Raising the Bar with Beer

Sam Adams - Scott Hempstead - Boston Beer Company

in the Mix magazine worked with the Boston Beer Company to come up with the questions we hoped you would like most to see answered by Scott. Here is what he had to say about a number of important topics.

ITM: What do you see as the biggest opportunity, as it relates to the bar, in casual dine today?

SH: Given the current casual dine environment of flat to declining guest counts, we believe the biggest opportunity is to drive incremental sales and profits from existing guests. To do so, I think we need to steal a page from the off-premise and take a more structured category management approach.

First, focus on lead brands to maximize sales and guard against distractions from brands with less potential. Second, offer mass-produced beers but promote craft, which will balance volume and profit drivers. Finally, use variety strategically to take advantage of beer drinker excitement around experimentation. Keep your beer program fresh and varied–but don’t get distracted from what creates sales and profits.

ITM: Okay, but we continue to hear that craft beer variety is driving a lot of growth. How can operators take advantage of this but still manage the beer lineup efficiently?

SH: This is true to a point, but in most markets 80% of craft beer sales come from about 5 brands. And for national accounts it’s even more important to focus on those leading brands that can efficiently meet beer-drinker demand for style variety and drive trade up by educating and creating new craft beer drinkers.

ITM: So how would you build your draft beer lineup?

SH: This is the #1 question we get asked. We’d take a three-step approach that balances sales and profits. Identify your beer segments and fill each with a lead brand before you think about duplicating. Use mass-produced, year-round craft, seasonal craft, local craft, imports, and potentially a regional choice, depending on specific market conditions. Our consumer research showed that by filling segments with lead brands versus duplicating segments, operators can satisfy more of their beer-drinking customers and increase draft beer profits by 25%. Once you’ve satisfied each segment, go back and add additional brands based on their ability to reach more beer drinkers and still drive profits. For instance, you might consider adding a limited release craft or imported beer to appeal to a more dedicated high-end beer drinker. Add variety with bottles rather than using valuable draft handles on low volume, low margin brands.

ITM: Are there other ways operators can leverage craft beer to drive profits?

Scott Hempstead - Sam Adams - Boston BeerSH: Yes, in-store and out-of-store merchandising using menus, table tops, and social media. Beer is the most popular beverage in casual dine by far–almost 50% of all customers prefer to drink beer and of these customers almost 75% make their beer selections after they get to a restaurant! With the explosion of craft, operators now have a profitable way to talk to these customers in menus and on the table top through food pairings. Craft beer and food is a natural pairing and one that operators should take advantage of to enhance the guest experience, create a competitive advantage, and drive higher profits.

Operators should also leverage special glassware for high-profit beers, to generate excitement and encourage customer trade-up. For years, wine and spirits companies have been putting their products in glassware that enhances the drinking experience and we think there is huge potential for operators to do the same with style-appropriate beer glassware. In fact, through consumer research we found that 1/3 of beer drinkers would pay more for a beer served in a special glass.

Operators should embrace social media. It is here to stay and will only gain more and more traction. Facebook and location-based platforms like Foursquare have demonstrated success in increasing traffic and guest engagement for a relatively low investment.