In a previous blog post we discussed the benefits that industry clustering has brought to the Maine craft brewing landscape. From knowledge spillover to increased access to suppliers, all signs point to industry clustering being a resounding benefit for an industry that’s been booming for the last decade. To illustrate this, in Maine alone, from 2007 to mid-2018 the number of breweries has grown from 14 to over 120.
All this growth in Maine is causing some pause in an industry used to double digit growth recently, with production on the decline from 2016 to 2017 by 0.2%. With this explosive, concentrated growth comes the inevitability of increased competition and market saturation. Nationally, 97 breweries closed in 2016, up from 68 in 2015, and 46 in 2014. It makes sense that smaller markets with large amounts of breweries, like Maine, would feel the pressure from this cool-down. A recent article highlighted the changing dynamics of the Maine brewing industry, noting that breweries are increasingly focused on the business aspects of running a brewery like marketing and distribution, instead of the actual beer making.
Hit hard by recent industry trends are mid-sized breweries. In Maine, recent reports have cited Geary’s Brewing as a prime example of the greats of yore being pushed out by new upstarts crowding the landscape. Established in 1983, Geary’s production began to fall as the industry has grown in Maine, down 68% from its high in 2008. According to media reports, this pushed Geary’s to the brink of bankruptcy recently as they sought new owners who have tried to engineer a turnaround strategy that balances their loyal following among older customers with a need to appeal to younger audiences with differing taste preferences.
Even successful brands like Allagash Brewing have caught the concern of some industry publications. A report in Strategy and Business gives the example of Allagash as a currently successful midsized brewery that is stuck in a spot within the industry that is potentially limiting to growth. Midsize breweries of this type often lose the hyper-local appeal of small microbreweries, but they can’t yet match the production and distribution mechanisms of the much larger craft breweries like Sierra Nevada and Sam Adams.
Moving forward it is apparent that certain breweries will have to make some changes to combat these industry wide headwinds. We have found that it is best for businesses to think about pathways to sustainable growth earlier, so that factors like cost reduction and operational efficiencies can be implemented before a business is inching towards unsustainability. Turnaround plans are hard to execute correctly while balancing the daily demands of production, distribution, etc. At Opus we have experience in applying sound turnaround principals at the core of all business to the specialized dynamics of niche industries like craft brewing. Industry clusters like Maine’s craft breweries are great additions to a local economy and culture, but it is important for owners to continuously seek out best business practices to make sure their great product can drive a sustainable venture with long term prospects for profitability and growth.
