Good Beer Hunting

Critical Drinking

There’s Always Money in the Lemonade Stand — How the Own-Premise Model is Rewriting the Beer Industry’s Future

We brewed for the first time at Bissell Brothers Brewing Company on Nov. 21, 2013. When you finally experience something that you’ve been working toward for two years, you tend to be quite lucid. I remember many things about that day. The standout was the arrival of Rob Tod and Jason Perkins to our little garage bay brewing operation. The two beer celebrities next door at Allagash had shown up unannounced with some bottles to congratulate us and hang out! Even though Noah and I had met both before, on that day, for us scared, greenhorn kids, it felt incredible and validating. To bastardize a Jay-Z line, we knew these two men could’ve been anywhere in the world that day, but they were there with us.

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Over the next few years, our Allagashian neighbors embodied numerous examples of why they’re an industry leader across all metrics. They helped us troubleshoot in emergencies, sent their own guests over to our broom closet of a taproom, and were always gracious and welcoming to Noah, myself, and our staff as we grew. We recounted these experiences with our neighbor many times to visitors and family friends during our burgeoning early days. “Don't worry, that will be you one day,” they’d often respond, gesturing across the street to the sprawling campus of one of the largest craft breweries in the country. These loved ones had the best of intentions—and they assumed we had a desire to grow Bissell Brothers into a regional brewery with nationwide distribution. We’d always politely nod and change the subject, knowing that, even in the early days, our path to growth would be quite different than our friends next door.

In most sectors of business, there exists a collective assumption that everyone operating in that industry must have the same, or at least very similar, goals. This form of illusory correlation is easy to understand. In an era of laptop entrepreneurship, commercial brewing still has all the trappings of red-blooded classical American Capitalism—tangible assets, investors, bank loans, supply chains, and distribution networks. As such, there’s overwhelming acceptance and enthusiasm behind the “growth is good” and “more is better” capitalistic war cries resonating in the beer world with every announcement of a major expansion, distribution into a new state, or corporate acquisition.

And growth is good. As we have all heard hundreds of times at this point, “craft” beer consumption still represents a small percentage of total beer consumption worldwide. There is, indeed, still lots of potential for the industry to grow in volume. But what happens when the long tail gets infinitely long? What happens when the rate of new breweries and increased capacity at existing breweries is far outpacing even the most optimistic estimates of “new” craft beer drinkers? What happens when there are 7,000 breweries in the country? How can you plan for growth in this environment?

In this arena of unprecedented saturation, we must come to accept that “growth” will mean different things for different people. Producing more beer doesn’t necessarily mean a better situation for your company. Indeed, we’ve never in history had so many communities be able to tout their neighborhood breweries as producers of world-class products. For many of us, producing more beer is not just a question of tank and floor space, hop contracts, and brewery staffing, but of where else could this beer go that people will buy it? In the last few years, I’ve watched as numerous brands—respected, even legendary, in their home areas—enter the Southern Maine market only to see permanent, gigantic pyramids of their products sit on the floor of Whole Foods in perpetuity. Indeed, it seems that regions known for great beer attract out-of-market brands looking to expand—but demand for these beers wanes in lieu of local options.

So then, how do you make the right decisions regarding growth, when it's very clearly a fluid, subjective concept in the totally splintered beer market of 2018? For Bissell Brothers, and for many breweries in the Northeast and elsewhere, the answer was, and is, the taproom. The taproom! The on-premise experience. Putting the taproom first and building the rest of your business around an own-premise model gives a brewery unprecedented control, insight, and flexibility—all crucial tools when navigating this exciting and complicated time in the beer business.

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The advantages to building an own-premise model start with attracting the people who are going to love you. This is especially crucial in a market with lots of beer like our hometown of Portland, Maine. It allows you to draw lines in the sand regarding your products, taproom environment, and overall vibe, thereby fostering regulars and repeat customers that already love you and are telling all their friends about you. Kevin Kelly’s “1000 True Fans" essay opened my eyes, and it resonates now more than ever before.

Own premise allows you to not water yourself down for the masses. Indeed, now is the time to lean more than ever in the opposite direction, and make less concessions as to what kind of beers you’re brewing and what kind of world you’re creating. These things should be coming from inside you, from someplace authentic, that will attract like-minded people. At this stage of saturation, you’re selling to a very specific group of people within your market who love what you’re doing: the flavors of the beer, the execution of the styles you offer, the personalities of the people making and selling the beer, the brand, the culture that is exuded. All of these things matter immensely in a world of plenty, and the taproom allows you to build your world, to find your people.

The second crucial advantage to own premise, and perhaps ultimately the most important, is the control and insight it gives you over your entire cash flow, demand, and place in the market. There is simply no substitute for having this information so within reach. As we watch the declining sales and buyouts/closures of regional craft breweries who have suddenly become the most vulnerable sub-designation, one can’t help but realize the benefit of eschewing complicated distribution networks—in which your product, now far from home, will languish on the shelf, competing with dozens of other brands in the exact same position—in favor of a lemonade-stand-style business model where you can make choices regarding expansion, product development, and other sales questions with much of the guesswork eliminated.

In 2017, Bissell Brothers received just under 90% of our revenue from our taproom, showing a predictable Pareto distribution (a power law that demonstrates 80% or more effects coming from 20% or fewer causes, also known as the “80/20 rule”). If we were located in a more rural setting, or not located so close to so many amazing bars and restaurants where we’re proud to be on tap, I’d be willing to bet the skew would be even greater.

Applied, these numbers mean several things. One, obviously, is greater economic health. When you don’t need to have salaried salespeople fighting for shelf space in some distant locale, that revenue can go right back into the company—and the numbers can be eye-popping. Also, the data that will help you decide how to grow is clear and present and right in front of you via your taproom’s POS analytics. With own premise, there are no third-party consulting firms, no expensive cost-analysis plans, no diluting your brand’s value by begging accounts or distributors to sell more of it.

A third benefit to own premise is actually a bunch of benefits: the soft, intangible advantages. There’s the peace of mind of having all your beer relatively close by. There’s not having to worry about date codes and acceptable shelf life as your product collects dust in some distant bottle shop where your brand carries little-to-no value. There’s sleeping well at night knowing your beer is being consumed fresh, and the vast majority of it is being sold in an environment where you control everything and can give the customer the exact experience you desire. There’s enjoying the family environment of a staff brought together by the mutual feeling that they’re creating something special, something worth traveling for. The list goes on and on.

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You might think “it’s easy for him to say that now,” so allow me to take you back to the beginning. Our first taproom was little more than a broom closet—two tiny anterooms to the twin garage bays that made up the first iteration of Bissell Brothers. Two 20-barrel FVs and a corresponding brite tank were the only capacity we started with. Music was played through computer speakers, beer—one option, The Substance—poured from a junkyard fridge we painted green and fit with taps. The tables were ketchup drums and cable spools banged together by friends. (And those are still going strong in our current taproom!). Hodge-podge sheets of handwritten brewing recipes and calculations, tap handle sketches, and various other documents made up the wallpaper of our tiny bathroom. It was janky. It was DIY. It was all we knew how to be. But it was us. We hid nothing and we were who we are, all the way.

As we began selling cans from this place, we saw the aforementioned benefits appear. We were finding our people, day by day, largely due to this world we had created, where we controlled everything. What was happening at the taproom was used as an indicator for how we should pursue growth, because there were so few variables. People were coming there for our beer, on our terms. Another side effect of this type of mentality is that, due to our focus on the taproom, even when that taproom was tiny and akin to a kid’s clubhouse, the company was able to birth a legendary front-of-the-house team. We are incredibly proud of their attitudes, abilities to handle crowds, beer knowledge, and the way they help make guests’ experience the best they can possibly be, while politely maintaining order simultaneously. The reason we were able to do this is because, from early on, the majority of our sales came from our taproom.

There are, of course, numerous other variables, the largest and most obvious being beer quality. I can confidently say most of what I have stated regarding own premise with certainty largely in part because my brother Noah makes excellent beer that both locals and flatlanders come to get. An own-premise operation that is peddling swill won’t last long in this climate. But we’re not talking about the subjective nature of beer quality in this article, we’re talking about the objective benefits to own premise: the advantages of catering to a smaller, like-minded demographic using the increased revenue from eliminating much of the cost to get the beer to market and using the time it frees up to focus on other crucial aspects of the business.

When you remove any real need to attempt sales, you're awarded options. Options on how to make your business better and distance yourself from the competition in ways that those who must sell more beer to make their business work simply cannot. Since we do not need to worry about selling more, we’ve been able to build out, at our own pace, a whole new facility for producing sour and barrel-aged beers in our hometown of Milo, with absolutely zero debt. I have also gone on to open a restaurant with separate partners. Meanwhile, our staff enjoys excellent pay, great opportunities for travel, and comprehensive benefits. We pick and choose what events to do and where to travel with our beer based on personal interest—there’s never a "need" to "get exposure." Every choice we make is entirely in our control, because at this time we are helping to define the market instead of chasing it.

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I worry about some of these beer makers I see jumping into distro deals that will land them in the end caps at the supermarket, all while tripling down on equipment and space. Moves like that will put you on a fast track to get Green Flashed real quick in this climate. Thirty thousand barrels and up is incredibly shaky ground to stand on nowadays.

PayPal co-founder Peter Thiel posits that all companies are either in what he calls "perfect competition" or they’re monopolies. He goes on to say that the average person tends to think of monopolies as the realm of mega-corporations, but in reality, if you create or define a sub-niche, you can easily monopolize it. So with respect to those options I mentioned a couple paragraphs up, when you’re in perfect competition with the market, you’re a brewery with sales reps in polar fleece vests bugging bar buyers about free samples, while their product—which is oftentimes very good—suffers, sitting on a grocery store shelf next to dozens of other indistinguishable brands. On the other hand, these redefined monopolies foster their own die-hard fans and define markets and sub-markets through both product innovation (read: hazy IPAs in 2014-2015) and having the financial freedom to deliberately not cater to everyone.

All of which is to say: own premise has proven invaluable to Bissell Brothers and numerous other breweries operating in this country today. It’s certainly not the only viable way to operate a brewery. Nomadic staples and personal favorites Mikkeller and Stillwater are just now getting into the own-premise game (and physical brewery ownership) after a decade of building their respective labels into worldwide brands. Regional New England brewery Narragansett continues to push forward with the “low-cost-yet-still-craft” mindset. (We proudly sell two Narragansett brands at my restaurant, Highroller Lobster Co.) But for breweries just starting out, eager to grow and enter distribution, I would offer words of caution and, perhaps most of all, patience. Think of it as a lemonade stand. Keep all variables within arm’s reach, and build a practical growth plan based on real-world, real-time data that doesn’t rely on speculation or unnecessary partnerships.

Locally, as an industry member, I can’t help but notice the actions of other nearby operations. A handful of breweries in the Northeast U.S. are attempting to double, triple, or quadruple their outputs. For some of them, I wonder where they think the demand exists for these huge increases in supply of their products. Or if they're aware of all the hidden costs (in money, but also in company and brand identity, time and quality of life as a manager/owner, etc.) and infrastructure problems that will likely appear with such large pivots.

At the same time, I see another group of Maine breweries operating lemonade stands. They’re developing a following, however small at first, and catering to these people. Making beer, selling all of it, and repeating the process, fine-tuning things as they go based on real-time feedback and observations that are completely accessible to them. When I think about the future of beer, and who the winners and losers are going to be as growth continues to level off, all my money is on that latter group.

Words by Peter Bissell Graphics by Cooper Foszcz