Sometimes when potential retailers call begging to sell your wildly successful product, it's better to say "no"--at least for now. Meg Gill, co-founder and president of L.A.-based Golden Road Brewing Company, knows this lesson well.
Here's another in my series where I pick a topic and connect with someone a lot smarter than me. (There's a list of some previous installments at the end of this article.)
This time I talked to Gill, who, at under 30 years old, may be the youngest female brewery owner in the world. (In case you're wondering: I really like their Wolf Among the Weeds brew; tastes great and for an 8-percenter is very smooth, even for far-from-a-beer-guy me.)
Most entrepreneurs who start a craft brewery are brewers--but you're not.
I had worked in the beer industry but no, I'm not a brewer. What I realized is that craft brewing is a passion project for a lot of people... but not necessarily for people with business backgrounds. Even if they create a great product, pretty soon they lack the infrastructure to manage their growth.
I have a friend who is an awesome winemaker but a terrible winery owner. (He freely admits it--well, at least now he does.)
The fact the microbrew bubble burst is often attributed to bad beer in the market. Generally speaking, that happened because many entrepreneurs were hobbyists who didn't have the sales distribution background to know how to get their beer into the market.
Fresh beer sells beer. Volume requires distribution. Volume is like success; nothing succeeds like success, and nothing helps a brewery succeed like volume.
But you can't get to volume, and then to profitability, without fresh beer. That's something we live by. Even though our first year was incredibly successful, we learned that without comprehensive tracking and reporting systems for distribution and retail, we couldn't control whether our beer was fresh.
You'll never control every variable but now, with the right systems in place, we can get pretty close.
Speaking of retailers, getting shelf space is one thing, keeping it another.
Managing the shelf space you gain is a key part of the business. You have to monitor those shelves very closely to make sure that out of stocks don't exist in any of a chain's stores; out of stocks get you thrown out of the chain network really quickly.
At the same time most chains measure success based on velocity. They can't see that you're out of stock; they only see that you sold 20 cases and they wanted you to sell 30.
Early on we grew so fast we had major out of stock issues as well as no real way to measure where our beer was going. A key step was installing SAP software for inventory tracking on raw materials and finished goods and wholesaler inventories.
Once we did, we realized we were out of stock in some areas while wholesalers were putting four- to six-week old IPA on the shelf in others.
So that became our mission: to bring locally brewed beer to the market and sell it as quickly as possible so it is as fresh as possible. Now our IPAs sell within one to two weeks, which is pretty incredible. That's partly due to our software but also to the very talented people who work for us.
You're the only craft brewery in Los Angeles. Where did you find great people?
Since there hasn't been a beer culture in LA, there is a lot of talent but there isn't a lot of experience. In a way that's great because we've gotten to build and grow people's skills. Even so, we've hired over 90 people in the last year, so it's definitely a challenge.
It's also a challenge because you not only run a brewery, you run a pub.
The Pub is the No. 1 marketing and exposure outlet we have. We control what beer gets into a consumer's glass: It literally goes 200 yards from tank to glass. That is the best beer experience you can offer.
We do everything we can to create a culture and experience around it: tours, education initiatives on craft beer, events with other breweries, training, bringing in retailers from around Southern California. When the food is great, the atmosphere is great, and the beer is great, people keep coming back.
And it's the most profitable way you can serve a beer.
You're growing very rapidly, but in a very focused way.
Our wholesale business in the first quarter was up 220 percent from the first year. That's a stunning number. But we're not opening markets, we're trying to broaden our penetration in SoCal. We're focused on new points of distribution locally so we can measure velocity locally.
A lot of start-up brewers get a call from a retailer in, say, Ohio who says they want half a truckload of beer. You think, "Hey, great," send the beer out... and it doesn't sell because no one knows who you are. Maybe a couple beer geeks picked it up, but by the time they did it was old and they didn't like it.
We try to keep things local to keep brand awareness up locally so we can penetrate the market here.
In fact, the mainstream chains said yes to our beer before we even had a package. We sold them on the concept of a locally brewed beer in a package.
We want to be the hometown hero. We said, "We're building a multi-million dollar brewery to make outstanding beer." We sold them on the dream and the concept. I didn't have an option.
When we launched we had about 2,000 total points of distribution and 500 draft accounts. Now we're up to 3,500 retail and 1,000 draft accounts.
What would make you decide it's time to expand?
When I started in the industry, I would have said, "When I have a great distribution partner."
The more mistakes I've made, the more I've realized that you do have to have a great distributor--but you also have to have great retailers lined up before you hit a market. And you also need excitement and buzz: The most important person is the person buying your beer off the shelf. They have to know about your beer. Ultimately that's up to the brewer.
Today we have distributors and retailers begging us for beer. And soon we'll have the capacity. But we won't grow into other markets until we have the sales and marketing infrastructure in place to create the excitement and buzz our beer deserves.
Check out other articles in this series: