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Weekly Thoughts: BTSB – Consistency In A Can: Luke Livingston of Baxter Brewing

Consistency In A Can: Luke Livingston of Baxter Brewing

Below are some excerpts from our conversation with Luke Livingston, founder of Baxter Brewing Co., a craft brewery that has grown to be the third largest brewer by volume in Maine since its founding 8 years ago.  Initially the 16th brewery license in the state, Baxter was the first in New England to produce beer exclusively in a can or a keg  in part for the environmental benefits and in part to serve its mission of accessibility and portability.

Luke talks about competition as an incumbent in an industry that is seeing more supply growth than demand growth and his company’s focus on product consistency to serve its growth ambitions which include exporting to the UK and Canada.

You can listen to the full episode by clicking the audio image below, on our website, or on iTunes (more podcast players coming soon!).  Know someone who would be great on the Big Time Small Business podcast?  E-mail in at podcast@chenmarkcapital.com.

The Vision

A lot of the bones of the company were in that original business plan, and in a lot of ways, we haven’t strayed that far from it.  Being can only, being dedicated to Lewiston/Auburn and to Maine, making styles of beer that people weren’t making in the state then, and in a lot of ways, still aren’t.

As the popular styles of the industry have ebbed and flowed, we continue to find ways to do our thing and to innovate.  That’s always been really important to us.  It’s always been my mantra.  It was in that business plan, and still is today: as long as we continue to make beer that we give sh*t about and other people give a sh*t about, and stick true to our core values, and the tenets that are most important to us as staff and coworkers, we’ll continue to grow as big as we want.  That was the plan from the beginning.

I could see a Cumberland Farms from my apartment in Portland where I was writing my business plan.  My plan was to create beer that you could take anywhere, hence the can, and buy anywhere.  So many of [the] breweries have a business model that is predicated on the taproom model, and the lines out the door on a Saturday morning,  I never wanted that.

I wanted Baxter Beer to be available in every Cumberland Farms, every Hannaford, and every Rite Aid in Northern New England.  That was important to me.  I wanted it available to anyone, and to go anywhere.

The Struggle

I think it sounds sexy to have sold a website, but in reality, I sold it for $1600 or something.  It covered my rent for a month but certainly did not cover all my bases.  I [did] some freelance writing during that year [of fundraising].  I worked at the Portland Sea Dogs slinging Sea Dog Biscuits for a couple summers.  Even after we were under construction at the brewery in the summer of 2010, I was still hustling Sea Dog Biscuits.

And then, to be honest, and I’m still paying for it today in a lot of ways, I paid my rent on my credit card for a lot of that year.  It was a calculated risk.  I figured I had the rest of my life to pay off my bills if things didn’t work out, or even if they did work out.  But, yeah, it was a financial struggle that I was willing to take, that I’m still paying for.  Thankfully, I was young and naïve.

The Industry Today

It wasn’t so defined, but it was a hell of a lot easier.  I can’t imagine today being like, “You know what’s a great idea? I’m gonna go open the 128th brewery in Maine! I’m not gonna do anything differently than anybody else!”  I don’t see the appeal in that, personally.  Call me cynical but back then, we could have a business model that was different from everybody else’s.  We could be the first to can.

I don’t know that a first exists in Maine in this industry anymore.  We were also the first major production brewery in Lewiston/Auburn.  We were always (and still are) treated as a big fish in a small pond.  The municipalities of Lewiston and Auburn love us.  We got a ton of earned media right out of the gate for being north of Portland, for renovating an old mill, for my age, for canning, for making American-style ales when other people weren’t.  I think all of those opportunities that existed for us at the time don’t exist anymore.

How to win the long game

Nationally, craft beer still accounts for roughly 12% of beer sales in the country.  It’s higher in Maine.  Mainers love Maine-made things.  So, of 100 people who walk into a liquor store, only 12 of them are buying craft beer.  Nine out of those 12 are gonna buy an IPA, and 8 out of those 9 are never gonna buy the same beer twice.  So, your market gets real small, real quick.

Locally, the example I use a lot is Flatbread on Commercial Street in Portland.  I’ve been going there since I was in high school and they’ve been good to us since Baxter opened.  When we opened, they had 12 draft lines.  So, on the worst day, we got a twelfth of the sales.  Today, they have 30 draft lines, but they’re not seating any additional people.  The restaurant didn’t grow.  Yeah, 1 or 2 additional people might be buying craft beer than were 8 years ago, but now we’re looking at a thirtieth of the beer sales instead of a twelfth.  We haven’t done anything differently to deserve that.

You haven’t seen another blockbuster deal like Ballast Point since Ballast Point.  There hasn’t been another billion dollar valuation since then, and there won’t be.  I think the breweries that will thrive and continue to exist are the ones that are paying attention to the business, are making consistent beer, and are focused on their consumer and their growth, not just the line at the door on a Saturday morning.

Quality by Intent

I think that’s the business model of so many of these new breweries.  They’re not thinking about tomorrow.  They’re just thinking about the line at their door on that Saturday.  [Thinking about the future is] something we’ve always prided ourselves on, and I think that’s why we’ll continue to be successful and be relevant.

Our Director of Brewing Ops came to us from New Belgium and Oscar Blues before that, so breweries who are doing it even bigger, and better, and more consistently than we are.  Our Operations Manager, we hired from Pepsi.  She was at Pepsi and Green Giant, so talk about consistent companies, huge operations, and we were able to pluck her from those operations. She’s an Auburn native; we were high school classmates, and she’s here making sure that we’re producing the same quality, consistent product, and getting it out to retail, in a record short amount of time.

Teamwork makes the dream work

For me, that decision, honestly, came right in my business plan.  I think, in a lot of ways, a lot of the reason for our early and continued success is [that] I was self-aware enough to know the things I didn’t know.  It was never my plan to do everything.  It was my plan to hire well, and to have an incredible team of talented people around me, doing all the things that I knew I couldn’t do, or didn’t want to do.  That was the plan from the beginning, for sure.  I think one of the things we’ve always gotten right at Baxter, is having the best damn team we can.

I think it speaks to the quality of the team, and the quality of the brand, and the quality of the company: the people that were meant to stick around, have; the people that are meant to matriculate into Baxter, have.  I think that the right people, when they’re here, it’s palpable.  They can feel that team, and people want to be a part of it, both from a staffing perspective, and from a brand perspective.

A lot of our early success was because consumers could tell that those guys at Baxter, have got something figured out. They’ve found that “je ne sais quoi” and want to be a part of it, whether that’s drinking the beer, going to the promos, or applying for a canning line job.  Jobs that honestly pay 11 bucks an hour and are pretty repetitive and pretty shitty.  We’ve never had a shortage of applicants for it because people want to be a part of what we build.  We’re very lucky, for sure.

Have a great week,

Your Chenmark Capital Team

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