations? Now, this might well be a possible target market.  Brewers have really struggled to ‘feminise’ their product (not helped by an obsession with perpetuating some other-beers-makes-you-fat-but-ours-doesn’t myth). De-rednecking has been the effective message in both the ‘imported’ and ‘craft’ segments, but that tends to have just pushed beer down wine’s snobbery path.  Targeting a more youthful market might require soft-drink/spirits type marketing (and, again, perhaps a sweeter/fruitier palate).

Is beer as confusing as wine? As snobby?

Again, there is some bifurcation here.  Major beer brands are typically presented as simply ‘beer’. Meanwhile, craft-brews tend to play up nuance and complexity, although to varying degrees. I guess if some of the current associations of non-beer drinkers can be overturned then confusion might decline.

What are the big element along which beers and brewers compete?

The Blue Ocean idea is that there are big gains to be made in making the normal battlegrounds less relevant and/or alleviating your firm of the ‘burdens’ of your competitors.

Despite all the discussions above of what’s in the bottle, most folks in the beer business will tell you it’s about access to drinkers (i.e. distribution), and finding a cost-effective production method to suit your intended price-point.  Beer’s core ingredients (malt/sugar, hops, yeast, water) are costlier when chasing more exotic/substantial flavours. Currently the big cost-savings come from large scale in bottling, packaging, trucking, marketing etc  Getting product on shelf and on taps is tough in the face of existing brand loyalties. Finding alternative delivery mechanisms that don’t cost much more is very, very hard (and even tougher given the legal constraints in multiple domains).

Might this just be diversification?

It is possible this is just old-school diversification, and Casella will ‘simply’ aim to leverage some of their current capabilities (in brand management, packaging, distribution, etc). They’re far from the first Aussie winery to go down this path (precedents include Moorilla, De Bertoli and Knappstein), but they’ll be the first with real international muscle.

What Blue Ocean opportunities (if any) can you see here?


The tyranny of distance (for Aussie beer drinkers)

September 28, 2010

One of the joys (and frustrations) of travelling is seeing new and/or different business ideas executed well.

Our apartment in Rome was just a couple of doors away from perhaps the best executed specialist beer bar I’ve seen outside of Belgium.  The hole in the wall, with the cool moniker of Ma Che Siete Venuti a Fà (which translates roughly as “what the hell are you doing here?”), was a true revelation.

Italian beer barI’d never really picked up a beer culture in Italy beyond the pale, insipid Peroni etc one sees everywhere. This place turned that impression on its head.  Here were 14 taps of artisinal beers from nearby lands (Belgium, Netherlands, Germany, Denmark, Britain) and the ‘hood (i.e. Italy), all fantastic quality, diverse in style, well-explained by the friendly barman, willing to give you a taste and enthuse about the offerings.  And, this was all delivered at competitive prices (nothing more than 6 Euro a pint).

The set up was decidely unpretentious, with most beers consumed standing out in the small, cobbled street or perched on the small number of stools.  There was no food on offer, but plenty within staggering distance.  No one was over-inebriated. All seemed most happy discussing the beer and the football on tv.

This is exactly what I’d love to see in Melbourne.  But the problem is one of distance and the associated costs.  No one could get such beers in kegs to Australia quick enough or cheap enough (especially once excise is hurled on top), so the variety and quality just wouldn’t be there.  What we do end up with is such European beers (in bottles) that are priced out of reach of all but the most eager/profligate, and/or the compulsion to pair such beers with overpriced food as some sort of destination venue.

The other option is cheerleading for the local microbrewers and trying to build a broad enough suite of offerings (which the Local Taphouse has made a good fist of in Melbourne).

Interestingly, that was the strategy of the bar across the road in Rome.  It only offered Italian microbrews (including some amazing stuff in 750ml bottles, such as collaboration between an Italian mob and US brewer Dogfish Head called My Antonia), but was smart enough to offer loads of tables, and excellent, cheap food (including the best pizza we’ve had in Italy this trip). This strategy worked extremely well due to the spillover from the destination bar.

I’d travel a long way for Ma Che Siete Venuti a Fà. Many others would too – it has topped the global ranking tables at the Ratebeer website in the past. Unfortunately, no bar in Australia can make such a claim.

Give that they may brew

February 10, 2009

As many of you may be aware, my home state of Victoria has been ravaged by some brutal fires in the past week which have killed hundreds and destroyed the livelihoods of thousands more. It is a truly tragic and heartbreaking state of affairs. Australians are being very generous with donations and efforts to help rebuild people’s lives. I thought I would take this opportunity to highlight a particular instance of loss.

Hargreaves Hill beer fire ravaged donate pleaseOne young business devastated was a microbrewery dear to my heart at Hargreaves Hill just north of Melbourne. This business had recently expanded into a full-blown offsite brewing facility that has now been totally wiped out by the fire. Such growth was no doubt a very large financial risk and to see it destroyed must be heartbreaking.

The founder of the firm has been a leader of the microbrewing community in Victoria through his role as president of the Victorian Association of Microbrewers, and lobbied hard for more sensible taxation of these start-up businesses.

A Melbourne beer bar, The Local Taphouse, is running a fundraising effort to try and kickstart Hargreave’s recovery effort (as well contributing to the broader post-fire effort).

As any of my past students know, I am not a particularly generous fellow :), but I have handed over some cash to help them out and hope other beer (and small business)-lovers amongst you will do similar. More information at this blog.

Other agencies helping out in these difficult times, and also well worth donating to include the Red Cross and the RSPCA.

Please do not see this post as belittling or trivialising the losses of any others in these fires.  Rather this is an effort to target some small percentage of the generosity towards a particular entrepreneurial effort.