CBB // First, the buzz recently was New Belgium’s news about Fat Tire. We’ve watched this broader industry trend of removing a brewery brand and focusing on a beer brand. From your perspective, how do you read this?
DV // I see it as they have this intellectual property that is the Fat Tire brand that probably more than half of the people that buy Fat Tire think is the name of the brewery—they don’t even realize they’re buying a beer from this brewery called New Belgium. And it was massive—it was one of, if not the biggest craft beer in the country (or maybe second or third to Sierra Nevada Pale Ale) less than 10 years ago. So, it’s too big to just ignore and let sit on the shelf. But the liquid became very stale in the minds of most consumers in their 20s and 30s.
I think there are a couple different flavor profiles that work now—there’s the golden-ale taste that is like a craftier version of a premium lager. And then there’s, of course, the flavors of IPAs, which have, whether bitter or not, big fruit flavors, whether that’s citrusy or tropical. To me, Fat Tire’s traditional recipe does none of those things. There are still people who like it, they’re just fewer every year, and it’s snowballed to the point where the brand is still good and has all this potential—it can be so many things—so why not try something different with the liquid and weave a story that has potential to resonate with a large swath of consumers?
CBB // There’s a certain nostalgia that a lot of us have toward this. And that feeling that something can change feels like we might be losing something. It’s funny how we collectively feel this sense of ownership over something as simple as a beer recipe. The other piece that I find funny is that they had already changed the recipe.
DV // This is another thing they did with it that I think is fascinating and something that most craft breweries are not organized enough to do. But this new beer was out there in the market for months. And nobody was talking about this change. With the new liquid, with the new packaging—how did this go five months until it became a Twitter story? And why were they not talking about it? Why could I not find this label on their website, that’s in the market? They have a history of doing this where they test things out—they just did it in like two markets, probably their own and one other. It’s like we saw with Hard Mountain Dew—that didn’t go to 50 states. They pulsed it into three states to learn a few lessons before they went wide. I think New Belgium was trying to quietly get some reactions to this and see what happened with it, in case they wanted to make one last tweak or two before going nationwide. They’ve done this with other things—they’ve done it with Voodoo Ranger, where they’ve tested certain Voodoo Ranger brands taking New Belgium off and then adding it back on. That’s smart. It’s just something that most breweries don’t have the luxury or the patience or timeline to go through, those stages of launching a new brand.
CBB // The success of Voodoo Ranger, in a way, has given them some leeway to work on and play with and experiment with the Fat Tire brand. It no longer has to be that giant tentpole. When you look at those largest brands and the IRI numbers, everyone is declining with one exception. The strangest story that came out of the pandemic was the growth of their imperial IPA at 10 percent ABV, which seems to fly in the face of all conventional logic. Last week, I got a press release from New Belgium about their new Voodoo Ranger Fruit Force beer, and the line was, “Comes in at a very drinkable 9.5 percent.” I thought, “This is a crazy world we live in now.” How do you explain this?
DV // Craft brewers, for a while, were pushing an agenda and skewing too much toward what the brewers and what the people who work at a brewery all day, every day, want, which is lower-ABV styles. We’re the decision-makers on what we make and what we prioritize, so I think there was probably widespread overdoing it on low-ABV styles and [hoping that] that narrative would play out—that consumers would want the style of beer that is also what we want to drink at the end of the day.
While on the other side, I think consumers—especially the hyper-engaged craft consumers, the loyal ones who go to the store every week and pick up that same beer or same family—I don’t think that’s necessarily what they want. They want more flavor, and they want more alcohol. We talk a lot about how craft beer can’t compete with macrobreweries and the pricing that they offer. But there are a lot of instances where if you actually do some math on ABV-to-price, a lot of times craft beer is a better deal. Right now, if you look at our IPA Anti-Hero [6.7 percent ABV] versus Modelo [4.4 percent] on the shelf, in a six-pack, I think Anti-Hero is actually a better deal for somebody shopping for alcohol. Now, obviously Modelo’s an extremely popular brand and has a very loyal following. But I think a lot of people shop like that, and I think that while everybody was going low, quite a few years ago, New Belgium decided to bet on high and use their scale to offer pretty high–ABV imperial IPAs at a lower price than we’re used to seeing. And it worked.
CBB // The buzz-to-bucks ratio is definitely in their favor on that one. Let’s look at the flip side—that session IPA piece is something else that you talk about. It’s something that we all thought there might be more opportunity in, and it certainly grew—maybe on the back of one brand, Founders All Day IPA, and others that were trying to kind of occupy that space. But that seems to have hit its plateau.
DV // Yes, theirs has been down a sizable amount—not to the point where they would move away from it, just the point where they need to throw new things at it, to give it a boost, which they’ve done with some line extensions. We put out a product—I want to say it was five years ago—called Every Day-Hero. It was an IPA that’s still around—not for much longer, I don’t think—but we tried the 15-pack. It’s not that it didn’t work; it’s just that when you try to go that low on price and offer consumers the economy package, that gives them a bunch of beers for a much better price, you need to really hit a certain volume to make sense. For us, it was just hovering around as like the eighth-most successful thing we were doing out of like 12. For a beer with those kinds of different economics, it really needed to be like fourth or higher for it to make sense for us to do. Otherwise, the numbers just weren’t adding up for trying to keep it fresh in the market when it’s not always going to be cold. It wasn’t selling through fast enough that we felt comfortable that the beer was going to be in good condition, in all instances, when it finally made it into someone’s fridge and into their mouth. We decided this wasn’t a big enough success for us to keep doing since we already have a year-round pale ale.
We saw the low-cal IPA come and go pretty fast in the industry—that might have just run into the worst timing possible when those came out. But I just see it as something that’s not going to go away—you’re going to see plenty of breweries that release a session IPA, especially if you’re a smaller local brewery that can crank out seven new beers a month with a label and a can. But as a big top-100 brewery trend, there’s better opportunity elsewhere.
CBB // Putting on your chief-marketing-officer hat, innovation is necessary within the beer world. But at the same time, you need revised expectations about how long a lifespan any product can have. As you think about developing new brands to push this innovation piece, what’s the expectation for those? What is this lifespan of a brand, what’s the build phase, the maintenance phase? And then when do you know when it’s time to pull back and try something else?
DV // I have this imaginary line in my head that is the year 2015. Before 2015—give or take, of course—that’s where I felt building a brand went from easy-ish, to really hard. We launched Anti-Hero in 2010. Technically, 2012 is when it went into cans. And then in 2015, we released my favorite beer, which is Fist City, our pale ale. I have all these people say, “I can’t believe Fist City isn’t bigger than Anti-Hero. No offense, but I like Fist City so much more.” And I’m like, “No offense taken. I drink 10 Fist Cities for every one Anti-Hero.”
But I always tell them Anti-Hero came out in 2012, when there were, like, six breweries in Chicago. It was the first beer that screamed “IPA” and went for it and made itself accessible in all the stores. We just went for it early. Fist City came out in the 2015-pushing-into-2016 timeframe when there were 100-something breweries in Chicago, and everybody was throwing out everything, and brands started to get lost. You just didn’t get instant notoriety.
Now, it’s all about prioritization. If the concept for a new beer comes up, and people say, “Hey, Doug, we think that this could be something big,” the question always has to be, “Is it big enough to be one of our top three, or maybe even top five priorities?” My head always goes to our sales team. How many things can you give our sales team and say, “Give this focus.” You cannot do that to 12 things, and we have more than 12 products. They can only ask a store to carry so many things, or a bar—they can only run through so many [while] encouraging the bar, “This would make sense for you.” Sometimes the concept will come to me, and I’ll say, “Do you see this being something that we push harder than Anti-Hero, Hazy Hero, Freedom Lemonade, Fist City?” And they’re like, “Well, no.” And I’ll say, “Well, just so you know, that’s never going to be successful unless we decide, ‘Yes, it is.’”
There are only so many products you can go big with. This ties into another trend happening, this idea of brand extensions. It’s something that’s been happening for 10 years. Every IPA we’ve made for 10 years has the word “Hero” in it. [For] every one, we create our own Marvel-like universe of our own hero characters, and theme them around the type of IPA we’re making. And other breweries have their own versions of that—Firestone with the Jacks, Bells with the Hearteds—it’s been happening, it’s nothing new. But, all of a sudden, we’re seeing a snowball effect of more of these than we ever thought were possible happening right now.
A recent one was Rogue—they launched Dead Guy IPA. I said, “This makes a lot of sense to me” because now your sales team can go in and talk about Dead Guy as a family, and they have one thing they’re talking about that could represent two—and I’m sure someday there’ll be a third Dead Guy and maybe a fourth. But it just simplifies this complicated world that every brewery has built for themselves. Nobody has a simple portfolio. For the most part, everybody has done more and more. And now these brand extensions just make it easier to explain. If you see “Hero,” you know that’s a riff on IPA of some kind from Revolution.
It is very helpful to tie it into something else you do—because, at this point, people are so lost and overwhelmed with too many new beer brands.
CBB // Let’s talk about lager. Is this a real trend? Is this something that we are just willing into being? Or are there actual commercial legs to this? Have you been able to—at a Revolution scale—connect lagers with craft consumers?
DV // Not really. We try, and we will continue to try as long as we exist. But it is a struggle. I’ll be honest, we have a year-round pilsner—it’s our brewers’ favorite beer, and it’s our worst seller. It’s not something we’re trying to make go away—we keep it local, so we only need the Chicago audience of retail to support it. It’s great, people love it, our regulars love it, and again, our employees love it. It’s pretty affordably priced compared to every other craft lager out there. There are only so many people out there who are willing to pay that craft-beer price—that over $10, the $11, the $12, the $13 for the six-pack or four-pack of a craft lager. It’s just still small. It is growing, it’s just growing slowly—which is okay; slow can be healthy and sustainable. But as an IPA brewery, it’s even harder.
We have three, and probably more breweries [in Chicago]—shout out to Dovetail, Metropolitan, Goldfinger—who are making pretty close to exclusively all lagers. More and more markets now have at least one of those or had one and now have two. Again, it’s hard to do so many different things—we are dying to try to crack this nut and have a lager, and my mind is constantly racing for the best way to be successful doing that. Do you try to compete on price and do what I was just talking about with the session IPA? And what makes that hard? And is there a demand for this IPA brewery to make an American lager? That’s something I think about a lot. And I think, “No, not really.” Yes, we have these loyal diehards, who are maybe exhausted from IPA, [and who] would love a beer like that and would totally drink it in our taprooms. But trying to sell big 12-packs or larger is just a whole different game that’s really hard to compete on.
CBB // Is lager something that you need to then think about a different format for selling it in? The consumption mode for lager tends to be something I want to drink in some sort of quantity. Is that more draft-focused than packaged beer, where I want to buy my 10 percent ABV beer in package to take it home, versus the lager that I want to drink when I’m out someplace and have to drive myself home?
DV // If we’re talking about draft and at a restaurant, like hey, maybe they would like your craft American premium lager. And they’d be willing to have it on, but do they already have your IPA? And if they make that switch, is that actually good for business? They’re not going to want to pay the IPA price for that keg because they’re not going to be able to charge the IPA price on their menu necessarily. And you’re like, “Wait, am I hurting my business by doing this?” You want to go after the places that don’t currently support your existing [products], and you have to identify that opportunity and say, “Is this worth it?”
We have awesome liquid that could be that—we have some on draft right now. It’s something I think about every day. How do you invade that turf? I don’t know how you do it. I’ll be honest, I don’t know if that’s a nut that can be cracked. You can always do the Firestone 805 model, which is to spin this thing off into its own animal, but you have to have a huge amount of money to put behind that, to get people to know what it is. You connect it to a lifestyle [where it can] be more than just this new liquid.
I think that’s part of the way to make this successful. For us, it’s got to be heavy Chicago. If we’re going to sell most of this in Chicago, how do you make it lean into Chicago? I think that might be the only way to get a Miller Coors or Pabst drinker to drink your better, more premium, maybe less-adjuncted version of an American lager. Hit that premium, hit that local, and make the brand be something that would resonate, especially to local people.
CBB // It’s been fascinating to watch this—in particular, watching craft-brewery brands create separate lager brands that somehow feel retro.
DV // It’s almost like our 2015 imaginary line. It’s hard to compare yourself to this brand that has had 40 years of brand-building behind it, most of which was in an era when there wasn’t this overwhelming number of beers on the shelf. If you say, “Yeah, we’re gonna make the next Old Style”—no! Old Style was the beer of the Chicago Cubs for how many years? Everybody knows what that is because of years—decades—of brand-building that was done. You can’t just make that and have, like, one year of patience for it to work. Because it [won’t].
But if you come in with some kind of big, long five- to 10-year commitment, knowing that we are going to lose money on this lager in year one, probably in year two … then maybe in year three or four is when we’re actually making money, because we realize the only way this is going to work is if we invest, invest, invest. Then we can pull things back, [after] we’ve got penetration into the market, and we’ve got a consumer base that is now loyal, and that’s buying this beer [regularly]. It’s just really hard to do that, now. It’s hard to be that patient, but you need to be if you want to try something new.
CBB // I also want to talk about some of the turbulence that we’re starting to see. It’s human nature to be tuned in to the bad news and to be prepared for things going the wrong way. We are finely tuned as human beings to sense danger, and we often sense a little more danger than we should—or we draw bigger things out of some of the small things that we see. However, it’s the nature of hospitality—things come, and things go. Some things work, and they work for a while, and then they don’t work. How do you feel about where we are, in this business right now, in terms of openings, closings, and churn within the hospitality industry in general?
DV // It’s tough because there are just so many different situations out there. There was an old Tony Magee—founder of Lagunitas—phrase that he used that I love, and I think about it all the time when I’m asked these kinds of questions. He said that, as breweries, we’re all points on a curve—the curve being the lifespan and the growing pains and the maturation of a brewery. That’s what the curve is. We all started at different times, and we all have our own sets of variables, but we’re all on these curves. There’s not just one curve, there’s like the curve of a national or regional brewery, and then there’s a curve of a brewery that’s more of a brewpub, and all those different business models in between. Different breweries started at different times, invested differently. Some made every beer look nothing like the other, and some focused more on the brewery itself and made the brand and the style of beer secondary. Everybody’s just so different.
Then in pre-pandemic late 2019, kicking off 2020, we were having tough conversations about the same things we’re talking about now. That was more than three years ago, and then everything changed. We had the pandemic, then we had this influx of cash in everybody’s bank account, where—thanks to stimulus and thanks to so many ways you no longer could spend your money—everybody had a little bit of extra to throw at craft beer, to throw at library sales and barrel-aged sales and all these premium products. Between that and the PPP loan support, it really took the heat off. Then that got renewed for another round in 2021. There were all these economic factors propping up a craft industry that was already showing some chinks in the armor of saturation. Everything kind of got delayed until now, and now we’re at the point where we have credit problems in our country, we have people who have dipped too far into their credit cards. Instead of having all this stimulus hitting their bank account, now it’s gone negative on their credit cards. The cost of everything is going up, whereas our wages aren’t necessarily keeping up. It’s not that craft beer is getting crushed right now; it’s that it’s getting hurt by like, 10 to 15 percent, which sounds about right. Pick any company you want that’s a public company, that’s something you support. Go look at their stock price over the past three years and see how every single company that’s operating in a market—see what they’re doing, and then look at how down craft-beer sales are, and it actually doesn’t look so bad. We’re in a stormy time, where decisions have to be made. Not every craft brewery is the same. There are 2,000-barrel craft breweries that were founded by a husband and a wife that are month-by-month in terms of making ends meet. And there are 2,000-barrel breweries that are a side project of a rich multimillionaire. To customers, those are just two equally sized breweries, but they have very different factors.
My main thing is that right now, it just kind of depends on what financial situation you are in, whether this could be a time to double down, [whether] you have the flexibility to do that. That could make your brewery level up to the next big thing. But then there are other breweries that just need to survive and just need to simplify what they’re doing. Get through this—it might not just be six months, this could be 18 months, it could be 24 or 36. But it will eventually turn.
If you can, whittle things down to make sure you’re focusing on the things you’re best at and not trying to throw too many noodles at the wall right now. Just lean into what’s working. For some who need to be more conservative and make sure they get through this, and don’t have that pile of cash sitting there to float them through this time, that’s where I think it’s all about focus, prioritization, and a little bit of simplification, too.
For the full conversation with Doug Veliky, listen to Episode 287 of the Craft Beer & Brewing Magazine® podcast.