Brewers beginning to look abroad
MICHIGAN – It was nearly seven years ago when the Danish sales representative first stopped by Kuhnhenn Brewery looking for American-style IPAs.
For the company started by brothers Eric and Bret Kuhnhenn, exports have become a significant portion of their sales – amounting to more than 12 percent of the Warren brewery’s output in 2012.
But exports were not initially a part of their business plan.
“They sought us out. They wanted it for seven or eight years, but we didn’t have enough to send,” Bret Kuhnhenn explained. “It wasn’t until two years ago that we could brew enough to export. “This gives us a foothold not just in Denmark, but England, and France as well. We’re in the Delirium Café in Brussels, people can get our Loonie Kuhny.”
The distributor, Drikkeriget, was searching for American brands to export to European customers and had found Kuhnhenn when touring the state. The Danish firm eventually landed seven of the state’s most popular craft breweries, including Dark Horse Brewing Co., Founders Brewing Co., Jolly Pumpkin Artisan Ales, Kuhnhenn, Leelanau Brewing Co., Short’s Brewing Co. and the Livery.
While Kuhnhenn is one of the smaller craft breweries in the state, producing 1,400 barrels in 2012, exports now factor into the brothers’ expansion plans.
“Now that we’ve pursued the exportation of our beer, we set aside a small portion when we expand,” Bret Kuhnhenn said. “They’re willing to pay 30 percent more (in Europe). It’s expensive beer, and they’re willing to pay more for it.”
The American craft beer exports set a record in 2012, according to a survey conducted by the Brewers Association, the trade group supporting the craft beer industry. Craft beer exports increased by 72 percent compared to 2011, with a value estimated at $49.1 million.
For many brewers who came up during the 1990s and 2000s, the breweries of Belgium and Germany were the meccas for the industry. Originally drawing on old brewing styles and recipes developed in Europe, craft brewers went on to develop a style that was uniquely American – featuring bolder flavors and developing beers that wouldn’t have occurred to brewmasters three centuries ago, let alone three decades ago. (Short Brewing Co.’s Bloody Mary beer leaps to mind).
The tables have turned today, explained Mike Stevens, co-founder and CEO of Founders Brewing Co. in Grand Rapids. Overseas markets are turning on to American craft beer, particularly the pale ales and IPAs, while brewers are traveling to the U.S. to gain insights into the industry here.
“We were exporting essentially when we had extra beer sitting around – a pallet here, a pallet there,” Stevens said. “We are fanatical about the quality of our beer … we didn’t share the same effort with our international efforts. It came down to a decision that we were either going to commit to our international markets full-time, or not do it at all.”
Founders had long exported small quantities overseas, typically to foreign competitions, but had only committed to export markets within the last six years. The rise of Internet connectivity and social media has sped the development of foreign markets. Stevens can connect with beer geeks across the globe with a tweet today, where it may have taken years in the past to convince distributors to take a chance on bringing new beers to consumers.
The Grand Rapids-based Founders now exports more than 6,000 barrels to customers in England, Australia, Denmark and Puerto Rico. The company today announced it was working with beer importer James Clay Ltd. to distribute its beer to the United Kingdom. Founders will begin exporting its regular, seasonal and draft beer later this year.
“(Overseas markets) are much like our first 15 years. You were taking cases of your product to people, letting them try it and push for space,” Stevens said.
Like 15 years ago, educating the consumers remains at the forefront of craft brewing’s sales strategy, he said.
Quality remains key
The beers in Founders’ portfolio have a shelf life of 150 days and the company zealously works to ensure its beers are fresh through annual audits of all its wholesale customers and many retail locations. When your product can sit in a shipping container for as many as four weeks in transit, Stevens knows that it limits the shelf life of his product when it reaches the market.
While sales representatives travel the U.S. to ensure their beer is fresh, exporters have to rely on their distributors to help protect the product.
“It is a disadvantage that you don’t have market managers doing field audits,” Stevens said. “You realize you have to have some flexibility. We’re not dealing with a marketing plan that sets particular volume goals. Rather, we set distribution goals – particular hot spots that we want to reach.”
Finding the right partner
Founders isn’t alone in looking at exports to grow the business.
The Brewers Association is working to help grow craft beer exports through its Export Development Program. From helping brewers navigate the regulations surrounding exports to maintaining a list of trusted distributors, demand is growing, particularly in Scandinavian countries, said Mark Snyder, export development program manager.
“Our members are concerned about the quality control from production, to distribution, all the way to the store shelves,” Snyder said.
The program starts by doing the leg work for craft brewers who may not have the resources to travel abroad, doing due diligence on distributors.
For Joseph Infante, senior attorney at Miller Canfield in Grand Rapids and a home brewer himself, the due diligence for distributors is key to protecting a brewer’s brand when looking to foreign markets. Distributors are the face and eyes and ears of a brewer in a market.
“You really have to ask: How are you going to protect my brand? It comes down to the same issues as here – you have to vet your distributors,” Infante said. “You have to ensure that they have experience with craft beers. Will they push your brand? You don’t want to get lost in the shuffle.”
Others focus on domestic growth
For many brewers, there exists ample opportunity for growth domestically. Bell’s Brewing Inc., like many craft brewers in the state, is in a constant push toward meeting ever-growing demand for its beer, said Laura Bell, marketing director at Bell’s.
“It is all about production and how much beer we can make – we’ve never been willing to sacrifice product to send to Canada or across the ocean when there are people in the U.S. that want our product,” Bell said.
The brewer shipped 216,000 barrels in 2012, and has plans to increase that by 20 percent in 2013. Bell’s has exported small shipments in the past, a pallet here or there for beer dinners and competitions, but has no plans to export in any significant quantities.
“We would have to take it away from someone who is already paying for it to send it overseas, which doesn’t make much sense to us,” Bell said. The company distributes to 18 states, Washington, D.C.; and Puerto Rico and is in the midst of expanding into New York. “Only being in 18 states … leaves us 32 more states to go.”
Bell’s sentiment echoes that of many in the state, said Scott Graham, executive director of the Michigan Brewers Guild, the trade group for the state’s craft beer industry.
“I haven’t had many conversations around this. It is not something a lot of people are looking at,” Graham said, noting that many of the exports that do head overseas are destined for competitions. “At this point it really is more promotional than business development.”