BEER BY THE FIRKIN
Hey there sports fans,
I’m taking a sojourn in New York for a week and a half, and one thing that always strikes me about this city is its bold, largely undefended irrationality. Without expounding on that bold claim, I’ll provide a single example: I saw a subway ad today that indirectly mentioned the rent for a ~550 sq ft apartment as $3,400. And this is supposed to be fairly normal, since it’s an ad. And for what, I ask you? Survival for survival’s sake, it would seem - an out of whack dollar-to-sq ft ratio justified, loosely, by an equally stunning culture-to-sq ft ratio, layered on top of a sense of purpose driven by the toleration of absurd living conditions; Stockholm syndrome, city-wide.
Free association aside, I tend to think about New York while I”m here, obviously, which, when combined with the always-running contemplation of beer, leads me to ponder some of the wilder NY beer stories I’ve heard and researched. One story that strikes me as particularly memorable concerns, funnily enough, the first employer of Brooklyn Brewery super-brewer Garrett Oliver, namely Manhattan Brewing Company. Long story short, these psychopaths decided, all the way back in the 80s (!), to brew craft beer on the island of Manhattan, and deliver a portion of that beer by horse-drawn carriage. Which is to say, they actually poured money into a non-ironic 1786, which even to me seems like a bad idea.
While they eventually shuttered, they survived for a number of years, and it’s their kooky tenacity that has stuck with me since first reading about them. So this week, in the spirit of making bad ideas (on paper, at least) actually profitable, I thought it’d be fun to talk about the business of cask ales.
Making money the easy way
I can’t recall where, but I’m sure I’ve made the argument on this blog before that if you want to make easy money, you should make Hazy IPAs and at least one kettle-soured “crushable” sour beer, which is to say you should cash in on beers that the market favors.
This idea of “market favorites” can easily be made concrete; here’s an experiment: head over to a decently stocked beer store (which could even be a supermarket), and write down the prices of 10 4-packs of each of a few beers, e.g. Pilsners, Hazy IPAs, Barrel-Aged Stouts, and classic (West Coast, say) IPAs. The differences in the costs of production for these beers are, oh, perhaps a few dollars at most per 4-pack ($3.50 is our biggest spread, and that’s as bad as anyone’s will be since we’re tiny), so if the averages for a 4-pack of one of those is, say, $3+ dollars above the rest, you’ll probably make more money by making that thing. These are beers that I like to describe as having a “market premium,” and VNBC’s existence was initially justified in part by this logic.
So that’s the easy play - what if you did the opposite of that? Can you still make money? Is there perhaps even some sort of advantage to deliberately brewing under-valued beers?
Cask Ales and the Strength of Branding in a Flooded Market
That doozy of a section header tells you most of the story - in a flooded market where everybody's brewing Hazy IPAs and Fruit Loops Pastry Stouts, you might stand out by brewing hyper-sustainable beers, or Belgian beers, or extraordinary lagers in a sea of “meh” attempts, and standing out means you at least have a decent shot at making money, as long as your business model isn’t profoundly flawed, and we’ll take it for granted, given the preponderance of examples, that just about every niche of brewing is breakeven-able.
Two examples of this in the soda world might be Coca Cola and Jones Soda. The former has so thoroughly nailed a particular recipe/soda type (like Trumer Pils has done with German Pilsner), that the quality of the product itself demands a crazy premium. Would you pay $6.50 for an RC Cola at a Dodgers game? I thought not.
And on the other extreme, I’ll never forget the insanity that was Jones Soda’s horrifying Thanksgiving Soda pack, featuring such bangers as Brussels Sprouts and Wild Herb Stuffing flavors. The idea there wasn’t to sell a huge volume of disgusting soda, but to make memorable soda, and emphasize the pretty huge array of flavors they made in their heyday.
As a blog post on MacLeod’s site, the natural question is where “warm, flat” cask ale fits into the picture. I’ve spent a considerable amount of time thinking about the pluses and minuses of building a brand around a fairly unusual serving method in the context of Los Angeles, a city famed for its heat and hence proclivity towards colder beverages, and I’ve come up with a few key points, namely:
There are a decent number of UK expats that live in LA, and if you’re starting a brand new brewery (as we obviously once did), it behooves you to have a customer base on day one
This is why I personally dig the idea of Santa Monica, the heart of the expat community, for a (now) third location
While less extreme than vegetable soda, I think the idea of building a core brand around an authentic, traditional, and almost steampunk method of serving beer (and implicitly, skillfully brewed British ales) is quite brilliant; again, you want a day-one crowd, and you’d expect beer nerds to go ape for such a concept. I was in college at the time, so who knows if they did, but ya gotta hope.
Finally, not really a plus or a minus, you may cross your fingers and hope that over time, your regulars will get used to (and perhaps prefer, as some do!) the refreshing simplicity and ease of drinking that cask beers afford, making this gimmick more of a legitimate decision in the long run; heck, where else can they go for cask ale once they’re hooked? All the way down at LAX, which is...super far from the valley (though I love that brewery’s beers, if you get the reference, I just don’t and won’t ever regularly drive there given MacLeod’s existence)
Finally, you’d be wise to ask about the profitability of cask ales, and from two perspectives the news is pretty good.
From a cost-to-make perspective, cask ales tend to be lower ABV beers (thus, cheaper), not super hoppy (cheaper), and unfiltered (cheaper), and they’re stored at a...less low temperature (cheaper), though the cask conditioning means they take about as much time as (perhaps a touch longer than) a hoppy draft ale, so there’s not a huge advantage there. We charge the same per oz for cask ales and our baseline draft beers, so the margin on cask ales is a bit better (if your bartenders don’t waste a ton of beer with fast, and hence foamy, pours)
And using data from the last two weeks, our top cask ale (King’s Taxes) sells 55% as fast as our top beer overall (Van Ice), making it something like our sixth best-selling beer, and the other cask beers generally sell better than our slowest-selling draft beer, which I consider a win. Again, implicit in all of this is the idea that you build a brand around UK styles and cask pours, while also brewing Van Ice, Better Days, Deal with the Devil, Calvert Crush, and Son of Leod, say, to pay the bills. If we just sold those last beers, I’m pretty sure that we wouldn’t be doing as well as we are, but that’s conjecture, I’ll grant you.
Conclusion
If profit were the key to happiness, Wall Street would be flooded by people of all stripes; clearly, there’s more to the equation, and selling cask ales is a pretty fun thing to do. If you’re considering starting a business, you simply must create a very, very strong brand that separates you from 99% of your competition, and if that brand can be something you find fun, all the better. 1786 may be a wildly irresponsible idea, but hey, where else are you going to find a period-acted, 18th century bar that sells a Rum Punch and Mac & Cheese worth telling your friends about?
Cheers,
Adrian “Ol’ Smitty” Febre