One Shot, One Whiskey, One Beer: Scaling in the Beverage Industry

Last week, I stumbled across three great articles detailing the complexities behind beverage companies “scaling up,” and the difficulties behind maintaining both the quality of the drink, and the niche status of the product.

Whiskey

The first article, from NPR, is a quasi-expose of certain whiskey brands which sell under “small batch” or “handcrafted” labels, but are, in fact, products of, MGP, an immense distiller located in Indiana. These small whiskey brands depend on their unique, small-distillery vibe to differentiate themselves. At the same time, the barriers to entry – casks and time – are high, and the quickest way to get into market, and scale with demand, is to go with a large, established producer. The downside is, of course, a slight lack of veracity on the part of the label. And if whiskey drinkers like anything, it’s pedigree.

Craft Beer

NPR also has a compelling article on a similar conundrum faced by the growing craft beer industry, and its trade association. In effect, craft beer is built upon its small-ness. A drinker is no doubt drawn in by the unique nature of the craft brewery brand, and its decidedly un-corporate vibe and taste. However, if a craft beer becomes popular, it must no doubt expand its facilities, its distribution networks, and supermarket footprint to match demand. And it will, in effect, lose its craftiness – the very thing that separated it from Bud Light or Michelob Ultra. And so craft brewers, much like the aforementioned small whiskey labels, seek to strike a balance between meeting their bottom lines, and not “selling out” their real or manufactured brand heritage.

Coffee

The Atlantic has a superb piece of Blue Bottle Coffee’s iced espresso ambitions. But no article on Blue Bottle would be complete without a profile of James Freeman, the company’s founder, whose zen-like commitment to the perfect cup makes him the veritable guru of the grind. And Freeman’s Blue Bottle coffee, like small batch whiskey or craft beer, is a beverage whose cache is partly built upon its small-ness and non-ubiquity. The article draws the expected comparison between Blue Bottle, a revered, niche cluster of coffeehouses, and Starbucks, the phenomenally successful chain maligned by coffee snobs everywhere. Blue Bottle’s iced beverage will compete with Starbucks’s bottled Frappucino drinks, an evolution that has the former careful – extremely careful – not to alienate its caffeinated base.

Scalability is obviously a challenge in any industry. But when firms define themselves by smallness, they can become victims of their own success, and so the transition between niche and mainstream – and from artisinal glasses to kitchen tables – is one that requires precise brand positioning. Pass the Irish Coffee.