The craft brewery business is booming. As the industry expands, it’s harder than ever for up-and-coming breweries to make a name for themselves. You know how to make great beer, but do you know how to get people to drink it? The Vault at Bolstr.com sat down with Ron Lindenbusch, head of sales and marketing at Lagunitas, to learn how Lagunitas grew into one of the top craft breweries in the world through building the right relationships with distributors and understanding how to effectively price and position their brand.
Widely regarded as pioneers of the hop-heavy craft beer movement, Lagunitas has been uncompromising in their mission to create a premium product and inspire a craft beer renaissance in the U.S.. Founder Tony Magee started brewing in 1993, and over the course of the last 20-plus years turned Lagunitas into one of the largest craft breweries in the world through a combination of business savvy and brutal honesty.
We had the pleasure of talking with Ron Lindenbusch, head of marketing for Lagunitas, at the new Chicago brewery and taproom to candidly discuss how their unique approach to relationship building, pricing and positioning, creative branding and of course, making really good beer, contributed to their meteoric rise and continued success.
How to Build Long-Lasting Relationships with Distributors
“You really have to get out there and prove yourself. When you get a distributor in this business, they’re going to deliver your beer, but will they build your brand?” Ron asks.
Probably not. As the number of distributors in the country declines, down from 4,500 around 10 years ago to less than 2,000 now, there are fewer and fewer opportunities for craft brewers to find a home. The fact that you have to make great beer is a given. Knowing how to get that beer into the hands of consumers? That’s another story. The challenge now lies not only in producing beer people want to drink, but in proving your value to distributors to gain their trust and loyalty.
“Once you deliver value to a distributor, they get behind you and it’s a snowball effect,” shares Ron. “Once they’re making money on you they do get behind you a little bit more. You get access to their sales team, they’ll work with you on margins a little better.”
Ron came to Lagunitas with knowledge of the distribution side of the business, having spent his years before joining Tony at the brewery running a brewpub and working as a distributor focused on imports and microbreweries. It was that insight that led Ron to focus on relationships with distributors as a catalyst to getting Lagunitas beer on taps and in stores.
As Ron explains, the start-up phase of the breweries is a struggle in a lot of ways. There’s a lot that goes into getting started with a distributor and gaining buy-in of your product. Having an understanding not only of the craft beer market in general, but the way distributors work, is essential in finding the right partner for your brand. However, don’t underestimate the importance of having a quality product to back it up.
“Luckily our beer delivered. When it hits the shelf, it moves. A lot of other brands, they don’t have that velocity to convince the distributor to focus on them a little bit more,” explains Ron.
While many brewers focus on building relationships at the customer and industry level first, Ron warns against that route.
“For us, the consumer relationship was really never a focus because that wasn’t where the struggle was to make it happen, it was at the distributor level first and retailers second. I didn’t go hang out at brewery parties with brewers, we were just out trying to get distributors. I’d hop in the car and ride with their sales guys and teach them about the brand, treat ‘em right, buy ‘em lunch, get ‘em drunk,” shares Ron.
The focus on distributor relationships paid off in spades, as Lagunitas continued to grow throughout the country.
“As we started to spread out around the country distributors generally wouldn’t even call me back, they just weren’t interested,” says Ron. “Now we’ve grown to where, for the last five or seven years they’ve been calling us, so it’s been totally different.”
Creating a Competitive Pricing Strategy
Perceived value is something that plays a large role in the way Lagunitas prices and markets their beers. In the late 90s and early 2000s, they let some of their first beers, a Pale Ale and an Amber Ale, get beat up by the price wars occurring on store shelves. Not wanting to weaken the perception of their flagship IPA, they made a conscious decision to hold back the release in six-packs so it wouldn’t be affected by the price fight. Instead, they chose to push the IPA in restaurants and bars. By keeping it on tap, Lagunitas built a following for the IPA and really reached a critical mass before the six-packs were released.
“Right as we started doing six-packs we got caught up in this weird pricing structure. We played it with the Pale and Amber but we cheapened those brands and as a result they were never going to be a premium again. So we held the IPA back and when we felt confident in the higher price, we released it,” explains Ron.
It’s vital to be conscious about the effects of price on the perception of your brand. When pricing your beer, think about the long-term impact it will have on your product. A lot of brands try to scale to critical mass through moving discounted units, as Ron saw during the late 90s and early 2000s. The problem with that strategy is that you’ve fixed your margins at a discounted price, which didn’t turn out to be a healthy thing for any of the brands in the previous price wars. Consumer trends don’t lie, people buy what’s on sale. With so many options on the shelf, be cautious about the positioning of your product from the very beginning, or you run the risk of cheapening the value of your brand forever.
“You’re going to see it again, they [breweries] are starting to play price games. They’re going to cheapen that brand and there’s no coming back,” states Ron.
Even today, in a world where craft brewers can easily see premium four-packs being sold for $14.99, Lagunitas stays firmly in the $10 per six-pack range. And that’s not by accident, or the result of a missed opportunity to increase profits.
“Pricing is lower than it needs to be,” Ron says simply. “We could get more for the beer but we want it to be perceived as a value. When somebody pays $10 for a six-pack and they get home and they’re blown away by the beer, they think they got a great deal. I think that’s where our relationship with the consumer becomes genuine.”
Lagunitas Sucks: Creating Effective Brand Positioning & Employee Culture
Lagunitas is well-known for its unique brand voice, developed by Tony and influenced by Ron throughout the years they spent sharing an office in the Petaluma brewery. That voice extends from their social media and online presence to the attitude that permeates every Lagunitas employee.
“We’re just lighthearted [with] the packaging and the names,” says Ron. “We’re self-deprecating, we like to make fun of ourselves and we screw up a lot so we like to admit it.”
How self-deprecating? Well, they did name a beer Lagunitas Sucks after all.
“It gives people an understanding of what you’re all about,” Ron continues. “If you can be consistent with that tone across all channels it starts to resonate as just the way it is.”
Ron and his team put a great deal of effort and detail into hiring a first-rate team to open the Chicago brewery. He sought out a management team to set the right tone for the company, to share the message that they want passionate, hard-working people. With the expansion into Chicago, Ron has focused even more attention on staff and culture training, making sure new employees know what is expected from them and in turn what can be expected from the Lagunitas team.
“It was hard to think that we were going to be able to hire 175 people [in Chicago] and put them in a building and say bam! Be Lagunitas. So we interviewed very carefully for personality as much as skills. Personality comes first. You can teach people a lot of skills but you can’t teach them to be cool,” laughs Ron.
The Lagunitas attitude isn’t an accident. From the early days, when Ron and Tony would shoot ideas off of each other, until now when the company has grown to 650 employees, Tony still touches every bit of the business. Many of the core team, including Tony, his wife Carissa, the vice president of finance, and Ron himself, have been with the company from the very beginning and embody the spirit of Lagunitas. In fact, Ron credits their ability to keep Lagunitas together to Tony’s leadership and steadfast attitude.
“We both feel the same way about what we’re here to do. And that’s not to get big, it’s not to get rich, it’s not to do anything but just have a place where people want to come and hang out and work and be part of it,” says Ron. “If you do it right, you’ll make money and you’ll get big and it’s proven itself to be true, but that was never our intention [to get big]. And now it’s a challenge to get big and keep the edge and keep the culture.”
Cheers to That
In the end, you can point to many things that led to the success of Lagunitas. Whether it was taking a chance on leading their brand with an IPA, building relationships with the right distributors, having the industry expertise to price and market their beers competitively, or creating a brand that resonated with consumers, founder Tony Magee had the foresight to lead Lagunitas to be one of the top craft breweries in the country.
“It’s just a genuine feeling that we want to connect with everybody and over-deliver on every relationship we’ve got,” shares Ron.
In typical Lagunitas fashion, Ron sums up their story with passion for their people and a commitment to being a true craft brewery until the very end.
“We’re not for sale. We’re fiercely independent and we’re not for sale. Tony wants to die on payroll and he wants to leave a legacy to everyone that’s here, that they will have this to work here and be part of it for as long as they want.”
Lessons on How Craft Breweries Can Achieve Scale from the Head of Sales & Marketing at Lagunitas originally appeared on The Vault on Bolstr.com.