Case Study: Societe Shares How They Use Their Brewery to Make Cold Brew Coffee
It is safe to say that a large percentage of the world’s population loves beer and or brewing beer. It is also safe to say that many people also love coffee and today’s popular cold brew coffee. Most breweries already have the equipment to make cold brew coffee. And with a bit of training, brewers can make one of the most popular drinks of the evening and one of the most popular drinks of the morning. Adding coffee to a brewery product line can help draw new customers and, at the same time, maximize the use of a brewery. Travis Smith and Douglas Constantiner, from Societe Brewing Company, share with MARKS about their decision to make cold brew coffee and why every brewery shouldn’t say no to making coffee.
About Societe Brewing Company
Societe Brewing Company opened in 2012 in San Diego, CA, founded with former professional brewers, Travis Smith, and Douglas Constantiner. The philosophy was that it’s “best to work at a brewery before you open one.” They also saw San Diego as the best place to open a brewery because, in their opinion, the city has the highest concentration of world-class breweries. They had considered the Bay Area, Portland and Denver, but liked San Diego. The city’s craft beer drinkers were focused on IPA’s. And IPA’s are a favorite of theirs. “Our taste buds aligned with the preference of the consumers in San Diego.”
Societe Brewing is in the design stage of diversifying their product line to make cold brew coffee. Here is their thinking about their journey.
Q&A with Societe Brewing on Their Journey to Making Cold Brew Coffee
Q: What led to the discussion about adding/diversifying product in your lineup?
A: At Societe Brewing, we believe in an 80/20 rule. Meaning 20% of our effort generates 80% of our revenue. It is just the way it works in a sales business. In our product lineup, we have three core beers that makeup 75% of our volume. One of them is 60%! But we still have to focus on our other 14 beers to round everything out. This gets us to 100%.
Our vision statement is to make great beer. But there are ways to find pennies in the process. When I talk about innovation and creativity, it is not coming out with a new product. Societe Brewing isn’t trying to push the limits of what “is beer.” We don’t do pastry stouts. We don’t do wacky things. We like to get creative and innovative in strategy. We wanted to get creative, and we had excess capacity at the brewery. If the brewhouse isn’t running, we aren’t making money on it. So if we are only brewing two times a day – 5 days a week, how can we make money on Saturday and Sunday? We looked at products that would fill in the gaps. Coffee just came to us pretty easily.
Q: How will you bring the spirit of Craft Beer’s ingenuity and experimentation into your new product?
A: Passion is a good way to start because it gets you through a lot of hard times, long hours, and loss of sleep. But passion doesn’t make a business work. I believe in having a sound business plan, regardless of passion. I think passion should be a success rather than a product. For years, industry consultants have been saying craft beer is not a real thing. Don’t consider yourself a brewery. Consider yourself a beverage manufacturer – a beverage company. That wisdom made sense to me. So I started reading business industry news. I looked at all types of beverages – sports drinks, water, sodas. We are in the beverage industry. We rely on consumers and customers for success. We have to position ourselves to respond to the customers’ interests and tastes. Otherwise, we cannot grow.
Q: Do you anticipate your existing customer base taking on the new product, or will there be an effort to reach a new sector of consumers?
A: It will be a Societe product. Our name recognition is very strong, so that is a good starting point. We have to accept that the customers will not be completely different, but a very different-acting customer base. When you buy a beer, you might be buying 6- or 12-pack. When you buy cold brew coffee, you might only buy 1 or 2 cans at a time, or buy a jug for your fridge. You don’t drink six cold brew coffees on a Saturday afternoon. Even if it’s the same customers buying this product, they are acting differently with their purchases and their consumption. It would be different. Let’s make it and see if it sells. Now when it’s actually working, let’s make this a real business. Make sure the customers are happy.
Q: What are your medium and long term goals for this new product as a percentage of your total production (including beer)?
A: We’ve set the base sale rate at a level that would set off an alarm and indicate that we’re not hitting it, and we’d then need to cut the ties pretty quickly. We hope that the coffee would be more successful than the brewery. But we have set a lower limit and would stop moving forward with the new product if it hit that lower range.
Q: Could you utilize your existing equipment to make cold brew coffee? Will it require any additional equipment? Will it require a brewery reconfiguration?
A: Packaged cold brew seems like it is picking up. We have the equipment already; the mash tun is just a giant coffee filter. And we have a mill. We have everything in place, so we said, let’s start exploring. This is an easy switch to turn on during downtime. Luckily, my brother is chairman of the board at a coffee roaster out in Brooklyn. I am friends with an equivalent position of mine at that roaster. Its Parlor Coffee. They are a classic roaster coffee, a local coffee shop. Talking to them led to discussions with other roasters. Brewers have an incredible advantage here. While we might not know the perfect temp and or perfect process for roasting coffee, we know how to transfer liquid in a sanitary environment with little to no oxygen. So to make cold brew coffee, we swap out the gases, CO2, for Nitrogen. There’s no difference in the rest of the process. I saw that a lot of roasters’ systems lacked in that process background.
We opened off the bat with a 20 bbl – 2 vessel brewhouse, 2 – 20 bbl fermenters, and 2 – 40 bbl fermenters. Since then, we have purchased 4 – 40 bbl fermenters and 4 – 80 bbl fermenters, a 40 barrel brite, and an 80 bbl brite tank from MARKS. Societe has only bought from MARKS since 2014.
Q: How does the method of distribution/logistics differ from beer?
A: We were self-distributed up until 2019. We are in about 750 restaurants, and that’s still about 90% of our business. We have a 3,200 square foot tasting room and do a lot of business out of there. Our goal, when we opened, was a production facility and not a tasting room model. We know production brewing and not retail. As the years went on, our wholesale self-distribution business grew. Up until this pandemic crisis, this was 92% through our distribution partner. Then we launched cans in February of 2020. That became an 80/20% mixed draft to package. Now, with the stay at home order in California, it’s a 1 to 99% draft to package mix. We got our canning line up and running just in time for this crisis. We got really lucky. Without the packaging, it would have likely been a death sentence for us because we relied heavily on restaurants and draft business. I believe in return on luck.
We talked to our current wholesaler. They are new and aren’t sure if they’d carry the cold brew coffee or not. So we are looking at a couple of other wholesalers. Or we might turn on self-distribution again. We did that for seven years. We were pretty damn good at it so that it would be an easy flip of the switch.
Q: Are you anticipating additional challenges for the new product that is different from beer?
A: We talked to quite a few breweries that are making cold press coffee. It has its own set of challenges for the shelf life of beans, if you’re roasting, it’s 30 days. In that sense, it’s tough to manage. That’s a short product life. For cold brew coffee in package form, it’s all over the place on how long the product lasts. Depending on how big you get, national logistics to get your product on the shelf, it can take a month to 6 weeks, if you’re shipping your product across the country. It can be over a month old by the time you get it on the shelf.
One thing I learned when it comes to beer, wine, or whiskey, is that a restaurant can have multiple products. Typically a restaurant will have one kind of coffee, and they don’t even advertise it. I think with a cold brew package, the restaurant could carry a couple. Usually, they wouldn’t be offering multiple company cold brews. That would be a tough market to carry for one restaurant. But off-premise, the battleground is with the big companies and fighting for shelf space. A lot of specialty stores have a wide collection of cold brews from specialty grocers. They will carry different brands, flavorings, organic, or fair trade. You have to focus at a high level to grow this type of product. My fear is if you grow this too much, at some point will you be unfair to your brewery, because you’re focusing on cold brew. It’s going to be a balancing act.
Q: Are you able to exploit existing synergies in the brewery to help your transition into this new market segment?
A: Water bottle companies are not in the business of packaging water. They’re in the business of selling plastic. They’re not making anything. Soda production takes a day. Everything is so short compared to brewing beer. None of us really realized that until seltzer came out. A brewery is perfectly set up for any kind of beverage. We also looked into making ice tea. The mash tun is a giant tea filter. We have all the chilling necessary, so we have everything in place. We know quality from a shelf-stability standpoint. Everything comes down to process and equipment.
Q: What steps will you take to mitigate the risk of this new venture?
A: What’s crazy for us craft brewers to realize is that beer takes a really long time to make. In the alcoholic beverage world, compare the beer brewing time to making wine or spirits. We are fortunate to turn our tanks over relatively quickly. But now looking at seltzer or ice tea, it’s a 1 to 2 day production time. Our overhead is 1.5 times our ingredient price. Can you imagine if our ingredient price was 3xs our overhead? At that point, it would be extremely profitable if you’re able to sell it successfully.
Q: Will you able to utilize and cross-train your existing brewers, or are you having to recruit new employees with a coffee background?
A: We can cross-train no problem. People always tell us how cool it is that we found our passion. Beer is pretty easy to get passionate about. The same thing goes with coffee. Most people love coffee. So if you have a great product that you like, it’s really easy to learn. It’s a perfect thing for a brewer, a match made in heaven. No brewery out there should say, no, you can’t make cold brew coffee. You already have the equipment. It’s so similar and translates.
Q: Any advice you would give to another brewery thinking of diversifying into a new market segment like cold brew coffee?
A: Its way easier to make it then sell it! Making it is a piece of cake. Not saying it is easy to make coffee. There are highly skilled people, not just the roaster or the barista, that make sure that’s the best cup of coffee it can be. As brewers, we have a huge head start at making coffee, ice tea, or hard seltzer. We have all the stainless steel processing equipment, some hard assets, and leverage.