Photo: vmiramontes via Flickr
Terry Michaelson is the Chief Executive Officer of Craft Brewers Alliance, a craft brewer that makes, markets, and distributes craft beer under the labels Widmer Brothers Brewing, Redhook Ale Brewery, Goose Island Beer Company, and the Kona Brewing Company.
I had the privilege of speaking with Michaelson. He is on the forefront of changing consumer tastes, with absolutely no guarantees for the future other than that people obviously love the product.
I couldn’t help but wonder what that would be like, so I asked. What I found was that this man absolutely loved beer, and he created a successful business out of is passion.
TC: Tell me a little about your marketing plans and efforts. How is your model distinct from the big boys who have exorbitant million-dollar advertising budgets?
TM: For us, this is about creating personal connections and there is a personal approach than what a big brewer would typically do, so we want to build broad awareness of our brands. If we can get people to hear our story and sample our beer, then we’re successful.
We still focus on some traditional things like print and radio, and are involved in sponsorships and festivals. We are also focused on marketing over the internet with blogs and Facebook and finding places where people are going to spend the time to find out about the brands. We spend only in markets where we think the brands belong to create those long-term connections.
TC: I heard you touch in there on social media marketing. Has that avenue become valuable for your brands?
TM: Definitely, the social media marketing is a big effort for us, because we can get to the consumer and surprise them in a positive way. People want to get to into these brands and understand their story, and then participate with them. They can drink craft beer because it makes them feel good and it’s affordable.
TC: Sounds to me like your company is on the forward edge of two very new and untested frontiers: the craft brewing industry and social media marketing. What does that feel like?
TM: As we look at it, there’s two ways we see that: one, it’s certainly a challenge. We’re paving new paths in terms of how things are done but we also see that as mostly a tremendous opportunity because it allows us to create new experiences for consumers, because overall, they are looking for something fun and something that makes them feel better in their lives. It’s a tremendous opportunity for growth. The challenge isn’t so much creating the business; the business is there, and it’s strong. It’s more how do we make certain we maximise those opportunities because we don’t just want a nice business, we want a great business.
TC: According to OregonLive.com, “Widmer produced 286,000 barrels of beer in 2009 and 184,000 barrels of Redhook. Adding Kona’s production puts the company at 583,000 barrels, or more than 18 million gallons”. Is that a fair assumption going into 2011?
TM: Yeah, that’s a fair assumption.
TC: How does that level of expansion change the underlying value of CBA?
TM: What it changes for us is that it continues to give us the opportunity to put more people in the marketplace to sell the brands and help people find our brands. It helps us put more dollars in the marketplace to make create those all-important connections. The other thing it does is continue to make us more important to the retailer because the key to all of this is getting some distribution so the consumer can actually have a chance to find the beer and try it. We’re one of the larger craft brewers in the country, certainly in the top 2 or 3, and that’s important because that’s retailers are looking at for.
TC: Is there a defined line between a craft brewer and a typical brewer, and if so, as CBA grows, how close are you getting to crossing that line and losing the “craft stripes”, so to speak?
TM: We’re not there. I think it’s changed where there it’s no longer about a volume level anymore. It’s more about subjective valuations – what type of beer is it, what’s the brand all about, and where does it come from? Retailers are looking at the story behind the beer, and aren’t so much worried about the volume to determine whether or not a beer is craft. It’s about the quality and authenticity of the source.
It’s the segment growing up – look at Kurt Widner, he was a home brewer and was passionate about doing what he loved and having a business. He used to talk about, if I could just get 10 accounts, I’ve got a good business, because in the beginning of this, that’s what people were thinking. Now that the expectations have changed for the consumer, they want to be able to find it and experience it whether it’s on premise or off-premise. It’s more about the experience and less about how big you are.
TC: So we’re talking about creating an identity.
TM: You’re exactly right. People are excited about having craft beer in their life. It provides them with a unique environment and experience. The pioneers of the industry – the Jim Kochs and Ken Grossmans of Sierra Nevada and Kurt Widmer – those people were really at the forefront and really risked a lot when they were starting their companies. I think the consumer can really connect to that kind of passion those people have behind their beers, and because they can relate, they love the drinking experience.
TC: Tell us about your relationship with Anheuser Busch.
TM: We have a distribution agreement with AB, because this being a three-tiered industry, the only way to get to market is through a distributor. The AB has traditionally been the strongest with the most market share and has high standards in how they deliver and care for the beer. That is a strong component of our business.
TC: AB owns a sizable, albeit minority stake in CBA. Care to comment on the buyout rumours that are flying out there?
TM: What I can tell you is that they are just rumours. We’re very dedicated to continue being an independent company and growing our business. That the plan at this point.
TC: How do you think those rumours came about? They sort of exploded all over the net during August.
TM: It’s hard to tell. I think people look at the changes in the business. We had a modification to our agreement with AB, so that could be a driver. Quite frankly, I think people just start throwing darts at the wall hoping it hits something, because there wasn’t anything specific that we could point to that would lead people to believe that.
We wrapped it up. I thanked him for taking the time to talk beer with me, and mentioned how interesting it was to interview a CEO that was literally brimming with delight about his brands. One of the last things he said: “That’s great, I really appreciate that Tom. Thanks for your interest and I always have a good time talking about beer and our company,” as if I couldn’t tell.
Tom Copeland is a financial journalist and founder of Bullworthy.com.
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