Craft brewing and business strategies: ‘Small is the new big’

With a background in businesses management and strategy, combined with a passion for brewing, Sam Holloway specialises in studying the business of craft breweries. Drawing on his research, he created craftingastrategy.com, a global learning online community whose mission is to help craft brewers run successful businesses.

But the very definition of ‘success’ – and the strategy taken to achieve this – can be very different for craft brewers than to other businesses. All businesses need to make money: but for craft breweries there may be other factors in play. What about goals like enjoying where you work and what you do, or having a role in the local community?

‘The things we’ve been teaching in business school don’t match the reality of the craft beer industry’​

Holloway’s interest in the dynamics of the craft beer business started when he realized that the rules of big businesses don’t match what is going on in craft breweries.

“The things we’ve been teaching in business schools for years – you have to be big to be successful – that wasn’t matching the reality of what I was seeing in the craft beer industry,”​ he explained, speaking to BeverageDaily at the Brewers of Europe Forum in Brussels this month.

“Consumers were responding very differently to small breweries than the traditional ‘get bigger’ equation was promoting.”​

Economies of scale, for example, has always been thought of as one of the keys to success. But even that bedrock of business has been shaken by the craft beer industry, says Holloway.

While the aims of most businesses may be simple – make money – the goals for craft brewers are more complex. What about the happiness of the people who own the business or brew the beer? What about the experience of the consumer? And what about the place of the business in the community? What about the values you and your consumers hold - particularly those of being a small, local brand?

“If you’re a publically traded company or a large company with people and ambitions and shareholders pulling at you, the only way to run your business is to maximise profits,”​ said Holloway.

“But craft brewers would transfer some of the wealth that might be from profit maximisation and they’ll have a better employment benefits for their employees, better salaries, they’ll reinvest in tasting room for a better experience for consumers. ​

“So craft doesn’t necessarily maximize economies of scale, they find the appropriate scale given their ambitions. If they want to get rich, maybe they should maximize economies of scales. If they want to have a nice life and contribute to their communities, maybe they can take a little bit less in profit maximisation and increase things like happiness, kindness, and community.” ​

Consumer driven markets​

And the craft beer movement has shown that being small may be much more suited to today's market place. Consumers value local products, and want to support local businesses. 

And today it’s consumers that are driving the market forward, not companies. Brewers of all shapes and sizes need to respond to this.

“I think the most challenging thing for breweries is that consumers are dictating market conditions more so that firms,” ​said Holloway. “Traditionally the firms competed with each other, there were very few choices, the consumer just consumed what was in front of them. ​

“Now consumers are driving the decision calculus of firms – kind of the opposite of before – firms are having to respond and that’s really difficult. So that’s what we’re doing at craftingastrategy.com – we’re re-writing the business fundamentals to respond to these consumer driven markets.”​