Even as the number of US breweries marches steadily toward 5,000, the demand for “limited” beer continues to outpace supply. Craft beer enthusiasts continue to reach for the newest beer instead of the proven or even more affordable options. Some newer breweries are actually building their entire model around one-off releases, at least in their early years. Pipeworks Brewing in Chicago was one of the first to adopt the concept of throwing beers against the wall (not literally) and seeing what sticks. For years, they would release new beers, practically on a weekly basis, then remake or tweak the recipes which showed the most potential. As Pipeworks scaled, that model was adapted to accommodate regular, rotating 16oz 4-packs, but still maintains its reputation of offering frequent limited releases.
A newer example of this model, which requires a strong trust between consumer and brewer in order to be successful, is Mikerphone Brewing. Mike Pallen (Owner/Brewer) explained some of the specifics behind his production and distribution, “In my situation, I produce seven barrel batches. Those batches usually yield 65 to 75 cases (12 750 ml bottles). These cases are then self-distributed to roughly 30 stores all over the Chicago and Chicagoland area. I have tried my best to give consumers a fair chance at getting Mikerphone beer, all while considering there are only so many hours in the day and traffic in Chicago is terrible. Spreading out 75 cases to 30 stores means most stores only get 2 cases per batch.”
The retail store owners who sell these limited releases are faced with a pricing dilemma. Oftentimes, stores are only allocated a single case or two of 12 bottles, when demand could be 5-10x that. Page one of your microeconomics textbook tells you that it’s inefficient to charge anything less than the equilibrium price. In other words, the highest price possible that would result in all 12 or 24 bottles being sold. That equilibrium price often results in a significantly higher margin to the retailer than intended. On Tuesday, Pallen received an e-mail from a fan accusing a retailer of significantly inflated retail prices on his Monday release, Imperial Smells Like Bean Spirit. Mikerphone's subsequent response on Facebook put a big smile on my face:
So why do store’s gouge on prices for these limited beers? Greed tends to be the initial reaction, but I believe it goes beyond that so I continued the conversation with Pallen and also reached out to Chris Quinn, owner of The Beer Temple in Chicago. “Stores realize that they only have 2 cases,” Pallen began, “but are getting calls everyday asking for these beers. Multiple stores have told me their phone rings off the hook asking about Mikerphone. This is crazy to me. I pinch myself everyday to make sure this isn't a dream. One store even said they want me to pay their phone bill since all the calls are in regards to Mikerphone. Ha! So when they know several people want a beer even before it gets to the store, they know there is a demand. Demand is high, supply is low...greed sets in and boom, prices get marked up.”
Quinn added, “In their minds, if people are willing to pay it, why shouldn't they be allowed to charge it?” Some find these tactics to be shortsighted, but the practice makes more sense as awareness spreads about the secondary market for beer. “Owners may realize that even if they do charge the suggested MSRP, all that's going to happen is people will flip these beers online for a greatly increased price,” Quinn elaborated, “At least it's legal for the store owner, as a licensed retailer of alcohol, to make the money instead of some guy on Craigslist.”
“I even saw it on my post yesterday”, Pallen pointed out, “People said they would have paid whatever just to get a bottle. These are not your typical craft consumer, but they do exist and can do very well for themselves.” I agree with Pallen that these opportunistic hucksters are not the typical consumers, but when you’re only producing 65-75 cases per batch, it doesn’t take too many of them to cause a ripple.
Despite not participating in these pricing behaviors, Quinn shared additional perspective of why retailers gouge, “There are certain stores that only see a certain set of customers when the rare beers come in. These people know all the spots that get a specific beer, and could easily just go from store to store to collect a stash of them. These customers only buy these beers, and rarely if ever buy anything in addition, such as their weekday six pack. In this sense, the store is being cherry-picked of its most limited items by people who otherwise do nothing to support the store. Meanwhile, the regular customers who actually help keep the lights on rarely get an opportunity to purchase these items, if they even would want to in the first place. In this way, the gouging is basically just a ‘jerk customer tax’"
The Fallout - End Consumers
The end consumers are the most directly impacted. I chose the term “end consumer” very carefully as I am referring to the individual who actually drinks the beer. It’s important to make that distinction today, when it’s not uncommon for beers to change hands multiple times before finally being consumed. I joke that beers can be like bitcoins, where others refer to them as baseball cards, pogs, or Pokemon.
Pallen expands on the impact to the end consumer, “The reason I wrote the message on my Facebook was not about stores making extra money off of me, it was directed at the fact that consumers are being taken advantage of. Consumers realize that there is a limited supply of Mikerphone beer right now, and know that if a store gets a 'higher demand' Mikerphone beer, chances are it will sell out quickly. So if they see it at a store for $17.99, they buy it because they do not have time to visit other stores to see if that is a fair price. Right there, they are being taken advantage of. And then when a consumer finds out that they over paid, they are going to be upset. Upset at the store, and possibly at the brand, in this case Mikerphone. “
The Fallout - Breweries
The effects of these pricing decisions are felt by the breweries as well. Pallen and I have a similar approach as consumers, where $10 for a single bottle represents a key threshold where our expectations rise exponentially. In other words, we choose our +$10 single bottle purchases a lot more carefully than our $8.99 4/6-packs. When a beer is sold at a significantly higher price than the brewery intended, it raises the expectations of the consumer to an inflated level that is unfair to the brewer. In addition, it hurts the brewery’s chance of building their fan-base by scaring off the more rational consumers who would have paid MSRP, but not the gouged price. This may not seem like a big deal now as Mikerphone can’t meet current demand for certain styles, but after a few rounds of expansion, those missed opportunities could have an impact.
Pallen adds, “It is important to note that when price gouging happens, stores make way more money on the beer than a brewery ever will. When a beer is marked up higher than normal, it sends the wrong message to the consumers. Consumers may not understand how pricing works, that was partly why I made that post. I cannot control what a store charges for my beer. I can guide them and hope they follow that, but at the end of the day, they are legally able to sell the beer for whatever they want.”
The Fallout - Retailers
I go back and forth on the impact of this negative publicity on the retail store itself, given the type of stores who usually participate. On one-hand, these stores have a built-in audience based on the convenience of their location and the majority of their customers aren’t after these high-priced limited beers. On the other hand, as Pallen points out, “I think in the day and age we live in, where people use social media every minute to rate beer, food, stores, etc, retailers are foolish to even ever think to gouge. When consumers see price variations, they begin to talk...privately in craft beer groups, and then publically.” Pallen took the high road, not calling out the specific retail store where his incident took place, however his fans took care of that for him and thousands of people have now seen.
It’s not the the fear of negative publicity that encourages Quinn to charge fair prices at The Beer Temple, “I don't think that I have any right to set the price above what is considered to be the commodity price for a particular beer, which is my cost plus a set margin. It's the brewer who thought of and created this beer, so why do I have the right to make an exorbitant amount on it? What people do with the beer after me is beyond my control, but as long as it's in my stewardship, I want act respectfully towards my customers, my suppliers (the brewers), the beer itself, and me.”
Unfortunately, the shenanigans don’t stop with simply overcharging for limited releases. In NYC, store owners have been caught attending brewery-only releases, then selling those beers at 100% margins on their store shelves or online site. Other Half, one of Brooklyn’s most popular new breweries, took a stand against one of these stores last year:
Why are consumers paying?
These are my two favorite theories:
So will this situation get better? Will it get worse? In my opinion, we're about half way through the bad part. It's going to get worse and there will be a lot more incidents like Mikerphone's, but eventually things will level off either because the secondary market bubble will burst, or because supply begins to catch up to demand. I would love to hear your thoughts and opinions.
Last week, Instagram announced that beginning soon, “the order of photos and videos in your feed will be based on the likelihood you’ll be interested in the content, your relationship with the person posting and the timeliness of the post”. It doesn’t take a Harvard degree to realize that this is the next phase of Facebook’s plan to monetize their April 2012 acquisition. Facebook forked over $1 Billion for the photo-sharing app in it’s pre-revenue days and unfortunately it’s time for them to capitalize.
The first visible phase of Instagram’s revenue generation consisted of “sponsored” ads, which began on November 1, 2013. At first, the ads were few and far between. You could catch-up on an entire day and perhaps only see one ad. The “sponsored” ads have gradually picked up, but still tend to be minimally invasive and often very creative. If you ask me, bring on the ads, just don’t bury the accounts I choose to follow. If I didn’t want to see their posts, I’d unfollow the account. That’s unfortunately not what Instagram wants. Instead, they want each account’s number of followers to rise so that brands become increasingly more reliant on the application to reach their fan base. To encourage users to follow more accounts, they are attempting to prioritize your feed.
How does Instagram know what you’re interested in? How do they know your relationships or interest in the person or brand? With Facebook, you have linked “interests” and “relationships” in your profile. Businesses have separate pages versus individuals, which allow Facebook to easily decipher between the two. The only automated methods I can come up with to attempt a designation between individuals and businesses on Instagram are:
Each of these have pretty gaping holes, with the last being the most promising. Instead, I believe Instagram will simply begin prioritizing the accounts with which you engage the most (like or comment) on Instagram.
All the breweries, distributors, retailers and personalities in beer who spent a great deal of time, energy, and creativity building their brand and sharing their culture on Instagram are about to have the rug pulled out. Instagram has the potential to begin allowing accounts to “promote” their post and bypass the algorithm which would otherwise send their post to the abyss. If you are Stone and you lead the industry with 212K followers, what are you going to do if your next announcement is going to fall to the bottom of 70% of your followers’ feeds? You’re probably going to pay the piper, because the audience size is way too valuable not to.
The change could actually wind up being positive from the user’s standpoint. Seeing the accounts whose posts I “like” and comment on most at the top of my feed doesn’t sound like a bad deal, as long as the algorithm can avoid excessive repeats. Brands however will become challenged by the new newsfeed. On one hand, your most active and engaged fans will be significantly less likely to miss a post. You’ll get a free boost into their share of mind. However with studies showing plummeting engagement rates on Instagram, these engaged fans are becoming a smaller piece of the pie, despite a continuing rise in users and follower counts.
Potts shared his reaction to the change, “As a visual person I hate to see Instagram taking this approach. It seems counterintuitive to what they started as, a platform to easily share photo's with followers. I can only assume that this is a path to forcing brands to opt in to boosting posts, aka paying for promotion. Instagram was for me the most democratic and fair of all socials, and the one that had the least amount of soapboxing by followers. If they didn't like the content of your post, they wouldn't 'like' it- it was rare that people would get into large debates and give long winded opinions on why they disagree with everything you do.”
I can sympathize with breweries here, but I also feel that the Return On Investment is going to be there for most posts. Let’s say a taproom’s average customer has two beers and leaves with one 6-pack to-go. Not unreasonable, right? The brewery’s margin on that purchase is probably similar to the cost of boosting one post. If your breakeven point is obtaining 1-2 incremental customers for whatever it is you are promoting, that’s at least worth trying. This won’t make the pill any easier to swallow, but it’s why we’ll likely see small, medium and large breweries trying out the sponsored post.
Just because breweries give in and start forking over $10, $20, maybe $50 or $100 to boost posts doesn’t mean they won’t be searching for an alternative behind the scenes. Potts admitted that he didn’t have an alternative mapped out yet, but was very interested in a contingency plan. If you ask me, there are a few alternatives in the works:
While it’s a shame that this is about to happen to craft breweries, we would be ignorant to say that we didn’t see it coming. The change is going to force breweries to step up their creativity, both in the creation of better content and the means of getting it in front of their audiences.
Special thanks to Joey Potts, one of the most creative designers in the industry, for sharing 18th Street’s perspective on the changes.
“Let me serenade the streets of L.A. From Oakland to Sacktown, the Bay Area and back down.” California’s love of craft beer has had a major influence on the national scene and was the logical selection for my second state to begin examining. The numbers back up its dominance as California ranked 2nd in production in 2014, only behind Pennsylvania. Wait...Pennsylvania? Because Yuengling falls into the Brewers Association definition of craft beer, PA is technically #1. If you disclude those Yeungling barrels, the Keystone state would lose 72% of its craft volume.
Understanding each breweries audience size with tools such as Instagram provides good perspective, but growth trends are crucial if we want to predict the future. I find it more fascinating to look at who is growing the fastest and trying to figure out why, versus simply looking at who is the biggest. Year-over-year production is the best available data point to measure growth, but that information is collected via a survey and only published annually by the Brewer’s Association. The results aren’t posted until March. Here we are in February of 2016, with only 2014 production data to pull at, so I decided to remain focused on Instagram audience size until next month when I’ll begin merging the two. Here are the Top 20 California breweries by Instagram Audience Growth Rate, over the Past 2 months (minimum 5K followers):
I was both surprised and excited when I saw who was seated #1 in follower growth, Monkish Brewing out of Los Angeles. Surprised because I expected it to be one of the big boys with a deep marketing department. Excited because I got the chance to share beers and chat with one of Monkish’s key ambassadors a little over a year ago. I was in Orange County on business and met some fellow beer enthusiasts at the Iron Press for dinner, where Monkish happened to be holding a “Tap Takeover”. I spent a good part of the night chatting with Brian White of Monkish about distribution and exploring new markets. I’ve kept up with Brian’s personal Instagram feed and was excited to reach out and share these statistics.
He was quick to respond and walk me through their recent use of the application. “We were frustrated with our use of Instagram and social media accounts.” White explained. “It was inconsistent, at times maybe too artsy, lacked good content, and we didn’t have a specific person overseeing our social media. Our mode of operation was more of a shared endeavor, but in that we lacked consistency.”
At Monkish, it probably wasn’t feasible to hire a full time employee to assist with their social media, and White admitted that thinking of it as a “hat” wasn’t producing the desired results. “We hired our friend Kallie to help oversee the accounts, provide consistency, posting at the right times of day, and writing content with the right hashtags.” Brian walked me through their thought process, “What spurred this move was a desire to get our name out there a little more, and get people to share what we are doing over here at Monkish. We are also trying to be responsive to the comments that need a response.”
Call it a consultant, a contractor, or a part-time employee, there are a lot of situations where it may make sense to bring in a friend or expert to help navigate a specific topic. The alternative might be slating it as the 5th priority of an existing employee, which often results in less than desirable attention and quality. “It’s been wild how quickly our numbers shot up.” Brian began, “When I started here about a year and half ago we were close 4,000 followers I believe and compared to today we are over 10,400. The benefits we are hoping for are content for our brand, conversations and pictures posted by others, and a general excitement about our beers that we are so proud of.” Brian along with Monkish owner Henry Nguyen are still making major contributors to the feed, but Kallie is keeping them on point, adding structure and helping to optimize the process.
Besides everyone’s goal of brand building and product awareness, I asked about some of Monkish’s specific goals with their Instagram feed. White explained, “I think our other goals are providing a fun feed. We want to show our Monkish style because embedded into Monkish is our love of music, philosophy, theology, and nostalgic memories. We are working on how to get that across on the social media platform.”
When asked about the qualities of his favorite brewery feeds, White explained, “For me the best brewery instagram feeds are the ones that are intentional. I love photography and those breweries that take the time to get the right picture are okay in my book. I believe some have enough money to hire a professional photographer, but we enjoy taking pictures and documenting what’s going on with us. The caption below the picture is to the point and informative. We all have a short attention span. We are not likely to click ‘more’. And I like funny distinct hashtags. We started the #brettparty hashtag here at Monkish and it’s fun. It’s catching on a little bit! Like I said earlier, I see Instagram as a yearbook, a narrative, and a setting for the future. It’s a really fun outlet to interact with customers.”
Two challenges encountered by craft breweries have been repeatedly brought up by my favorite industry writers, podcasts, and twitter accounts. The first involves how we get more people drinking beer, preferably good beer, instead of wine and spirits. The second involves how breweries can improve loyalty in the form of repeat sales, instead of serving as a “tick” for beer geeks looking to try everything once, but nothing twice. I would like to propose a simple, affordable strategy that will help the individual cause, while furthering the craft industry as a whole. Before explaining, let me give you some background:
About 3 years ago, I decided to create a social media account to log my beer experiences and chose instagram as the medium. I didn't have any specific goal in mind, but I knew I wanted to learn m̶o̶r̶e̶ everything about the industry and meet people who share a similar passion. After a few months, the feed was nothing special. It was filled with the classic pictures that everybody takes at least once, like your precious beer cargo fastened by a seat belt.
One evening during the Summer of 2013, I prepared to grill some burgers for the wife and I. I walked onto my balcony wearing Ray Ban sunglasses while carrying a bottle of Lagunitas' Undercover Shut Down Ale. While waiting for the burgers to cook, I lined up the beer for a quick picture. Instinctively, I looked at the name of the beer and decided to lean my sunglasses against the bottle. While preparing to post on Instagram, I played up the angle by tagging the brewery and writing "Undercover Shut-Down Ale is staking me out. Better drink it before it gathers intel."
Shortly after posting, Lagunitas fired back at me by commenting, “Roger that. Keep it very hush hush and on the QT.” It was fun and I got a good laugh out of it. The next time I was shopping for beer, I found myself gravitating right to the Lagunitas lineup. After all, Lagunitas and I were now best buds right? My wheels starting turning as I sized up their offerings. The following month led to more purchases, which lead to more instagram posts:
Craft beer enthusiasts want to be more than just consumers, they want to feel like they are a part of the conversation and I was no different. Spending time talking about beer and influencing piers through Beer Advocate, RateBeer, TalkBeer, Facebook groups, Untappd, etc. is one way this is accomplished. I chose Instagram as my primary means of connecting and it’s been exciting to see that platform grow. From Instagram’s inception in 2010 through January 2014, the #craftbeer had been used less than 1 million times. In January 2016, it now sits at over 6 million. That’s a lot of free content and advertising, the majority of which is created by the consumers
So back to my original questions, how do craft breweries continue to grow enthusiasm, while also improving customer loyalty? It's simple, interact with your fans on a more personal level. "Like" their posts, say thank you, make them feel a part of what you are doing because well, they are. Prioritize looking through all the posts you were tagged in on a regular basis and consider the different levels of engagement:
At a minimum, make #1 and #2 happen. It won’t take much of your time and even if it does, it’s worth it. Show your appreciation and enhance your odds of that individual making a follow-up purchase sooner. Their followers will see the comment, which will encourage them to create their own content. Regarding #3, I don’t blame any brewery who wants to keep their feed 100% original. However, at least consider the benefits of setting the precedent that if anyone creates an over-the-top, kickass picture of your beer, it’s getting shared. Now you’ll have a small, but influential subset of your most die-hard customers looking to reach that status. It’s free content for you and a tip of the cap to your best customers, who often have strong voices in the community. An extreme example of adopting this strategy is Six Point (Brooklyn, NY), who allows the majority of their feed be contributions by their fans. Their followers know that if they show a little bit of effort, they have a good chance of their post being shared with nearly 50,000 other Six Point fans. I tested this out a few months ago and sure enough:
Another brewery that I’ve been interacting with since the early days is Pipeworks Brewing here in Chicago. I reached out to someone who I have a tremendous amount of respect for, Kate Brankin, to confirm or deny my suggestions. Kate wears a number of hats for Pipeworks including brewer and social media. Whether she would phrase it like this or not, Kate serves as the voice of the brewery. By that, I mean she takes the entire team’s personality, mashes it together and conveys it to their fans in a consistent, funny, and creative style.
When I shared my overall thoughts above with Kate, she replied, “Engaging with consumers, in a real and genuine way is very important to us and, in my opinion, the craft beer industry as a whole. Unlike most other industries where the only conversation between the producer and the consumer is through monetary means (i.e. Oh sales are going up, people like! We must make more and not change a thing!), or unorganized sounding boards (i.e. I'm yelping about this...) there is a history of organized critical dialogue between the producer and consumer of craft beer. Websites like Ratebeer and Beer Advocate encouraged many initial consumers (including myself) to think critically about beer, and allowed for consumers to express not just if they liked something, but why. The craft beer industry is also interesting in that many of the consumers are also creative producers themselves. Homebrewers are still some of the most passionate taggers, posters, commenters and they know what they're talking about.”
The original comment from Lagunitas served as an “aha” moment for how I could differentiate my own account. The continued reinforcement from breweries like Pipeworks is what kept it going. As the audience built into the thousands, the feed evolved into my personal contribution to generating excitement about craft beer. And I’m not the only one doing this, not by a longshot. There are hundreds of stunning, creative craft beer themed Instagram accounts and tens of thousands of people sharing their craft beer experiences on Instagram. If breweries push the love downward to their customers more often, the enthusiasts will multiply and the occasional new influencer will emerge. Below are the statistics of my instagram feed to give you an idea of the level of engagement that one individual can contribute to the industry. Prioritize a little extra time to interact with fans, spread a little extra craft beer love, and watch as you brew more loyal fans.
The Brewer’s Association just announced that the number of breweries in the United States has reached an all-time high of 4,144. As this number increases, seemingly by the thousand each year, branding is becoming more critical than ever. Most grocery stores are now equipped with a craft beer section and an endless rainbow of options, each looking to stand out. As a result of the increase in resources being poured into effective branding, some breweries are committing more resources to protect their brands. Recently, Lagunitas pursued legal action against Sierra Nevada over Hop Hunter IPA’s label, specifically the manner in which “IPA” was written and its resemblance to Lagunitas IPA’s label. Consumer backlash to the suit on social media was vehement; ultimately, Lagunitas decided to drop the case shortly after its announcement. Dogfish Head has been on both sides of preemptive cease and desist letters, including one sent to Pizza Boy Brewing in September over the name of their Punk’in Disorderly Pumpkin Ale, which bears similarity to Dogfish Head’s Punkin’ Ale. And Chicago’s own Half Acre Beer Company, in light of several changes to their award-winning IPA, made the most of a useless pallet of empty cans:
Intellectual property can have a number of applications in the beer industry. Among them is trademarking, which represents the focus of this piece. Copyrights, trade secrets, and patents have their place as well, but are less common and more difficult to defend in the beer industry.
A brewery’s trademarks would typically include – alone or in combination – their name, logo, and design. The trademark is used to exclusively identify the source of the beer. A name, logo, or design which could confuse or mislead the consumer into mistakenly thinking they are buying the beer of a trademarked brand is likely in violation of trademark law. In trademark law, the legal test is referred to as “likelihood of confusion.” The degree of protection received by this mark depends first on whether it has been registered. The minute you create your name, logo, design, etc., you may start using the TM symbol on your packaging. This is referred to as an unregistered trademark and only protects your brand under state law, in the geographies where your beer is currently sold. Obtaining a registered trademark ® from the USPTO provides you protection across the entire United States, regardless of where you sell beer, under federal law. To use a registered trademark, you must be engaging in interstate commerce. In other words, you must be selling your beer in a state other than where it originated. However, you may still file for a registered trademark in advance of interstate commerce by filing with an “intent to use” declaration.
The benefits are significant, even if the process is unfamiliar to most people. For a brewery like Aquanaut, who dealt with a dispute in their earliest stages, it’s all about peace of mind as you move forward and invest in your brand. Laws added, “I think there’s a certain sensitivity among the individuals that have been involved with the brewery, since its inception, to trademark disputes. A lot of effort was put into marketing the brewery as Strange Pelican, so when we had to change the name we were essentially back at square one as far as building brand awareness was concerned. I think that entire experience kind of highlights the benefits to protecting your brewery’s brand and name.”
Protection begins on the date of filing, not the date of issuance. The process of obtaining a registered trademark takes approximately one year, if met without opposition from the USPTO. Aquanaut beat the averages, beginning the process in March 2015 and obtaining their registered trademark on November 10th. “We didn’t run into any pushback from the US Patent and Trademark Office regarding our logo and name, so, I think we’re probably one of the lucky ones. What little experience I’ve had with this process in the past leads me to believe that it can be significantly more complicated that what our experience would dictate.” The more research you conduct prior to submitting, the quicker your turnaround time will likely be. That research should begin with some basic Google, Beer Advocate, and Untappd searches, then lead you to the USPTO website to search the database of registered trademarks. Meet TESS: (http://tess2.uspto.gov/).
The cost to register a trademark online is now $225, plus $100 for each class of goods, which, for beer, is likely only one class. The choice between searching and filing a trademark on your own, as opposed to hiring an attorney, usually comes down to risk tolerance. Attorneys have access to better databases and have spent years learning how to analyze the results of those searches. Additionally, an attorney can help draft a better trademark application. These services cost money up front but help reduce surprises and long term costs. Regardless of the stage of one's brewery, consulting with an attorney is a wise investment.
Understanding costs associated with consulting attorneys for intellectual property purposes is important. On average, chicago-based law firms charge a range of $500-$1,500 with a mean of $1000 and a median of $600. This includes the filing/registration fees mentioned earlier and assumes that the application is not met with opposition from the USPTO. Aquanaut’s costs landed right at the mean. “We did everything through an attorney,” Laws disclosed. “Overall, it cost us about $1,000 to complete the process. And I’d say it was money well spent.”
The fees only stay at this level if the registration is uncontested. In the event that your application for one or more classes is refused, you’ll likely want to hire a lawyer to help you with the “prosecution” process. This will raise the bar on fees to a mean of about $1,600, median of $1,400, and overall range of $500-$6,000. This is why the preemptive research that you should do on your own prior to investing in your brand and applying for a trademark is so critical. Unlike patents, trademarks do last forever, as long as you renew them. To maintain a trademark, it must be renewed between the 5th and 6th year after registration. Then it must be renewed again every ten years. Each renewal will cost approximately $500 in USPTO filing fees.
Upon receipt of your registered trademark, the work is not over. It’s up to you to find other breweries who are violating your mark. There is no watchdog out there who is going to do this work for you, though there are certainly firms you can hire to monitor your intellectual property if you want to take on that additional cost. In the craft beer industry, when a potential violation is identified, it’s common for the brewery to begin with a letter mentioning the clash of name, design, and/or brand. The trademarked brewery typically offers to assist in working on a solution that works for both sides and being flexible along the way. If that fails, a more formal cease and desist letter written by an attorney will follow. While a legal battle is possible, it’s usually not in the best interests of either side financially.
Laws proposed that we are likely to see a lot more of these conflicts arise in the near future. He explained, “Protecting your brand is especially important as this proliferation of breweries continues in the US. I’m sure the odds dictate that trademark disputes will probably become more common as more breweries open. I know we’re also seeing a lot of new brands enter into large markets like Chicago, and I’m confident that could prove problematic as well, as the process continues. All of the above reasons warrant putting the resources into protecting your brewery’s brand and logo, at the very least. I can’t really speak to protection of flagship brands, as it’s something we haven’t pursued yet.”
While obtaining a trademark for the brewery name, logo, and design should be a high priority, specific brands in a portfolio should be considered soon after. This is especially true as brands are proven out and evolve into a year-round offerings. An example of a flagship brand being trademarked is West Coast IPA, which was filed by Green Flash Brewing Co. in June 2011 and granted in November 2012. Green Flash began using the name in 2005, and their successful registration of the trademark prohibits other breweries from naming their beer “West Coast IPA.” Whether another brewery can describe their beer as a “West Coast IPA” or “West Coast-style IPA” is a loaded question, but ultimately comes down to “likelihood of confusion” from the consumer’s perspective.
Branding has become a hot button issue for new breweries and breweries-in-planning. Intellectual property is at the heart of that issue: what visuals and verbage represent your brand, and how? Brewery owners, both current and future, would do well to become educated on the basics of trademark law, an effort that will help protect their investments. Resources will always be tight for brewery owners, but these upfront costs are well worth the peace of mind they provide business owners as they move forward investing in their brand.
Classic spots in the City of Chicago like Hopleaf, The Map Room and Goose Clybourn converted countless unsuspecting patrons into craft beer fanatics over the last decade. As craft, especially local craft beer, soared to new heights of popularity, opportunities began to present themselves outside of the City. Two of the early movers in the recent surge are now two of the most popular, Solemn Oath and Penrose, who sit 13 miles apart in the Western Suburbs.
I had always wondered what the motivating factor was for Eric Hobbs, formerly of Goose Island and co-founder of Penrose, to choose Geneva, IL as their home. Was it the more reasonable cost of land and building? Was the environment more conducive to open fermentation? When I asked, it turns out the answer was much simpler. It was the opportunity, and in 2014 his vision became a reality. Eric grew up in Geneva and recognized that the Tri-Cities (Geneva, St. Charles, Batavia) was ideal for a Craft Brewery. I made the early mistake of thinking that Solemn Oath’s decision to choose Naperville, another Western Suburb, as their home in 2012 would have influenced Eric’s decision. It turns out that Eric had started the business plan for Penrose in 2010, two years before Solemn Oath even opened. This served as a friendly reminder of just how long it takes to open the doors of a new brewery, well over three years in Eric’s case.
Most “outsiders” to the craft beer world would view these two breweries in neighboring towns as competitors, especially since both have tap rooms and focus on Belgian-inspired beers. While there is of course some truth to that, Penrose and Solemn Oath have done a great job at representing the industry and their respective community. I have always felt that each other’s success is actually in both of their long-term best interests. When I asked Eric if he sees Solemn Oath as a competitor, he responded “Well there is truth at the core of the statement - every brewery competes with every other for retail real estate, wholesaler/retailer/beer drinker share of mind. But I would also make the case that a strong local beer community is a worthwhile goal, and that is ultimately why breweries like Penrose and SOB work together to offer new/unique beer drinking experiences. We also share info about their events, and they do the same for ours. Then again, we also F@#% with them every chance we get."
He’s right in my opinion, and it’s what I find so fascinating about this industry. Per the Brewers Association, in 2014 89% of national beer consumption was Domestic/Import, while 11% was craft. Looking at barrelage, if we stick with 2014 stats, every percentage point that craft gains translates to just shy of 2 million barrels. That represents a tremendous opportunity for new breweries and expansion for existing ones. This is why I believe that the comradery demonstrated between Penrose and Solemn Oath, both behind-the-scenes and on social media, is helping to further interest in communities not used to having a local presence. Each macro, wine or cocktail drinker who Penrose converts to craft beer is likely to check out Solemn Oath next, and vice versus. Crowded shelves and tap handles will continue to be competitive, probably more so than ever, but will result in most new investments having a heavy emphasis on the taproom/on-premise model. That’s always been more common in states like California and Oregon, versus my home state of Illinois, but we're starting to see it more and more. Both Penrose and Solemn Oath however, have had this vision from the beginning.
Saying that the two breweries share a significant portion of their audience is one thing, but being able to quantify the overlap would be more meaningful. One way to measure would be to extract their Instagram followings, compare, and find out how much they do overlap. I find Instagram to be especially relevant here because Penrose and Solemn Oath are among the elite with their Instagram presence. Despite being very different visually, both feeds are clean, consistent and have a cool story-telling approach. They don’t just tell you what beers are being released and when you can expect to see them. Both breweries give you an inside look at who they are and what they’re all about. Eric explained, “John [Barley] (Founder, Solemn Oath) and I absolutely both feel this is a very important part of our ability to share an authentic/honest story about our breweries. In fact, I hired a former photojournalist as our Taproom Mgr (Jeff Cagle) to be sure our story and photos were on point.” Jeff’s work is indeed fantastic and represents their brand perfectly. The overlapping follower results below are fascinating to me, but not necessarily surprising:
I was curious what Eric thought about this 40.5% overlap in customer base, to which he explained, “I hadn't really thought about it before you mentioned it, but I guess I'm not too surprised to hear it. I'm sure our brewery's close proximity to the other would affect this, but I think it would be more attributable to the fact that we regularly engage with each other on social media.” From my experience over the years, being mentioned in someone else’s post will certainly result in a small gain in followers, but those people will unfollow you the second your posts no longer feels relevant. The more active you are, the more you subject yourself to being unfollowed. My @beeraficionado feed has 12.7K followers, but has been unfollowed by over 7K people. I wouldn’t say that Instagram has reached it’s peak yet, not even close. It has reached the point however, where users regularly clean up and curate their following, keeping it as relevant as possible. I do agree that awareness of each other’s feeds is enhanced by the mentions, but given how active each account is, I don’t feel either brewery would be able to maintain followers who aren’t current or soon-to-be patrons. Penrose averaged 24 posts/month over the last 3 months and Solemn Oath averaged 16 posts/month. Eric suggested monitoring the overlap after a significant mention, which will be an interesting experiment to try at a future date.
I realize that we haven't necessarily gotten to the bottom of many of the points I've brought up, but I wanted to kick off the conversation. There's a lot more that can be done comparing follower bases than just looking at 2 breweries head-to-head. Once we start involving the entire local scene or the entire local distribution footprint and involve retailer accounts as well, we'll have a lot more to discuss. I am curious what everyone thinks about these topics. Feel free to leave comments here or on Instagram. Your feedback will help steer future posts.
I have 3 people to thank for making this possible. Thank you to Eric Hobbs of Penrose for your willingness to provide feedback and color to the article. Thank you to Matt Johnson for your assistance with the data. And finally, thank you to Brian Devine for creating the badass Venn Diagram to help illustrate the overlap in Penrose and Solemn Oath's following. I look forward to collaborating with you each on future ideas and again, I welcome any comments or feedback from readers.
Now that I've set the scene with the IL breweries possessing the largest audience on Instagram, I think it's also interesting to keep an eye on who is picking up steam the fastest. There are 170 breweries in Illinois (per Brewers Association, 10/15/15) and another 54 in planning. For the purposes of this graphic, I only considered those with at least 250 Instagram followers. Here are the top 3 gainers as a %, over the last 2 calendar months:
I reached out to Pete Ternes of Middle Brow Beer Company, a unique brewery in Chicago founded by home brewers, which donates half of profits to charities. Like most co-founders of small breweries, Pete is involved in all aspects of the business including the execution of Middle Brow's social media strategy. First, I wondered if the 2nd place ranking was a surprise to Pete, to which he answered:
The comment about pulling back from other media had me especially intrigued as I've experienced very little success sharing my photographs anywhere besides Instagram. I asked Pete a little more about that and he didn't hold back any punches when it came to Facebook, adding "Facebook is hot, wet, air-deprived garbage...it's where posts go to die. Unless you pay to have your post seen by your followers and some other handful of people. And at first that means paying $3 to boost a post, but Facebook then reels you in and stops showing your posts to anyone unless you boost them for $6. then $12. then $25."
"This move is very shortsighted of Facebook. or of Facebook's bots. fine..." Pete half-joked, "They gotta charge companies for accessing their customers, not so surprising, perfectly smart of them. But to charge small businesses with very small marketing budgets even to reach 1-10 of their followers is nuts. They should be focused on helping us grow into big companies so we can start spending thousands of dollars per year on Facebook ads. Instead, they're stifling us. it's also really bad user experience for their individual users. I have loads of friends who ask me, "why don't i ever see any of your news? why do i always have to search to find things out about you?" So Facebook is missing out on a win-win-win here. Small businesses would be happier with Facebook (and use it more) if they didn't require boosting until you had, say, 50K followers."
It's an interesting point that Pete brings up, as Facebook seems to have become a pay-to-play platform which treats large corporations the same as small business, perhaps at the expense of their user experience. How do the small guys even begin to try to get big on that platform without pouring money into it right off the bat? Knowing the personality of most craft breweries, in addition to their small marketing budgets, I don't see much investment in Facebook moving forward. Middle Brow was willing to confirm my suspicion, at least as far as they're concerned:
I know from personal experience that maintaining an active and engaging feed, with fresh creative content is no easy task. A question I've always wondered is where craft breweries prioritize their social media presence and strategy. The answer is going to be different, depending on who you ask, and can pretty easily be evaluated by looking through a brewery's post history and response rate to questions. I always root for breweries to place a high priority on social media, Instagram specifically, but I had never asked anyone specifically about priorities until now. Pete explained:
"On our priority list, it's basically #3. That said, if you clocked the number of hours spent on tasks, it may look like #1. Let me clarify a bit. First and foremost we want to make great beer; we have to make great beer. We cross our fingers that people like our beer as much as we do. We've seen some evidence that that's true and we hope to see the amount of that evidence increase at an exponential rate as the months pass.
A close second to that priority is the work we do with local charities. We could have brewed beer for ourselves for the rest of our lives... but the imbalance we see in craft beer (and so many other industries) is what got us into brewing on a large scale. The imbalance we're talking about is the amount of money people spend on this luxury while so many people in our community struggle. Incredibly large chunks of people in the former group are constantly looking for ways to try to help people in latter group. So it's an imbalance that can easily be fixed if we can make enough beer and get ourselves in front of enough potential customers. But you can't do the latter unless you spend a ton of time on social media. so while it may be our 3rd priority, we find ourselves occasionally acting like it's our 1st."
The passion of the Middle Brow team is truly special and I look forward to following their progress through Instagram and of course supporting their efforts by trying their beers on tap and in bottles around Chicago. I didn't mention this to Pete, but one of my favorite things about Middle Brow is not just the money they donate to charity, but the time. They've organized a number of events such as cleaning up our Chicago beaches with Alliance for the Great Lakes and volunteering with the Chicago Food Depository to help build food packs for the hungry. Why would you not want to root for these guys?
I want to thank Pete for taking the time out of his busy schedule to help give us an honest, inside look at how Middle Brow views social media.
As craft beer's popularity continues to climb, Instagram is emerging as one the most useful tools for key industry players to share their story, build a following and stay in touch with their fans. In an industry with so little budgeted toward marketing, a strong following should serve as a powerful indicator of both current and future success. To kick-off my project, I created a database of all Illinois breweries who are registered with the Brewers Association. I linked that database to their Instagram statistics and watched what happened over the last couple months. While I have a lot of more complex and interesting findings in the works, I wanted to start out with some basics. Let's first take a look at the top 10 biggest audiences in Illinois:
The first number I wanted to mention briefly is the 13.1% per month growth rate that Goose Island's Instagram audience has seen as of late. A lot of work goes into their feed and it shows. You could argue that Goose has the marketing budget that smaller breweries do not, but I prefer to think of it as prioritization. They clearly have a strategy and see the value in consistent, high quality content. I have a lot more to talk about with Goose Island, but will save that for future posts.
Most breweries tend to follow their distributors, piers (other breweries), retail accounts, influencers and sometimes their biggest fans. Lagunitas however makes an interesting and uncommon decision to follow zero other accounts. I can see reasons to criticize this strategy, but I actually believe it's smart in their case. All eyes are on Lagunitas as they prepare to make major leaps like we've never seen before, both in the US and abroad. With the entire industry following their progress closely, why bother trying to follow a handful of accounts back and likely ruffling feathers of those that you don't? What's the point? It should also be noted that a lot of small breweries' Instagram accounts are duel serving as their owner/brewer's personal feed. That is certainly not going to be the case with a company the size of Lagunitas, which would likely be run by one or multiple individuals in their marketing department who have their own personal feeds.
The Top 10 list is fairly predictable until you reach #6, Arcade Brewing. How does a brewery that just opened in 2014 already have an Instagram audience ranking 6th in the state? I believe there are a lot of interesting reasons which go beyond just "what's in the glass". For starters, think about the typical demographic who buys craft beer. I believe it's fair to say that a high % of these individuals grew up playing Atari, Nintendo, or Sega. Arcade's branding has the opportunity to create nostalgia, which leads to new customers and followers. There are 4 different bars within 2 miles of my home that are completely filled with and themed around old school video game machines. Arcade Brewing is a natural event partner for each of them, which results in cross-promotion through social media to a heavily targeted audience. In addition, the branding attracts the retro gaming crowd who may not otherwise pay attention to craft beer. This gives Arcade two different customer segments to draw from. While they may not be a lot of Chicago beer geek's #1 brewery yet, they are probably the favorite of a lot of gamers.
I was able to catch up with Chris Tourre, one of the co-founders of Arcade Brewery, who added "I believe our social media growth isn't just about us forcing our community to consume what we are putting out either. Social media growth happens when there is a true engagement and back-and-forth. Hot brands, regardless of industry, will have tons of followers. New guys like us rely on publishing provocative information, while also working hard to have an open dialog with our community. "
I'm glad Chris brought up this last point because it's one I am very passionate about. From my experience, it's just as easy to lose a follower as it is to gain one. The more content you put out there, the more you expose your fans to burnout. Arcade had the most active Instagram account of all Illinois craft breweries in August and the 7th most active in September. Engaging with your followers is one of the easiest ways to keep them around. Chris went on to explain, "Whether its 'cheers-ing' their posts, thanking them for posting about us, or simply being responsive to their questions/comments. Those are the simple things that we get continued positive feedback on from our community."
Here's a picture I posted over one year ago when Arcade packaged their second beer, a Grapefruit IPA which I brought out to California to share with my father-in-law Sal.
If you scroll up, you'll see I did end up picking up that bottle of Mega Milk, and it was delicious.
I've always been interested in beer, but about 7 years ago I began working in the industry, specifically on the distribution side. Unlike most voices you hear from in distribution, I'm not in a hands-on sales, marketing or business development role. My expertise is in the process and mechanics behind making the business run at optimal, scalable efficiency, while ensuring financial accuracy and compliance. As these 7 years have flown by, the way I do my job has changed and become heavily reliant on data and reporting to predict, prevent and monitor.
In early 2013, when craft beer really began hitting that next level, I created a hobby that combined my love of beer with my desire to learn more about photography and editing. I decided to create an Instagram account dedicated to craft beer and the handle @beeraficionado just happened to be available. The feed started out as nothing, but quickly evolved into creating scenes where the name or label of the beer comes alive in the picture, with the help of props, Photoshop and a little dry humor. The number of amazing industry people and like-minded fans I've had the opportunity to meet as a result of creating this "character" on Instagram has made all of the effort well worth it.
My desire to contribute to the craft beer industry has outgrown my pictures on Instagram, though those will certainly not be going anywhere. I have had a number of "great ideas" over the years, but they each get immediately roadblocked by the same problem. The data points in craft beer are in no way connected, limiting the ways technology and analytics can be used to solve problems. For the last few months, I've been playing around in my free time with ways to solve this problem, or at least make progress. As I have begun to connect the dots, fascinating insights are showing up left and right, and I think these analyses are worth sharing.
Beer Crunchers will dig into the numbers, pose questions, share opinions, discuss with insiders, and share the results with anyone interested. Like my Instagram feed, I'm here to celebrate the good and educate you and myself on the unknown, not call anyone out or make anyone look bad. I know I won't get very far alone, so please reach out if you are interested in collaborating.