Saturday, November 10, 2018

Breweries tapping into the retail dollar

Taproom crowds are becoming commonplace in North Texas (Armadillo Ale Works).

Atmosphere, unique offerings and fresh beer from the source - those are some of the reasons beer drinkers often frequent taprooms at production breweries around North Texas.

Yet, these popular destinations didn't exist at the dawn of the current craft beer boom. Consumers were able to purchase beer for on-site consumption at a brewpub (restaurants selling beer brewed on the premises), but operating a taproom wasn't an option for the first wave of new breweries to open in 2011, because they weren't allowed under Texas law.

That ban was lifted in 2013, and in the time since, taprooms have become commonplace. Most established breweries in Dallas-Fort Worth have added taproom space, while startups tend to have them in the plan from day one. It's come to the point that all but a few of the over 45 production breweries in the region now employ a taproom.

So, what factors have contributed to the rise of taprooms in North Texas?

One catalyst is the ongoing shift in market dynamics. Breweries continue to open at a breakneck pace, which means there are more brands of beer being brought to market. The problem is, wholesale and retail partners can't keep up. There are only so many taps on the wall at the local bar, and there is only so much room for stock at distribution and retail.

Nevertheless, breweries need outlets to sell their beer, and a taproom offers a solution when met with limited access to placements in the marketplace.

Taprooms are also good for business. The ability to sell beer at retail, rather than wholesale, prices has a discernible impact on the bottom line. This is especially important for small breweries and companies just starting out. In fact, numbers from the Brewers Association show the growth rate for smaller breweries with taprooms is nearly twice that of those depending solely on distribution.

At the same time, running a taproom can complicate relationships with wholesalers and retailers who view them as direct competition.

Stakeholder concerns range from being undercut on price, to being shut out on special releases that would attract more customers. In those cases, it's on brewery owners to share the wealth and to be aware of how their in-house price points compare to those of partners.

From a wider view, opponents say taprooms take business away from bars and restaurants. However, data suggests visits to a taproom aren't mutually exclusive. Based on results from a 2017 NCGA OPUS survey, brewery visits didn't replace trips to the bar for a majority of consumers.

On top of that, additional data says taprooms may work boost the bottom lines of partners as well. According to a Nielsen poll conducted by Harris in 2018, over half of regular craft drinkers (defined as those who consumed craft beer on a weekly basis) said they were likely to purchase more beer at other on-premise venues after visiting a brewery.

At the very least, taprooms represent a place to engage and educate consumers, where they can try new beers and make a direct connection with the people behind the products. If the experience is a positive one, consumers are more likely to seek out a brewery's products the next time they are out on the town. And in that scenario, a taproom's existence benefits everyone involved.

Originally published as part of a special section on NTX Beer Week in the November 1, 2018 edition of the Dallas Observer. An online copy of the complete newspaper is available by clicking here.

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