122 - What the Healthiest Breweries Are Doing Differently (feat. Aaron Gore)

0:00You can make incredible beer and be a homebrew. You get into this because you want to sell incredible beer. And if you want to do that, then there's all of these other elements that go into it. And it doesn't mean that beer is not important. It just means that beer is now a part of this larger business tapestry that you have to respect and treat with the same level of care that you're treating the liquid that you're putting out.

0:33Aaron Gore: Aaron Gore is here on the show. Aaron, Cody and I are always amazed when we drink with you and then kind of leave. You are the yin to our introverted yang. You are the, and I say loud, loudest is not obnoxious. You are the most extroverted person I've ever met in my entire life. I don't know if that's a compliment or not. I just wanted to start by saying that. Hello. Hi. Hey, Isaac, nice to see you too. No, loudest was also a good description. We're actually, people at home, not recording this using microphones at all. I'm in South Carolina. He's in Indiana. We are just hollering. I'm yelling across that distance, and we're recording it.

1:16Aaron Gore: So it's been working out pretty well. Aaron, we've known you for, I don't know, seven or eight years, maybe longer now, years. Give us a quick version of your background story. I know you've worn a million hats. uh what what led you to where you are today in the beer industry absolutely uh so really got started in it of all things coming out of college but more than anything didn't really know what i wanted to do so started working for tjx companies they own you know tj max home goods marshals that whole family businesses and i got laid off at a pretty early age and realized i never wanted to work in an office again uh so i was talking to my girlfriend at the time I'm now my incredible wife, Chris.

1:59And she was like, well, what do you like? I said, I don't know. I like beer. And she said, well, do that. It was like a light bulb went off. I didn't even consider the fact that doing something that you're passionate about rather than something that you kind of had to do for work was even an option. So she actually found me my first job in the industry on Craigslist of all places and basically handed it to me, said, hey, you got a job now. And I was running routes for Finch Beer Company out of Chicago, and I ran the Northeast for them. And by the time that we moved down south and since then, I've run operations, I've run sales.

2:35I spent six years as a consultant. I ran a licensing and co-manufacturing startup. I work in the software space now. I've worked with guilds all over the world at this point and very straight organizations, not just in beer but also in cider, mead, coffee, kombucha, and I'm also the co-founder and vice president of the American Craft Beer Hall of Fame.

2:56Aaron Gore: So you have a lot of time on your hands and I'm glad you're here today. Yeah, plus two kids. So you know, clearly I hate sleep. I just heard one of mine trundle, that might not be the right word, run up the stairs very loudly. She might burst in here in a moment. What do you think, so this is the type of stuff we talk about when we get together. And one of the reasons we want to do this is just hit record on the conversations we typically have anyway. But what do you think craft, you know, craft beer, capital C means in 2026? Do you think that word has utility still? I do think it's a tough question.

3:33I think it has utility, but I think defining craft is almost like defining the definition of the word obscenity. You know, it's one of those you'll kind of know when you see it, but it also really depends on the perspective of the people you're asking, because what craft is to the average consumer is very different from what craft is to the Brewers Association, which is very different from what craft is to the majority of the people within the industry for whom it's as much a subculture and a community as it is anything else. So within those contexts, what craft means is very different, but it does still have some intrinsic value for describing this thing that is different, even if it's tough to put our finger on, even if it's more a spectrum than a firm definition.

4:18Something that is counterposition and something that is different than this industrial scale beer that really existed for the majority of America's time as a beer brewing nation. And obviously that became more and more so over time, especially post-prohibition. But if you look at something like Budd or Miller or Coors, even if you look at the light lagers being produced by smaller breweries today, those sub-industrial breweries today, there is a focus on the quality of the experience, not just the quality of the economics that I think is very different philosophically between those two concepts, even when those finished products are not necessarily super distinct from each other.

5:00And I think that really is the messaging and the purpose behind craft, even if those lines have become distinctly more fuzzy now than they may have been back in 2011, as an example.

5:12Aaron Gore: Do you think the segment, just industry, do you think that the craft segment is healthier than people? So it's all doom and gloom, and it is very hard out there on the streets. We're all well aware of that. Do you think that it is healthier than people think, or are the challenges maybe even deeper than they're portrayed? Is this the structural question or the passing question? Yeah, I think the biggest challenge here is if you say that the industry is healthier than people think, people hear that as saying that the industry is healthy. I don't think it takes much to look at the metrics that we're tracking, the state of the industry, the sales, the number of the breweries, the share of throat, to go ahead and pull back a term that I think we were all happy to cast into the dustbin of history.

6:03and say that, no, the industry is not necessarily healthy. But there's a couple of things that, for me, are real bright spots there. One is what we've really seen more than anything is maturation of the industry. It's about the industry growing up. And if you even read some of what industry analysts were saying, as far back as 2016, I know I was writing about it, and I was not necessarily first to the game by any stretch. which any sort of fast-rising industry has a tendency to follow some level of S-curve. And one of the things you have a tendency to expect as growth outpaces penetration into the mainstream is some level of rectification.

6:42There's a lot of firms that never really had a business model to begin with, a lot of breweries that never really understood how to run a business. They were just able to ride this growing wave of craft beer as a concept. Time caught up with them. A lot of those were going to close irrespective of COVID. A lot of them were going to close irrespective of any of the other changes that we've seen around the industry. So that part was always going to happen. And in a lot of ways, it's led us to an industry where we have smarter, more capable, more adaptable businesses, either coming to the forefront or ones that were already there really proving themselves out within a more competitive market.

7:21it. The other thing I think that we need to keep in mind is that compared to a lot of industries, we're actually in pretty good shape, you know, for all the changes and challenges. It's like, and I've said this a lot of times, you know, beer is really bifurcated, you know, as a, as a market, you know, we have our larger wholesale focused breweries that specialize in that. The vast majority of breweries have realized that what they really are is a hospitality industry with the beer problem, not vice versa. We're using our production equipment, our brewing equipment as a way of recouping some of the margin that would otherwise be going out to a wholesaler in the case of a traditional bar and restaurant.

8:00When you look at it like that, the business model makes a lot more sense, but it also means that we've got to compare ourselves against those hospitality businesses, not just against this kind of platonic ideal of what the brewing industry was one point in time. And when you look at that, breweries close at a lower rate than traditional bars and restaurants. They tend to do better in terms of total revenues, in terms of RevPash, revenue per available seed hour. They tend to have higher margins. So in a lot of ways, the beer industry is actually one of the most sustainable segments of the hospitality industry.

8:33And to my knowledge, no one is sitting around saying that we have a collapse or an apocalypse of restaurants. There's been challenges. COVID was a huge devastating blow to them, but that's just small and mid-sized businesses that's running any sort of smb is hard and there's not a huge amount of money in it but you know that level of churn that level of natural evolution that level of of you know some companies just not being able to figure out the path forward but others finding a sustainable lifestyle business just becoming a third space and providing utility to their communities, I think that's more true now than it has been at any other point in beer's history.

9:15Yeah.

9:15Aaron Gore: If you zoom out, it is far less dire. I've got my hands or feet, whichever appendage, in multiple different worlds. I've got the trades over here, and I've got Codo here, and I've got writing here. It's just kind of across the board, the economy is bizarre because you look at your 401k and things are looking really great, but then you go out, talk to your neighbor or your cousin or whatever, and they have a hard time affording groceries. This is very weird. I think that's just affecting everything. It's just like this dark cloud. It's very weird. There's nothing deeper there to say other than, yeah, it's complicated.

9:58It's a very real vibe session on top of some actual hard problems. I mean, and this isn't to mitigate it, like focusing in on just beer, like our version of groceries is hops and grain and packaging supplies. Those have factually gone up in costs and beer consistently under indexes versus inflation on our price increases. So as much as people say beer is becoming more expensive, it's actually become less expensive in relative terms to the typical basket. it. But when people feel crunched, they feel like they have less to spend more generally. And when breweries are feeling crunched, they don't feel like they can necessarily move on price the same way that they have to move on how much they're outlaying for all of those inputs.

10:40So it is a very real phenomenon, like margins getting squeezed, that's becoming a lot harder. But more than ever before, those inputs really aren't the biggest cost for the majority of the country's breweries anyways. It's labor. Food costs, if you're running a restaurant, that's an absolute nightmare. Your margins on food are slim, even if you need food to be competitive in the market these days. So it's very real problems. But, you know, for me, the whole story of craft beer going all the way back to Ken Grossman building his first brew house out of dairy tanks is, you know, one of, you know, adaptation and creative innovation around to problems, not necessarily through them.

11:20And if we're going to stop and say that this problem is somehow intractable at a time where craft beer is bigger than it's ever been and has more resources than it's ever had, that seems to me to be kind of intellectually dishonest with ourselves, because there have been far bigger problems at times where craft beer as a idea in American culture was so much less secure, that we're going to find our way through this. And we already are. You can see it in the market right now. And I know you work with breweries and planning just as well as I do. And the people entering the market right now are the smartest that they've ever been.

11:53They are way smarter before opening their doors than I ever was after being in the industry five, six, eight years.

12:01Aaron Gore: Very squared away. Yeah, we're working with maybe three startups at any given time. And the conversations now, this is all anecdotal, but the conversations we're having today versus, say, 2016 are just light years apart. I mean, actually talking about audience and differentiation and positioning and, like, concept. Oh, they have a P &L. It's amazing. Yeah. They know what those letters mean, yeah. I don't know if you can paint with a broad brush, but what do you think the healthiest brewery, like, the most resilient breweries are doing right now? Is there anything that kind of unites them or is it completely case by case?

12:38I think the healthiest breweries right now are the ones who realize that it doesn't matter how good your beer is if you can't keep the lights on. You know, if there's no business to be able to provide the beer, then it doesn't matter how good it tastes, how good it is. And we've all seen some breweries with absolutely amazing beer shut their doors because they were over leveraged or didn't have a good way of communicating with the public, getting people across that threshold. And those are tragedies, objectively, but you have to keep the lights on. You have to keep the doors open first. That is your first abiding mandate because you can make incredible beer and be a home brewer.

13:15You get into this because you want to sell incredible beer. And if you want to do that, then there's all of these other elements that go into it. And it doesn't mean that beer is not important. it just means that beer is now a part of this larger business tapestry that you have to respect and treat with the same level of care that you're treating the liquid that you're putting out. And those are the ones I think are doing best is the ones who realize that, you know, your business model is not beer. Your business model is selling product over your bar. There's a lot of things you can be selling over your bar.

13:46Your beer is just ideally your highest margin one because of the fact that you're recouping that margin by producing it in a house. when you start thinking of it in those terms. It makes a lot of your business decisions a lot more reasonable and rational. And this is reflected in the breweries that closed down. If you look at the rates of breweries that closed down, there's been a few surveys. Last one was a couple of years ago, so I'm sure some of this has shifted a bit. But in terms of directionality, it's cash flow and it's leverage and it's leases. That's what shuts breweries down. It is not beer quality.

14:18And I think all of us can name a brewery in our own neck of the hoods that makes mid beer that kills it in terms of, you know, getting people through the door.

14:27Aaron Gore: Sure. And that's because the average consumer is never going to be a Cicerone. They're never going to be a diehard. And frankly, for them, beer is a part of their life. It is not their life. And that's OK, because one of the things we did amazing was recruiting all of our biggest fans to work in the damn industry. So as we really started bringing those people who are our diehards in, that's the exact same people who we were taking out of that consumer pool. So we need to realize that for most people, they might be into music. They might be into professional wrestling. They might be into Doctor Who to the same level we're into beer.

15:00But, you know, this is just a component of their lives. But we can't build an industry without them.

15:05Aaron Gore: Is there stay here for a minute? I know you do consulting work. is there kind of like where do you where do you start when you walk in with someone like is there low-hanging fruit i mean just like pure cogs is that like a place i mean like there's so many things that you can look at what do you eat what do you how do you even get into it to help someone right the ship absolutely uh chief one's always data uh just actually having access to it for a lot of breweries they're capturing a lot they're either capturing a lot more than they realize and haven't really put it in a form that they can digest and use or they're just not capturing it and that's you know some of that's a cheap plug like my day job is i help run a software company for brewery management software for the industry that's what we do but part of the reason i jumped into that space was i've been using brewery software almost my entire career i'm a big fan of data i married a professional data analyst it's an area that uh clearly i'm a bit invested really into data really really into data you know i'm sure she's got a great personality i'm mostly after for a day to two kids later.

16:09But you have to be able to understand what is real. And for a lot of brewery owners, like any sort of overtaxed small business owner wearing too many hats, stressed out, and I get that. But if you're making decisions based on your gut, you're the one who has to eat the results. And a lot of times the way that you feel things are going or how you feel things are happening in the market, in your locality, inside of your own four walls even, isn't necessarily reflective of truth. And patterns are hard to find if you're not able to get everything in a way that you can digest. So that's one of the cheap ones for me is like, let's take a look at your COGS data, your sales data, where your revenues are coming from, start building some trends and not just looking at this individual product is doing well and And these ones aren't.

17:03But the number of breweries who have no idea how many of a certain style they really optimally need on their taps. You might only need one IPA. And that's going to sell just as much as if you have six of them because they're all cannibalizing that same customer. Or it might be incremental where every one that you add is adding one more pint as people experiment around. And without being able to have that feedback loop, that information that you need as you run some of these natural experiments in your own tap room, It can be really easy to make assumptions that are largely built on guesses. And the problem with that is all of us, no matter how well read you are, no matter how much experience you have, we're all prone to biases.

17:41We're all prone to blind spots. We're all prone to dearth of information in certain areas. And we need to be able to look at things clear eyed and clear headed if we're going to be able to make the right decisions for a business that has admittedly few resources and, you know, high stakes when you got an SBA loan, your house is on the line. One of the first times we ever sat down for one of your talks at a conference, I think you just, my main takeaway was you outlined just basic cogs of different styles.

18:12Aaron Gore: And I think a lot of people in the room's jaws dropped because you made a very clear point where a lot of people's like number one or two or three beer, or maybe just put emotion into it, their favorite beer is really costing them way more. Like they need to not do that, you know, six week turn thing. They need to be, you know, and I just, I don't know if you can speak to that for a minute, but it really, it made even Cody and me look at our own business and be like, where are we kind of f***ing up? Because a lot of people are just, it's a lack of data. I mean, that really is all it is. Yeah. Yeah.

18:43No, a hundred percent. The big point I try to illustrate people. And one thing I learned both the hard way and repeatedly over the course of my career has been as a consultant or even just someone commentating on the industry, I can't make assumptions either. There's always going to be cases where my past experience isn't necessarily the experience that's going to be relevant to your business, which is why every time you got to work on building expertise, not just experience. Because expertise is about understanding the underlying principles behind your experience and being able to imply them to novel situations.

19:18A lot of people mistake those two. And experience by itself only really helps you if you're in the same situation again. And that rarely happens in life. But for COGS, one of the chief problems is a lot of people don't really know what they're looking at. Because there is a lot to take into account. Because your inputs, grain and hops and yeast, those change in terms of their costs on a weekly basis. They're incredibly volatile. They change based on the agronomics involved in hops and grain. They change based on the market itself, demand for certain things, whether or not you're engaging in contracts for certain hop varieties that are in high demand.

19:58So even knowing the individual lot of hops, the individual purchase you made, if that's getting used versus when you made three weeks later, it's coming in at 20 % higher in cost. That can have a real impact on what you're actually intaking. And the anecdote I've used a lot of times, and I won't name names, but there was a brewery in Georgia that I consulted four years ago. They had seen some huge growth over just a couple of years and couldn't figure out why they had no money. Tragic classic problem, Sure.

20:31Aaron Gore: Yeah.

21:00product in the market. And if you don't have the ability to see, you know, skew by skew, format by format, you know, week by or like at least batch by batch, what it's costing you, it can be easy to wind up upside down without even realizing it. And that's one of the things that I think is so tragic is, you know, if you have that data in front of you, it's easy to get ahead of this to reformulate. That's one nice thing is customers can be a lot more forgiving. You've got a lot more tools as a brewer than you do in, say, wine. If wine, if you've got a bad vintage, you're not going to be able to charge as much for it, and that's just the nature of it.

21:37There's not a whole lot that you can do. There's definitely some interventions winemakers can do for consistency, but it is a lot more limited. In beer, you've got a lot of levers you can play with, but if you don't even know that you need to be pulling those levers, It can be real easy to, even if you're not winding up upside down, find yourself pushing a product that's making half the margin of another product that might be selling less, but is just an absolute winner for you in terms of what you're actually putting in the bank. Or not even realize that you're vulnerable on a particular hop variety that's now becoming really constrained in supply.

22:10Cost shoots up. What are you going to do? You've made the mistake of putting it on the label. stupidest thing anybody can do when they're producing a flagship beer is tell you what hops are in it because now if anything changes you're stuck so you know the more you're able to understand that the more you're able to adapt to it and recognize that you know your inputs these aren't manufactured products uh in this in terms of your inputs like it's not like steel or the steel is steel is steel steel steel you know your grains are going to change the coas are going to change the quality of extract in your grain, the quality of alpha acids, you know, the aromas, the essential oils, those are going to change.

22:51Your formulas are going to need to change and your availability is going to need to change because it's an incredibly niche industry. So you have to be able to adapt and you can't do that if you're only finding out about it after you start losing money.

23:01Aaron Gore: If I were good at interviews like this or conversations, I guess we call it, uh, at the very beginning, when you were giving me your background, I would have asked, had you ever gone back of house to brew beer? I know you've brewed beer before, obviously, but did you ever, like when you, when your wife said, we'll just do beer, did you ever go into brewing or was it always more marketing consulting? No, when, uh, sales was the first spot, I was really good at running my mouth. Uh, discovered that when I was, I actually was a professional wrestler back in another life and discovered I was, if you can run your mouth, uh, in your underwear, pretending to get your ass kicked in a VFW hall in front of like 20 people, you can run your mouth pretty much anywhere.

23:41Aaron Gore: Oh, yeah. I do that for free on Tuesdays. Yeah, exactly. Some of us call that a good time. But yeah, so went into sales really just kind of trying to figure out what I was good at, realized I had a knack for it. The operations stuff really came later. A lot of that came through hard-earned experience and through screw-ups of my own, through learning the hard way and reconciling that I wanted to make sure that I educated myself enough to not only prevent any of those mistakes within my own businesses that was running, but also being able to help other people within their businesses as well. But to go back directly to your question, I think I brewed two commercial batches ever.

24:22No one wants me brewing a third. Yeah. I understand all the principles. I know how to do it. I've home brewed. I am not a good brewer And part of that reason is brewing is baking. It is very much attention to detail and your margins are slim. And if you're good at that, then you are able to churn out some incredibly consistent product that is absolutely delicious. I'm more the artist kind of cook. I'm very good at cooking, not so good at baking. I like to be able to do it by feel and by flavor. And in that way, I'm actually pretty good at making wine and cider at home. But yeah, brewing was never my knack, ironically, for it being my first love of an industry and the one I've spent most of my career in.

25:06Aaron Gore: The last time I was involved in brewing, I was at Big Lug and I drank probably 15 short fills on accident before noon. On accident. Yeah. Well, I mean, they stack up. They were lockers. It was fine. But Scott was like, you have to leave. You can't be like, we're going to get sued. You can't be up here. So I stay on the boring side of the table and help people build their brands. We're kind of coming down at a 30 ,000 foot a little bit now. What beer styles or segments or occasions maybe are you most excited about over the next few years? What do you kind of see around the corner? Well, it's what I'm most personally excited about and what I think is going to be informing the industry.

25:49uh for the industry itself i think the most exciting element is and the most important element is the fact that we realize that if you have the equipment to brew beer you have the equipment to make a lot of stuff that is an incredibly flexible system if you got if you got the equipment to make beer outside of doing like crush you can do wine you can do cider you can do mead you can do hard seltzers you can do any sort of blended spirit-based product you can As long as you're using bought-in spirits, you can do hemp beverages, you can do soda. There's an enormous amount of flexibility because you actually are over-invested in terms of equipment by having not only the tanks and the brights and everything, but also the hot side.

26:31So breweries are incredibly versatile businesses. And if you ask Bart Watson, president of the Brewers Association, me and him had been talking even a couple of years before he came on board as the president when he was still chief economist for the BA that, you know, this is the Brewers Association, not the Beer Association. That's very intentional.

26:50Aaron Gore: Yeah. It's an industry that's there for the businesses themselves. And those businesses have realized that, you know, by that same logic I was describing earlier, the more things you're able to produce, if you can do them well, and if you can do them at enough of a scale to make them cheaper than just buying them off of a wholesaler, you can recoup your margin on a lot of stuff. And that's a real point of versatility. I've worked closely with the American Cider Association and the cider industry as well. And that's one of the challenges they have is a lot of breweries are going into cider and a lot of them are doing it poorly.

27:20So how do they continue to educate and reach across the table to these folks who are able to and inevitably going to do to make cider, but help them make it better so that they're able to help build that category rather than hurt it on behalf of everybody. So I really think that versatility is not going to go anywhere because more than ever, customers really do like the customizability of the average beverage shelf. And you see us grocery stores have more variety than ever. if you go to the beverage section of any grocery store has more variety than ever in terms of categories and products and that's a beautiful thing now as a consumer that's that's a net benefit me personally i do love the fact that as the industry has started to tighten a bit it's made differentiation that much more important and it's kind of one of the great ironies is being a craft brewery that makes every single sort of style is no longer a differentiator because there are so many breweries out there and so many of them really were making largely the same types of beer.

28:23Not necessarily the same quality, but same styles. So more and more of them are finding their differentiation through branding and messaging and values, but a lot of them are also building their product mix into that as well. And that means that you're getting some real cool specialization, but that leaves room on the margins for playing around in some of these styles that you'd never see before. Like I've seen more Lichtenheiner's in the last two years than I've ever seen in the industry. And it's not that many people are drinking them, but if your specialty is in traditional German beer, then that is a style that plays into who you are as a business that wouldn't work for most of the breweries down the street.

29:03So that lets you kind of create more value out of even a lower selling product than you'd get if you were just having to compete with the five IPAs, the Pilsner, the Goza, and everything else that you'd be having on if you were kind of an old model craft brewery. I say realizing we're only talking like six years ago, that was really trying to make every single style at once without any sort of sense of what makes them different than the brewery down the street. Do you think that mid-strength, so this is what

29:31Aaron Gore: everyone's talking about right now. Everyone meaning in our little chamber. Extremely small echo chamber. Everyone, the survivor bias of everyone coming to us to work with that. And we're like, oh, the whole industry's blowing up. Do you think that this is going to just kind of become a tiny corner of the industry? Or do you think that the idea of moderation over abstaining, abstination, That's not a word. Do you think that that could become like a broader trend that seeps into the industry? I think it definitely can. I think beer has always been the drink of moderation. It's easy to forget in our land of double IPAs, but compared to wine, compared to spirits, it still very much is.

30:15And historically, that's been its kind of mark in the landscape. Back in the 1800s, England had a huge issue with public drunkenness, and there's a very famous political cartoon. You can look it up. It's Beer Street and Gin Alley. And it's showing the kind of contrast between a world where everybody's drinking beer and one where everybody's drinking gin. Kind of hilarious in retrospect. but I do think moderation is going to be a continuing theme that seems pretty clearly laid out even if a lot of the fears of Gen Z isn't drinking have started to largely abate as we've realized they're just aging into it same as any generation does I do think moderation as a principle is one that's not going anywhere but what we've seen is it's not people going full sober, there is definitely a worry people are just going to stop drinking entirely.

31:08And what we found is that by far the biggest category for drinkers for non-alcoholic beer are drinkers of full strength beer.

31:17Aaron Gore: Yep. So I think much more what you'll see is zebra striping. And for anybody unfamiliar with that term, it's alternating alcoholic and non-alcoholic beverages, whether that's water or something like a non-alcoholic beer. that has been probably the most popular way of engaging in moderation and now that the quality of non-alcoholic options has gone up they feel like adult beverages you still feel like you're participating in the occasion i i see that really being the path forward to moderation but i don't think most people are looking to kind of binge and abate like you know go with something that's 12 alcohol and then have a non-alcoholic beer so it's one of the reasons i'm a little skeptical of like the low elk, uh, you know, it's kind of pre-trend now, but it's on everybody's lips.

32:05So, you know, low alcohol beers are going to be the future. I don't see that being the case. I do think it's going to be those kind of five to 6 % beers coupled with non-alcoholic, uh, for anyone who's looking to engage in moderation is going to be kind of the primary modality. I think people struggle a bit to, to go maximally into a, like a triple IPA followed by, uh, by a water. Um, I think that's going to be a little less likely. And I do think low alcohol products, people just aren't willing to pay the premium you need to, to justify them because they do cost, uh, close enough to full beer in terms of price to where, uh, the average person, if they're not committing all the way to non-alcoholic, they're just not going to pay for a 2 % beer the same way that someone in a pub in the UK back in 1920 may have been willing to with an English smiled.

32:54Aaron Gore: I think that's the biggest hurdle for the entire segment is just the pricing. It's not even the perception. It's not even the positioning. And we've heard that from really large breweries that are flirting with the space. It's just, will people actually buy this? And we've always, I mean, we'll talk about this for a minute. We were talking to Bump Williams a while back about it too. I'm skeptical of the idea that consumers look at two things on shelf and go ABV to dollars and I'm going to buy this because it's like more ABV and it's going to get me more like lit. But then I feel like I'm in the minority because almost everyone else in the industry does say that that exists.

33:30Aaron Gore: I don't know. Do you have like, do you have any evidence or thoughts on the idea? I mean, I also think, let me, I'll be quiet and let you answer here in a moment, but I think it's like, if you're, it's an occasion thing too. If you're at a ballpark, we're working with, we were talking to Rob Day about this recently. If you're at a ballpark, you're going to buy the biggest ABV thing you can because it's going to cost you 15 bucks anyway next to a mic ultra. So it's like, well, I'm going to go big. Anyway, I think there's a question in there. I'll be quiet. No, no. I think you're definitely onto something with the way that people engage with these things.

34:05I don't think, matter of fact, I think pretty much every shred of behavioral economics would say that people are not the rational, you know, it was at a homo economicus that we like to think they are. They're not sitting there working out the total ABV per dollars and cents. But I do think occasions more than anything are something people do calculate. So if you're looking at a four-pack of craft beer, that is four times you are going to be able to have a beer. When you are looking at a 750 of Tanqueray, now it abstracts it enough to where, A, you have a hard time conceiving of how many occasions that is, but you know that it's a lot more than that.

34:50So even if you're spending$15 on the four pack versus$30 on the bottle of Tanqueray, that Tanqueray, you know, is going to get you a lot more. And you don't really think about the mixers. You don't really think about even necessarily the alcohol content. You're really just getting into, you know, I'm going to get quite a few drinks out of this bottle. And it's going to last as long as I need it to on the shelf. And, you know, it's versatile. So if I'm feeling like an old fashioned one day and feeling up these knees another day, like like liquor in general allows you to kind of play your own bartender and mixologist a decent amount.

35:22I think that's part of it. I think that's a lot less than people realize spirits aren't doing that well either. You know, for all the talk about them gaining share, they're gaining share, but they're not doing great. And craft spirits in particular are in full collapse. If we think beer has had a rusty years, the craft spirits industry has been in an actual Armageddon here stateside. wine's been suffering as well. I think the bigger issue is we need to recalibrate our thinking and realize that alcohol is not competing just against alcohol. And we've seen this across segments, but our challenges have a lot more in common with movie theaters than they do almost anything else in the sense that movie theaters used to be where you went for entertainment.

36:04And all the way back in the 1930s, the average American went to the movie theater, I think it It was like 47 times a year. And by the 19th, like late 1950s, I think it was down to something like sub 10. Now these days it's under two. And the reason is there's just so many other ways to entertain yourself and to occupy yourself. Home has become more entertaining than ever. And I think that's a huge element. Like for a lot of people, they are social drinkers. I think we underrate the fact that the social element of drinking was what was driving a lot of drinking. It was people going out to the bar because that was their main form of entertainment and social interaction.

36:40Well, it's more fun than ever to just stay home and avoid people. My wife didn't realize she was an introvert until COVID. And then she was like, oh, I hate people. And now she doesn't go out if she can avoid it. And, you know, there's TV, there's video games, you know, a good book. It's more comfortable to be at the house. You can take more back and enjoy it at home. People have started cooking again after decades of cooking at home declining. And it's an element I think that we underrate is that there's just more ways to keep yourself entertained and occupied. You know, your phone is, you know, all the entertainment you could ever want.

37:15And for a lot of folks that need to go out to the bar and have a drink or even to have a drink at home is less pressing because there's other competing ways to spend their disposable income and to keep themselves occupied. And that's OK in some elements. I mean, there's plenty of things to argue that this is not necessarily good for the average American, but at least no better than alcohol. But it does mean that rather than us looking at, you know, spirits as being the big cause of our woes or wine being the big cause of our woes or seltzer or any of the above, you know, realizing that, you know, it's just there's a lot more options on things to do these days.

37:57and particularly in an environment like right now where people are also feeling a crunch on their home finances, it really does mean that more than ever our value proposition as a category, beverage alcohol, is a lot less strong than it used to be. What are you optimistic about within beer, within the future of beer?

38:18Aaron Gore: Leave us on a happy note. Yeah, no, I think the biggest thing I'm optimistic about is we're figuring it out. like you know there will always be a place for places for people to gather there will always be a need for people coming together for camaraderie for the need to gather over a common beverage a common experience and in that i i think beer is always going to have a place but more specifically and i guess more totally optimistically you know the the hospitality based model it's a good one There's a reason that is by far the largest paradigm. And we had a lot of breweries who didn't know how to differentiate.

39:01They didn't know how to communicate within their community. They didn't know how to create a welcoming space. They were people who got into this because they wanted to make good beer. And that's great. That's the foundation, that kind of almost ridiculous over-optimism that comes with entrepreneurship. That's what created this whole cloth. Now we see people starting to approach these things a lot more reasonably and a lot more rationally and realize that this is a business like any other. and that as long as you mind your P &L, as long as you mind your investment, as long as you're not over leveraging yourself, as long as you're communicating with your community and engaging with them in the same way that a dry cleaner or a convenience store or a bar or a restaurant, what have you, any sort of small or mid-sized business does, that there is a very sustainable paradigm here that's built on things that have been true about humanity for as long as people have been around.

39:58You know, there were local restaurants and street eats places and taverns going all the way back. I'm reading a book, actually, funnily enough, I was using it to prop up my microphone earlier. I'm reading a book about beer in ancient Samaria right now. And one of the chapters is all about the tavern space all the way back in America or America in the world's earliest civilizations. And I think that that element will always be here. And when we realize that the need for people will always outweigh the need for beer, but that the need for beer helps facilitate satisfying that need for people, that's really where we as an industry survive and thrive.

40:39And that's really an area I think we're starting to get better at than we've ever been before.

40:45Aaron Gore: Aaron, thank you for hanging out today. That's beautiful. Always a pleasure. Always a pleasure hanging out with you, man. Thanks for listening to Beer Branding Trends. If you like what we're doing here, if you find this valuable, please rate and review us over on iTunes and head over to beerbrandingtrends.com to join more than 5 ,000 subscribers who receive our monthly email newsletter covering strategy, currents, and actionable advice from Kodo Design, a branding firm on the front lines of beer and beverage branding. Take care. We'll catch back up with you soon.