Allagash Brewing founder Rob Tod counseled fellow Maine brewers on what he predicted will be choppy waters ahead during last week’s New England Brew Summit in Portland, Maine.
In his keynote address to about 600 attendees, Tod traced New England’s industrial roots from community-based farms, factories and breweries in the 19th and early 20th centuries to centralized mass production. The exception to that rule: the craft brewing industry, which has wrested millions of barrels of volume from international beer manufacturers and put nearly 8,000 local breweries and taprooms back into neighborhoods across the country.
“We’re going to have to work hard to protect what we’ve built,” Tod said. “We just saw how much value we’re delivering to communities all over this country. We’re going to have to work hard to protect it, because I can tell you there’s nothing that the big mega-brewers would like more than to take beer back into those big factories.”
Tod founded Allagash in 1995, when there were about 500 breweries in the U.S. Since then, it has grown to become the fifth-largest craft brewer in New England and the 30th-largest craft brewer in the country in 2018, the most recent year for which Brewers Association (BA) data was available. Allagash’s volume grew 8%, to 104,000 barrels, in 2019. In an environment in which most regional or larger craft brewers’ volumes were declining, Allagash will likely climb the rankings of U.S. craft brewers.
“If you’re a regional brewer, you are not growing double-digits. These days, you’re lucky to eke out a point or two of growth,” Tod said. “And I think it’s going to get tough for everyone else. I don’t think there’s going to be much slack in this industry for anyone.”
To navigate the headwinds, Tod offered five points of advice: focus on safety first; emphasize quality; choose markets thoughtfully; be mindful of how growth is achieved; and get involved with guilds and trade associations.
“We absolutely are not immune to market forces,” Tod stressed to an audience of employees from many breweries far smaller than Allagash. “Neither are you guys, even though it may seem like you are at times.”
Tod encouraged brewers to consult the BA’s safety resources to establish procedures.
“Make sure you’ve got a safety plan at your brewery,” he said. “If you don’t, it’s really unfair to your workers.”
Tod covered quality in the same matter-of-fact manner: “No matter how small you are as a brewery, you need a lab.”
In Allagash’s quarter-century of existence, its distribution footprint has changed drastically, which Tod attributed to advice from Jerry Sheehan of multi-state wholesaler Craft Brewers Guild: Don’t be a mile wide and an inch deep.
In 2005, Allagash sold 5,000 barrels while distributing to 26 states and Washington, D.C.
“I couldn’t give it away, and my solution to that problem was to open up as many states as we could just to do enough volume to survive,” Tod said of flagship Allagash White.
Allagash retrenched and began deploying key business tactics, such as investing in a salesforce and hosting annual business plan meetings with wholesalers. Today, Allagash distributes to 15 states, as well as Washington, D.C., Chicago, Philadelphia and Pittsburgh, and has seen its volume skyrocket since the mid-2000s.
“This is something that scares me a little bit: I see a lot of breweries these days having success in their backyard, which is great, but they want to bring that success two, three, four states away,” Tod said. “I would just say be careful if you’re doing that. Make sure if you’re doing that you’re really supporting and understanding those markets, doing planning meetings with distributors, making sure your beer’s being rotated, making sure it’s fresh on the shelf.
“Just don’t be too cavalier about opening these about opening distant markets,” he continued. “And keep in mind that if you do open a distant market, you’re competing with an awful lot of local breweries.”
Tod cautioned brewers against “getting over your skis” and making investments based on growth that might not be sustainable.
“One thing that we believed in, for right or for wrong, is being very incremental and careful,” Tod said. “We’ve always tried not to take big steps, where, if we make a huge investment, if we’re not up 50% the next year, we’re in trouble. We really, really tried to avoid that.”
Tod also requested that the industry stop referring to hard seltzer as beer and displayed a photograph of three glasses: a vodka soda, a hard seltzer and a Coors Banquet Beer, drawing cheers and applause from the audience.
“I’m not judging,” he said. “I drink spirits, I drink liquor, but let’s not call it beer. Please.”
The hard seltzer boom, which leading financial firms estimate could reach nearly 10% of total beer sales over the next four years, has been a boon for distributors and brewers who are brewing it to supplement lagging beer volumes. Tod is concerned that seltzers could cannibalize too much share from beer in the long term.
“One of my big concerns is last time I went to my local grocery store, I wasn’t noticing them adding more coolers, and these seltzers are going in a cooler space that was previously occupied by beer,” he said. “We’ve worked for 25, 30 years building this beer shelf out, and the seltzers are going in this space. So, is it good for beer? You know, I don’t know.”
Tod’s parting advice was to engage with state guilds and national trade groups, such as the BA. He pointed to the extension of excise tax relief that Congress passed in December as an example of what becoming politically active can accomplish.
“Seriously, get involved,” he said. “All the progress we’ve made on the federal and state level does not happen on its own.”