Creativity  and Craft Beer

By Glenn DeLuca


With well over 4,000 breweries the shelves and taps are getting crowded and more
breweries open every other day. So how does one survive or stick out in this
marketplace that will continue to get more crowded, not that they’re dropping like
flies. In fact it appears to be quite the opposite, very few are closing up, but the boom
won’t last forever. I just saw that Boston Beer stock took a hit as they’re not growing
and basically Jim Koch said hey there’s a lot of competition out there. And in this
marketplace of new breweries and beers we sometimes forget our friends or even the
one we had last week.

So for starters I guess you better make damn good beer. You’ll get a lot of people
wanting to try you because your new but that wears off and if I didn’t like it the first go
round I’m really not likely to ask for it again. A good location if you’re planning to
primarily sell out of your tap room and a catchy name that sticks with visitors. And
then of course there are catchy names for da beers and better yet, making really
different beers with funky ingredients that I might try once and never again. Great
graphics, hey if you can’t sell enough beer, getting visitors to buy t-shirts and mugs
helps. In that vein, my Beernexus Bud…ah let’s change that to comrade so there’s no
confusion, Vince and I went to the Jersey Girl opening at MT&G recently; met the
owners and brewmistress and came up with a few , what we considered good
marketing suggestions, being the beer aficionados we are. To be fair, they’re just
opening their doors so have tons to think about and accomplish so probably would
have come up with the same ideas when they had time to relax and reflect.

So yes, creativity, thinking outside the box, finding the niche space, those can all be
helpful. These aspects are captured in one of my favorite shows, Shark Tank.
Entrepreneurs go on and pitch their business and hope for an investment. Some of
the ideas are lamer than lame and you wonder how they even got on the show. Every
once in a while someone has an amazing idea/product that just blows you away and
you know will definitely make it. And hey it doesn’t hurt if you have one of the Shark’s
backing you up with money, ideas and contacts.

A couple of recent episodes peaked my interest when I heard they were having beer
related segments. First the Beer Blizzard, basically a plastic ice cube in the shape of
the bottom of a beer/soda can that you freeze, pop in the bottom of your koozie and
it chills your beer, so you can drink it ICE COLD. Exactly what we craft beer drinkers
want, an ice cold beer with no more taste than the stuff we used to buy years ago
and drank ice cold so we didn’t taste it. Needless to say the Sharks weren’t too “hot”
on the idea either. Seems like it’s more geared to college kids pounding than us craft
beer drinkers having a great time at the beach or backyard bbq. Oh well, like I said it
peaked my interest, but not for long.

Then came Mobcraft Beer Inc.  a brewery out of Madison Wisconsin. I’m glued to the
screen to find out what this is about and what makes it unique enough, if anything, to
be on Shark Tank. First we get the intro video on Mobcraft from Henry. He and some
friends started brewing beer in college and everyone loved it so much they built their
own craft beer business. They doing so well they can’t keep up, so now they want the
Sharks help to build a new facility and go nationwide. As one of the 3 co-founders,
Henry Schwartz comes out to the now classic Shark Tank entry music and I’m waiting
anxiously for the pitch.

They are seeking $400,000 for a 16% share of their company.  Now comes the
interesting part, Mobcraft is the world’s first (at least according to them)
crowdsourced craft brewery. Craft beer lovers go to their website and submit ideas
for beer they would like to have brewed. They’re reviewed primarily by Andrew,
another co-founder and their brewmaster, to make sure they can actually brew it and
each month fans vote on user submitted ideas. The winning beer is brewed and you
either pick it up or they work with online liquor stores to ship straight to your door,
which at this point are 40 states. Henry emphasizes the “emotional” connection they
are making with the consumers who are suggesting and then voting, and building
brand loyalty.

Enough talk it’s time for the fun part, he has a flight of six beers for each Shark to
taste; a coconut chocolate wheat beer, hop gose the grapefruit, a coffee stout, which
was a silver medal winner at GABF, a vanilla wafer porter, a sour Belgian double and
a sour red ale. I would guess the Sharks are not big beer drinkers and as they go
through each one there are some very mixed reactions. Daymon and Mark don’t
really like most of them, Lori really likes the vanilla porter and Robert is the only one
who likes the sours.  They are surprised to hear there is really grapefruit in one and
coffee in the other…oh yea major confirmation; the Sharks are not beer drinkers at
all.  Henry describes the consumers putting in ideas as the “ultimate” craft beer fans.

Now the Sharks get to their questions and first want to understand how it works, so
suggest that they all want a sardines and chocolate chip beer. And we have our first
“ah ha” moment; we learn the catch or as Henry calls it, the caveat. Voting is another
way of putting your money where your mouth is, or in this case where your taste buds
are. Your vote is actually a $25 pre-order for a 4 pack of 22 oz. bottles with a pre-
authorization on your credit card. If the beer you pre-ordered is not the one chosen
to be brewed there is no charge.

They started in 2013 with the thought they could ship direct to consumer like wineries
do. They quickly learned that was not possible and it took nine months to get the
necessary permits to go through online retailers and have negotiated they sell in
volume to them so they take a smaller percentage than traditional retailers.

On to the financials; they’ve sold $350k with $280k of that being in the last twelve
months. They’re projecting almost $500k this year, but that will be a $28k loss
because they’re building a new facility. They started brewing in college and decided
to see if they could make a commercial go of it. The three owners put in $33k to start
and they have a $150k loan they used to buy the guts of an existing facility, which
they’ve now outgrown.

Lori asks Henry about his background and he tells us about his passion for
skateboarding and trying to get a job in a skateboard store at age 15. The store
wasn’t doing well and was getting ready to shut down, so no job, but his mother
encouraged him to buy the store because he loved skateboarding so much. He’s
thinking I’m a 15 year old kid, but his mother must have a plan and some positive
vibe. They paid $8,000 for the store and in three years he built the business up to
$50,000 in revenue, tripled the floor space and inventory. Sounds like this guy has
some business smarts, at least with something he likes.

Robert wants to know “how do people find you.” They started by going to every beer
festival in WI they could find. The Sharks are all shocked to hear there about 65 beer
festivals annually in WI. Now it’s Mr. Wonderful’s turn to tell everyone how much he
knows about the craft beer business. He starts off by saying that there has been a
ton of expansion (really, I hadn’t heard…) and that most are running at 40-60, maybe
70% capacity and the capital outlay for that’s a big problem.  He was hoping they
would be looking to find that open capacity rather than build their own facility. Yes
Kevin that’s called “contract brewing” and there is a ton of it going on. There are
some breweries who have no brewing facility at all and it’s all contract brewed. Hell
Pabst who owns numerous brands doesn’t have their own facility so it can be done
on a large scale. Henry says they looked at that but claims that craft beer lovers
really want to have their beer brewed locally; hum so why do you want a Shark
investment to go nationwide…would seem to be a contradiction. Just be honest and
say you want your own brewery like most craft beer brewers do. And btw if that were
the case then as a craft beer lover I’d only drink NJ and some NY & PA beers to make
sure they’re local…NOT. Sorry it’s the quality of the beer, not whether it’s made next
door or thousands of miles away. They already have a $1.9M approved bank loan,
so this is the path they’ve chosen. In all this talk there was never any discussion
about how many barrels their current system is and what they plan to build. Maybe
that’s getting a little too much into the woods for the average viewer or maybe the
Sharks don’t know that’s the barrel production is the major measurement, but that’s a
basic piece of info to me.

Then Robert asks about going outside the model, more main stream with distribution.
They actually already are in 75 liquor stores, which again Mr. Wonderful is unhappy
with.  Damon wants to know about the finances for retail, so Henry tells us it varies by
product but for one he brought a case costs about $28 to make and retails for $48. I’
m assuming he’s now talking 12 oz. bottles, so that’s $2 / bottle.

Robert thinks they’ve got a very unique model but has no passion for it and is not a
beer guy.  “I’m out”

Lori liked the vanilla porter and the stout but doesn’t know enough about brewing
and beer and can’t she herself investing - -two down.

Damon flat out says he hates beer so he’s definitely out

Mark says he likes beer, but he’s a Bud Light guy, so really not interested in the craft
beers. He knows it’s a hot area, but not for him, he’s out.

And then there was one, Mr. Wonderful, who starts by praising their incredible model
to tap into this really hot trend. He feels they could make a ton of money…and then
we go to commercial break…

But he doesn’t like they’re retailing and owning their own brewing equipment and can’
t understand why they would do that.  Henry says they’re very worried about quality
control to which Mr. Wonderful tells him he doesn’t believe that  and that he, Mr.
Wonderful, could show him how to fix it, but Henry is too stubborn so he’d like to
spank him like a baby seal (not sure if he’s heard from PETA recently about his baby
seal comments)

He’s out!  This means no investment from any of the Sharks.

On his walk out and final comments Henry says he’s sorry Kevin didn’t like his
direction, but they’re definitely going ahead and building their own brewery. They
want to have their own identity.

Like I said I really enjoy the show, but that was more interesting than usual, I need to
sit back and take a breath. I had a hunch and by the end it was clear to me that the
Sharks don’t know much about craft beer. And even though a few said it was a high
quality product I really can’t trust their taste on this. I also think they must be given
some idea of what type of business is coming out so they can do a little research,
otherwise there may well be nuances they have no clue about. There are always little
clues that they know specifics you wouldn’t expect them to know by the questioning
and after all they are investing their own money. Each does have different areas of
expertise, which helps them all when looking at the business offering. But it’s not only
that but the entrepreneur(s); their ambition, their drive, their love of their idea. There
are many times the Sharks question that when it’s not their full time work, when it’s a
hobby. In many cases the Shark thinks that person has that drive and is really betting
on both the product and the person to carry it out. The best product or idea will go
nowhere with little behind it. Will or is Henry one of those in the craft beer industry;
guess we’ll have to wait to find out.

The one thing that really bugged me was Mr. Wonderful’s proclamation that most
brewers are running at 40-60, maybe 70% capacity. From what I’ve seen and read,
which is a obviously a small sampling of the 4000+ craft breweries, my gut tells me it’s
higher in the 80+%  range. Many small brewers don’t have the capacity to brew
enough, which is why they expand or turn to contract brewing to supplement; case in
point Lawson’s Finest using Two Roads. I did some online research to see if I could
get some stats but it’s difficult w/o subscribing to the Brewers Association, etc. and
even then I’m not sure I’d get what I want. Looking at the top ten, in 2014 their output
was about half of all craft beer production.  #’s 3, 4 & 6 on the 2015 list; Sierra
Nevada, New Belgium and Lagunitas respectively, have all undertaken new breweries
that will have a substantial increase in their capacity, so who knows what the actual
production vs. capacity is today as it changes every day. And I don’t think these big
guys are really looking to contract out to really small breweries like Mobcraft, so do
those numbers mean anything in this context.  Hey sorry I’m a numbers guy so can
get carried away with it…

Moving on, I’m still not sure if this crowdsourcing model is just a flash in the pan or will
continue to be successful. Next step is to check out the Mobcraft website. The How it
Works page is simple and not too informative; Submit, Pre-order and Drink. I click on
the Submit page and I need to sign in or create an account. I don’t plan on ordering
and I’m happy to see they have a checkbox to add to the mailing list, which I uncheck
as I don’t want to get bombarded with their emails, so here goes.

I’m registered and the Submit form opens. It starts with Beer name (so you get to
name your own beer, definitely more incentive to buy it), Beer description (45 words
or less) and Beer Style, where they provide you with a dropdown box with just over
fifty choices. Having recently sat through numerous BJCP prep classes I can see they’
ve taken some liberties with the recognized styles and I’m even more sure many of
those making a suggestion do not know specifically what style beer they’re
describing. Lastly a checkbox whether you’d like your actual name on the label or not.
The Pre-Order page has the last eight winners on it, three of which are sold out. You
can click on any of them to get a description along with the recipe details. I click the
Order Now button on the Mystique Double IPA. I have a choice of $13 for a two pack
plus $12.50 for shipping or $25 for a four pack plus $14.50 shipping.  So there’s the
second catch, shipping, a four pack will cost me $39.50, almost $10/bottle!! I choose
another and the pricing is the same. So if I live in Madison WI and can pick it up,
$6.25 for a 22 oz. bottle isn’t bad. I’m not sure why I would want to pay for shipping
when I can go to any major beer/liquor store and find a great selection of bombers
and pay $10 for one that commands that price. It may not be better than one of the
Mobcraft brews, but if I don’t like the Mobcraft beer I’ve got three more bottles I paid
almost $30 for… Now if a friend is having a birthday or special event and you want to
do something special, you could take a shot and if it gets brewed you could have a
great surprise…hopefully great tasting also.

The Taproom page tells me they’re opening June 25th; I’ll skip the sign up for
updates or promos.

I go to the Past Winners section which has all the beers with their labels and whether
you can order or it’s sold out. I’m surprised there are thirty beers, going back to
August 2013, so they’ve been doing this crowdsourcing for a while. Seven of them
are still available with some being from the first few months. I’m hoping for those
purchasing those that these are not from the original batch… Some sound
interesting, Laughing Clown Cholate Stout (cocoa and vanilla beans), Mystique
Barrel Aged Double IPA (bourbon barrel , hops, hops, hops), Sipping on G&J (juniper
ipa), others I wouldn’t touch with a ten foot pole; Malt Shoppe  Stout (lactose, cacao,
salt, vanilla), Black Tart Outlaw (cherry, berry, apricot), Cranberry Censored
(cranberries, loads of cranberries), etc. I’d say there are about ten I might taste, ten I
might drink and ten I could possibly enjoy. I certainly wouldn’t be ordering a four pack
of two thirds of these, but maybe that helps explain why brewers are making some of
these wacky combos since craft beer drinkers are suggesting them at Mobcraft,
although it could be a chicken and egg type scenario. I will give them credit on their
graphics; they certainly do spend some time and creative juices on the labels.

Maybe I’ll see if some of my fellow Beernexus or drinking buddies are interested in
going in on a four pack, just to say we tried it…

Glenn DeLuca writes about beer and culture of drinking. He may
be reached by writing

***   ***   ***
Glenn DeLuca
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