Beer Data Wars - Episode 1

The Universe

A long time ago, during a time in the craft beer industry that seems far far away, breweries couldn’t keep up with demand. The Sith macro brands were being challenged by rebel start-ups assembling a selling story that included smaller batches, bigger flavor, freshness, and locally made, taking aim at 20% market share by 2020. Camaraderie within this resistance quickly became fractured leading to a period of IPA Wars and many of craft beer’s strongest allies giving in to the dark side. In 2024, the universe remains in a chaotic state of war with craft breweries now seeking out more sophisticated weaponry as they focus simultaneously on attacking the Sith with premium lagers, while improving their own position within the ranks of the rebel craft beer alliance.

Between breweries, wholesalers, retailers, and consumers, data is being created at each step of a beer’s life cycle. From procurement of raw materials, to production, logistics, sales, and even consumption, there are systematic collection points for information that can help inform future decisions, timing, and strategies. During the craft beer arms race that took place at the beginning of the last decade, breweries were able to get away with prioritizing growth over optimization, therefore tools to visualize this data weren’t in nearly as high of demand.

Today however, with total industry growth potential in doubt, breweries need to be extra tuned into their data to stay a leg up on their consumers, competitors, and frankly themselves. Mark Twain famously said, "During the gold rush, it's a good time to be in the pick and shovel business” and many companies took his advice. The options for craft breweries to purchase data is overwhelming, with each option having it’s own use cases and limitations. This post is hopefully the first of a long series about beer data, but for the beginners out there, we must start with the universe.

Breweries

It doesn’t take much volume for a brewery to outgrow a basic, off-the-shelf system like Quickbooks to manage its purchasing, production, inventory, sales, and financial reporting. ERP Systems customized for craft breweries have become a competitive space for managing these core pieces of the operation that ultimately drive the company’s Income Statement (P&L), Balance Sheet, and Cash Flows. Critical functions to financial management include Invoicing, Accounts Receivable, and Accounts Payable, but the next level of data beneath the surface is where a lot of the opportunity and strategy lies. Examples of questions this data can help answer include:

• To what extent are the inflating costs of raw materials (malt, hops, cans, etc.) impacting selling margins? Is a price increase warranted?

• What are the yields on each year-round recipe and to what extent does the yield vary each time its brewed? Does that variability impact margins? Is an unknown source causing poor efficiency recently that should be investigated?

• How many Days of Inventory are on-hand before a brand is out-of-stock, based on the Average Rate of Sale?

• Whether a brewery’s sales are to distributors, or self-distributed to retailers, how are sales trending compared to their budget & goals? Which retailers, distributors, or geographies are ahead of pace? Who is slumping and what can be done to try to reverse this trend?

There’s an ERP solution for every size brewery, each with their own pros, cons, and trade-offs, but all of them contain the ability to do far more than generate the company’s financial statements.

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Wholesaler Inventory & Depletions:

Just like breweries need a system to manage their operation and financials, so do their wholesalers. To make the best decisions at the supplier level, brewery’s need access to their distributor partner’s data so that they can answer questions like the following:

• Beyond shipments (sales from breweries to wholesalers), how are depletions (sales from wholesalers to retailers) doing?

• Which beers are selling well into accounts? At what rates? Are accounts re-ordering? How many accounts, aka points of distribution, have bought within the last XX days? Who stopped buying and is the sales rep aware and doing anything to address that?

• How much inventory is each individual wholesaler sitting on and at the current Rate of Sale (Cases Selling/Day on Avg) for each beer, when do they project to be out of stock? Is the next brew day and/or shipment scheduled strategically to ensure that the brewery doesn’t 1) run out and miss sales, 2) overproduce and have aging inventory with nowhere to go?

The key player in this space is called VIP (Vermont Information Processing). When I worked for Reyes, this was their ERP system for the beer division so I would do audits out of it for eight years. After joining Revolution on the supplier side, I learned more about a tool of theirs called iDig which consolidates all of our distributor’s data into one tool that we can query reports from that help us run our operation and prioritize our sales strategies.

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Retailer Sales Data, aka Pull-Through or Scans

The most helpful source for understanding the broader picture and competitive landscape of craft beer is syndicated data, aka scan data collected from the bigger box stores. Obtaining this data not only provides breweries with insight into their own sales to consumers, but they can benchmark their results against their peers and look at categories or markets as a whole, using both volume and dollar metrics. While not cheap, access to store-level data can help answer questions like:

• Where does a brand rank in a given market and how does its selling price compare to the competition? If favorable, is the sales team using this as a talking point when meeting with retailers where the brand doesn’t currently have a shelf spot?

• How much $ is being generated on average for each point-of-distribution? Of all the retailers where a brand could be sold, what % is currently captured? Therefore, how much opportunity remains for a brand from the standpoint of additional distribution?

• Does being on sale impact price? How much of an uptick in sales took place for a brand when a promotion was being run?

• What styles are gaining and losing the most momentum? Is a new product in development part of a category that’s on it’s way up? or down?

• Is a particular format (ie, 6-packs of 12oz cans) trending higher in the market at the expense of another (ie 4-packs of 16oz cans)? Should a brewery consider switching their core beers from one size to another?

• How big is a territory that a brewery is considering opening distribution in compared to their home market? Is it comparable in size or a small fraction of it? Are expectations heading into this expansion reasonable?

While scan data won’t provide insights as to what’s selling at taprooms, your favorite local bottle shops, or other independent stores, it provides fantastic detail into what’s selling at a broader, category level.

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Consumer-Generated Data, aka Check-ins & Bottle Caps

Last, but certainly not least is data generated by the consumer themselves regarding the drinking experience. While there’s significant volumes of data input into social mediums like Instagram each day, those platforms weren’t built for beer, so they’re only useful anecdotally. That’s where Untappd comes in, which was designed to easily capture every relevant datapoint from the consumer experience, and has been since 2010. Imagine the power behind being able to answer questions like:

• Is one of my beers one of the most checked-in beers in my area? or at least within its style? If so, imagine the power of being able to show that fact to an account that doesn’t feature your beer as part of your next sales pitch.

• What styles are growing in check-ins vs. shrinking? Does that differ in my local area compared to Nationally? Is there a style bubbling up that’s getting much more traction than I may be giving it credit for? Could a style be gaining popularity elsewhere that’s likely to gain traction here soon?

• What if a beer is getting rated an entire bottle cap lower on average at check-ins at a particular bar? Could they be pouring the wrong keg? Or have gross draft lines? Should I send a Sales rep in the check on it?

• What are consumers saying about our new release? Are they using a positive flavor descriptor that we hadn’t considered, but would be smart to revise the menu description to now include it?

Most think of Untappd for their subjective bottle cap ratings, but there’s actually a much more valuable set of information beneath the surface which their parent company Next Glass packages up and offers through a service called Untappd Insights. Untappd data is incomplete, since only a % of consumers actively use the app, and there can be a bias to the consumers who participate. That being said, the same is the case with all data sets involving the end customer. If you know how to account for the biases, there’s a wealth of trend information buried within the check-ins that can be weaponized to help sell more beer.

Using the Force

While I titled this post “The Universe”, I’ve only touched on a handful of the data available. There’s still customer relationship management (CRM), on-premise draft, payment data from retailers to distributors, excise tax data through tax authorities, the Beer Institute, the Brewers Association surveys, and more. Then there’s companies doing the work of the Jedi by mapping and merging multiple data sources together so that they can be viewed in tandem, via user-friendly dashboards to facilitate a more efficient analysis.

There is way too much beer data, in too many different places, and not enough human fire power at craft breweries to get through it all, yet. The Beer Data Wars will not reach a peace anytime soon, and the story will continue to be written in Episode 2…