Are some U.S. brewers at risk of expanding faster than their market demand? And should you go with a bathroom or a taproom?
Both topics were on the table at last week’s Brew Talks when a panel of brewery owners talked growth and expansion strategies in the craft beer space. Meeting during the Craft Brewers Conference in Philadelphia were Firestone Walker co-founder David Walker, along with 21st Amendment co-founder Nico Freccia and Devils Backbone COO Hayes Humphreys.
The importance of the first question, which wove through the discussion, was underscored one day later, when the Brewers Association’s chief economist, Bart Watson, highlighted the risk of breweries adding capacity beyond their realistic production needs at the BA’s annual state of the industry address.
The second question came up as each of the breweries represented on the panel discussed the unique challenges they faced in the midst of a major facility expansion.
One common theme across all three companies was their struggle with finding and managing the necessary capital to undertake a major building project.
For 21st Amendment, the main difficulty was picking which expenses to prioritize as the company built its first brick and mortar production facility. Freccia joked about how he was forced to sacrifice building a bathroom on site in order to finish the brewery’s taproom as the project drew to completion.
“Ideally we probably would have wanted to build up a little more cash before we jumped into this and in retrospect we spent too much money on building a brewery,” he said. “We probably could have done it cheaper by putting a smaller system in, but the trade up is we got a lot of runway now.”
Although Devils Backbone initially ruled out selling off any part of the brewery’s ownership, Humphreys said the company chose to sell to Anheuser-Busch InBev after maxing out its available line of credit before it could hire any staff to support the massive expansion.
“These big expansions, they’re expensive, it’s big dollar values, and it’s a long time before you start getting the dollars back in,” Humphreys said. “We went back to the banks to see if there was anything else we could get done and we were pretty much maxed out, at that point we realized we were gonna have to adjust the ownership of the company somehow.”
Beyond funding, the group discussed other challenges such as managing distribution, hiring the right staff to support a growing brand and maintaining control over production as demand and competition continue to rise.
“One of the big challenges in growth is when you start down the path at a certain point there’s no turning back,” Freccia said. “At that point, your decisions about how you run your business start being dictated by something other than how you want to run your business.”
Watch the full discussion below, or over on the Brewbound YouTube Channel.