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Morning Briefing Strap Line
Fri 27th Jan 2017 - Friday Opinion
Subjects: Building brewery retail sales, how businesses can try something new in the experience economy, and broadening the appeal of cider 
Authors: Glynn Davis, James Marchant and Emma Sherwood-Smith

Building brewery retail sales by Glynn Davis

It’s 5pm on a Thursday and the official opening time of the taproom of Threes Brewing in the heart of downtown Brooklyn, in New York City, has just arrived. But on entering this comfortable industrial space it is already alive and serving a number of people. When we hit 6.30pm the place is properly buzzing with a throng of drinkers.
It was pretty much the same story when I visited Interboro Spirits & Ales in the Williamsburg area of Brooklyn. Despite only being open since September the former wood workshop space has its bright shiny new brewery (as well as glistening copper distillery) fully operational and is tempting in many drinkers. On the day I popped in at about 4pm it already had its fair share of customers that had not been put off by a sudden sprinkling of snow.
This level of customer activity at breweries is not uncommon in the US. The reality is they frequently sell the vast majority of their output on their own premises. It is not unusual for some breweries to sell 100% of their beers in their taprooms or for takeaway – what they classify as retail sales. Even though taprooms have become a welcome phenomenon in the UK, with most new breweries now incorporating on-site bars, it is much more established in the US. It is very easy to see why this has been the case because the margins are significantly better if sold direct to the public rather than selling through myriad third-parties – wholesalers, retailers, grocery chains, and pub companies – as is the case with most breweries in the UK.
Maybe it is the trading mentality of the British that seems to have companies exporting their beers around the world (through many different organisations who take out all the profit margin) when they are not really making the most of selling their products in their own back garden. There is a real problem in the brewing industry in the UK right now involving a growing number of the newer craft brewers that have emerged in recent years. Competition is proving fierce and even with the tax break they receive as a result of Smaller Brewers Relief), the fact is many of them are struggling to make it pay. If they sold the bulk of their output direct to the drinker then it doesn’t take a rocket scientist – or an accountant for that matter – to calculate their financial situation would be significantly enhanced.
Clearly there is a challenge in attracting drinkers to out-of-the-way locations but I’d argue many of the US brewers genuinely are in a middle of nowhere wilderness, whereas in the UK we don’t really have the same definition of middle of nowhere. What these brewers need to provide – alongside their quality beers – is an offer that makes it worthwhile for drinkers to make the effort to visit them. Rigging up a trestle table might convey a rustic non-corporate artisan ethos but it increasingly doesn’t cut the mustard with more demanding drinkers.
There is a lot to be learnt from the Americans. My experience is they invariably provide a great food offer to compliment their beers and typically deliver an extremely welcoming venue. Threes and Interboro both have the industrial ambience mixed with a dash of cool bar vibe and the usual high level of US customer service. Thankfully we are seeing a number of brewers in the UK up their game and deliver experiences that compare very favourably with their US counterparts. There are a number of London-based brewers – including Beavertown, Howling Hops and Crate – that have made great efforts to stand out with their retail offers.
Outside London, worthy of mention are Cloudwater and Magic Rock as well as Buxton Brewery, which has a pretty cool taproom in the heart of its brewery. Oddly, it hasn’t quite managed to open it to the general public yet – maybe this is because it has its own pub in the centre of Buxton to keep people on a pilgrimage to the town for its beers more than happy.
The new craft brewers have certainly made their impact felt in the market and disrupted the brewing industry, to the extent it is even being felt acutely by the big boys. But if they are to ensure this is not just some short-lived phenomenon then they need to get their financial houses in order and one way of doing this is investing time, effort and money into building their levels of retail sales. It might just be the difference between life and death for some brewers. 
Glynn Davis is a leading commentator on retail trends

How businesses can try something new in the experience economy by James Marchant

There’s a new disruptive influence in town that is giving rise to more immersive and intimate lifestyle choices – welcome to the experience economy. Whether individuals are flocking to bars, restaurants, or theatres, spending across the experience economy is rising by as much as 9% year-on-year, particularly among the culturally curious and affluent income groups. It’s not just in the UK where lifestyle is taking precedence over possessions. At Just Opened Group we’ve identified consumers around the world, including New York, Singapore, and Sydney, are embracing experiences and are enthusiastic to try out the hottest new openings, discovering something new and different.
Put down to the popularity and influence of social media, allowing users to share and compare their latest experiences, this economy is expected to grow and expand as consumers continue to look for the next big thing. For this reason, it’s important for businesses to capitalise on such a growing and vibrant economy. By having the below tips front of mind, lifestyle businesses will be better placed to tap into the array of experiences which consumers now crave.
Stay connected
Businesses should be aware of the growing influence of social media, not just in attracting customers to a specific outlet but also in how they share their experiences. Through just a click of a button friends are sharing images of trendy brunch dates, communal gym classes, and much more. By having a strong presence on social media and even making the most of promotional offers via Facebook “check-ins” for example, businesses can springboard themselves to success in this growing economy. 
Keep it interesting
In thriving and vibrant cities such as London and New York, businesses have a huge pool of open-minded individuals with disposable incomes. The opportunity for businesses to do something a bit different and truly tailor their offering is vast – not only to attract new customers but also to ensure products or services are fresh, adding a competitive edge. Consider collaborating with an up-and-coming brand – for example a drinks business could partner with a street food stall and create a pop-up or bespoke event so consumers can experience both brands in a unique way.
Become a digitally native business
The smartphone era means goods and services are now being offered in a peer-to-peer way. The sharing and experience economy are now working in tandem with one another. A business that take advantage of both can attract new customers where sharing experiences is key. Investing and adapting digital platforms could be beneficial to encourage consumers to your business and improving their experience. For example allowing customers to purchase products or services through social media can encourage spur-of-the-moment purchases increasing sales as a result.
Be aware of market trends
Spending growth has surged as consumers shun expensive material possessions for more meaningful experiences to share with their friends and family. It was a particularly strong year in terms of communal eating and drinking with places such as Red Market and Dinerama in London and Smorgasburg in New York showing a new trend within the restaurant sector. Eating out is no longer seen as a formal past time but rather an innovative sector that plays host to a variety of immersive and shared experiences. Businesses should be looking carefully at what’s driving specific market groups and ensure they have sufficient leverage to truly reap the benefits in this growing economy.
Over the years, consumers’ priorities have changed as lifestyle choices become more accessible. The dining out culture has become less formal, with casual dining experiences and speakeasy-type places coming to the fore. People now have a broader and indeed more relaxed way of spending their money. Resulting in a wealth of opportunities for lifestyle businesses, not just because of the rise in social media and connectivity but the number of open-minded individuals who want to spend their hard-earned money on memories they can treasure. The experience economy and the businesses that are part of it can certainly expect a buoyant and action packed-filled year. 
James Marchant is co-founder and chief executive of Just Opened Group

Broadening the appeal of cider by Emma Sherwood-Smith

It’s no secret that innovation is key to category growth, and the UK cider market is no different. New product development has long been a sure-fire way to attract drinkers into the category and convince them to stray from their usual choice. This potentially means a trade-up to something new, driving sales for operators and growth for the category as a whole. The current 2.8% on-trade growth of the category is a strong indicator cider is still very much front of drinkers’ minds, but there’s much more we can do to stretch the category for operators and grow their sales. We need to tear up the rulebook and create new behaviours, new attitudes and new perceptions. 
Occasional cider drinkers consider it a summertime pub garden drink – a long, refreshing, two-handed over-ice serve that’s all the more tempting as the mercury rises. That’s exactly the attitude we need to change. By restricting sales to such a short period (and we all know how unreliable the British summer is), we’re also hampering any potential growth within the category. So let’s push the boundaries of cider drinking completely. Let’s lose the “summer” label and make cider the tipple of choice for more drinkers, regardless of the weather. We want cider to start being considered for occasions outside the sunny pub garden, and to do this we must break these unwritten cider rules.
It’s important operators are supporting this shift in attitude too. There will always be a natural spike in sales of cider over the summer, but we now need to shift the focus away from this. Consider promoting some cider brands over the winter to remind consumers their favourite summer drinks can be enjoyed all year round and help to build brand loyalty. Stock brands that can be enjoyed straight from the bottle so you’re not automatically losing customers later in the evening that typically won’t want to drink two-handed serves.
What else can we do to break the rules of cider to encourage consumers to see it as all year round? We know it’s typically seen as a long drink, but we believe there’s a premium end of the market where that doesn’t have to be the case, where we can change its drinking occasion and where we can entice drinkers from other categories. Super-premium ciders, ideal for the “special occasion”, are primed to help stretch the category boundaries in an entirely new direction.
Something else we’ve been working hard on in recent months is the terminology we use to segment the cider category. You might think these category sub-labels aren’t that important – but on the contrary, these terms actually help us develop the products consumers want and in turn drive sales. Alongside mainstream classics and flavoured, as well as premium flavours, we identified a core growth area in the form of the artisanal apple segment.
This is the premium end of the market – the brands for those who are buying cider for a lower-energy occasion, as an accompaniment to food perhaps. We know 70% of apple cider drinkers are more than 35, and that probably means they have a bit more to spend too – meaning this is an important segment. At the moment it’s lacking in premium and interesting options to suit these drinkers, and that’s where the growth must come from. 

Summer is always going to be a key time for cider, but there’s no reason why the category can’t be profitable for operators all year round. Using innovation to create new occasions and maintain the excitement around premium cider is just a starting point in encouraging consumers to drink cider “out of season”. There’s so much more to cider than a fleeting summer moment and now is the time for us to change drinker perceptions so together we all reap the benefits of cider’s innovation.
Emma Sherwood-Smith is cider director at Heineken 

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