Critical Drinking

Critical Drinking — We’re Gonna Need a Bigger Moat

The memory is a vivid one, and it provided invaluable perspective for me.

On a steamy night in June 2006, the open windows of the second floor dining room at The White Horse on Parsons Green were providing little comfort. The great American beers being poured gifted us substantial relief against the London heat and fueled engaged chatter as the delicious beer dinner progressed. I was attending as part of a Brewers Association coalition of American craft brewers that included Doug Odell of Odell Brewing, Eric Wallace of Left Hand, and Adam Lambert of Rogue Ales.

Our guests were British writers who we hoped would find interest in our beers and lend American imports some well-deserved press. Plates cleared, the question and answer session began. Right out of the gates, a broadside shot was fired by a journalist who wanted to know what we intrepid American brewers sought to offer a nation of drinkers whose pubs—and some breweries—were older than our country.

Bill Covaleski is the founder and brewmaster of Victory Brewing Company.

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Each of us stood and faced the questioner with respectful poise and positive energy, focusing our rationale for export largely on innovation and American hops. As our words hung in the still, muted air, sincere-but-uninspiring, Michael Jackson rose to speak. Delivering a textbook example of the often circuitous, yet always-impassioned manner in which he defended beer of character, he rebuffed the journalist by concluding that “to create a delicious beer and not share it is a sin, and these gentlemen don't wish to be guilty of a sin.” Boom!

I remain a firm believer that sharing is, indeed, caring. Though it was oh-so-cool to be reminded of that by Jackson, I also know that deliciousness often declines as dust accumulates. If your beer is sitting far from your brewery, seeking a good home like an orphaned pet, are you entirely virtuous? I ask myself that often, while doing everything necessary to support my beer, and the final customer experience of it, in all territories.

Taproom guests bring you reality.

One might argue that fortifying at home is the new adventure facing today’s regional brewer. In thinking on that premise, I was reminded of both a) where we came from and b) where we are right now. The venture that Victory co-founder Ron Barchet and I—as well as our friends and family shareholders—undertook in 2016 by partnering with our comrades at Southern Tier Brewing places a priority on its established regional strength. This established strength at home, with a chunk of taproom retail baked in, affords us more efficient revenue capture over our further, distributed markets. Allocating our capital over markets as we see prudent puts the “home base” contributions to work. In this way, we can best serve our prized home market while not neglecting emerging and distant geographic opportunities. So while I see the “fortifying at home” premise as a solid one, allow me to share some observations and theories on the matter, knowing that all solutions are situation-specific and therefore ours may not be yours.

“The more that things change, the more they stay the same” goes a line from a favorite Rush song of mine, the words themselves culled from a deeper, more-original well. This line touches on my personal outlook on our recent announcement of an Artisanal Brewing Ventures operation in Charlotte, North Carolina. When plotting Victory out on paper, Ron and I arrived at the investment in on-premise operations to support our packaging brewery ambitions for a number of reasons. Chief among those was the built-in feedback loop your customers offer you when you let them in your brewery. Real time, nuanced data can be so much more valuable than constructed focus groups when properly observed. Besides, guests make an actual party out of what might otherwise be lonely self-idolization at the brewery tap. And partying is fun.

Taproom guests bring you reality. Which is why, increasingly, our wholesalers are asking us, “How are you doing at home?” They’re legitimately intrigued, looking for clues that will help differentiate our brand in their market. They’re looking for success stories to take to market, as well as warning signs about brands that may be slipping into danger zones. They trust us to provide this knowledge gleaned from the consumers to whom we are closest. Providing additional value to our wholesalers and their retail customers who serve our great brews to delight their own guests, our taproom customers are the frontline guinea pigs, so to speak, who prove the quality of our beer is really what we intended for it to be. The fact that we, at Victory, have 842 seats of patrons at our three locations in Chester County putting our products to the test on any given evening surely must bring a certain measure of confidence to a retail or wholesale partner as we are quality assuring the products with our own super fans. That’s commitment to the end results.

The investment of a 350-seat taproom was a risk we felt was worth taking on in a community that had so few social options with great beer.

So, with a 25-barrel brewhouse and canning line, we and Southern Tier will look to operate our Charlotte home as a brand incubator, developing recipes specific for local tastes and feeding that ongoing feedback loop which has proven valuable time and again. At our on-site taproom, these new offerings will be poured side-by-side with our proudest accomplishments like Prima Pils, Nu Skool IPA, Golden Monkey, and Pumking, creating a competitive showplace for all of these liquid concepts. As is always the case, the cream will rise to the top. The flavorful ideas that resonate most with Charlotte-area customers will be noted. Our observations from these experiments will inform packaging and distribution decisions, just as our observations from our original Downingtown taproom helped us form our core lineup, in step with the local audience, 21 years ago.

Seen through this lens as a brand incubator, our North Carolina outpost is an important move to extend our regional imprint from a historic base just a day's drive away from new customers. We expect it will bring new momentum to our brands through relationships with these guests. We are not expecting all of our relationships with Carolina area beer lovers to be new ones, though. Well aware of a growing market of “ex-pats” who have moved from our original home markets down south and to the mid-Atlantic states, we expect this brewery and taproom facility will offer us all an excellent opportunity to reconnect. 

“Home is where the hospitality is” probably best summarizes our logic on this point, a confidence that great guest experiences are more important and memorable than the address of the brand's first location. Victory and Southern Tier’s original taprooms in New York and Pennsylvania have always aimed to provide experiences that turn visitors into brand advocates, and we'll work hard to accomplish the same dynamic in Charlotte, maybe with a head start on this due to some recently transplanted fans from Pennsylvania and New York.

But is it really possible to localize a brand by putting roots in a new territory, as it was for us in Downingtown 21 years ago? Offering new draft innovations and tried-and-true Southern Tier brands, our partner's Pittsburgh taproom that opened in January of this year has catapulted that city to Southern Tier's top market, measured in sales to outside accounts through the wholesale tier, on-site sales excluded from that measurement.

Of course, it remains of paramount importance where you choose to put those new roots, as not all markets are equal. Let me take you back to 1996 and our original outpost in Downingtown for some more perspective on regionality and what a qualified market looks like. The U.S. Census Bureau's 2010 Census ranked Chester County Pennsylvania #25 in the nation for median household income, placing it solidly at the top of all Pennsylvania counties. Population had increased 15.5% from 1990 to 2000 and, again, another 15.1% from 2000 to 2010, with agriculture still a top industry here, fortunately. Having met in 1973 as fifth graders in the neighboring county, Ron and I suspected that residents of Chester County had the background, interest, and financial wherewithal to embrace our “microbrewed” takes on the world’s classic beer styles while we were writing our business plan in 1993. Sleeves rolled up and a dedicated core crew alongside us, this notion proved true in the 144-seat, gymnasium-lighting lit former Pepperidge Farm factory building we set up shop in.

I vividly remember a middle aged, white collar patron sipping a Victory Festbier in our early months and saying something like, “You guys ought to brew a Pilsner. You seem pretty good at these German beers, and I love a good Pils.” He and others like him, via their input, encouraged our restless brewer's investigations and essentially greenlit Prima Pils into existence with their enthusiastic guidance. They dared us to create so many compelling flavors in this industry that appreciated finer things when finer beer joints were few and far between.

If your beer is sitting far from your brewery, seeking a good home like an orphaned pet, are you entirely virtuous?

We brewed a Belgian Tripel to scratch a more personal itch, and when the batch was drained in three weeks’ time, our audience had told us decisively that we had a winner. Mindful of their well-being, we would not permit more than two 12-oz. servings of Golden Monkey to any patron, which surely jump started the legend of “the monkey,” not to mention chants of “respect the monkey” at backyard barbeques and bonfires in the new residential neighborhoods all around Victory where no one was counting the servings enjoyed. Those who had been enlightened—or punished—by this strong and seductive brew in this manner have become devoted fans. I guess we kinda dared them too, huh?

Our investments in our home community have always been sincere and heartfelt, running the full gamut from watershed stewardship initiatives via our Headwaters Grant to sponsoring two candidates for Woman and Man of the Year with the Leukemia and Lymphoma Society. All of these charitable initiatives have fed the critical dialogue we enjoy with our customers in so many enriching ways. Like a sturdy stool standing on legs of quality, innovation, and charity, there’s no clear shot for a competitor to kick that base you built out from under your customer. 

The strength of that model may factor more deeply into our home market strategy. We have three breweries with taprooms in Chester County, each about 18 miles apart from one another in a V form, Kennett Square being the base. That base is in a historic-yet-vibrant community, and likely the source of any mushrooms you have ever enjoyed. (Check the package—I'm confident.) Folks from that community were avid supporters of our operations in Downingtown since we opened, but the problem are those miles of twisting, horse-country roads which connect from point to point. Those guests deserved a Victory of their own, closer to home. 

But is it really possible to localize a brand by putting roots in a new territory as it was for us in Downingtown 21 years ago?

It took a progressively minded mushroom farming family venturing into real estate development on the side of town that needed the investment, away from some of our loyal accounts, to create our brand’s second home which opened in April of 2015. In the northwestern corner of the Victory Triangle sits Parkesburg, home to our large-scale brewery that began production in late 2013. Enthusiastic support from the township and access to the West Branch of our beloved Brandywine Creek made this location a near no-brainer. The investment of a 350-seat taproom was a risk we felt was worth taking on in a community that had so few social options with great beer. We even put in a hitching post, so as not to exclude any interested equine-inclined patrons, as the township we are situated in there boasts a plain sect (Amish and Mennonite) population of 20%.

With the Parkesburg taproom opening in November 2015, we had our chess pieces deployed as the castle walls of our brand locally. To date, only one other brewery has penetrated the Victory Triangle—we share Kennett Square with Kennett Brewing Company, which opened in June 2015. Is our defense of our Chester County house offensive? Maybe only to those who are offended by great beer close to their home—not our target audience.

Sadly, young, enterprising brewers venturing into ownership today can no longer receive Michael Jackson's wisdom firsthand as I did after first meeting him in 1997. But, the many who have asked me at festivals and beer dinners for guidance have walked away with my mantra—“Make yourself important at home. Those nearest your brewery decide your fate.”—ringing in their ears. I hope for everybody's sake that this is good advice.

Words by, Bill Covaleski Graphics by, Mike Duesenberg