Tap Handle Choice: How Data Can Solve the Craft Brew Halo Conundrum

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If you’re one of the craft brew-loving denizens of Hell’s Kitchen, one who partakes in pints at the trendy West Side neighborhood’s ample selection of taverns and bars, you’ve likely seen your array of options skyrocket recently.

And that makes sense. After all, craft beer is experiencing an unprecedented boom. In the past decade, the number of brands and breweries has doubled. Today, there are about 8,000 breweries in the U.S., an all-time high. More than one out of every three beers poured in bars around the country is craft. America, for years the land of light beer, pricey imports and little else, is in the midst of a love affair with craft beer.

But there’s a halo effect that extends far outside the tony environs like those found west of Eighth and north of 34th. In everyday American bars strewn across working class neighborhoods, middle class suburbs and rural townships, owners and managers are jumping onto the craft brew bandwagon—but we think they’re going about it wrong, and have the data to prove it.

As consumption has exploded, the number of taps devoted to craft beer has grown, with more competitors crowding the space and fragmenting the market share. As with any market trend, the rush to join in has been a bit overzealous, and within their margin of error there is opportunity.

The first thing to understand about those rows of taps at your local watering hole is just how valuable they are. Consider your local grocery store. The product displays at the ends of each aisle—commonly called “endcaps”— represent the most sought-after real estate. Brands jockey for position to get into end-cap rotation.

Beer taps are no different. An owner’s or manager’s beer selections can make or break a bar. The choices about those taps are some of the most important business decisions they will make. The boom, not the reality, has guided those decisions. As the sector grew at double-digit rates each year, retailers sought to compete and leverage the trend, increasing the share of taps to craft. But collectively, the industry has over-responded to the trend, and our clients’ pour data supports that conclusion.

With the craft beer boom, it is understandable that these decision-makers have drifted further in that direction. They are seeking that Hell’s Kitchen clientele, and are stocking their kegs to appeal to the demographic. But our data at BeerBoard tells a different story. We can see that while craft beer is 35 percent of total pours, craft brands take up 78 percent of tap real estate.

Again, this schism between market perception and market understanding represents a huge opportunity for bars to home in on what is working and what is not. Craft brews are growing, and they will continue to, but the decision of which brands to stock and how often to turn them over should be made with analytics, not gut instinct.

The economics of a neighborhood and its demographic makeup tell more than any brewery or distributor sales rep ever could. Buyers should constantly be interrogating data to find the sweet spot. For instance, domestic beers from brewers like Budweiser, Miller and Coors still account for nearly half of all volume. One borough away from Manhattan in Staten Island, that share is even higher. But this has not made those bar owners immune from going all-in on craft, even though it makes less sense economically for them.

It’s a location decision. For one bar, 40 handles devoted to craft brands might be right. For another, 12-15 might be more in line with what the clientele is dictating. This is a strategy that calls for more analytics, less guesswork.

With modern data analytics tools that monitor pour trends, bar owners can make smarter decisions about which brands they allow onto their most valuable real estate. It is possible to create profiles for bars based on their demographic profiles, and further, it is now possible to show pour trends broken down to style, brand, dates and even time-of-day. In a commercial world where Big Data has come to govern many buying decisions, it is reasonable to assume this will be standard practice in the coming years, and bars that don’t move in that direction will be at a competitive disadvantage.

That shift isn’t always an easy adjustment in thinking for bar owners and managers. After all, these are subject matter experts. These leaders likely spent many years behind the bar themselves, learning the art and science of bar management.

As an outsider to their operation, it can be a challenge to come in with spreadsheets and bar charts, telling them about the mistakes they’re making. These are people who know their business inside and out. Most folks who own bars, taverns or breweries, in my experience, ended up doing so because of a passion for their work. They have a vision for their establishment. They know what their regulars like, down to the pint.

That’s admirable, and a sign of a good business owner. But in a crowded volume business that thrives on kegs, there’s no space to think in pints.

 

Mark Young is the Founder & CEO of BeerBoard, an industry-leading integrated beer management and guest display system deployed across over 50,000 draft lines nationwide.