Should New Breweries Have A Dump Fund?

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Should new breweries have a "Dump Fund?"
It's becoming more and more common...
Whether I'm out trying a new brewery in my town or while I'm traveling...
I get excited for the experience, order a pint of whatever sounds good, and take a sip.
My brow furrows and my lips make a disapproving gesture.
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Searching For The Perfect Pint
The beer is bad.
Usually there's a huge flaw. Often diacetyl, phenols, or acetaldehyde. Sometimes there's not just one flaw; it's the entire beer that's off - from the recipe, to the ingredients, to how it was stored and served.
If I close my eyes I might think I'm tasting one of the many below-average (we'll say to put it nicely) homebrews I judge in competitions.
Except those are homebrewers. I never say anything insulting on those score sheets and always provide helpful feedback for the brewer.
This brewery's beer, on the other hand, is something I paid for. And it should taste much better than an ill-fated homebrew entry.
Even my most non-beer geeky friends notice the poor quality at new breweries. That's when you know it's a problem.
Look, I get it:
  • Opening a new brewery is crazy expensive (I've never heard of a start up brewery staying under budget).
  • Breweries rarely open on time and they have countless people asking when they're going to open their doors. Not to mention restless investors. There is tremendous pressure to start pouring.
  • When you invest all that money into equipment, permitting, renovations you need dough. You need to sell beer!
So far consumers seem OK with being guinea pigs. Especially when it's a neighborhood brewery, the locals are more lenient.
The attitude is one of, "Hey, we know you're new and you're still getting the kinks out. We like you guys and support you, so we'll put up with sub-par beer until you figure things out."
And that's totally cool. It's something I really respect about the craft beer community, and I've been a willing participant myself.
Except that the problem is getting worse, and consumers are getting impatient. Here in Colorado, 64 new breweries opened in 2014. There are over 100 more in planning.
How long will consumers be willing to play guinea pig? Not long is my guess. When there are so many high quality options, why be a beta-tester for bad beer?
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Expect Quality In Every Pint
Which leads me to my main point: When you open a brewery, you need to serve good beer from day 1.
The problem is often a lack of skill and experience. A lot of brewery owners jump into it without having worked at a professional brewery, gone to brewing school, or even before becoming a top-notch homebrewer.
But even a highly skilled homebrewer needs to learn how to brew on a professional scale. It's a totally different ballgame and takes time to learn the new equipment and process.
With that in mind, I suggest new breweries have "dump fund." It's for learning your system and dialing in your recipes.
Budget for a certain amount of batches that you're simply going to dump out because they're not ready for serving to the public.
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Good Quality Beer Equals A Great Reputation
If batch #1 turns out delicious, great! Serve it. Just consider it a bonus.
Maybe some breweries do this already. I don't know and I'd be interested to hear how often this happens. This is what a pilot system is supposed to be for, except these start up breweries are so small that they are essentially pilot breweries themselves. Or if they are using pilot systems (most likely a homebrew system), something goes massively wrong when it's scaled up to the big system.
All I know is that there are many breweries serving their early batches that are clearly not ready yet.
Yes, this is easy for me to say when it's not my money on the line. A brewery owner is probably groaning right now over the added expense of this idea.
Or is it more expensive?
What about first impressions? What is the long-term cost to your reputation for serving bad beer?
As Will Rodgers said:
"It takes a lifetime to build a good reputation, but you can lose it in a minute."
Whether it's a dump fund or not, the point is this: The time is coming when a brewery can't open with bad beer and survive in the marketplace. In fact, it may already be here.
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At $4 a pint, they are not selling beer at a loss. Its built into the prices just like any restaurant.
 
@poptarts I think you missed the main point of the article. I'm not arguing that they should build risk into the pricing (every business should do that). I'm saying that they unless their early batches are really great, they should dump them instead of serving them as many breweries currently do.
 
You never get a second chance to make a first impression...
 
I'll go one step further and suggest that early success with sub-par beers gives some new breweries a 'if it ain't broke don't fix it' mentality. Hey, if they can serve unbalanced hazy beer with hop chunks bobbing up and down for 5 bucks a pint, why work the kinks out at all? That is the case with one of my local breweries. When they opened, I was excited to drink beer brewed 3 blocks from my house. That first pint tasted (and looked) like something I would be embarrassed to serve my friends. They've gotten slightly better, but their IPA is still murky and chunky and harshly bitter. Their taproom seems to stay full, so maybe I'm too picky, but with so many other options out there, I don't buy their beer.
 
100% agree with Billy and the article on this one. I have paid $4 or more for a craft beer on tap that just sucks.
Its even worse when I have had that same beer before that was pretty good one trip and is a totally different beer on a different trip in a bad way. This is when you know they are just schlepping the bad batches to the masses to keep loss cost low. Bad move as I have shunned 2 of my local breweries due to this habit.
Those of us who are homebrewers and have been for a while can tell the difference and you really do only get one shot with a homebrewer to make a first impression.
 
I've been complaining about this for months with only mild validation! If the craft beer bubble is going to stick around like we all hope $5 a drink of sub-par product is unacceptable. People (your average consumer) are buying expensive beer because it's cool, and the worst part is none of them even know it!
 
You better plan to serve awesome beer or you're not gonna last in this market. Consumers have taste buds now. If your beer is bad, your business WILL fail. That kind of crap only works for ABInBev...
 
As a new head brewer I just was upgraded to a 10bbl system and I'm still working the kinks out in my process, mostly efficiency issues. I wish more people would be honest with what they taste. If all I hear is that it's really good and getting rave reviews from the tap room then I'm less inclined to change something that I perceive might be off. I'll take honesty any day from customers because who knows what their background is and I might learn something.
 
Why not just get a sampler first before you buy a pint? If the sample sucks, move on. Here in Albuquerque, we have had an explosion of craft breweries, three of which have gold medal winning IPAs. If a brewery opens now and the beer is bad, the brewery is not going to be open for long. Bad beer=bad business.
 
"Dump Fund" beer could be served at a discounted price as "irregular". Then cost could be covered or at least the pain of a bad batch wouldnt have as much of an impact.
 
Completely agree on this article. As a fellow Coloradoan, I try out new breweries at least once a month. They get the first shot as soon as i can stop by after they open. Depending on those results, I will give them another shot in a couple of months to work out the kinks. If they haven't improved, they are off my list of places to go and recommend. I guessing several used brewing systems will be coming on the market in the next couple of years.
 
Just to pass on information. A brewery has to pay taxes on all beer that they produce. If it is dumped, a FV/BT bursts, bottled or kegged, they still have to pay taxes. The owners are less inclined to dump out a sub-par beer if they can sell it. Add to this the fact that they have been paying for their lease, all the costs of starting a brewery, equipment and supplies, employees, insurance and utilities... They generally open for business in a deep financial hole.
While I agree that they should have worked kinks out of their process and system before they open, sometimes that is not always possible. The moment they get their license they are losing money, so getting the doors open and the beer flowing is a priority.
 
There is a brewery here in town that serves subpar beer on a continuing basis. They were good homebrewers who quit their day jobs to open a brewery and then just scaled up their homebrewers recipes without any changes. The result is really, really shitty beer. Whatever flaws were in their home brews have been magnified 50 fold. They didn't want to pay a consultant to come out and help scale up their brews or even hire someone to show them how to use professional grade equipment. Our area is just getting into the brewery scene so they still have the "new brewery" effect going for them, but all it will take is one good brewpub opening up to shutter them for good.
 
This is an effect of the craft beer "bubble". You see this in most bubbles. In a bubble, you can make money without things like quality products, or a "viable business plan" (i.e. look at the 90's dot com bubble), or adequate risk mitigation (i.e. look at the subprime loan bubble).
But bubbles dry up. And when they do, these sub-par breweries will get their comeuppance. Give it time. This will pass.
 
@mhurst111 I agree that there will be used brewhouses on the market within the next few years. Realistically, that is how it should be. If a brewery cannot or will not produce at least good quality beer, they should rethink their business. Craft Breweries are a "hot" commodity right now and there are lots of people that are jumping in trying to cash out without really knowing anything about the business, having no business experience and/or limited brewing experience. If you talk to most successful brewery owners, they often have a degree in business and have owned or managed top notch companies before. I've heard it from lots of 'Pro Brewers' on podcasts and interviews... If you want to own a brewery, have an MBA or a partner that has an MBA, that is more important than a Brewing Degree from UC Davis. If you want to be a brewer, then get a Brewing Degree. Most homebrewers don't realize how much is involved in running a brewery, it isn't just about brewing 5 or 10 gallons.
 
Or, just have a "Bad Batch" day and the beers are $0.50 or something to cover the cost of cleaning the glass.
 
I don't blame the patrons. They often don't understand what they are tasting. After all, bars were packing them in while they swilled the mass produced stuff that was all we had until the craft brewing industry began.
I'm imagining a way to use the bad brews. Can't they serve as educational examples of what you don't want? Sure, dump most of the bad batch. Don't sell it - that's for sure! But what about giving it away to the public during a tasting event as an example of what is bad with explanation for why it's bad too. Heck, I'd pay for this experience. Not as much as I'd pay for a well crafted brew, but I'd pay to learn what it really means - via my own taste buds - to taste a beer that suffers from diacetyl, phenols, or acetaldehyde off flavors.
Just my 2 cents.
 
I can empathize with breweries, but I won't sympathize. If you can't afford to guarantee top quality, you shouldn't be in business.
 
I think the time is here for a "dump fund".
There are two local brewpups I have been to once and I won't go back. I wasn't into beer enough to identify what was wrong but I knew the beer wasn't worth the price tag so I left after one beer and haven't been back.
I can choose from five other local breweries and a craft tap room with 20 rotating taps all within fifteen minutes of my home so there is no reason for me to waste my time with a place that even once sold me a bad beer.
 
To you on here who run small upstart breweries or are thinking of taking the plunge in this direction, take heed of this comments section. These are what the folks that can really help spread the word on your business in a positive way honestly think when you try to sell us less than premium beer at premium prices. We speak the loudest not by words, but with our wallets. Some valuable info to be gleaned here.
 
If there's over 100 on the way, you can count on 90 of them Not being here 5 years from now. In that time, the 10 that left will have shaped up nicely
 
Some brewers realize they have made a bad beer.... and relabel it as "Sour Beer"!! LOL!!!
 
Just don't go back it's that easy. Everyone has the right to brew bad beer and try to sell it to you. Now if you buy it than that's on you. Ever since I got into homebrewing it seems like the first thing people tell you is. "ya know just because your buddies think your beer is good don't think you can start a brewery"..Who the hell is anyone to try and tell you or anyone else that you shouldn't do something. Seems like it's just bitter people that hate to see someone else dive into something they didn't have the balls to do. Don't ***** just don't buy...
 
I once bought a can of beer from a bar where the beer was local. It tasted like medicine. That's one of the only times I've ever not drank a beer I paid for. Also went to a brewery in CO, I won't mention which one, and ordered a beer. The waitress came out with a milky glass full. I said; what is this? She said it's the bottom of the keg, you can only get this flavor until the keg is gone. I said; take it back. I couldn't believe it. Yes I agree that beer should not be served or bottled or canned!
 
I've been surprised by bad beers that were even more expensive than much much better craft beer, not biggie I just won't buy them again at least in a long way, if they're still there in a few years I'll try them again.
 
I've only had bad beer at one new brewery before, it was a place that was as focused on serving food as beer; I haven't been back. There's tons of great breweries in the Seattle area and three (at the time, now 4) good to great breweries in town, so why would I bother with bad beer?
 
@losMythos I totally agree with you about voting with your wallet, but I also want these breweries to succeed. I'm rooting for them and I truly hope they take the advice in this article and read the comments.
Serving bad beer is also bad for craft beer as a whole. If someone is new to craft beer and skeptical, one lousy experience may lead them to say "all craft beer stinks" when in reality it's just that one brewery's beer that stunk.
 
I operated a startup brewery putting about about 2000bbl a year for the past two years.
As I am young and don't have the funds for such a venture, I was signed on as a head brewer.
The ownership did not understand the finer points of beer and its flaws, nor did the distributorship (in our state they're mandatory)
In the 4000bbl of beer I put out I would have dumped a lot if I were judging it.
You see many breweries are popping up with get-rich-quick minded investors at their helm.
My investors in particular came out of the gate under-budgeted and because of that, we got all the basic hardware but I was shorted on all my QC equipment.
I kept producing batch after batch telling myself "this will get better, if we just sell a few more I can get what I need"
But financial reports came to my desk, and the money was there. It was just being wasted on marketing, software, travel expenses, ect.
I got so sick of sending out crap batches. Once a hefe batch with a hint of lacto was shipped to a hot warehouse. I knew they'd soon be corrupted and sour. But there were deadlines and nothing I could say would stop it from going out the door because "it tasted good enough to the rest of management".
We were in turn shooting ourselves in the foot. This particular lacto batch did indeed do as I had expected. It went from being our most popular beer to our least popular. Sales in general dropped off. This is an extreme example of what happened regularly. But the brewery was located in a State with less than 30 breweries, so most* breweries with the capital to start survive due to regional dominance. Perhaps I wasn't given enough power or money or something. A brewery should be owned by the brewer, trust no other.
In distributed states where you sell in bulk, the problem is not the input cost of dumping a batch, its the lost revenue from selling said batch. Another huge issue is distributors themselves. Ours took my pristine session IPA out of my coolers and put it in 100 degree warehouses for 2 months. In states where distributors are required, package beer suffers.
It got to the point I wouldn't even drink our beers, there were so many technical flaws and no means to fix them. Everything was just...off.
The problem with production breweries is that the margin of return is much smaller than that of a brewpub, they are more likely to blend away bad beer with good beer to make meh beer.
I wanted to create a culture of beer connoisseurs and critics. A culture who knows what good beer is an isn't afraid to dump a shoddy glass. A culture that can talk to me about the technical aspects of beer. That never happened. I produced blonde day in and day out. I wanted to do many beautiful things, but at the end of the day, the all mighty dollar reigns, and the vast majority of bad batches will be chocked up to "we'll do better on the next one."
Stick to homebrewing my friends, cherish the honesty of it.
 
I think a big problem is a lot of them do not know they are serving bad beer as they don't have the palate development dialed in yet.
New breweries need someone with a good palate to help them out up front.
 
I travel all over the country and try many of the various micro and nano-brews I come across. Denver is rife with them, and the vast majority are at least good. I can only distinctly recall maybe ten specific brews I couldn't finish and at least half of them were experimental. So it might be overstating things to say bad beer is a real problem. Craft beer is a bubble (the real problem) and like all bubbles this one will burst. The hard thing to witness isn't a good brewery making bad beer but good brewers (sometimes great brewers) who think they can get by on passion alone. Unfortunately many of the upstart breweries (not all) fall back on the "build it and they will come" mentality. I've spoken to at least ten upstarts who specifically cited some form of "people will buy the beer if you brew it" as their business model. That may have been partially true five, ten or especially fifteen years ago if you had your ducks in a row, but now even a good product and good marketing doesn't lock in success quite the way it had in years past. In the words of a good friend, if you're opening a micro in 2015 or beyond you best come correct or not at all.
 
It's a lot like the restaurant business. If you're not serving great beer (or food) right out of the starting gate, you're screwed. Like someone else noted above, "you never get a second chance to make a first impression."
By the time you figure out you're missing the mark, the bad reviews on Yelp and other sites will already be piling up.
A brewery could offer up "test samples" of a new batch, for a reduced price. Emphasize that it's not an "official" release yet, that you are working out the bugs and want some honest feedback. Then adjust as needed on the second batch.
 
@Thundercougarfalconbird Thanks for your candor.
<i>"The problem with production breweries is that the margin of return is much smaller than that of a brewpub, they are more likely to blend away bad beer with good beer to make meh beer."</i>
The problem with a brewpub, however, is that they often have an entire other income stream. They may be able to sell bad beer with impunity because the margin is high enough on the beer that even if they're not selling a lot of it, selling bad beer won't put them out of business.
Locally we have a brewpub with decent food but crappy beer, in a major retail mall right next to a big movie theater. Just based on location, they get a lot of traffic, and they sell a lot of wine, liquor and commercial beer to offset the crappy beer they brew on-site. It's such a waste that they even have brew equipment, as the restaurant would probably be better if they'd get rid of it and just sell commercial craft beer.
 
I disagree that craft beer is a bubble. I think craft beer is here to stay, and the proof is the customer. The average consumer of craft beer is so much better educated in beer than ever before, and their palates are more discerning than a lot of brewers give them credit for. Granted, there are a lot of lousy breweries out there that won't last long (yay! cheap brewhouses for me in a few years) but the people drinking craft beer are going to continue to multiply. I see it every day and it makes me very, very happy. I agree wholeheartedly that the best breweries are owned by the brewers, and I think we will see that trend continue to grow. Look at the amazing diaspora from Goose Island as a prime example (Southern Tier, Firestone Walker, Virtue Cider, Revolution Brewing Co. are just a few of the breweries started by ex-Goose brewers). Brewers are going to keep getting experience on someone else's dime before moving on to open their own successful breweries. Think of these sub-par breweries as the minor leagues for brewers, where they can hone their skills before getting called up to the majors.
 
My buddy who opened his brewery last year (he has been a head brewer elsewhere and has many awards under his tenure) is a stickler on his beer for reasons mentioned. He has a 30BBL system and ended up dumping his first amber due to a flaw in it. It was something minor, and he probably could have gotten away with it, but he didnt. His last IPA which is solid) batch came out hazy, and he didnt serve it due to not being consistent with what his normal IPA appearance was. Small details like this are what make me look up to this guy, pick his brain, and use him as my critic.
He also self distributes (allowed given his annual production) so he has control of how his beer is handled. When I asked him if he would ever distribute in the beginning, he was hesitant due to the gamble on how your beer is stored with a distributor.
Ive noticed some newer, local breweries wanting to pump out a lot of varieties and the beer quality is sacrificed. Yet they still get customers. I guess the good thing is that word of mouth travels, at least in the craft beer world. There are some local places that I believe are only still standing due to their superb location. There are a few places downtown, one at least with prime location for football games, that sell sub-par beer but get a plethora of foot traffic during football games, other sporting events, or just your average weekend night.
 
I agree with the premise; breweries should have a dump fund, if they care about their reputation. BUT it should only be dipped into if it's an actual brewing flaw.
At the same time I think if you're focusing on being a small experimental brewery, it should be expected that all of those experiments won't succeed in making well-balanced and great tasting beers. The beer shouldn't have diacetyl or other lazy-brewing flaws / mistakes but if you end up with a habenero IPA that's too spicy for 90% of customers you should still try to sell it.
-If you're not failing, you're not trying hard enough and learning enough to become great.
Failure IS and should be an option on the way to success or you'll just make mediocre beer -that beer already exists and its macro beer.
I also think people seem to be misunderstanding what a bubble is -if craft beer is currently a bubble and it pops, that does NOT mean that "craft beer isn't here to stay" or that it will dissapear. Simply that supply is outpacing demand and the current status is unsupportable. -You're going to have localized places where there are bubbles and where there are not. Beer's a local product, generally.
There's people currently operating / owning breweries who have no business doing so and who have nearly no business plan, horrible branding / marketing, no hope of becoming profitable giving the size of their brewhouse, and just no appreciable experience or knowledge of how to make beer well. Lots and lots of bubble-like behavior out there; in Seattle right now, anyway.
Adam
 
Most assuredly if it's not fit to serve, it's not fit to sell.
Right on logic. I appreciate this article.
 
@Thundercougarfalconbird Really appreciate you sharing this with us. The behind the scenes insights are eye opening.
 
@CA_Mouse Breweries in CA need to pay taxes on beer that crosses the threshold from production to sales, and if you dump it before that, it's not taxed. I'm not sure if this is state specific, but if you ruin a batch in production and never put it to your kegging or bottling line, it isn't taxed.
 
More breweries should forgo the dump fund and just serve junk, it's always nice to find commercial brewery equipment at bargain prices on Craigslist.
 
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