Global Compliance Series: ShipCompliant Beer Summit Recap

Late-season snow settled in over Denver on March 29, as a couple dozen people — mostly brewers, with some attorneys and consultants mixed in — gathered at Great Divide Brewing’s Barrel Bar for the inaugural GCS: ShipCompliant Beer Summit.

Hosted by ShipCompliant by Sovos, the Beer Summit provided a venue for regional brewers to connect and network, while also hearing from industry members, including Patrick Maroney, Director of the Colorado Liquor Enforcement Division, on how to grow their businesses and upcoming regulatory changes for brewers in the Centennial State. Here are some highlights from the panels:

 

“How to Grow Your Footprint in a Crowded Market”

Kicking off the presentation portion of the event, ShipCompliant’s own Mackenzie Latham emceed a panel on how breweries can succeed and expand in an increasingly crowded field. Joining her were Mark Boelman, Director of Accounting and Administration for Left Hand Brewing; Chad Yakobson, Owner and Brewmaster at Crooked Stave; and Brad Windecker, CEO of Orchestra Software. (The following questions and answers have been edited for clarity.)

 

How do you establish your brands in stores, and once there maintain that foothold?

Mark Boelman: Having a legacy product [such as Left Hand’s nearly ubiquitous Milk Stout] is a great entry point in stores, from which you can introduce a broader selection of brands. But always know that shelf space is limited; any room you give up will be filled by a competitor. So don’t get rid of a brand without having something ready to replace it.

Chad Yakobson: We started out with a hundred different brands, but had to pare that back so we could focus more on drawing an audience without also overwhelming them. But no beer was sacred in that process. What we’ve really seen is a need to keep up with our fickle customers — they’re always looking for the next great beer, and we need to keep up with that demand by having new varieties ready to replace labels that aren’t selling anymore.

Brad Windecker: In our experience, consumers aren’t so much “fickle” as “promiscuous.” Since about 2014, we’ve seen this strategy of constantly shifting brands become more ubiquitous. Now more breweries understand that you can’t keep an audience on brand loyalty alone. Today’s sophisticated beer drinkers are constantly looking for something new; in order to succeed, a brewery must be up to the challenge of keeping up with that promiscuous demand. A few legacy beers can get people in the door, but you then need a constantly rotating list to keep their attention.

 

How do you determine your distribution strategy, and work with distributors to make it succeed?

MB: It’s critical to work with distributors who are knowledgeable with selling craft beer, and are committed to selling your beer. There are more breweries and brands out there than ever before; distributors get overwhelmed by SKUmageddon as much as consumers do. So don’t think you can just give them your beer and walk away. You have to know that they have the resources and drive to get your products into stores.

BW: One word: data. You have to communicate your strategy clearly and directly with your distributors, so they can be a good partner in selling your beer. But if you don’t know which labels sell, or where your consumer base is, a distributor won’t take you seriously, and won’t put in the effort to sell your products. If, instead, you present yourself as professional, knowledgeable, and manageable, you’ll get their attention. Distributors can’t sell your product in a vacuum; the better the model you provide them with, the better they can help you succeed. It’s also important not to get too big for your britches. We’ve seen many breweries out there try to expand too quickly and end up flat on their face. Know your market, know your audience, and cultivate them thoroughly before you look for the next area to grow into.

CY: Working with a distributor has to be a whole separate business within your business. Unless you’re willing to put in the effort and commitment to selling your beer, by developing a strong brand and effective marketing (and first of all, making great beer), no distributor will pick up your brands. You also have to figure out how to get noticed in different markets; being “local” alone isn’t enough — after all, a brewer in Portland is no longer local when they’re selling in Tennessee. But getting more involved in new markets, including, say setting up remote tap rooms, can be a great way to build that national presence, and get your beer to more consumers.

 

How do you set yourself apart in stores, on increasingly crowded shelves?

MB: Super sexy packaging, seriously. If you’re in a store, walking through a crowded aisle, needing to make a quick decision, something that really catches the eye will stand out and be purchased. But, while that’s great for random or new customers, you also need to have good name recognition so that they become repeat consumers. Having a good brand, or certain legacy products, like Milk Stout, has really helped Left Hand.

CY: Absolutely. Getting good brand recognition is critical to getting a sold consumer base. And that can start with the label. As we say, beer has to be both “art in the bottle, art on the bottle.” That requires having solid marketing and design teams. It’s also important to not overwhelm your audience. Originally, each of our brands had unique designs; they would sell, but consumers wouldn’t come back for different styles — we didn’t have a unified look. Once we changed to highlighting the Crooked Stave name on our cans, we ended up getting a much stronger consumer base who know to keep coming back to our section in the store.

BW: It’s all about having a vision and story of who you are and what your beer is about. Beer drinkers are special in that they can really commit to a brewery that stands out and fills their needs. This is different from other product types — for instance, vodka drinkers focus on the brand but not the producer — how many Grey Goose drinkers ever think about Diageo? With a strong vision, that clearly shows up on your labels, you can turn the random consumer into a lifelong friend.

 

 

“The State of Colorado Beer”

Filling out the afternoon was a presentation by Patrick Maroney, Director of the Colorado Liquor Enforcement Division (LED), who discussed upcoming regulatory changes facing the beer industry in Colorado. And indeed, there are some major changes in the works.

Many of these rule changes follow the passing of SB 197, in 2016, (which we discussed in part here), which among other things, expanded the ability of convenience and grocery stores to sell  full strength beer. SB 197 accomplished this by removing a lot of statutory language concerning 3.2 beer. (Currently in Colorado, convenience and grocery stores can only get a license to sell beer with an ABV below 3.2%.)

However, as Patrick explained, the way SB 197 was constructed could complicate its implementation. This is because SB 197 did not excise 3.2 beer (called “Fermented Malt Beverage”) from the statutes, but instead merely remove the ABV cap. So, from January 2019 on, convenience and grocery stores with an off-premises Fermented Malt Beverage retailer license can sell full strength beer — but they can only make purchases from distributors and producers with their own Fermented Malt Beverage licenses.

When Patrick asked the audience — made up mostly of Colorado brewers — how many had a Fermented Malt Beverage producer’s license in addition to their Malt Liquor (i.e. beer over 3.2 % ABV) license, no one raised their hands. In the end then, for convenience and grocery stores to sell full strength beer after January 1, 2019 someone — either the retailers, or their providers — will need new licenses.

In addition to these kind of regulatory complications, Patrick noted that the LED is looking to expand their enforcement of trade practice rules in the state. This follows a pattern among other states, notably California and Florida, which are also cracking down on trade practice violations, though at this moment, Colorado is not actively working with the federal TTB on any enforcement actions.

Ultimately, Patrick explained, the LED’s primary drive is to provide the necessary education and support to help Colorado’s beverage alcohol industry thrive in a safe and fair manner. The state has long stood out for its flourishing craft beer market. While a friendly legal environment (such as more liberal self-distribution permissions) has helped, it’s been the active partnership between industry members and regulators that has really made the Colorado craft market succeed.

It is in this spirit that we at ShipCompliant at Sovos were honored to put on this inaugural Beer Summit. Providing a forum for education and cooperation is something we pride ourselves on. And to support that, we are again very grateful for the fantastic participation of the panelists and everyone who came out. We look forward to holding more such conferences in the future, in different locations across the country. Keep an eye on our events page for updates.

 

Find out how ShipCompliant by Sovos can help your business stay compliant and grow. Request a demo today.

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