Entrepreneurs

3 essential business growth lessons from the craft beer boom

You don't have to be a fan of IPAs to know that the craft beer world is doing something right. In 2015, 620 new breweries opened, with only 67 closing their doors. That 10.8 percent failure rate is higher than the long-term average but has been consistent in recent years as the overall number of brewery openings has spiked. It's also much lower than in the restaurant industry, where as much as 60 percent of new establishments close in the first three years.

Just how tough an industry it is makes the craft beer success story all the more notable. There's a $100-billion-dollar deal between AmBev and SABMiller in the works that beer experts argue has been made, at least in part, to weaken craft brewers' ability to independently distribute; a high-profile Budweiser ad campaign designed to belittle the craft beer movement; and an overall slowdown in production that craft beer is bucking.

"The status quo sucks," said Jim Koch, founder of Boston Beer Company. "It's only the status quo because we haven't yet figured out how to make it better. Every successful entrepreneur or business owner, regardless of the industry, must have a similar mind-set with whatever they do. Without it you get lazy and the competition will pass you by."

Pass you by or make you pay up. Craft beer hasn't only pushed Budweiser to change its iconic advertising strategy but is also cashing in on Budweiser money: The beer giant has been buying up craft labels, including Breckenridge Brewery and Four Peaks.

A woman pours beer at the Great American Beer Festival in Denver.
Getty Images
A woman pours beer at the Great American Beer Festival in Denver.
"The status quo sucks. It's only the status quo because we haven't yet figured out how to make it better." -Jim Koch, founder of Boston Beer Company

We've zeroed in on three strategies that have led to success in the craft beer world that are relevant to all entrepreneurs.

"Whether you're just starting a business, at the top of your industry or somewhere in between, you have to constantly be asking, 'How can I do this better?'" Koch said.

1. Don't drink alone — craft brewers often succeed by working with what a technology company would consider an "enemy."

While the competition for shelf space and tap handles is ferocious, most craft brewers don't view others in their field as enemies, as is common in many industries. They share secrets, work together with other brewers and encourage up-and-coming breweries.

It's a rising-tide-lifts-all-boats philosophy that brewers say has the added benefit of making craft beer lovers more loyal to that segment of the industry. Sierra Nevada's "Beer Camp Across America" series, which just launched, includes 31 brewers working together to create six unique beers that are available only for a year.

"The craft brewing renaissance is part of the hippie dream of the '70s, so I think there is some built-in idealism," said Sam Calagione, founder of Dogfish Head. "By and large, we all help each other and share ideas, do events or make actual beers that are collaborative. You don't see [Samsung] and Apple coming out with a collaborative phone. ... I think that resonates with beer lovers who see that it's about the love of beer, not money."

It's working: Nearly half of the more than 4,100 breweries in the United States increased their capacity by 10 percent or more in 2015, but according to the Brewers Association, the vast majority of capacity in the country isn't expanding. The beer giants are stalled, and if MillerCoors is successful in closing its Eden, North Carolina, facility in September (the Teamsters are fighting it), total capacity for the U.S. beer industry will likely go down this year.

Boston Beer goes a step further, having provided loans to craft brewers (along with other food, beverage and hospitality small businesses) since 2008.

"We've provided start-up loans to over 30 craft brewers," Koch said. "This is counterintuitive to most people. Why would you help your competition? Craft brewers help craft brewers because we believe ... there is still so much room for craft beer to grow."

2. The brand on the label is essential to promote, but the most important brand campaign audience is internal — your employees.

Even if you're collaborating with other brewers, you still need to stand out on your own. In some cases, that's done by taking risks with new beers. Other times it's about establishing a big marketing presence. But many brewers start their branding efforts with their employees.

Jen Kimmich, co-owner of The Alchemist, maker of Heady Topper, which is one of the top-ranked beers in the country, said it does not talk about mission statements or tell people "how great it is" to work for the company. "We do, however, show our customers (and community) what it is like to actually work here," she said.

The Alchemist recently created a Facebook video series portraying its staff. Kimmich said employees are everywhere on the company's website, Facebook and YouTube page. The Alchemist has a videographer on salary who loves creating fun clips for social media, Kimmich said, adding, "Our employees love being filmed!"

The company has named a beer after an employee, has printed their faces on T-shirts and has 4th of July floats with staff.

"If you are genuine, honest and, most important, unique in employment branding efforts, you will attract like-minded people who will be passionate about the employment you provide," Kimmich said.

In the 12 years since the company opened its 60-seat brewery, it has never spent money on paid advertising. It gives money to the Food Shelf or other local organizations; investments made in employees (livable salaries, paid time off, health insurance, 401(k) plans and meals) have helped create a reputation for being a good employer.

"Our customers are loyal to us because of this. This is what I mean by attracting like-minded people; not just employees, but loyal customers," Kimmich said.

3. The customer is the king of beers, and R&D in any industry — use them early and often to uncover potential blockbusters.

Including customers in the product development decision-making process is an approach the craft brewers have honed.

At Dogfish Head's Rehoboth Beach, Delaware, brewpub, for example, customers have the chance to sample one-off brewing experiments, and if the consensus is positive enough, the company considers rolling those beers out nationally. Palo Santo was initially a small batch but is now a year-round offering. And Dogfish Head's upcoming winter seasonal Beer for Breakfast is getting a push because the pub verdict was so favorable.

Another rarity: Namaste started out as a pub batch for some brewing friends who were having a tough time. Customers loved it, so it found its way into 750ml bottles as an occasional release. "People REALLY loved it, so we put it in 12-oz. six-packs and made it available year-round," said a Dogfish Head spokeswoman.

Focus groups can be useful, but giving the people who are already using your product a voice in how it evolves helps protect against missteps and losing their future business. "Businesses that incorporate their consumer into the R&D process will find that's a wonderful way to build loyalty, because they take pride in being part of the decision," Calagione said.

And there's another key reason for using customers over paid focus groups, according to Calagione: "Paying customers are going to be a lot more honest than focus groups."

By Chris Morris, special to CNBC.com