Reprinted courtesy of Beverage Master. Read the full issue.
Continuing with part two of our Q&A from the Craft Brewers Conference from Denver, with additional follow-up questions to our panel of experts. It was clear that times are tough and brewers are feeling the pressure from every aspect of their business. Innovation and disruptive solutions to engage consumers and capture retailer interest were top of mind during our discussions.
Consumers are using their disposable income on more than just beer, with consumption patterns and drinking occasions changing constantly. Generation Y and Z are entertaining spirits, RTD’s and wine as well as new and emerging industries in seltzer and cannabis (medical and recreational). Minimum wage pressures are challenging employee recruitment and retention, forcing pressure on engagement and culture. Virtual distributor models and companies like Amazon Prime are making distributors rethink and retool their sales and service strategies.
Diving deeper into your business plan and implementing a detailed strategy to scale your business to be more effective and efficient is a must do for brewers who want to enjoy continued success in the future. Here are some additional questions from our audience and answers from our Baker Tilly team of subject matter experts:
Answer: Knowing what to track and having a process to capture and interpret the data is 1/3rd of the challenge. Another 1/3rd is knowing strategies and tactics to deploy that will correct or accelerate performance. The final 1/3rd is sharing the information beyond ownership and Sr. Management to really get your team moving in the right direction. At a minimum, record your own historic information to allow for benchmarking and variable pay opportunities that can be used to incentivize and motivate team members to accelerate performance. Here are a few good reports/charts to run:
Answer: It depends. A loss isn’t a bad thing if your intention wasn’t profit but rather impressions. Creating a detailed business plan by department is the first step in understanding ROI’s. Each department should have KPI’s established that tie into the achievement of the plan/budget. Agreed upon actions and required resources should be identified, tracked and measured to achieve the KPI’s. Frequency of measure really depends upon what you are tracking. From a production standpoint, it could be by brew, by monthly/quarterly budget, etc., sales by month or distribution by quarter. These are good measures, but recouping profit only tells part of the story.
Breakeven analysis is a great way to understand what is at stake or what you need to get back your investment. A standard percentage return is not always the best approach, but can be a good way to begin the discussion. There will be some things you can and should make more or less on depending upon the intent of the offering. You can put a breakeven on manpower, brands/SKUs, special events, etc., but all shouldn’t be the same ROI. From a timeframe standpoint, it would vary. People and equipment tend to have longer tails with ROI so those could scale quarters to years. Products and special event breakeven could be achieved overnight. It’s best to categorize the opportunity, apply a timeframe and capture it with a tracking/measuring system for future benchmarking.
Answer: Aggressive but realistic goals are great for any organization’s sales team as long as you have the following clearly outlined:
Our recommendation is to have the right goals set with the right accounts with the aforementioned in place instead of goals that don’t make sense for accounts and/or geographies that you are targeting based on your plan and budget.
The goal of every good company is to plan for and achieve realistic business objectives that tie into all aspects of your business. The collaboration of departments into one business will help avoid pitfalls of silo development, which lead to mistrust within your organization and hinders the organization’s performance. As stated with these questions and answers, having a collaborated and efficient organization is the key. If everyone knows their role and targets (not just the sales team) then you can start to operate more effectively and efficiently as one company, tackling the industry together and scaling up efforts to drive elements of your business plan.
For more information on this topic, or to learn how Baker Tilly specialists can help, contact our team.