Entrepreneurial

Beer startup needs to create a buzz

October 22, 2009

Erica Shea (L) and Stephen Valand. REUTERS/Julie Gordon

As the jobless rate climbed toward 10 percent this summer, Erica Shea and Stephen Valand, quit their advertising jobs, took $10,000 in personal savings and started selling their 1-gallon home brew beer kits from a stand at the Brooklyn Flea Market, testing the theory that beer is recession proof.

“When you go from an actual salary down to $0 an hour, it’s quite an adjustment,” admitted Shea, who got the bug for beer making after she stumbled across her dad’s old home brewing kit. But when Shea and Valand went to brew their first batch they discovered there was no place in New York to buy the ingredients, so they created the Brooklyn Brew Shop. The kits take up only a foot of floor space and come with everything needed to brew your own beer.

Shea said they opened their stand, which they rent for $100 a day, on the July 4th weekend, but sold just five kits. By the end of the month they had moved 40 kits, which go for $40, or $30 without grain. The kits, which make about 12 bottles through a four-week process, include a 1-gallon glass jug, some tubing, a racking cane, a thermometer, sanitizer and the yeast, hops and grain. (read the full story here)

THE PITCH

The U.S. craft brewing industry has weathered the recession better than most, with sales up nearly 9 percent in the first half of this year, according to the Brewers Association (BA). The BA, which has more than 1,500 members, also reported that overall U.S. beer sales were down 1.3 percent in the first six months of 2009.

Shea and Valand believe the trend of brewing your own specialty beers will continue to grow and that it will entice a younger, more urban demographic that enjoys the ability to experiment with different flavors.

“I just think that because there are really good craft beers now, there is really a drive for people to explore that and make their own really good beers,” said Shea, who has used ingredients as bizarre as lobster and jalapeno. “Our challenges as we continue to grow the business are time and space. There’s only so many hours in a day that you can be doing things and there are so many ideas that come up that we really want to pursue, but ultimately there are two of us and we get tired.”

TAKING IT TO THE EXPERTS

Sam Calagione, who founded Dogfish Head Craft Brewery in 1995 with his own home brewing equipment, understands the struggles Shea and Valand are going through to grow their business and felt they have the passion and commitment to make it work. Calagione said the craft beer and homebrewing movements are “thriving” and are being driven by the greater “‘localvore’ movement as people are treating themselves to gourmet coffee, bread, beer, etc. when they might not be able to afford a new house or car or large purchase.”

Calagione suggested Shea and Valand bang the drum more about Brooklyn Brew Shop by getting more involved with online communities around homebrewing, such as the ones at Ratebeer.com and the Beeradvocate.com. He said they might also try connecting with “crafty” types on websites like Etsy.com. To further promote their product, Calagione advised renting booths at places where serious beer drinkers hang out, such as farmers markets, craft fairs and beer festivals.

Calagione said they should also offer 5-gallon jugs “as the space it would take to make 5-gallon batches isn’t five times as big as the 1-gallon batch and the brewers could yield over two cases of great beer instead of 12 bottles.”

Amy Mittelman, the author of “Brewing Battles: A History of American Beer”, felt Shea was a good spokesperson who “highlights the growing role of women in the brewing industry.” Mittelman said that women traditionally did the brewing at home in their kitchens and she felt this is a point Shea could stress as a way of marketing the product to women.

Mittelman, who also writes the blog “Brewing Battles”,  said the high price of beer in New York should help encourage customers to try their product, but said the main “appeal of home brewing is getting exactly the taste you want” and that Shea and Valand should emphasize the creative aspects of their business to new customers.

In terms of scaling the business, Mittelman cautioned about jumping into retail stores and urged the founders to grow more organically online and at festivals and fairs. Mittelman suggested Shea and Valand try selling their kits on Amazon.com first, as they would “need a broader brand identity before they can approach places like Target and Wal-Mart.”

Beth Goldstein, the president of Marketing Edge Consulting Group and author of “The Ultimate Small Business Marketing Toolkit”, said they should lower the price of the kits to possibly under $30 and not include the grain, as a way of increasing their profit margin.

“I couldn’t help but wonder if this is similar to the razor-blade model, where you sell the razor cheap – as a loss leader – because you make a significantly larger profit on the blades?” said Goldstein, who also suggested they convince their customers to buy annual memberships, where they could get various grains delivered to their house on a monthly basis, similar to Beer of the Month Clubs. “This would produce a steady, reliable revenue stream. They might even have ‘Home Brewing Parties’ and show people how to conduct these (getting their customers to basically sell for them). Mary Kay, Tupperware and many jewelry companies have perfected this model.”

Goldstein said before they try marketing their kits to retail stores, Shea and Valand should seriously improve their website, as “it doesn’t look very professional.” Goldstein said she doubted major retailers would take them seriously enough to host their kits based on their current site, which is cluttered with too many messages that make it appear amateurish. “I certainly wouldn’t feel confident buying from their site, which is unfortunate since they’ve got an intriguing story and I see lots of opportunity for growth for them.”

Do you agree with our experts? What do you think of entrepreneurs Erica Shea and Stephen Valand and their business? Would you buy one of their kits and brew your own beer at home? Leave your comments below:

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