Craft beer collaboration: a strategy for success

Professor Sarah Drakopoulou Dodd and Dr Juliette Wilson are carrying out research into the craft beer sector, and here Sarah looks at collaboration within the  growing craft beer industry which may have lessons for other sectors.

The craft beer industry is growing dramatically around the world, creating not just employment and export income, but some very radical business models. The industry is driven by a tight-knit, passionate community, always delighted to share their experiences and insights. And, of course, there’s the wonderful output from the industry – the beer itself. If you’re talking to people about their beer, their breweries, the industry, it would be rude not to partake of a glass of the (very) good stuff.

My Strathclyde Business School marketing colleague Juliette Wilson and I immersed ourselves in the early-phase Irish craft beer sector as guests of the Alltech Craft Brews and Food Fair recently, exploring ‘beer-preneurship’ with colleagues Ciáran Mac an Bhaird (Dublin City University), and Angelo Bisignano (Nottingham Trent University), looking at how new business models of collaboration drive growth strategies. As well as the Irish sector, the study also concentrates on the longer-established Nottingham craft beer cluster, allowing us to compare two thriving entrepreneurial communities, at different stages in development.

So why does craft brewing matter so much to entrepreneurship and local economic development?

Consider that in 2014 the craft beer sector earned nearly $20 billion in the USA, and accounts for 18% of all dollars spent on beer. This equates to a 22% year-on-year dollar sales growth, with exports particularly strong. New craft brewery openings are also running at around the 20% rate, year on year. This trend isn’t confined to America. With three new breweries opening each week, and an estimated 15% rise in sales among SIBA members in 2014, the UK now has more breweries per person than any other country in the world. In Ireland, the craft beer scene is much newer, but growing rapidly. It has seen a dramatic increase in the number of breweries opening over the last three years - 64 independent breweries and growing. Breweries tend to open in one of two types of places; either in the agricultural setting of quite remote rural areas, or in industrial estates on the edge of (former) manufacturing towns and cities. Both these contexts are typified by a real need for new businesses, new jobs, new skills, and new hope.

Craft brewing has some very interesting lessons to share with other sectors about the benefits of collaboration. The Irish sector was often described to us as “a family”, and brewers were quick to point out “they aren’t our competitors, they’re our colleagues”. Indeed, Beer Ireland, the Artisan Brewers Society, explicitly lists amongst its values “providing less experienced members of the profession with guidance and mentorship”. We saw this practised in all sorts of ways. There is the very common practice of cuckoo, or gypsy, brewing. This is where a micro brewery – often a new start-up not yet able to afford its own production facilities – will be hosted in an existing brewery. It then produces its beer in what – in other philosophies – is the manufacturing plant of their main local competitors. Brewers come together to buy supplies and equipment, and organise local events and marketing campaigns. Kegs of beer are routinely swapped for retail in other brewers’ pubs, as are “tap takeovers” - completely taking over another bar’s taps - which are often combined with a “meet the brewer” event. (Think about this for a moment: brewpubs inviting the competition into their own outlets, and introducing their products and people to their own customers..this is not typical small business behaviour.)

We watched brewers borrowing supplies and equipment, helping fix temperamental equipment, and discussing the finer details of their recipes. Collaborative beers involve staff from one brewery, or beer bar, visiting another to develop a new beer together, which is then branded and sold as a joint creation. Brewdog and Yorkshire’s Black Sheep are just two examples of businesses whose investment has come largely from the beer drinking community itself.

The main reasons given for this co-operation tend to be around passion for great beer, genuine friendship bonds between kindred spirits, and the pure fun of creative play. However, very strong and sound strategic reasons for acting collaboratively too are articulated, as craft beer challenges the dominant mass-market products of the global drinks market. This is where the real competition is perceived, and individual brewers see each other as fellow pioneers in re-shaping the tastes of beer drinkers towards higher quality, more differentiated products.

Few individual artisan brewers can yet manage the scale and scope to impact upon the “macro” players in the beer industry – with notable exceptions like Scotland’s very own Brewdog who we were delighted to welcome onto campus last week, with Entrepreneurial Scotland, to share their story. Yet as a community of like-minded businesses, the sector is able to scale itself very rapidly indeed, whilst retaining the excellence, character and individuality of its diverse participants. Indeed, growth in the overall market share of craft beer is the most typical metric used to articulate success, and as a target for the future. Widening geographic market reach is also facilitated by keg-swaps with less local colleagues, and collaborative brews play a similar market introduction role, particularly to new export markets.

For the wider sector to thrive, it’s important that all craft beers can be strong ambassadors of the movement, and that no poor craft beer reaches the consumer. Sharing skills, recipes, and experiences of brewing helps keep the overall quality high, and provides hands-on means for continued learning and development of all involved. The distinctiveness of each brewery’s kit, and water, means no recipe can ever be fully copied, so outright “stealing” of product secrets is impossible. Swapping kegs is a much cheaper, less cash-intensive tactic for driving expansion and keeping customers at home intrigued by new offerings.

Taken together, the commercial benefits of collaboration form a powerful dynamic strategy for this high-growth sector. Throughout the business process, collaborative models are driving the artisan beer revolution, turning this craft community into a major business challenger.

Could this collaborative way of working have benefits in other sectors? Has your business benefited from something similar?