There is a major trend in the beverage industry – diversifying into other beverages. Breweries are making wine, energy drink companies are buying breweries, distilleries are getting into flavored malt beverages, and wineries are distilling spirits. It’s a crazy mixed up world! MARKS Design and Metalworks has seen many of our brewery customers move into other products for a while and the trend is accelerating. There are many factors driving brewers to take on new craft beverages. Reaching new customers, increasing brewery efficiency, expanding into new markets, assuring business diversification as one product may slow, and meeting the changing tastes of drinkers are all reasons to diversify.
Perhaps the first reason expressed by brewers is to “have fun”! Craft brewers are creative artisans by nature. Each story MARKS’ engineers and consultants hear when working with a brewery who is interested in diversifying always starts out with a passion to try something new. As one said, “If I can ferment it, I want to try it!” We see that the successful forays into diversified alcoholic beverages starts with a curiosity about new recipes and experimenting with new ingredients.
For a while there was a new craft brewery popping up every week. Each brewing multiple styles of beer and trying to find the right “kitschy” name and identity. In the last few years there has been a shake-out of craft beer. Between those strong brands being acquired by large breweries or other beverage makers, smaller weaker brands going out of business, or changing tastes of younger drinkers, growth in the volume of craft beer has slowed. To keep relevant, brewers are joining the growing trend in the U.S. alcoholic beverage industry to develop and bring to market new beverages. Ekos, a company that offers business management systems for craft breweries, reports that a third of their customers will be launching new types of products in the few years.
No-Alcohol and Low Alcohol. Trends in alcoholic beverages suggest that customers are actively shifting to non-alcoholic drinks. Searches for “non-alcoholic drink” are up 60% in the past few years. This is largely influenced by the growing ‘sober-curious’ movement and a wider focus on health and wellness. For example, “Dry January” and “Sober October” have become huge trends due to social media. As many as 40% of consumers worldwide are looking to reduce their alcohol intake for health reasons. Aligned with the wellness revolution, non-alcoholic beer offers lower calories and additional health benefits. It’s even becoming a popular choice for those seeking to enhance post-workout recovery.
Total volume of no-alcohol and low-alcohol beverages is expected to grow more than 30% in the next year. Sales of non-alcoholic beer have soared by 90% over the last decade, surpassing the growth of traditional beer. By 2024, the global non-alcoholic beer market is expected to surpass $25 billion, a stark contrast to the modest 1.8% growth predicted for traditional beer sales. Overall creating no-alcohol or low-alcohol beer is an easy way for brewers to diversify their offerings if they want to ride the wave.
Mix-In and Enhancements. Whether it is beer or other beverages, mix-in or enhancements are all the rage. All beverage makers are experimenting with additives and infusions for new and unusual tastes. Bitters, coffee, anything fermented, and cannabis are some of the most common additive trends.
An interesting trend is enhanced water beverages. Developing new tastes for water, new additives or enhancements is a developing market particularly among the younger generations.
Beverages in Cans. Anything in cans (including wines and spirits), bourbon, whiskey, and tequila, wine (particularly rosé), craft beer, locally made, low-ABV, ‘healthy’ alcohol, ready-to-drink beverages, private label beverages, and cannabis infused drinks are a continuing trend that has continued from 2020.
Direct to Consumer. Finally, Direct to Consumer (DTC) has really taken off with the impact of the pandemic shutdown. Many states loosened their laws regarding alcohol delivery. Laws vary, but only a few states now specifically outlaw alcohol delivery.
Given all these forces, smart brewers are looking at diversifying their product line to assure continuing access to customers and new markets.
Diversification is the process of expanding into new product offerings, expanding sales to the same customers, or reaching out to new customers. Diversification can be useful when one area of the business is experiencing stagnation or declining sales. It allows for adding variety on more options for the craft beer product. Industry diversification can boost the original brand’s image and company profitability. Market diversification can be defensive, protecting the brewery from competitors (energy drinks, wineries or spirit companies diversifying into beer).
The expansion can be considered related or unrelated diversification. It can be “vertical diversification”, that is products that have a similarity to them. Examples may be moving into lower ABV type beers, lo-calorie beers, hard seltzer beverages which can be beer alcohol based. Vertical diversification may have fewer risks as the beer brewing process is known and the equipment is essentially the same. This type of diversification is trying to reach more customers who are looking for a beverage similar to beer.
The expansion can be considered “horizontal diversification”, that is products that are in the same broad category but may have different processes or customer groups. Examples can include any other type of fermented, distilled or even non-alcoholic beverages – hard cider, kombucha, cold-brewed coffee, distilled spirits, read-to-drink cocktails, and wine. Horizontal diversification requires an expansion of equipment, cross-training staff, learning new processes. So there are more risks to this type of diversification. Yet horizontal diversification allows for an expansion to new markets, new customers, and extension of the brand.
There are many paths a brewery can take to diversify. MARKS has talked to a number of our partner customers to ask what led them to diversifying their brewery. We further asked about their challenges and successes. The brewers also give advice to others who are considering moving along the path of product diversification. The case studies include brewers that have diversified, are in the process of building a new product line, or who are in the discovery process.
Case Study 1: Diversification 101: Can a Brewery Make Hard Seltzer?
Case Study 2: Add Wine Making Equipment to Your Beer Brewing Business
Clear trends emerged from our conversations with our brewery friends. We heard that interest in diversification first came from the desire to try something new, the need to experiment. Not surprising, as this is part of the ethos of the craft brewery movement.
Once interested, each brewery started to assess their own situation. What is their facility’s capabilities? Do the staff have some of the skills to work with the new beverage or will they need to hire an expert in that craft beverage? Is there enough capacity in production? What are the licensing laws within the state? Can you distribute the new beverage with beer? Can you share production space? One brewery found the laws between producing beer quite different from producing wine, or even selling beer and wine together.
Assessing the facility leads to thinking about equipment. Some craft beverages lend themselves using some of the equipment used to the production of beer. Packaging equipment and process overlaps almost all beverages with cross-contamination being the main area of concern with regard to filling. Fermentation space can be shared with some beverages and the brewhouse/hot side can certainly be adapted for many categories. Clean in Place (CIP) systems are another synergistic brewery function. Cellar tanks (brites in beer production) can have multiple uses for storing many types of beverages.
Wines fermented in stainless steel make clean, crisp wines that are perfect for earlier drinking or in cases where the optimal ferment is meant to stay cold. MARKS also makes stackable stainless steel Totes that are a much better and more sanitary alternative to the common macro plastic bins often seen in wineries.
In any multiple uses of equipment, the real issue is cross-contamination. So thinking through production schedules and equipment use will be very important. Some of our breweries use the diversification of product to help fill in slow times in production. Maybe one product such as seltzer is done in the winter to fill in for slower beer production.
Our breweries also talked about some of the synergies in ingredients or processes that can be created by diversifying into new products. For example, those brewing cold coffee also use the coffee for some of their beer recipes. Or used barrels from the distillery process for use in some of their beers.
Various brewers also spoke about diversification as a way to help retain staff and keep them busy in slow times. Several found it helped keep their staff interested with new things to learn and expand their skills.
Overall, all our breweries found diversification increased their efficiency and profitability. This increase in profitability came mainly from reduced production downtime and increased market opportunities.
Tastes are changing. Hard core craft beer drinkers are a small percentage of overall drinkers. Pulling in other segments is important. Craft breweries have to compete with an endless variety of beverages out in the marketplace. People are into “healthier” lifestyles and are looking for low or no calorie drinks. The shift is to low-calorie beer, but with the craft beer taste or to hard seltzer. In a diversified pub or tasting room, couples, where one is a craft beer drinker, can bring their partner who may prefer wine, hard seltzer, or a ready-to-drink cocktail and join in on the experience. And for some who brew in certain states or Canada, experimenting with infusing the craft beverage taste with the properties of CBD or cannabis will appeal to a growing number of consumers.
Given the slowing of growth in the craft beer market, the changing trends in the craft beverage market, and the need to improve efficiency and profitability for most breweries, the importance of product diversification for your brewery is certainly a trend to consider.
Our team isn’t just technically proficient; we are brewing aficionados. With a rich understanding of both the technical and operational aspects of brewing, we craft programs that bridge the gap between machinery and the art of brewing. By marrying technology with craftsmanship, our custom programming ensures that each brewery’s unique character is enhanced and as the brewing landscape evolves, so do our solutions. Our team remains at the forefront of industry advancements, ensuring that our custom programs not only meet the current needs but are also scalable and adaptable for future requirements.
In the world of brewing, success is a blend of art, science, and technology. At MARKS Design and Metalworks, we’re dedicated to providing breweries with cutting-edge controls and automation solutions that bring out the best in every batch. So, raise a toast to efficiency, precision, and unparalleled quality with MARKS by your side!