beer business

Going long in August – BeerBud

 

beerbud

 

READERS NOTE: This is my effort in the Boak and Bailey exhortation to go long in August. They suggest people write a longer post – 1500 words or more – and post it today. They announced it in April but I only found out about it last week. Still, I managed to bash out just over 1500 words – and it just took two days. Guess that’s the years of newspaper feature writing paying off. Either that or my ability to crap on in print for ages. Either way, I did it. Here it is. Get yourself a beer, sit back and enjoy. Yes, that is an order.

 

I will never claim to have a head for business. I studied one year of commerce in high school and all I remember is that the teacher had a moustache and wore those trouser shorts combined with long woollen socks that were inordinately popular with teachers in the 1980s.

I also studied a single session of economics during my uni degree. It had something to do with factory workers in The Philippines, so that’s something that hasn’t really come in handy in the roughly 20 years since I graduated (for what it’s worth, I passed that subject).

And I’ve read all three Freakonomics books. That’s about it really.

So my ability to understand business concepts isn’t going to be that impressive. I usually defer to those working in finance and business sectors because I figure, it’s their area so they must know more about that stuff than me.

So it comes as a surprise to me that I can see that BeerBud is a really dumb business idea. One that will be lucky to be around this time next year. One that was started up by three young guys who worked in the banking industry and who should know all about risks and researching their markets.

If you don’t know what BeerBud is then you somehow managed to miss the wide media coverage it got last week (which was a great example of what you can get with a former journo handling your PR). Being the beer writer at work I had two separate people forward on the BeerBud release to me – however, I didn’t get one myself. Weird, huh?

BeerBud is an online store selling craft beer. Unlike a number of other journos, I didn’t bother writing anything for the paper because I knew it was nothing special. I knew the media release headline “Aussie barons brew ale revolution” was simply not true. You’re not brewing a revolution if it was already happening before you jumped on board. What you’re doing is following a trend – but being a latecomer to the party doesn’t sell so well, so they have to be portrayed as being on the cutting edge even if it is clearly untrue.

Before we look at the questionable business model, I feel compelled to say a few words about the fibbing that features in this release. People who saw my recent posts on the Stone Brewing Indiegogo farrago will know I’m not a big fan of fibbing. I’m not a fan of misleading people. And I feel the BeerBud sales pitch includes a few examples of that.

For example, according to their own guff BeerBud is “the #1 place to discover and shop for Australia’s best craft beer’’. Really? They launched their business a month or so ago and they’re already No1? That’s a pretty fast rise, wasn’t it?

No, actually, it’s bullshit.

Elsewhere in the release it claims that ‘‘For the first time, the best beers are now available at the click of a mouse at one convenient ordering platform and can be delivered to your doorstep anywhere in Australia.’’

Oh come on now. Really? There’s not a single business that already lets you order beer online and delivers it to your door? Really? You’re the first? Wow, that’s a huge surprise to someone like me who has ordered beer online from several Australian retailers – Slowbeer, Purvis Beer and Beer Cartel. And there are also others I haven’t used who do the same thing.

Let’s give these guys the benefit of the doubt. Let’s say that, despite working in finance they did bugger-all research into this market and therefore didn’t know of the existence of these places (yes, it’s bullshit. Of course they knew about them. But go with me here). They must surely have heard of Dan Murphy’s – easily one of the largest chain of liquor stores in the country and, I’ll wager, sells more craft beer than any other business in this country. They allow you to make purchases online too.

So how on Earth can they honestly claim this is happening “for the first time”? They can’t, because it isn’t.

Then there’s the backstory, where the three bankers were inspired to create BeerBud after being frustrated that Friday afternoon drinks meant hiking to a bottle shop that had “a lacklustre range and exorbitant prices”. This is greatly surprising to me because I live in Wollongong, a town only starting to get turned onto good beer. Since I’ve been a beer geek I haven’t had a issue finding beers I like in my home town. I assume these guys were living in Sydney, where the selection is much better, so I treat this whole backstory with a bit of skepticism. It feels like something that’s been whipped up because it sounds good rather than being true.

They also claim their website offers “expert advice”. Considering that same site also features a sales category called “Ales” which includes golden ale, summer, ale, amber ale and ESB, I doubt their claim to expert knowledge.

But what’s the problem with the business model? Well, firstly every single beer geek who has been part of the community for a few years will have already seen a few of these solely mail order beer businesses start and fail rather quickly. That screams to me that there really isn’t the market to support this sort of endeavour.

But that was then, this is now, they might respond. The craft beer market is growing, there are more people interested in drinking them. This is absolutely true but – and here’s the salient point – as the craft beer market grows the need for these mail order beer businesses decreases.

Look, two years ago I would have loved it if a bottle shop in my town sold Bridge Road Brewers’ Beechworth Pale, one of my favourite beers. But none of them did back then. Now I can buy that at my local Dan Murphy’s. Hell, I can buy it at my local BWS – which has for years just held a stock standard range of beers.

The reason I can do that is because the craft beer market is growing. These stores recognise that and so they start stocking more and more of them.

Which simply makes an online beer store less relevant. See, while the BeerBud guys may have looked to feed off the craft beer segment, the reality is there are other, bigger, players doing the same thing. And once they’ve finished feeding there really isn’t much left over.

There are some mail order beer clubs that are a success. I’m part of the Bridge Road Brewers Posse, where you get sent a mixed case of their beer several times a year, which often includes a beer especially brewed for the club. That will always work because people who like the brewery will buy it.

The other club I’m part of is the Tru Bru Bear Club. That sees me get six plastic bottles filled with beer – the same as a growler fill. This niche business will work because there are a range of beers that are never bottled, they’re only kegged. Unless your local bar puts them on tap, this is the only way you’re going to get to try them.
So to be a success, you need to be offering something unusual. Something hard to get. And a cursory look at BudBeer’s list of offerings tells me they’re not doing that. It is perhaps not a coincidence that the promo photo being sent out (it’s at the top of this post) features a range of the least-readily available beers in the BeerBud catalogue.

I went through that catalogue, counting each beer I knew I could buy at my local Dan’s. I got to 60 before I got sick of the process. But I think the point is made – they’re mainly offering beers that are already for sale at one of the biggest beer retailers in the country. Why would anyone order beers through BeerBud, when they can buy them off the shelf at Dan’s?

Maybe price? But a comparison of random case prices between BeerBud and Dan’s shows that there’s not much difference. I found one case that was $10 cheaper at BeerBud than Dan’s, the others were the same price or a few dollars more. Keep in mind too, that this doesn’t include delivery fees, which BeerBud charges but Dan’s doesn’t. Again, why would anyone order beer through BeerBud, when they can buy them off a shelf at Dan’s?

Maybe location? Well yes, I grant you there will be some towns that don’t have access to a Dan Murphy’s, but the chain has 189 stores across the country. So I very much doubt the percentage of people too far away from a Dan’s outlet would supply enough business to keep something like BeerBud going. No, they’ll need customers in the big cities too. The same big cities that already have easier, and cheaper, options than BeerBud.

I’m not entirely sure how to make a business like this a goer. Others like Tru Bru’s Bear Club operate as an adjunct to a real shopfront – their mail order op brings in extra business. But for BeerBud, mail order appears to be their only business. Stocking beers easily available at suburban bottle shops won’t help you long-term. Neither will sourcing limited release, hard to get beers from small breweries, as that effectively limits your market to beer geeks.

So chances are pretty good that BeerBud will end up being yet another one of those failed mail-order beer businesses.

 

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