Focus On Craft: Service Brewing

For a little change of pace during the month of Oktober we’ve been running a series of articles focused on the craft beer industry, its dynamics, and market forces affecting the industry.

Due to the positive feedback and interest in our recent Craft Brew spotlight, we decided to expand upon our microbrew expose with a series of interviews.  Each segment will provide a detailed view into each brewer’s perspective of the industry, goals and aspirations in entering the market, and valuation trends, risk factors, and growth initiatives.

 

Our first interview is with Kevin Ryan, President and Founder of Service Brewing Co. out of Savannah, Georgia.  Service Brewing is a Veteran owned and operated brewery with a mission to give back and support charities that support service.  The Company opened only a few short months ago, and in the first 2 months they have already donated over $6,000 to relevant charities.

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Kevin Ryan (Left), President of Service Brewing

The Company’s patriotic take on beer (a classic American pastime) has helped generate significant media publicity from various outlets including Fox Business News.  Their combination of passion and philanthropy is a recipe for brewing success.

Excerpts From Our Recent Interview:

J: The Craft Beer Community appears to have a collaborative brotherhood.  What are ways in which competitors come together to help each other out especially when it comes to benefitting from aspects that market leaders such as Sam Adams are able to achieve?

K: Right in Savannah we work with one of the first brewers in the area that broke down a lot of walls and educated the community for us.  They have been a huge supporter when we needed advice or even when we needed to store hops because our cooler wasn’t ready.  Likewise, they are setting up their canning line so we gave them blank cans.  We’re competitive but it’s a healthy competition where I think we all inspire each other to work harder.  It’s also good to see what other beers are out there – it helps brewers become creative.

On a larger scale, there’s a website called ProBrewer.com where [craft brewers] can go to get equipment, advice, and answers to questions.  The Brewers Association also has a forum where people who have raw materials go to purchase or trade with other brewers.  People aren’t giving out every detail or secret, but it’s a very supportive community.

 

J: The industry is highly regulated.  What have you found are some areas that made it hard to enter the market, or will be difficult to navigate going forward?

K:  The regulations are a constant learning process.  The stress for us was finally getting to that day where we were ready to launch beer, but we were still waiting on the department of agriculture to issue our license.  You can’t get a city license until you get the state license and you can’t get the state license until you get a federal license.  Like anything, the things out of your control are most frustrating.

Regulation even comes into play with our social media efforts.  In Georgia we are very limited in what we can and cannot do in regards to social media.  Social media is a huge way to spread the word “Hey, a new beer is being released,” or “We just bottled yesterday,” so people know to keep an eye out for it.  It’s been our primary means of getting out there and letting people know about our beer and brewery.  Generally social media, word of mouth, and beer festivals are ways in which to get the word out.  Currently the Department of Revenue prevents us from advertising events in which we are participating in.  The event hosts (such as restaurants) are seen as a retailer and any social postings are considered a violation of the regulations.  Brewers in Georgia are working with Legislators and the Department of Revenue to modernize the rules and regulations that govern our industry in the state.

 

J: What specific trends do you see in the microbrew niche?

K: It’s just picking up and more and more people are giving it a chance.  Craft beer is everywhere, but it’s still less than 8% of the total beer consumed in the United States.  Now there are so many breweries out there the variety available is so large creating potential to new consumers with varying tastes.  There’s a conversation every day in brewers’ world about how we get more women to drink beer.  It’s an untapped market.

We were asked on our recent Fox News interview, “Do the soldiers drink your beer?” I believe that as the soldiers mature, their taste matures.  You know the soldier that just turned 21 and is enlisted in the military is going to go and try to get the most bang for their buck.  They do the math and realize, “Well this is 10% so I’m really getting 2 and a half beers for every 12 oz. that I drink.” But after that initial introduction into the craft world, tastes and experiences evolve.  There actually was a guy here in Savannah from a local craft beer club went 380 days without drinking the same beer.  Some people go and try to run every day for a year, this challenge was to drink a different beer every day for a year, but this feat was more easily achieved due to the vast spectrum of available brewers entering the market.

 

J: With all of the variety and players out there, how do you compete in the market?

K: We don’t look at it as competition with other breweries.  We look at is as where’s our beer not being sold and why?  One of the things we’re quickly learning about is that the accounts that are represented in a particular restaurant are a lot less about the quality of the beer, but more about the skill and influence and salesmanship of the distributors.  They have a lot of strategies they put to use to get the beers they represent on tap versus somebody else’s beer.  We’re now at that point where we’re still expanding accounts and our distributor is still finding more opportunities, but it’s going to be up to us to go personally to the locations that are not carrying our beer locally and talk to them about the brewery and our beer, invite them over to the brewery, and have them taste what we’re offering in order to recognize that our beer is something they need to carry.

Being a local vendor is key especially in Savannah with the number of tourists we get.  Craft beer is becoming a big tourism draw.  So when people go on vacation they go into a restaurant and ask what is the local beer since they want to get something can’t get at home.

 

J:  Are you in the market with an eye towards consolidation in the brewery industry?

We didn’t start this company with an eye on selling in 5 years. We started it because we’re passionate about making beer and enjoy being our own boss.

K:  It’s not our intent.  We didn’t start this company with an eye on selling in 5 years.  We started it because we’re passionate about making beer and enjoy being our own boss.  However, consolidation is an opportunity in the future.  Overall, we aren’t looking to grow by acquiring other breweries since typically any brewery you can afford will not contribute to your own expansion, but it may contribute to cutting shipping costs through achieving economies of scale.

 

J: How do you propose to tackle the logistics hurdles?

K: When you put beer in a keg and send it to Atlanta it’s going to be two months before you get those kegs back.  So you have to build up your inventory and that’s another large capital cost.  That’s one of the biggest challenges in brewing logistics – “Where did my keg go,” “Where is it now,” and “How do I get it back?”

Cans are a great opportunity for us and help in this aspect whereby I use the military term, “fire and forget” – you send those cans off and you’re not really concerned with  where they’re going because you’re not going to get them back.  I feel like if I had my beer available for online sales currently then I’d be moving these cans at a rapid rate because of all the coverage we’ve had in the military community.  We’ve been getting inquiries as to when someone can be getting their beer in Idaho, Virginia, Alaska… For us to be distributing beer in Alaska, it’s going to be a long time. [Editors Note: When WILL we get our Service beer in Virginia, Kevin??]

 

J: And what about the shelving space?

K: We haven’t really gotten into shelving space until we get our cans out.  The week of the 19th of October we’ll start to fight the shelf space battles.  Our strategy to start out is to get to convenience stores and bars and restaurants that don’t have taps.  We’re going to wait a little bit to get into the big grocery store lines because shelf space is at such a premium.  If they give you shelving space and you can’t deliver the products they need and the quantity they want, they’re going to give that shelving space to someone that can and then it’s going to be a little while before you get back in there.  We need to make sure we’re able to maintain the inventory we need to do the supply.  I’m not worried about not selling enough yet, I’m worried about making enough to meet the demand.

 

J: Are there any Cinderella stories out there that highlight craft brewers’ exit strategy options?

K: Goose Island and Boulevard most recently are good examples of large scale successful breweries being acquired.  The first reaction from people is, “Oh my God.  How can you sell out like that?”  Fortunately for Goose Island, the quality of the beer hasn’t changed; unfortunately, a part of that revenue is going to feed that large scale brewery that purchased them.  In the end, and most importantly, the beer that made them as big as they are is still craft beer and still being made with the same ingredients.  They’re not cutting cost by introducing rice and its staying true to the brewing process.  It’s still traditional craft beer and it’s still good.

Just like anyone who sells a company, the person selling is going to move on.  You certainly can sell your company to your employees, you can have a portion of your company acquired to give you some capital to take it to the next level, or you can just pass the company along to the next person that is going to be in charge.  Whether a craft owner retires, they find another passion that they want to do, or they want to go sit on the beach and enjoy it, you have to determine what your long term goals are early on in order to make those goals a reality.

 

J: Where do you see yourself in 5 years or in 10 years?

K: We definitely want to have a wide distribution east of the Mississippi with a goal to one day have a national distribution/presence.  I look at Sweet Water as an example of success from a distribution standpoint.  They are one of the top 15 brewers in the country, as far as volume sales goes, and they have only been distributing in 7 states.  In 10 years I’d like to be at a capacity where we can support 180,000 barrels a year and whether that means we’re distributing in 7 states, in 14, or in 22, its less of a concern versus are we growing within our own capacity to the best of our ability.  I want to have the problem of we need to move to a bigger space because we just can’t keep up with the demand for our beer.

We’re making great beer.  If you think about it, we have 5 beers in production right now as well as small barrel production for testing.  To have 5 beers on the market in two months is pretty awesome.  We don’t need to change anything in how we’re making the beer we just need to focus on logistics at this point – getting enough kegs, getting enough cans to support the distribution.

 

Thanks to Kevin and Service Brewing

We’d like to thank Kevin Ryan of Service Brewing Co. first and foremost for his service to our Country and continued dedication towards community service and charity.  Kevin’s story is that of passion, determination, and creativity illustrating that the intangible value of your life’s work can and should be priceless.

 

About Service Brewing Co.

Service Brewing is a craft brewery owned and operated by veterans to honor and promote those that have put their lives at risk while placing the mission first.

Service Brewing dedicates a portion of their revenues to assist charities that support Service.  The Company crafts authentic American made beers for the curious and experienced consumer.  Service Brewing focuses on buying local whenever possible and in the same vein supports the grassroots efforts of those giving back to those that have served.  Their dedication to this cause is unique and their approach to craft beer is equally unique.  While brewing year round beers on a large scale Service Brewing Co. maintains a small batch Research and Development division to enable experimentation and innovation using locally available ingredients to connect farmers and consumers with their beer and mission.

 


 

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