Sailing the seas : Global strategies for craft brewers

1. Sailingtheseas:Global strategiesfor craft brewers Ina Verstl Brauwelt International

2. The global marketfor craft beer • Craft beer is brewed by a small and independent brewer • The global craft beer market: USD 38 billion (2017) • Projected CAGR of 14.1% (2018–2023) Orbis market research/GlobalData

3. Global craft beersales GlobalData

4. Global beersales GlobalData

5. The Beer Monopoly: Strategiesforgoing global • Exports • Contractbrewing, licencedproduction • Build and Brew • Buy and Build

6. Craft brewers: strategiesforgoing global • Exports • Build and Brew Stone Brewing Birra del Borgo BrewDog  • Strategic partnerships (Brooklyn+Carlsberg+Kirin) • Collaboration Brewing and cooperations inspired by the Sharing Economy Mikkeller • Contract brewing Yeastie Boys • Buy and Build (Duvel Moortgat)

7. US Craft brewers: exportvolumes • Export volume: 482,309 barrels (2017); 285,000 barrels (2018) • Domestic production: 25 million barrels (2017) Brewers Association

8. US Craft brewers: exportvolumes

9. Build and Brew: Stone

10. Case study: Stone in Berlin • Stone (founded 1996) in San Diego; production 388,000 barrel (2017); 9th largest US craftbrewer • “Americans deserved better, so we brewed it for them.” • Namedbeer “Arrogant Bastard“ • Objective: disruptthe German beer market (while building production hub for 30+ European markets, including Germany, and destinationrestaurantfor Berlin) • Official entry in 2014; 100 hl brewhouse; 1,200 seat Bistro (opened in 2016); cost: EUR 30 million (est) • Sale to BrewDog April 2019

11. Case study: Stone in Berlin

12. Build and Brew: Birra del Borgo

13. Case study: Birra del Borgo • Birra del Borgo (founded 2005) in Borgoroseby Leonardo Di Vincenzo; production 12,000 hl 2015 • Establishesmicrobrewery + taproom (Nomad) in Sydney withlocalpartnerExperienceIt (distributor) in 2014; cost: EUR 450,000 • OZ: morevibrantmarketthanItaly • Strategy: morelocalisedproducts; localproductionas a waytowards global distribution (benefitsoverexports: lowercosts; fresherbeer) • Plans to open microbrewery in Hong Kong withlocaldistributor (abandoned after saleto AB-InBev April 2016) • ExperienceItstopsdistributingBirra del Borgo‘sbeers • Repositions Nomad as an independentAustralian craft brewery

14. Case study: Birra del Borgo

15. Equity for Punks: BrewDog

16. Case study: BrewDog Timeline • BrewDog founded in Ellon (2007) by James Watt + Martin Dickie, then 24 yearsold • 2008: sellbeer at Tesco‘s • 2009: winawardasentrepreneurs • 2010: open first bar in Aberdeen; firstfundraiser Equity for Punks • More bars open; all have a certain ‘look’ with bare bricks, exposed ironwork and graffiti • 2012/2013: star in a reality tv series named “BrewDogs”; do collabs round the world • 2014: open bars in Brazil, ItalyandSweden • 2015: 27 bars worldwide, export to 50 countries, 365 employees • 2016: plan to open a distillery in Scotland • 2017: open USD 30 million craft beer hotel and brewery in Columbus, Ohio; sell 22% stake to TSG Consumer Partners for GBP 213 million; values BrewDog at USD 1.2 billion • 2018: announceplansfor a brewery in Brisbane, OZ; operate 70 barsworldwide; BrewDog barsbecomefranchisemodel; employ > 1,400 people; Equity for Punks has raised GBP 69 million (May 2019); 105,000 investors (May 2019); sell 450,000 hl beer; revenues GBP 172 million; gross profit GBP 58 million • 2019: buyStone‘s Berlin brewery

17. Case study: BrewDog • Mission: revolutionise the British beer industry, and redefine British beer-drinking culture • Built brand identity on brand associations of authenticity, individualism, rebellion, punk to differentiate from mainstream beer brands • Roger Protz labelled Watt and Dickie “lunatic self-publicists” and “over-inflated ego-maniacs” • Establish conventional corporate organisation • Invest in bars and retail • Invest in irreverent campaigns and digital (each bar has its own Twitter, Facebook and Instagram profile) • Complex and aggressive journey towards international brand recognition, craft beer production, and the establishment of a global fan base • Crowdfunding: Lack of consumer knowledge about the company made them turn to consumers for “donations” for expansion and to build relationship • The take home: Controlled controversy can pay off; consistent branding is crucial; crusading businesses can attract loyal fans

18. Case study: BrewDog

19. Collaboration: Mikkeller

20. Case study: Mikkeller • Mikkeller (founded 2006) in Copenhagenby Mikkel Borg Bjergso; sales 60,000 - 80,000 hl (est) • Strategy: build a global brandwithoutinvesting in bricks and mortar, beeriscurrentlybrewed at 5 locations • buildinternetfameascollaborator and beerdesigner (200 recipes/year) • Mikkel is positioned as a leader of a movement away from mainstream beers; he personifies a lifestyle brand • partners with host facilities, breweries and restaurants (45 locations worldwide) • has partnered to open businesses dedicated to food, spirits, chocolate • Organises festivals and running clubs • Focus on exportsandlocalsalesthroughbars (localpartnerships) • “We just do it when the opportunity’s there.”

21. Case study: Mikkeller

22. Contract brewing: Yeastie Boys

23. Contractbrewing: Yeastie Boys • Founded by Stu McKinlay and Sam Possenniskiein NZ in 2008 (no brewery); sales: 10,000 hl (est) • Until 2014: Yeastie Boys was a hobby business • Stu McKinlay: “Export is dead. It's not dead, of course, but it is dying and it is almost certainly unsustainable.” • Yeastie Boys exported up to 70% of its beer in its early days, but noticed a similar pattern across all markets: "We'd start off with a hiss and a roar, flatten off after a year or two, and then go into a gradual decline.” • Strategy: brew-in-market rather than export • fresher beer, at a sharper price, better margin and faster • Brew at Urbanaut/Auckland, Nomad/Sydney, and 2 breweries in UK (West Berkshire + Dark Revolution) • Beer recipes developed in UK

24. Contractbrewing: Yeastie Boys • UK: fromexportstocontractbrewing at BrewDog (2015-2017) • After BrewDogterminatedcontract, movedbrewingto West Berkshire and Dark Revolution • In-country brewing: from a joint venture contract brewing operation to a brew-under-licence model (NZ, OZ) • As UK craft beer market turns hyper-local, in-country brewing has advantages • Focus on off-premise (supers + off-licences)

25. Case study: Yeastie Boys

26. Craftbrewersgoing international • Entrepreneur at centre driver and bottle-neck • Personality-driven, thereforehighlycontingent • Relies on WOM + digital communications • Without a corporateorganisation, entrepreneursmay stretch themselvestoothin • Howtoapproachconsumers: educateormake an offer?

27. Craftbrewersgoing international • Foreignmarkets: do theyunderstandforeignmarkets • localpresence: exportsvsBuild and Brew • Importers and distributorsarethebottle-neck • large craft brewershavecapturedimporters‘ and distributors‘ shareofmind • Export opportunitiesmaydiminishwhencraftbeermarkets turn hyper-local (US, UK)

28. Craftbrewersgoing international • Collaborations but flash in thepanwithoutthenextsteps (team on thegroundtobuildbrand, sales and distribution) • Contractbrewing: hasitsownissues

29. Craftbrewersgoing international • Financing • Crowdfunding hasits own issues • Cash flowis limited; needtoduplicate/ multiplyventures • Build and Brew: fixedcosts; ROI after 3 years?

30. Craftbrewersgoing international • Exit: howcan craft brewers cash out? • Build and Brew: selltopartner/competitor • BrewDog: IPO issoleoption • Mikkeller? • Yeastie Boys: valuation?

31. Craftbrewersgoing international • Life cylceissues: • Howlong will foreignventuresbe profitable? • Howlongisthelifecycleof craft brewersthemselves? In-builtobsolenceof craft beerbrands? • Is craft brewing a start-upphenomenon? • Can craft brewerstransitionfromstart-uptolegacyto traditional brewer … and do theyreallywantto?

32. Biggestriskof all “There’s a danger that, while roaming the world, Stone is losing its focus on its home market. The world can wait. San Diego, where Stone is a craft beer cornerstone, cannot.” Peter Rowe, San Diego Union-Tribune

33. The Beer Monopoly cont