Jump to content
ADI Forums
microshiner

Craft is Not a Commodity

Recommended Posts

The thing about craft isn’t the craft. Everyone practices craft, whether you’re a grandmother making quilts for the church bazaar or you’re a sewing blankets in a factory in Vietnam. No, the thing about this phenomena we call ‘craft’ is that it’s an entirely new way of doing business. It’s a melding of the best practices of the Old World with the technological advancements of the New.

There is a reason I chose the name MicroShiner. It was because, like the moonshiners, whose moniker is believed to have been derived from the early English term "moonrakers" and resulted from the clandestine nature of illegal Appalachian spirit makers, this new breed of distillers were fucking rebels. This was the new Whiskey Insurrection, except that, instead of simply resisting a tax, these cats were wresting an entire industry back from those who had stolen it. They weren’t going to be satisfied hiding up some holler, or in their basement, sneaking out to sell a jug here and there or giving it away to their friends as Christmas gifts. No. They were about changing the paradigm. Regardless of the prefix - whether “moon” or “micro” - they were definitely shiners, and I thought they were badass.

But now it seems, sort of like its contemporary, the blockchain, that has, remarkably, grown up alongside it, this rebellion has been appropriated. Like the original Whiskey Rebellion, the real basis for this one has been re-authored, twisted to some other intent, and threatens to be given over entirely by the very same people who initiated it.

What I’m talking about is acquisition and the reconsolidation - worse yet, recentralization - of the production capacity that was distributed across the landscape by the craft movement. It’s a travesty, and I don’t care whether you’re a consumer, producer, distributor, or investor, you should have no part in it.

Here’s the thing folks. If it can be centralized, it can be automated, and should. Don’t get me wrong, I have nothing against passable drink at near zero marginal cost. But it has nothing to do with craft.

Craft production provides intangibles that almost cannot be quantified and certainly cannot be understated. Read Small is Beautiful by E.F. Schumacher and you’ll understand what I mean. And go ahead, send me your Hayek and Ayn Rand. But I’ve already read them too. They both agree.

I understand that you don’t care about economics. You just want to make, or enjoy, a good drink. Maybe you want to escape from the 9 to 5 and do something with your hands. Leave me out of this, you might say. No problem, you and I are on the same page already.

Perhaps you’re an investor, who got into this to get some ROI on your money. Really? That’s pretty last century, but okay. I hope you also bought some Bitcoin and shares of MGP. You might want to exit those now, too.

See the thing is, an independently owned distillery, appropriately scaled to meet the needs of a specific population, is not the same thing as a brand. And the demand for the thing I just described will always be there. The other thing, its a fancy label on some commodity whiskey. But you knew that. It’s why you got into craft in the first place.

The genie is out of the bottle people. Leave the past where it belongs. We are never going back.

 
  • reaction_title_1 2

Share this post


Link to post
Share on other sites

Maybe it's late, maybe those few drams I had after dinner leave me unable to process the written word adequately, or maybe I'm just a bit dense, but I'm having a little trouble figuring out your point here. 

If you're saying craft trumps brand and craft is here to stay, I'm 100% behind you although I do believe that independently owned craft distilleries also need to build strong brands and compelling stories to compete in the marketplace with commodity products.

  • reaction_title_1 1

Share this post


Link to post
Share on other sites

If you've read my other post on value propositions then you'll know that I don't believe micro-distilleries can compete with commodity products, nor should. My opinion is that over time automation will reduce the marginal cost of producing beverage alcohol at scale to such a point that it will be impossible for micro-distillers to be competitive on price, which is the only concern for the cohort of drinkers who account for the vast majority of sales by volume. Craft and commodity are diverging at a rapid rate, and there will be very little middle ground.

But what I am more getting at is, whether they intend it or not,  craft distillers are a part of a global movement toward decentralization. It is a massive redistribution of capital and production capacity, and it has only just begun. That is what is driving this thing, and those who have gotten into this thinking they are going to build a brand, scale, and exit are in for a surprise. It will work for a little while, but not for long. As commodity brands continue to lose customers even as they acquire the biggest, most successful 'craft emeritus' (as  ADI calls them) brands, they will quickly wise up. The future of the beverage conglomerates in the craft market lies in what Jeremy Rifkin calls 'performance contracts' not in the acquisition and ownership of actual operating distilleries.

So plan accordingly. Remain a rebel. Set a ceiling. Stay the course. Your business and your community will be better for it.

  • reaction_title_1 2

Share this post


Link to post
Share on other sites

Hiya MS, you might be interested in this Canadian perspective on 'peak beer' ( http://www.cbc.ca/news/business/beer-craftbeer-toolshed-labatt-molson-draught-sleeman-sapporo-abinbev-1.4439295 )which, generally bolsters your point of view. I think 'craft' as known in the beer world is pretty big. Even small breweries can cost millions to start and often the 'craft' of the original intent is further crafted to make sure the product can support a hefty overhead consistently. There are lots of mid-sized distilleries that would also fall into that category and if they have built a strong local market and they can keep the product flowing, they are excellent businessmen and probably understand the market in ways I sure don't.

As, I've mentioned in the past, I live in a land awash with craft booze of every kind and so I view the role of the "micro-distillery" as different than trying to service a mid-mass market using the craft term. Instead, I prefer the term 'artisan', suggesting a more 'hands on, locally sourced' approach. I think this gives the very small distiller a fighting chance on the local level, but offers little long term growth potential. Call that sustainable!

  • reaction_title_1 1

Share this post


Link to post
Share on other sites
18 hours ago, microshiner said:

 

See the thing is, an independently owned distillery, appropriately scaled to meet the needs of a specific population, is not the same thing as a brand. And the demand for the thing I just described will always be there.

 

I really like your post.  It is very well written and  I think that you are spot on with what you had to say.

  • reaction_title_1 1

Share this post


Link to post
Share on other sites

Great article @Glenlyon. Thanks for sharing!

So much good stuff in there but the key is: "I don't think the [growth] is sustainable"

Of course not. It's a closed system, and liters/yr is static (X liters/yr = Y producers x Z liters/yr). Therefore, if Y goes up and X stays the same, then Z must go down.

However, there is another factor at play, which is price. This creates a point of inflection, based on marginal cost. On the one side you have commodity, on the other side craft. A significant cohort (I say 75% by volume sold) will not pay more than the minimum marginal cost. The buying decisions about the other 25% are based on the strength of their value proposition, because that is what accounts for the added marginal cost in the mind of the consumer.

I agree with you - the mid/mass market is a no-man's land.

 

Share this post


Link to post
Share on other sites

Here is a follow up story on craft beer. The video that is embedded in the story is quite insightful visa vie the discussion around craft and why one may or may not choose to open a new venture. Although it does focus on beer, I feel many of the points can be applied to the distilling biz as well.

http://www.cbc.ca/news/business/beer-craft-brewing-1.4455032

  • reaction_title_1 1

Share this post


Link to post
Share on other sites

I enjoyed your thoughts. I've just started a small distillery and I really resonate with what you are saying about the middle ground being nonexistent.  We are basically serving the immediate local market of locals willing to pay extra to support their own and tourists willing to spend extra for something unique.  We are just selling from the distillery because we get to keep the distributor and retail cut.  Our first batch sold out in 3 days, but it was Christmas.  We hope by keeping the product scarce, it will have higher demand and price.  It will be extremely hard for us to expand to a larger market because of the higher distribution costs and the lack of adequate product supply with our small batch methods.  If we can sell it here and keep more $ per bottle why not.  But I sure don't expect to be hearing from the big boys with million dollar offers.

  • reaction_title_1 1

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now

×