This week Your Business takes a look at the craft brewing sector, which is beginning to take off big time.
Paul Croucher was a lecturer in pharmaceutics before he started his Rotorua-based craft brewing business, the Croucher Brewing Company, in 2004 with business partner Nigel Gregory. Croucher Brewing sells its beer nationwide, exports to Australia, North America and Asia and also runs two craft beer pubs.
Tell us about your business
Croucher Brewing started as an idea to build our own empire. We had a passion for beer and had seen how it was one of the last bastions of change for the Kiwi palate. No one was drinking cask wine or instant coffee anymore, yet we viewed mass-produced lagers as our premium beers. Our business has grown in part because of our own vision and hard work, but largely because of an increasing demand in New Zealand and more recently in Australia for better beer. In our hometown of Rotorua we found it hard to sell our beer to pubs and restaurants partly because of the security these operations found in the bosom of the big brewers so we started our own craft beer pub, called Brew, in Rotorua and recently opened another in Tauranga. The local aspect helps mitigate one of our greatest expenses, which is freight, and provides a terrific shopfront for our brand.
What other hurdles have you encountered?
The challenges have primarily been undercapitalisation and a lack of knowledge in the profession. Working out how to make a silk purse out of a sow's ear when you know what the silk purse is but you're not a purse maker by trade hasn't been easy. While we have strong ideas about what makes a good beer and we like to think we're reasonably intelligent, we don't have the technical knowledge or the infrastructure of the big players. But this has allowed us to take risks the major players can not afford to take.
Your beers have won a number of awards. How has that helped?
We've been determined to win major beer and business awards, to distance ourselves from a "homebrew" perception, and to gather brand collateral that says "this is a quality product". I think we expected each major award to have a significant and immediate impact on sales, which they didn't.
However, when we can say we won the best Pilsner award in one of the biggest beer competitions in the world - Croucher Pilsner took this title at the Australian International Beer Awards in 2012 - it all helps when you're trying to sell the product.
We also believed traditional beer drinkers weren't necessarily our target market so we asked Bob Campbell, one of New Zealand's few Masters of Wine, to critique some of our beers. He gave two of them five stars/gold medal and the other three stars/bronze. We used this to go to wine drinkers and say "Hey, beer isn't just that flavourless alcoholic soft drink you have after mowing the lawn. It's got flavour!"
What business skills have you had to learn?
When I left academia for business I thought that the dollar was boss. I have since realised it's far more complex than that and relationships are key. I've probably learned not to shoot my mouth off to beer geeks and be more receptive to their criticism. In [author] Malcolm Gladwell-speak these guys are the "mavens", on whose passion craft beers live or die. They perpetually criticise, rightly or wrongly, but it is their passion in part that is educating the masses and is the vehicle for the word-of-mouth marketing of craft beer. Through smartphone applications, such as Untappd, a beer fan in North America can review a beer and convince someone in Australia to purchase a Croucher Beer.
Any advice for others looking to get into the business?
Gone are the days when the market will try anything just because it's new. Like any new industry there are booms and busts and I believe there are some extraordinarily vulnerable breweries out there. For those who are really determined they'll need to understand the market well enough to know where their place is in it. In any case be sure you can sell your beer.
Craft beer takes an upward curve
Craig Bowen, founder of BeerNZ, which distributes the wares of 35 Kiwi craft brewers, says while Kiwis' overall beer consumption is static, the craft beer category is growing around 20 per cent a year.
Growing consumer sophistication and innovation by brewers are among some of the trends he points to for the upward curve.
Rotorua-based brewer Paul Croucher, of the Croucher Brewing Company, says he got into the business after sensing the momentous shift in our wine and coffee drinking habits was going to hit the beer industry.
Like fellow brewer Ralph Bungard, of Christchurch-based Three Boys Brewery, Croucher's background was as an academic scientist.
Both say those science skills haven't gone amiss in the brewing business.
Bungard and Croucher were also early movers in the industry here, and have been in the business for a decade.
Innovation and improvisation in the absence of big bucks are hallmarks of the reborn microbrewing industry.
Soren Eriksen named his brewery, 8 Wired Brewing, after the Kiwi can-do mentality.
His approach includes setting up his operation as a "virtual brewery", brewing 8 Wired's beers on equipment that he rents from other breweries.