Whether they brew 1,000 or 100,000 barrels of beer per year, opening additional taprooms is top of mind for many craft brewers today. But such expansions inevitably bring with them big, existential questions.
“Is this just going to be a bar serving one brewery’s beer? Is the higher margin worth the added complexity? How can I grow this side of my business without jeopardizing other parts of it?”
For many breweries, it’s natural to push toward a business model where they sell the majority of beer directly to customers. This helps control the experience of their brand while simultaneously driving higher margins. That extra margin also allows breweries to be economically viable at lower production levels.
The question grows more complex as production breweries expand into multiple-taproom models alongside strong wholesale distribution businesses. This move toward “own premise,” if done correctly, can support a brand in markets away from home base (when executed well and for the right reasons). But as overall craft-beer industry growth slows, more breweries are left with excess capacity and are wondering how to use it. That makes additional taprooms an attractive option for a portion of that extra capacity. At a time when tasting rooms have never been more popular with the public, that may not be a bad idea.
Strategic Decisions
We worked through these questions last year at Reuben’s Brews, as we opened a new tasting room alongside our new production brewery (in addition to our existing taproom and brewery). Our motivations were twofold. We wanted to welcome people into the new space so they could see where their beer was being made. Also, we felt that if the production brewery didn’t have a tasting room, we’d be keeping it “behind closed doors”—which we certainly didn’t want to do.
A broad concern with the opening of multiple tasting rooms is the impact on the three-tier system. The craft-beer industry must protect craft-beer retailers—they are a large reason for the success and growth the industry has seen, and they are a key ally in telling this ongoing story of craft beer. Opening a competing taproom close to bars and other retailers can be seen by proprietors as competition with their establishments, and you often see these retailers close to the new taproom no longer supporting your brand. For this reason, breweries with taproom-only growth models generally have very limited distribution, ensuring their taprooms don’t compete with their wholesale customers.
At the same time, a lot of breweries are opening taprooms that, in fact, are just bars (there is no brewing at the location, and it is more focused on retail than brand experience or education). This may be a viable business strategy for a brewery with a business model that focuses almost exclusively on direct-to-consumer sales, as customers would have to visit these spaces to get their beer. But for most breweries that have a multiple-channel distribution model—such as own retail and wholesale distribution—any new taproom should have an authentic reason to exist. The reason for opening a new space has to be more than just to create a place a customer can get your beer. It’s imperative to focus on how a new taproom can improve both your own and your wholesale partners’ businesses to create a win-win scenario.
Taprooms are popular because they have a strong experiential element. They are a place where beer is brewed, with all the sounds, smells, and sights that go along with that. They let people get closer to the brewing process, meet the brewers after a shift, and speak to people who are very knowledgeable about the beer. This is what people want in a taproom and what breweries are uniquely positioned to provide. Here are some suggestions on more authentic tasting-room models, over and above just opening a place that serves your beer, that various breweries have employed successfully:
- Take your R&D brewhouse, or buy an R&D brewhouse, and build a tasting room around that concept.
- Move your “clean” barrel program (e.g., your bourbon barrel-aging program) and build a tasting room around that program, storing the barrels there and focusing on that element of your brewery.
- Create a “sour house,” moving your sour-beer program to build a tasting room around it.
- Open a tasting room in your new expanded production facility, like we did.
Location, Location, Location
Assuming you believe that a new tasting room is consistent with your brewery’s strategic direction, the next question to ask yourself is, “Where to locate?” Here are some issues to consider.
If you are a distributing brewery, consider how well-known your brand is in geographic regions. Immediately around your brewery, you’ll be relatively well-known. As you get farther away from your brewery and fewer people are aware of you, you also become less local. This reduced exposure of your brand tends to happen in step changes (concentric circles away from your home base). You may want to boost your exposure in a certain area by locating a tasting room there, and this could also help the strength of your wholesale sales in that area, too. Or maybe you’re already strong in another city, and you want to put a tasting room in that city to build on that reputation. Either way, be specific and deliberate with your choice—articulate the impact to the brand in a holistic sense and not just the revenue such a location might generate.
Avoid cannibalizing existing tasting rooms. If there is a risk of cannibalization, you should have a very different value proposition for both spaces. For example, our original Taproom features our wide breadth of beers, whereas our Brewtap focuses on our educational programs with seminars and interesting beers (e.g., using different yeast strains) and hosts live editions of our podcast (Reuben’s Sightglass). Both spaces are less than half a mile apart, but they serve different purposes.
The density of taprooms in an area can also help drive location. This may seem counterintuitive, but in the Ballard neighborhood of Seattle where we are based, about a dozen breweries operate within a few blocks. Back in 2012 when we opened, you had to walk over an arterial highway to get to another brewery, and now there are many within a handful of blocks. It has become a destination neighborhood, attracting beer tourism, and people come to the neighborhood specifically to visit multiple breweries. We truly are stronger in numbers, and the density has created continued patterns of consumer behavior.
Evaluate upcoming residential developments in any area in which you’re planning to open. When we decided to open our original tasting room back in 2012, there were thousands of new residential units planned within a few blocks of our space over the coming five years. This gave us confidence that we had a strong and growing customer base in that location. Looking at the local newspapers and news websites can often get you a feel of what is in process. If you focus only on where people are now, you miss the opportunity to grow with a neighborhood.
Once you have your location, focus on interior design. When designing your new space, focus on brand consistency: How do you ensure that it still looks and feels like your brewery? The internal and external look, the design and feel, chairs/tables/bar, the number of beers on tap—you need to consider all these things. Make sure that you think about the typeface you’re using and the color scheme and draw clear connections to the original space to create a consistency in the brand experience. We use a certain type of metal in the bar in all our spaces, the same menu board system, same color schemes, same typefaces. The little things matter—time spent on creating a consistent brand-feel to the new space is time well spent.
The location decision can often make or break a taproom. Be prepared to say no if the building is nice, but the location is not ideal. In this increasingly competitive market, hospitality fundamentals bear important consideration. Location and potential traffic matter, and it’s often less risky to move into a more expensive yet better trafficked location.
One way that Reuben’s differentiates the Brewtap location is by hosting educational seminars.
Operational Issues
With the decision made to open a new tasting room, there are a number of operational issues that need to be managed for the new space to be a success.
Inventory management is the most obvious logistical issue—how do you get beer from your existing brewery to the new location? Maybe you use your distributor in the area (and pay their margin); you may even be legally required to buy through your distributor, depending on local laws. Alternatively, you could hire a person and buy a truck to transfer product. Either way, you will have to set up an internal ordering system, forecast and plan production accordingly, allocate the role to people, and set up a system to accommodate. We do this using OBeer brewery management software.
If taproom-exclusive can releases are a big part of your brewery, you’ll have to have a policy of how to release these between your spaces to avoid confusion in the market. What if people turn up at the wrong taproom for a release? What if you release a beer in both spaces and one runs out first? To avoid these issues, we hold all tasting room–exclusive can releases at our Taproom. To further help avoid confusion, our Brewtap opens an hour later—so there’s only one location open when releases happen.
Marketing different locations is potentially the biggest structural issue with multiple tasting rooms. How do your customers easily, and quickly, distinguish between the spaces? What is your naming convention between the spaces? How do you reference the spaces in social media to distinguish them without alienating each other? Do you have separate social pages or handles for each tasting room, potentially losing the gravity of your brand by diluting your followers among multiple feeds? We have kept with one feed for both spaces, to make life easier. We call one space the Taproom, the other the Brewtap. Given that the spaces are close together, it’s still easy for customers to get confused between locations. You must make things as easy as possible to avoid confusion, knowing that your customers will spend far less mental energy on this than you will internally.
Key to craft beer is being part of the local community. Without this connection, we might as well be big beer. When opening in a new neighborhood, it’s very important to connect with that community in many different ways. Can you do outreach with local charity partners and potentially support them for fundraisers? How do you manage the relationship with your retailer customers, such as bars—do they see you now as competition for them? One interesting solution is to release a special beer only for wholesale accounts (i.e., it isn’t available at your tasting room) local to the new tasting room. If you can give those local accounts a “win” and show them their importance to your business, it will help offset the appearance of new competition. What efforts will you make to join in with the existing brewery community in your new neighborhood?
Once all these other operational issues have processes around them, employee management will form the majority of your focus on an ongoing basis. Maintaining culture is important to maintaining the look and feel of the brewery in all its spaces. Maintaining information flow, so that all your team have the same level of knowledge about all the beers (despite potentially being distant from the brewers) is key. If it is logistically possible, can you use the same team for a variety of spaces, rotating them among locations? If not, consider budgeting for your bartenders to rotate time around brewery locations on an occasional basis to keep your team joined up. Regular location team meetings, with attendees from other locations, are advantageous, as well as using communication tools such as Slack. One key to success is creating multiple strong communication lines among your teams in the various locations.
For many craft breweries, the era of multiple taprooms is a new and unproven frontier in a fast-moving and dynamic industry. Time will tell how this new era of expansion will ultimately play out, but if pursued strategically and thoughtfully, additional locations can enrich your customers’ experience of your brand.
Photos: Courtesy Reuben’s Brews