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Limits + Brewery Production Survey Data

Limits + Brewery Production Survey Data

Of course we hate sales limits on beer.

We like selling beer!

Our brewery is fortunately in a spot where our beer is popular enough to warrant, in some circumstances, a limit on how much beer a customer can buy.  There is a lot of discussion on this subject on the internet recently and I wanted to chime in and explain why we limit.  See, when we release something highly in demand that we don't produce on the regular, we will inevitably run out of supply. The two important questions are how soon do we run out and who misses out on the beer when we run out?  If we release a special beer, we will have folks drive to the brewery from Texas to Florida to pick up the beer.  Most come from closer locales from Lake Charles to NOLA.   The point is that there are a ton of people coming to the brewery from out of town on the day of a beer release.  How badly would it suck to drive from NOLA to the brewery (2.5 hours away) to be there for when the brewery opens at noon, wait in a line, only to find when you get to the register the beer you came for has sold out?  

Let's suppose that we had no limit on the upcoming release of DDH Opus Vert crowlers at the brewery.  We would sell out in about an hour or less as a few people would buy lots of them, likely to either haul back to someplace like Houston or NOLA or to trade for beers from other parts of the country. Most people who came the day of the release would get zero crowlers.  If you weren't probably one of the first 50 in line, you would get nothing.  That would suck.  The brewery would sell the same amount of beer, but it would truly blow for a lot of consumers and fans who support us.  So we have the limits in place to try and get the beer in as many hands as possible and to at least try and have beer available for the folks who show up to the release.  Even with a limit, the beer may not last more than a day or more than a few hours, but at least more people get taken care of, especially folks from out of town who drive all the way here at least get their hands on some of what they want, worst case scenario.  

I would also point out that it is ironic that the limits are for the benefit of people who don't live next door to the brewery, yet the complaints about limits are mostly from folks who don't want to drive in for only 2 crowlers or 2 4packs.  I understand that complaint, but the lesser of two evils is to have the limit and at least stretch the beer rather than driving in for the release and getting zilch.   I would also be remiss if I didn't point out that this week, despite limiting crowlers of DDH Opus Vert and 4XDH Envie to 2 each per person, we have no limits on Opus Vert or DDH Envie Mosaic crowlers.  Also we are selling full case limits of Opus Vert 12oz bottles.  That is a metric shit ton of beer and honestly feel less bad about the 2 crowler limit this week than we normally do because of the volume of awesome beers available.  Still feel bad though.  Love you.  

Now some people make a good point and are upset that we don't make enough of these beers we know will be in high demand and suggest that we just produce more of them and remove the limit on sales.  Well...   Duh.    Of course we would do that if we could.  I'll use this as an opportunity to explain our current business situation and why we can't produce giant quantities of, say, DDH Opus Vert or 4XDH Envie.  

The primary limitation is space.  Physical space in our brewery.  We only have so much space for a few very critical steps in making beer but the main limitations are fermentation space, finished product storage, and packaging material space.  Have you ever noticed that we didn't use 4 pack carriers for DDH Envie or Rêve or Bloom?  Thats because we didn't have anywhere to store the 9 pallets of 4pack carriers that would require.  A minimum run of 4 packs is about 3 pallets per SKU.  Our brewery is busting at the seams and we didn't even have space to store 9 pallets of 4 pack carriers, for example.   We did expand two month ago to the building next door, which added about 4000 sqft to our operation, which helps.  In fact we have ordered new 4 pack carriers for the above mentioned beers, now that we have some space to store them prior to use.  But you can imagine that adding 4 packs for 4 or 5 new beers right now would cause problems again with space.  That's exaggerating, but the point is that we don't have space to do everything we'd like to do.  Now if we had a canning line and only needed to store labels for each beer and not mess around with carriers or case boxes....   maybe one day in the not-too-distant future.

Another major reason why we don't make larger quantities of these highly demanded beers is fermentation space.  We don't have enough tanks, simply put.  We have more coming in August, but today every tank is full with products we need to sell in our markets.  Taking a snapshot of today, our tanks are completely full of Canebrake, Envie, South Coast, DDH Envie, Ghost, and Opus Vert.   There isn't a free tank to make anything else right now.  We can't even make enough Ghost and Opus Vert or Rêve.  Adding a new product to occupy a few tanks would make things worse.   We are fortunate that we can make any amount of something like DDH Opus Vert or 4XDH Envie at all.  Bottom line, we need a bigger brewery.  

We are currently doing about 15,000 barrels of production per year (on pace for that this year).  With new tanks added in August, we can perhaps do about 18,000 to 20,000 barrels in 2018.  That will allow us some freedom to do more volume of these sexy beers, but until then it will be limited in quantity.  These are good problems to have and the team here is grateful for the opportunity to try and tackle them.  

On production capacity, the Brewers Association just released the production survey results for all brewers nationwide.  Interesting data to look at.  Especially locally in LA.  Our state's largest and oldest brewery, Abita, has lost production volume (presumably from losing sales) for the past few years and that trend continued in 2016.  I would have to guess that the influx of all of these small brewers in LA is the cause of that and the market share they are consuming.  The pie isn't getting bigger, but instead is being sliced up into many more, smaller pieces.  Parish grew to the 2nd largest output at almost 11,000.  NOLA is right there with us and essentially is the same sized operation.  Next are Tin Roof, Bayou Teche and Great Raft all growing to between 6,000 and 7500 barrels output in 2016.  Covington reports 5,000 barrels, Gnarly Barley is around 3500 barrels and Urban South reported 2,000 barrels.  All other brewers were below 1000 barrels in production, many closer to 200 barrels than 1000.  There are about 30 brewers in the state, so there are a lot of them in that range.  I think that is the trend going forward:  More brewers producing under 2000 barrels and very few producing larger amounts (10,000 barrels and beyond) with a few in transition between being very small and very large.  This is what a mature beer market looks like in places like Seattle, Chicago, Portland, New York, etc.  A lot of very small breweries that sell mostly on site and a much smaller number of larger operations that primarily distribute.

In addition to lots of breweries opening in LA, there are more and more national brewers bringing their products into our state and taking market share, taking shelf space, taking tap handles.  There is only so much market space to be had, as I said the pie doesn't appear to be growing much.  At least not fast enough to keep up with all of the brands coming into the market.  We see it first hand with our beers, the competition is tough out there.  I feel for the brewers who are just now getting started as they are finding it very challenging to get any market access at all at retailers.  You need to bring a special product or retailers and consumers will not give a shit about it at all and it will die. 

Nationally, the craft beer market is basically stagnant and had minimal growth from 2015 to 2016 which is very alarming as growth has been strong every year for the past 15 or more years.  There was a giant slowdown and it came mostly in the form of large "regional" brewers selling less and producing less.  Most of the brewers over 100,000 barrels produced less in 2016 than they did in 2015.  I find that very intriguing as a potential indicator of things to come.  

Another very interesting sign that we have personally experienced here at Parish is that raw materials are suddenly available.  Last year we couldn't find enough hops, but this year the hop farms are completely overstocked.  The grain price has dropped as the barley supply is overstocked.  Every supplier we talk to says that most of their customers over contracted, meaning most of the largest brewers thought they would be using more hops and grain in 2016 than they actually used.  Not a good sign.  What do you think is coming?  Are you optimistic that growth will continue and this stagnant growth year nationally is just a blip?  Or are you like me and think this is too big of a sign to ignore, that the nationwide market for craft beer is definitely changing from what it was.  Why does it appear that nationally craft beer appears to be hitting a ceiling? 

Cheers,
Andrew
Author: Andrew Godley

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