Untappd and The Wisdom of Crowds

Ask a brewer what he or she thinks of Untappd and the response you’ll get is some cocktail of groaning, sighing, head-shaking, eye-rolling, and some compulsive twitching. For beer drinkers, it’s a magnificent tool to enhance and assist with their quest to enjoy beer. For brewers, it’s often a source of anxiety and an object of resentment. And by “brewers”, I mean me.

For those unfamiliar with the product who are reading a brewing blog (my parents, if they’re still reading), Untappd is a social media application that has become ubiquitous in the modern beer world. Drinking a beer (even sharing a taster glass with someone) entitles you to “check-in” the beer. The check-in includes any details you want to provide – a photo, a description, and a star rating from 0.25 to 5. Through these check-ins, you develop a profile that displays your conquests; and the beer develops a profile, showing who’s been drinking it and what they’ve thought of it.

The ubiquity of Untappd can hardly be overstated. Untappd reported over 37 million check-ins in 2017. Our little brewery alone has over 11,000 check-ins since we opened in November, 2016. No doubt, the killer feature that has driven Untappd to this level is its Badge system. Check-in 5 different beers from the U.S. and get a “Land of the Free” badge. Check-in 5 more and get “Level 2” of that badge. Check-in 5 pale ales and get “Pale as the Moon”. Check-in 5 beers with photos and get “Photogenic Brew”. And so on. In my short Untappd career of 71 check-ins, I earned 59 badges. (And I’m a chump – proper beer drinkers typically have over 5,000 check-ins and 2,000 badges.) The badge feature takes this otherwise boring cataloguing exercise and turns it into a hunting game, complete with the serotonin-boosting status accumulation that motivates people to collect pokemon and participate in airline loyalty programs with unconditional, shameless devotion.

The feeling of improved status with every sip of beer is motivation enough to use the app, but the app also serves the very real purpose of helping the beer drinker make sense of an insanely huge plethora of beer options. Let’s say I’ve got a couple hours to kill today and I want to go enjoy a beer. Within a 10 minute Uber ride, I have access to over 100 establishments to buy a beer. Among them, there are probably over 500 unique beers available.

Now hold on a second! Let’s stop and admire how freaking amazing it is that this is a reality. How many people in the history of man have ever had this much variety at their fingertips? And this is a cheap luxury – the cost of less than a couple hours’ work for most Americans. If that’s not breathtaking, then neither is the Grand Canyon.

So, anyway, how do we make sense of this sea of options? What’s available, what’s good, what are people drinking, what haven’t I had before? Untappd is an extremely useful resource to answer these questions.

But is it useful to a brewer?

It should be. There’s a rich amount of data within these check-ins that should serve as feedback to the brewer. Is the beer good? Is it popular? What do people like or dislike about it? Where is it being enjoyed?

On our opening night, we were anxious to see our Untappd reviews. What a neat way to get feedback on the product we’ve put our heart and soul into. As soon as we got home, we started scrolling through the reviews and were shocked. Lots of glowing reviews, but some lousy ones, too. 2- and 3-star reviews for our pilsner? But it’s so clean and delicious – what more could you ask for? “A parade of 2-star beers”? These beers are awesome! Brewers, beer buyers, and beer writers have told us so! Were they just lying to us to be polite?

It didn’t take long to talk ourselves down from the ledge. Browsing around other breweries’ reviews revealed that it’s not just us. My shock at our Dollar Pils Y’all’s rating of 3.5 dissipated when I saw Real Ale’s Hans Pils (one of my all-time favorite beers) is also 3.5.

Commiserating with other brewers was comforting. A veteran brewer shared his philosophy on feedback: “The only feedback I care about comes from the cash register.” This phrase stuck with me. At the register, people back their preferences with money. They have skin in the game. And, whether selling beer is our objective or a necessary condition for survival, it’s vitally important. Would we rather have a portfolio of 5-star beers that don’t sell or 3-star beers that do?

It turns out that, for us, Untappd ratings are not a good predictor of sales. We instinctively know this to be the case, but just to put some numbers to it, we took a recent week’s tap room sales and compared them to each beer’s Untappd rating. Below are the 12 beers we had on tap over a weekend in February, plotting their sales volume against their Untappd rating.

Untappd rating vs sales

That R2 value of 0.14% means that Untappd ratings explain only 0.14% of the differences in sales among our beers. The remaining 99.86% is a mystery! To be fair, that point on the top-left of the chart is our pils. In spite of its low rating, it’s consistently our best seller. If we remove it from the group, the R2 jumps to about 50%. So I’ll concede that Untappd has some predictive power for sales, except for best-selling beers. I’m not sure that’s much use.

Browse around Untappd and it doesn’t take long to understand that a beer’s rating is heavily style-dependent. High ABV beers, rare beers, barrel-aged beers, sour beers, double-quintupple hazy dry-hopped beers will tend to have significantly higher ratings than pilsners, hefeweizens, and ESB’s, no matter how clean or technically sound any of those beers may be.

But, still, given that the styles are known, shouldn’t we be able to remove the style impact and decipher the quality of a beer from its Untappd rating? There’s a famous experiment by Francis Galton in England in 1907 where non-expert individuals were asked to estimate the weight of an ox by looking at it. 787 individual estimates were tallied, and their average was 1,197 pounds. The weight of the ox was… wait for it… 1,197 pounds. Untappd ratings may be a similar phenomenon: the individual ratings are meaningless, but a beer’s average rating, especially when comparing it to that of similar beers, should be an indication of its quality. For example, if I want to know whether my saison is good, I should be able to learn this from comparing its average rating to other saisons, right?

A little experiment of my own

One way to test whether Untappd ratings can indicate beer quality is to compare them to competition results. For example, The Great American Beer Festival enlists a rigorous process to judge beer quality among its 8000+ entries each year and award medals for the highest quality beers in each style category. If the Untappd rating is a strong indicator of quality, then a gold medal-winning beer ought to be among the highest rated beers in its category – analogous to the folks, collectively, correctly guessing the weight of that ox.

To test this, I took a random sample of 20 gold medal-winning beers from the 2017 Great American Beer Festival1 and looked at their standing on Untappd. For each style of beer, Untappd generates a “Top Rated” list, showing the 50 best-rated beers of that style. For each of the 20 beers considered: Is it one of the top 50 rated beers in its style on Untappd?2 It turns out that, for 19 of those 20 beers, the answer is, “No”.

GABF vs Untappd

This probably doesn’t surprise you. We might hastily conclude that, in contrast to the weight of an ox, the quality of a beer is not objective. And this, I think, is incorrect. I’m a firm believer that the quality of a beer – whether a beer is “good” or “bad” – is objective. The difference between a good and a bad beer is a set of noticeable characteristics. A good beer has minimal off-flavors and expresses desirable flavor and appearance characteristics in a coherent way (and “desirable” is almost entirely objective). A bad beer does not. Like the weight of the ox, quality is exclusively dependent on the beer itself.

The Wisdom of Crowds by James Surowiecki was published in 2004 and used the ox experiment as its opening anecdote. The book popularized crowd-sourcing3 and also generated criticism. Jaron Lanier argued that the wisdom of crowds is only harnessed when it isn’t defining its own questions and when the goodness of an answer can be evaluated by a simple result. Neither of these conditions are met with Untappd ratings: There is no definition or even guidance of the star ratings, and the user gets no feedback on whether his or her rating was accurate. The only feedback you get on Untappd is a badge for more check-ins, which motivates you to try more beers and give less thought to each.

There’s another theory that explains this discrepancy, which is that Untappd ratings do not intend to measure the quality of the liquid, but the enjoyment of the experience. Enjoyment, different than quality, is not entirely dependent on the beer. It depends as much on the person experiencing the beer as the beer itself. In other words, it’s subjective in nature. And the liquid is only a part of the experience. How it’s served, where it’s served, the packaging, the name, the story of the beer and the brewery who made it, what others think of it – these all contribute to the drinking experience, and there’s no reason why they can’t be considered in that rating.

The good news

While it’s not a good predictor of sales or indicator of the liquid’s quality (at least not with high resolution – I will concede that a 4.5-star IPA is probably higher quality liquid than a 2.5 star IPA), the ratings are not meaningless noise. They capture the enjoyment of the experience by the Untappd crowd. To the Untappd crowd, today, a great pilsner (Hans Pils) is not as enjoyable as an average IPA (Goose IPA). In a way, Untappd is an articulation of the craft beer zeitgeist. If we want to stay relevant – to stay a part of the conversation, to be on tap at key accounts, to keep influencers coming into the tap room – we ought not ignore it.

And for the brewer, specifically, there is good information scattered among the reviews. “Too much spice in this wit for my taste,” prompts us to evaluate that question and perhaps make adjustments. “Tastes like garbage water,” provides a potential name for a new beer. There are specific users who are capable of and interested in providing honest and insightful feedback, and we take their reviews seriously. It’s the kind of feedback we should have to pay for. In this way, Untappd is an awesome medium for the dialog between brewer and patron.

So, while the data may easily mislead or frustrate us, we mustn’t let that distract from the valuable information that this platform provides when interpreted appropriately. And as for that anxiety: the very human fear of being judged, even unfairly, is something that we would all be better off for overcoming.

1Untappd is highly protective against data mining, so it would have taken too long to look up all 97 beers; instead, we took the first 20 listed in alphabetical order by category. Random enough.

2Consider that many of the ratings of these beers were probably levied with the knowledge that the beer won a GABF Gold – one would expect this to actually boost the beers’ Untappd ratings!

3To its credit, the book detailed several caveats required for the wisdom of crowds to work. One necessary condition for success was that members of the crowd must not be able to influence each other, so that each rating would be independent. On Untappd, however, you see the average rating of a beer and the ratings your friends have given before you provide your input.

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The Beer Comes First (usually)

We have a saying around here, “The Beer Comes First”. This was an oft-cited mantra during startup, when we were in the throes of trying to open, with a million things to worry about. There was the website, our communication plan, staffing, merchandise sales, what music to play, how to handle account sales, how to handle accounting, etc. Then there was the beer: Are we proud of our opening lineup of beers, and are we ready to keep making more? Are they true to their styles, and are they flavorful and without flaws? All of the above items were important, but The Beer Comes First (TBCF). We will forgive ourselves if we don’t have a website on opening day, if we don’t staff adequately, if we have unforeseen circumstances force us to close the tap room early (and all of these things did happen); that’s okay, as long as we manage to get the beer right.

Looking back, this mantra was critical for us. Perhaps it allowed us to overlook details that we should have noticed – for example, it would have been nice to have the website in order on opening day. But, we were willing to live with some mistakes because the alternative – insisting on perfection in every aspect – would have made us go insane.

Since then, we’ve gotten our house a little more orderly. TBCF is still used, but its meaning has changed. Rather than an excuse to ignore responsibilities, it’s a mandate to put the quality of our product above all other concerns. Let’s say we have a beer that’s almost ready to sell – it could benefit from another two days in the tank, but an account is demanding it now. If we rush the beer, we might degrade its quality. If we don’t, we lose a tap handle. Maybe we lose multiple tap handles. Maybe it is a horrible commercial decision to wait on the beer. But, TBCF. Decision made!

Just to prove to you how much we put the product first, we even mash in extra slow! Here’s a clip from yesterday in real time:

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But is it really that simple? Does TBCF have practical limitations? Say, for example, that we’ve got a bunch of 2016 crop year hops, whereas the newest available hops are 2017 crop year. If, instead of using the hops we have, we bought the newer crop to use in our next batch, there is a chance that the beer will taste slightly better. The cost is a certainty – sell the old hops and buy the new hops at a higher price, plus transaction fees, plus the time involved; and the benefit is uncertain – the beer might (but probably won’t) be improved. Crunching the numbers, it would be very, very difficult to justify the expense of buying these hops. But, TBCF, right? Are we not duty-bound to buy the hops, commercial interests be damned? Wouldn’t it be insulting to the product and to our profession to do otherwise, just for the despicable, worldly reason of saving money? Isn’t this precisely what separates us from Big Beer? In fact, if we don’t do it, aren’t we even worse than Big Beer for being hypocrites?

The answer to all of this is disappointingly mundane: As with most principles, TBCF does indeed have practical limitations that we should not ignore. It does not prevail over every other interest without discrimination or qualification. On second thought, that means that TBCF doesn’t constitute a Principle, but rather it holds the lesser, unholy designation of an Interest. So, if we’re being honest, we ought to change our guiding principle from TBCF to, “We have an interest in making sure TBCF”. How lame does that sound?

There’s a narrative that [Insert awesome brewery here] puts their product above everything else, and has no commercial concerns. One of my favorite breweries, Reuben’s Brews, is a great example – they boast that every beer is designed to be as delicious as it can possibly be, with no constraints. Whereas other breweries make beers using what’s available to them (which hops are in the cooler, what grain is in the silo, etc.), they start from a blank canvas, specify what ingredients and process would maximize the beer’s deliciousness, and then, by all means, make it happen. And, damn, if their beers don’t back this story up! They are the best example I’ve seen of TBCF in action.

Adam (Reubens’ co-owner) is a true inspiration to me – he is a recovering accountant who recognizes the evils of “efficiencies”¹. There are measures you can take that make life easier in some way at the expense of an infinitely small, unnoticeable sacrifice in product quality. But, add up a few of these measures and your change in quality becomes noticeable. And, worse, by allowing these changes, you’re signaling to yourself and your staff that the product’s quality may be compromised to a degree. Next thing you know, you’re running a business of trying to make a product as cheaply and efficiently as possible – you’re competing with Big Beer at their own game. Best to avoid these endeavors altogether by taking a hard line: TBCF, zero tolerance!

As much as Reuben’s exemplifies TBCF, I am sure there is still a practical limitation. Would they ever throw a half-bag of German Pilsner malt in as a substitute for 5% of a recipe’s Belgian Pilsner malt (two almost-identical ingredients)? If they did it by accident, would they dump the batch? If so, I give up. I’m not worthy. But I’m going to assume that, on occasion, they do compromise. And actually, the narrative that some breweries refuse to compromise product is really an approximation: These breweries do compromise, but they  do so on rare occasion with minimal impact.

Our objective is to put the beer first in as many instances as we possibly can. We try to foster an environment that encourages it. We have more tank capacity and brewing capacity than we need, so if a batch needs to sit longer than planned or get dumped, there’s not a rippling effect throughout our business. Like Reuben’s, we don’t have a house malt or a house yeast and we have few contracted hops, so we have maximum flexibility on choice of ingredients. Our overhead is low: we don’t have a bank note, loaned or leased equipment, we’re in a small space, and we have 1 full-time employee; thus, keeping the lights on is not the driving factor in very many decisions. We strive to maintain a lean, flexible operation with a strong balance sheet, and this affords us the ability to put the beer first with very little compromise.

And when we must compromise, we must not take it lightly. If we have those 2016 hops, and they were stored properly, we’re going to use them, because it is unlikely to impact the beer, and any such impact would be very minor. But we don’t do it without careful consideration: How can we mitigate this – perhaps we can add a slightly larger quantity to compensate for potentially reduced aroma? Perhaps we could use these earlier in the boil and bring in newer hops to dry hop? Then, how can we prevent this from happening again? How can we ensure that this year’s crop gets used this year? And finally, let’s remind ourselves that compromises such as this must be the exception rather than the norm. Maybe we should even give ourselves a few lashings to make the point (and a good Instagram post).

The phrase “craft beer” has become loaded: it often starts arguments about, “Is [insert beer here] really craft?”. The meaning is often debated, although the most official definition is stewarded by the Brewers Association. Like most brewers and beer enthusiasts, I have my own definition of craft beer: A craft brewery is one whose objective is to maximize the quality of its product². There’s nothing wrong with the objective of maximizing profit, which many businesses (and, by definition, all public corporations) have, but a brewery with this objective cannot simultaneously have the objective of maximizing the quality of its product. Craft brewers, on the other hand, strive to put the beer first as often as possible³.

TBCF is not above compromise, but I firmly believe that the frequency and nature of such compromises is precisely what defines us as craftsmen. Now, if you’ll excuse me, I’ve got to get back to almost always putting the beer first.

¹There’s an excellent interview with Rueben’s by Good Beer Hunting from December 2017 here.

²This is not exclusive to the stuff inside the can. In my opinion, the product includes the entire experience, including the story, the art, etc.

³I’m not saying that profit is irrelevant or unimportant. It’s necessary for survival. But it need not be the objective, just as the objective of living is not to maximize oxygen intake.

Here Come the Breweries

Up from a mere 124 in 1986, there are now over 6,000 breweries in the U.S. and thousands more in planning. In Houston, our fair share of this growth is still yet to come, with 45 breweries open and 28 in planning. Last post I made the case that Houston can handle these breweries, and I discussed the implications for the large craft breweries that must sell their product in foreign territories competing against dozens of new native local breweries. I am not envious of this challenge, but I also recognize we will have our own challenges in dealing with this altered competitive landscape.

The pressures of competition are going to increase. We’ll have more competition – not only from new breweries, but also from existing players – breweries and other market participants like distributors and retailers – attempting to protect or claw back their market share. This means that we need to perform to an increasingly high standard, and be thoughtful and deliberate about how we’re positioning ourselves. Here are a few themes in the front of my mind.

We must remember: We’re only as good as our worst pint

I vividly remember a conversation a couple years ago that I had with a Goose Island (owned by AB InBev) representative, who told me that, “Most craft breweries can’t deliver a consistent product.” No doubt, this is a talking point in the arsenal of every Big Beer sales rep, used in attempts to push out craft beer in favor of their products. And as competition intensifies within craft, I would expect larger craft breweries may invoke a similar argument, perhaps in a subtler form: “We have been making beer for X years, we have an extensive lab and QC department, we won’t let you down!”.

And how would we respond if confronted with this claim? We have a short track record and a production staff of 1, who is an apprentice without a master. How could we offer the same quality assurance to a beer drinker or beer buyer as a macro brewer, or even a more established craft brewer? Maybe we could circumvent this challenge by telling everyone that they shouldn’t expect a consistent product from us, but that’s just who we are, so deal with it. I don’t think that’s a good idea, but Scofflaw Brewing did.

scofflaw-picscofflaw-text

In response to heavy backlash, they edited the post, scrapping all of that text. To be fair, they were explicitly (complete with explicit hand gestures) making an argument that other breweries implicitly make all the time by allowing poor quality products to reach beer drinkers. And this is a losing argument, as evidenced by the fate of that post. Beer drinkers have made it clear: If you’re a commercial brewery, and you’re selling a product for a premium, there is no excuse for poor quality. And thus, as we say, We are only as good as our worst pint.

We strive for that worst pint to be a great one. We have a burgeoning QC program, thanks to our beer-tender / QC consultant / lab guru Joe Jacobs. We have a rudimentary lab, and are currently developing a sensory analysis program. And our tool from day 1 has been the Brock Wagner Test. With every batch, we ask ourselves, “Would you be proud to serve this to Brock Wagner [founder of Saint Arnold]?” If the answer is “no”, it goes down the drain.

This is a very different question than, “Is it still good?” or, “Can we sell it?”. Not only is selling merely “passable” beer bad for us, it’s bad for the craft beer movement. If we’re making a hefeweizen, it needs to be great. Live Oak Brewing makes one of the best hefeweizens in the country. It’s a beer that can transform the occasional Blue Moon drinker to a craft beer lover in an instant. If we’re putting a hefeweizen out that’s not on that level, we’re poisoning the well. In fact, we’re dumping a batch of hefeweizen down the drain this week for that very reason.

Drain dumps are a last line of defense, and an established brewery with a team of experienced brewers and a heavily automated system should very rarely rely on them. However, for us, we have to accept they are a cost of doing business1, and in the long run much less costly than letting that beer go to market, especially one with an increasing number of great beers and sophisticated drinkers.

We must tell better stories

How will beer drinkers make sense of all these breweries? They’ll do what humans do: Categorize them. Which ones are good? Which ones are bad? What does this brewery do well? What makes that brewery special? Which other breweries is this brewery similar to? These questions will be evaluated by each beer drinker, consciously or unconsciously, through personal experiences, conversations with friends, and, of course, social media.

We’re telling stories, whether consciously or not. When we opened, we had six beers: IPA, Belgian IPA, Dollar Pils Y’all, Hefeweizen, Looyah Milk Stout, Amber. Since most of those conformed to simple style definitions, the narrative of, “Holler sticks with classic styles (and doesn’t do trendy stuff)” quickly made headway. Last year, after winning a GABF Bronze medal for our ESB, “Holler makes good English beers” started making the rounds. At one point, a beer buyer told us he heard we were “the feminine brewery” in Houston.

These are examples of stories that we’ve told unconsciously. Some are completely false, some are merely oversimplifications. Some are a good look, while others undermine the stories that we’re actually trying to tell. So how do we influence the conversation effectively? I believe it is by telling better stories than these narratives – stories that are more inspiring and more profoundly true.

Like many craft breweries, and unlike Big Beer, we can tell great stories without having to make anything up. Our brewery is a personal business, and we’re so proud of our product that we put our freaking name on it. Every beer we make is something we’re excited to make – not something our focus group or accountants told us to make. When we introduce a beer, we need to explain why we’re so genuinely excited about it, and share the inspiration. When we’re posting on social media, we need to show how authentically authentic we are. And this must be reinforced by the quality of our product. The story is important, but the beer still comes first.

We must resist growth for growth’s sake

People often ask us when our next planned expansion is. When we reply, “We don’t have one,” they seem confused. Perhaps they think we’re not doing well. After all, if we were doing well, wouldn’t we be expanding to meet growing demand? The truth is, as a small player in an increasingly crowded field of craft breweries, we think our business is positioned well at its current size.

Today we sell about 80% of our product through our tap room, and the remainder to draught account sales at nearby establishments. These account sales constitute an important channel for interacting with Houston beer drinkers. They provide an opportunity to reach new customers, and also to reinforce our relationships with existing ones. They also provide a certain legitimacy – when a reputable bar or a cool restaurant has our product on tap, it helps tell a story that we make fine beer.

While these account sales are an important component of our business, they do not generate much income for us. As a very small brewer, our unit cost is high, so selling our product at a wholesale price produces a very thin margin, especially compared to larger brewers with dramatically lower unit costs. Further, as all of our product is unfiltered (so as to maximize deliciousness when consumed fresh), it must be treated with care and consumed soon after packaging. This is ensured in the tap room, where it is served fresh from the tanks, or from kegs that have been kept cold and have not traveled. However, with account sales, we have to monitor how the product is being treated. With a limited number of accounts, all quite close to the brewery, this is manageable.

And as more breweries open, the tap handle space (and shelf space) is going to get increasingly crowded with other local options, and the larger regional and national players remaining in the space will be pushing high quality liquid, with force, and with strong support from their distributors2. Again, with just a handful of accounts within a short drive, we can maintain a strong relationship and provide attentive, personal service to each of them, giving our product the best chance to compete.

Were we to expand production, the additional sales would be account sales, so we would go from 80% taproom to, say, 50%. We would be increasingly relying upon a less profitable, more competitive, more complicated line of business that our little 7 barrel brewery was not built to handle. Instead of a tap room-focused brewery, we would become a wholesale-focused brewery with a tap room on the side. Or maybe we could convince ourselves that we could be both at the same time – to be a Futon, and we all know how much everyone loves Futons!

So, while we’re always looking for ways to grow incrementally (increase the scope of our tap list, bring more folks into the tap room, optimize our account sales), we must resist the temptation to invest in large capacity increases, in favor of positioning ourselves best for the future of Houston beer.


1I sure do talk about pouring beer down the drain a lot. The truth is, we do it very rarely. But it’s such a heavy, emotional experience that each drain pour tends to stay with me.

2 Large distributors, typically under the control of a large brewer, have an extensive bag of tricks they use to push out competing products in favor of their own. The most common is providing a full set-up to the bar: The draught system, the glassware, the tin tackers you see on the walls; this in exchange for loyalty. There are several accounts that are unavailable to self-distributed breweries because they are essentially controlled by a distributor, who is controlled by a large brewery. Interestingly enough, this is the exact opposite of the original intent of the three-tier system of preventing a manufacturer from dominating the supply chain. This fascinating subject deserves its own post, if not its very own blog.

Is Houston’s Brewery Scene Saturated?

Like the rest of the U.S., Houston has seen a well-documented brewery boom over the past few years. The Houston metro area (defined here, and throughout this post referred to as “Houston” (even though I personally cringe whenever I hear people carelessly refer to Houston’s suburbs as “Houston”)) went from 8 breweries at the end of 2011 to 45 at the end of 2017.

And that pace has been accelerating: Of today’s active TABC licenses in Houston, more than half of them were issued in the last three years. This includes several breweries that have yet to come on-line, indicating that the wave of brewery openings is still coming in.

TABC license count

This growth has paralleled the rest of the state and [by considerable lag] the rest of the country, where the number of breweries has gone from 2,000 in 2011 to 5,600 (+2,700 in planning) in mid-2017. As such, the question of, “Can we handle more breweries?”, has been addressed at every level, in every city, and by every beer journalist several times over. (Bart Watson, Chief Economist for the Brewers Association, is constantly digging into this.)

However, this has not stopped the question from being posed, especially in Houston. A new brewery opens, and a common reaction is something like: “Wow! Another brewery in Houston! Look at this fierce, cut-throat competition! I bet the other breweries aren’t happy about this! One would be crazy to open another brewery in this city!” This opinion is understandable, but I think it’s naïve. Let me explain.

The breweries opening today are drastically different than those 8 breweries in 2011, principally in terms of their size and distribution aim. In 2011, it was essentially illegal for a brewery to sell its beer directly to customers through its tasting room. The brewery’s only available channel was to sell through distribution (including self-distribution), where profit margins are significantly lower than direct sales: The brewery receives 20-30% of the price you pay at a retailer. Thus, in order to be a viable business, the brewery had to be big. Today, with the ability to operate a tasting room, a brewery can open with a fraction of the capital and overhead, and require a much smaller market than the big, distribution-focused breweries required pre-2013.

Even with a wave of breweries now operating in this newer image, I believe many of our Houston beer drinkers are still most familiar with Saint Arnold, Houston’s O.G. craft brewery. As such, when they see a new brewery open, they assume it must achieve a Saint Arnold-ish scale to survive. And if a brewery that size were cropping up every other month in Houston, I would agree this growth would be 2 Fast, 2 Furious. However, as an example of the scale of these newer, taproom-focused breweries, ours produces roughly 1% as much beer as Saint Arnold, and that may one day reach 1.5%.

One thing that often surprises people is that we think more breweries opening in the area is a good thing, and I think many other brewers share this sentiment. And it’s not just because we like drinking more local beer – we actually think it’s good for our business. Craft is still a small segment in Houston, and local craft is much smaller. The more craft breweries making good beer, the more people realize how great local craft beer is.

We even like the idea of breweries opening up within blocks from our location – it creates a destination for people, a great example being Ballard in Seattle, with 11 thriving breweries in 5 square miles. It’s common we have people coming into our brewery that aren’t familiar with our neighborhood, and when they’re ready to make a move, we’re happy to direct them to our neighboring breweries (and bars / restos). Further, when we’re in need of help, we’ve got neighbors with similar equipment, supplies, and skills to call upon. And we have great places to drink after / during work.

But how many is too many? Even if we’re dealing with small, neighborhood breweries and a growing market for local craft beer, that market must have some limit. I’m generally enthused about new breweries opening up, but if, on my two-mile commute today, I saw 30 breweries under construction, my territorial animal instincts would probably kick in.

One way to analyze this question is to use an analogy with a city in another state. Los Angeles (the metro area defined here) is twice Houston’s size, but both cities are sprawling metropolitan areas with humid climates, low air quality, and bad traffic. Using LA also portrays a more conservative estimate of demand than, say, Denver or San Diego, where the local beer scenes have flourished for well-over a decade. So, how many breweries per capita is LA currently supporting, and how does that compare to Houston?

brewery density

While LA is twice the size of Houston, it has thrice the number of operating breweries. It boasts 1.07 breweries per capita, whereas Houston has 0.66. LA also has 42 breweries in planning, lending strong support to the notion that its current breweries are easily finding demand. This means Houston may still have room to grow. In fact, to catch up to LA’s current level of saturation, Houston would need 27 breweries.

BPC

It turns out that Houston has 28 breweries in planning. If they all opened tomorrow, we would be on par with LA, except for the fact that LA also has more breweries opening, and Houston’s population is growing even faster than LA’s.

So, we think the Houston market is primed for more local craft breweries, and we think it’s a good thing for beer drinkers and local craft brewers alike. But it’s not a good thing for everyone. Houston, LA, and every other city in the country is experiencing this shift to more local craft breweries. As Bart Watson points out, 83% of the U.S. population now lives within 10 miles of a craft brewery.

It’s not hard to imagine what this means for large craft beer brands that must rely on markets outside their home turf to pay their bills. Take your beer into a market 200 or 2000 miles away, and you’ll probably find dozens of indigenous breweries selling fresh, delicious beer into that market. And the locals should buy your beer instead because… why? It’s definitely less fresh and probably less relevant. It might be cheaper, but at a difference of $1 per pint or $2 per 6-pack, who cares?

Maybe it’s a very special liquid, the likes of which no other brewery can produce. There are good examples of this, particularly in the realm of sour ales and spontaneous fermentations. Unfortunately, most large craft breweries were not built to produce these specialty products, but rather to produce a handful of core brands, many of which are in rapid decline.

The cracks started to show in late 2016 when large and ever-expanding Stone Brewing Company unexpectedly announced it was laying off 5% of its workforce, citing competition from Big Beer on one end and “hyper-local” breweries on the other. This month, IPA pioneer Green Flash announced it was pulling distribution from 33 states and eliminating 15% of its workforce. Such restructuring is an understandable effort to adapt to new market conditions, especially when considering the alternative: foreclosure, which Smuttynose Brewing announced last week for its 32,000 sq. ft., 75,000 barrel facility in New Hampshire — a state-of-the-art facility that was running at 50% capacity. The lead lender managing the foreclosure and upcoming auction offered his diagnosis: “It’s not the facility. It’s not the management. It is a change in what happened with 4,000 new entrants to the microbrew business.”

While I still believe that this wave is good for local craft breweries, it does not come without consequence for us. Standards of quality and pressure to innovate will continue to rise. “Local craft beer” will become a norm rather than a differentiator. Shelf space, tap wall space, and social media attention “space” will become increasingly crowded. These factors, and others, have vast implications for how we manage our brewery. So vast that I’ll need another blog post to cover it. Stay tuned…

Now for some wisdom from an old brewery…

We’re now 1.2 years old, which is approximately 35 in brewery years. So, hopefully we’ve learned 35 years’ worth of stuff. Here are my big takeaways… 


Sacred cows ain’t so sacred (aka Never Say Never)

Going into this venture, we had several principles that we vowed never to compromise. In our holy taproom, we would never have TV’s, those obnoxious flashing matrixes of pixels that divert people’s attention away from bona fide human interaction. Our tap list would fully rotate: No matter how popular a particular beer may be, when that batch is out, it would leave the rotation, if only temporarily, in favor of something else. We won’t have a flagship beer with some catchy name. And speaking of names, we’re going to give our beers simple names (Holler IPA, Holler Hefeweizen, etc.) to let our beers sell on their own merits – No gimmicky names!

Well, fast-forward a year and the field of sacred cows is mostly ground chuck. To a degree, our steadfast conviction gave way to pragmatism. Our tap list is still 80% rotating, but our Holler Dollar Pils Y’all (note the catchy name) and ESB (award-winner) are now permanent fixtures. And as the Astros’ pennant race became increasingly real, how could we not watch it in the tap room? Now, the TV is a retractable screen that is only used for special occasions, but nonetheless, it is always there to condescendingly remind us to Never Say Never.


Making and selling beer for a living is not a non-stop party

“Do what you love and you’ll never work a day in your life,” goes the saying. Not that we ever believed it, but I can say that in this case it is not true. We work hard in this business, and, to be honest, there are days when we would rather be doing something else. It is extremely rewarding, but it is still work.


Earth-shattering Revelation: You can’t please everyone, no matter how hard you try

Our goal was to make a wide variety of fresh, flavorful beer. And if we could do that, everyone would appreciate it and love us for it. Scroll through the online reviews and we would get nothing but praise for our hard work, save for perhaps the occasional thoughtful criticism that would only help us improve. 

This fantasy evaporated immediately after we opened. While our product was well-received and we were confident in its quality, it didn’t stop the Haters from making themselves heard. I was shocked to see that, among several positive reviews, we had someone call our beer “undrinkable swill”. How could he think that? I worked hard on that, and, more importantly, I find it objectively delicious! Of course, it wasn’t the last negative review we’ve received, and we’ve learned that Shitty Reviews are a fact of life.

Our skin has thickened considerably since then. But we don’t ignore criticism, as sometimes it can be useful. For any negative review, we read it carefully, consider the context, determine if it has merit, and take action from there. And we never scroll through reviews before going to bed!


Our alcoholic beverage code is really screwed up

We knew the code going into the business, but we didn’t realize how much time we would spend having to explain these rules to understandably bewildered guests and industry counterparts. We have to tell the bar around the corner that, “No, we can’t bring you a keg on Sunday, even though we are allowed to fill the keg and you are allowed to sell it on Sunday.” We have to tell the customer that, “No, we can’t fill your growler because we’re too close to a school (seriously).” We have to explain to people that, “No, the CR-V outside with the TABC sticker on it is not a TABC officer – it is our vehicle that requires its own designation and license to be able to transport beer.”

Many people are actually surprised to find out that Texas, in spite of how proudly supportive of personal liberty it claims to be, has possibly the most over-regulated beer industry in the country.


Parasites abound, and don’t believe anything you read on the internet

We get calls and email solicitations constantly to participate in listicles, festivals, and other promotions taking advantage of unsuspecting consumers. That Top 10 Brunches list that you saw on Twitter is probably sponsored content. The Artisinal Barbecue festival with “hand-selected local craft beers” was selected by the hand of an opportunistic promoter – the highest bidder was probably Budweiser or the Budweiser distributor, and that local craft beer is probably one of its brands that it disguises as such. That highly rated place on Yelp? You get the idea.

Unfortunately, having seen these promotions from our perspective so many times, I’ve become a cynical bastard. Now, when someone tells me how excited they are to pay $100 to go to a Ramen festival, it takes every ounce of energy in me not to go full Debbie Downer on them (and I usually do).


Retail is brutal

Kathryn and I have always (not always, but for a long time) loved the idea of owning a brewery – to have complete control over making a product that we, and others, enjoy. And the tasting room is a key component – it’s a place where we share the product directly with the beer drinkers and get to watch them experience it. Oh the joy of seeing someone enjoy the beer – it really is awesome.

However, having a tap room means we’re partially in the retail business, and the retail business is hard. Making a tasty beer is easier than making people walk through the door. Sometimes business is great, sometimes it’s lousy, and it’s not nearly as predictable, as we’d like it to be, much less something we can easily control. And what about those people that come in? Will they have a good time? Will they have too good of a time?

At the beginning, we obsessed over every day’s sales, trying to decipher patterns that would tell us the fate of our brewery. Our traffic is up – Do we need to brew more beer? Hire more staff? Our traffic is down – Is this because of the weather? Does nobody like our beer? Now, we look at it on a longer-term basis. How was this month compared to the same month last year? Are we appropriately staffed on Wednesdays? How can we make sure we’re prepared for each day to be 50% higher and 50% lower than expected?

In terms of the service, we’re lucky to have an excellent tap room manager and staff that are tuned in to customers’ emotions and behavior. We also close early (10 PM on weekdays, 9 PM on Saturdays, 7 PM on Sundays), so customers getting intoxicated at our place is not as likely as it is at an actual bar.

I could go on and on here, but the bottom line is that the retail business is hard, and we are still learning how best to manage it.


The business plan: The planning is important, but the plan is useless

My background is in business planning, so we did not skimp on the planning. We must have spent over 500 hours working on our business plan. Research into the market, comparable markets, competitors, equipment options and costs, financing models, locations and lease rates. We had a SWOT analysis, a 5-forces analysis, a cash-flow model loaded with scenarios and investment options and tornado diagrams showing our ranges of uncertainty (as though we could appropriately confine our uncertainty). When we sought investment from friends and family, one of the potential investors shared our deck with his investment advisor, who said it looked more polished and detailed than what he routinely sees from companies seeking investments on the order of $50M (our ask was more modest than this by a couple orders of magnitude).

We started executing this plan, and by the time we were open, almost every assumption we had was wrong, sometimes even outside the range of uncertainty (how could that be!). For example, we assumed that Kathryn and I could do the production, deliveries, and tap room management without any additional help (not even tap room employees!) for the entire first year of operation. This was true only for the first week of operation, and that was only because we had our friends helping us in the tap room for that week.

It wasn’t all bad, though. We had a number of assumptions that turned out to be wrong in our favor, so that the net result was more of a wash. We also built in sufficient cash cushion to absorb the impact of unforeseen blows. And, we are still following the overall strategy set forth in the plan, which has held up to the current business environment (more on this later, maybe).

The planning was a very useful exercise. It helped us think through many problems we would face, helped us generate novel ideas, and it helped us present a credible case for investment to ourselves and our partners. And we still do a formal annual plan, and consider the process very important and therapeutic.


Social media is life

Of the 6,000+ breweries out there, I’m open to the possibility that there’s an uber-hipster brewery that runs without any social media, but, c’mon, we know they’re just doing that to be ironic.

As much as I’d love to believe our beer could sell on its own merits and word-of-mouth, I don’t think half of our beer drinkers would know who we are if it weren’t for social media. It is an incredibly powerful way to communicate directly with people about new beer releases, new places carrying our beer, upcoming events, or whatever goofy stuff we have going on in the back of the brewery.

Kathryn spends a lot of time on it, and luckily she enjoys it and is good at it. There are a lot of consultants and promotion companies that have approached us to manage our pages for us (perhaps they don’t think we’re as good at it as we think), but we like the authenticity of our social media voice, and we’re cheap.


Beer really is a friendly and super-awesome industry

From the outside looking in, I was always skeptical when I heard the feel-good stories from breweries about how collaborative and friendly the industry is. But we’ve been shown 100 times over how that truly is the case. From the early stages of planning, we reached out to other Texas brewers, most of whom we had never met, for advice. Without fail, every inquiry we made was met with genuine generosity. We got in-depth tours and conversations, specifications on equipment, and I even got the opportunity to intern for a couple weeks at a brewery that had nothing to gain by tolerating my ignorance and uselessness.

Now that we’re up and running, we can still count on others for help. When we’ve been short on a particular supply, nearby brewers have bailed us out. Our keg washer broke down and we hauled our kegs to a brewery down the street to wash them. In any other industry, I think, such calls for help, especially given the inconvenience imposed on the other party, would be met with polite refusal or maybe a reluctant agreement to help in a limited capacity, or with quid pro quo. But in this industry, generosity is the norm, almost regardless of the consequences. Helping our fellow brewers is akin to a religious obligation, and we also do our best to step up when we can.

And it’s not just breweries. When we opened in November of last year, we were inundated with support not only from other breweries, but also from bars, restaurants, and even distributors that welcomed us to the industry and many of whom have become true friends.


Overall, it’s been a freaking thrill, with no shortage of “character developing” experiences along the way. Here’s to another 1.2 years!

Are you the Brewmaster?

It’s a common question we, and other brewers get. The short answer is, “No”. The long answer is the remainder of this post.

The word “brewmaster” is often used as a job description in the U.S., probably because it sounds more fun than “Director of Brewing Operations”. However, consider how the Germans treat the term. As Garrett Oliver says in The Oxford Companion to Beer: “The title implies the successful completion of some formal brewing education and the attendant degree.” Such a degree, like the Diplom-braumeister from the University of Munich in Weihenstephan, encompasses 2 years of study, 64 weeks of internship, and requires 3 years’ working experience under a certified brewing engineer.

This, to me, is a much more meaningful meaning. As implied by the constituent parts of the word, a Brewmaster is one who has truly mastered the craft, and should be distinguished from one who merely brews. To honor the difference, many U.S. breweries, ours included, use titles like “Brewer” or “Head Brewer” instead.

So who should rightfully be a Brewmaster then? In the U.S., we don’t have equivalent degrees to the German system. There are shorter programs, like the International Diploma of Brewing Technology at Siebel in Chicago and Munich, which yours truly attended, and there are 2- and 4-year degree programs cropping up at a small but increasing number of Unis, but these haven’t earned the prestige of the German schools and they lack the crucial intensive and lengthy apprenticeship.

An obvious way to properly earn the title is to learn German and dedicate a few years to earn a degree at Weihenstephan. But how else? In my opinion, in the absence of formal designation, a Brewmaster follows that ambiguously unambiguous definition of, “You know it when you see it”, particularly in the eyes of one’s colleagues and peers.

It’s someone who has put in the time: 10,000+ hours of hands-on, brains-on brewing, including hot-side, cold-side, packaging, lab-work, quality control, R&D, maintenance & repair, troubleshooting, process improvement, and training others. It’s someone who’s achieved recognized excellence in brewing. It’s someone you could hire to build and run your brewery from scratch, make great beer consistently, and make no major errors along the way. It’s someone who can control a process of nature in a god-like way, containing the myriad possible things that can go wrong. It’s someone who could tell you how your already well-functioning brewery could improve upon brief observation, or upon simply tasting your beer.

Perhaps this is setting the bar a bit high, but it ensures that nobody can achieve the title without earning it. This is the standard that we should require of anyone claiming to be a Brewmaster.

Of the 6000+ breweries open today in the U.S., more than half of them opened in the last 4 years. It’s hard to imagine that the number of true Brewmasters has grown at a similar pace. Indeed, I can speak for our brewery and say that we do not have a Brewmaster at the helm. When people ask if I am the Brewmaster, I specify that I am “The Brewer”. This is not just because I like to make a spectacle of my admirable humility, but also because I fall incredibly short of this mark, thus the sad, shriveled up vestige of a conscience inside me will not allow me to claim otherwise.

Sometimes, I make mistakes so dumb that I shouldn’t be worthy of calling myself a brewer. I’ve flooded our walk-in cooler with detergent (I caught that on video, thank God). I’ve unleashed a geyser of barrel-aged stout, from which I’m still finding debris almost a year later. I’ve unwittingly built a bomb in the form of an over-pressurized cask. I’ve even sprayed my poor assistant brewer in the face with acid solution (understandably, he has since left our operation). Even providing for a range of interpretations of the title, I think we could all agree this behavior is uncharacteristic of a Brewmaster.

On a more routine basis, I’ve made less spectacular but still consequential mistakes. I’ve under-pitched yeast, resulting in prolonged fermentation and/or purchasing of additional yeast. I’ve under-aerated our wort, resulting in poor yeast health and ultimately in a batch of beer down the drain. These mistakes were painful, but over the course of my first 100 batches of beer as a professional brewer, they should have been expected, and in spite of how much we think we’ve learned from them, it would be foolish to think they’re the last.

As with many crafts and trades, brewing historically followed an apprenticeship model. You would work several years under a master craftsman, and through experience and observation his/her wisdom would be passed down to you.

While I’m not technically an apprentice, I still think of my job as being an apprentice of the craft. Rather than learning from my master, I learn from my more-experienced colleagues. We’ve done collaborations with other breweries in Houston and elsewhere, and this provides a fantastic opportunity to observe, and be observed by, great brewers. When I graduated from the Siebel program in Munich, the great Professor Michael Eder told our class, “There will be other brewers who make better beer than you. Do not resent them. Learn from them.” This piece of simple advice adds a whole new dimension to the benefits of finding great beer – working with and learning from the brewers who make it is extremely rewarding.

The way I see it, I’m one year into a long apprenticeship, fraught with mistakes but rich with wisdom to be had in a craft that seems indefinitely broad and deep. A frustrating yet rewarding journey, and at the end of it somewhere is a prestigious title that will fit as naturally as OJ’s glove.

In the meantime, please do your part in the endeavor to restore meaning to the word. Next time you’re at a craft brewery and you meet a cocksure 20-something who calls himself the Brewmaster, ask him what he has done to earn the title.