Dogfish Head brewery is one of Delaware’s most famous home grown companies.
The company, which started in 1995, is now the biggest microbrewery in the country. Dogfish Head is growing at a staggering rate, in 2013 sales were up 17%, and 20% the year before that. This is particularly remarkable considering the overall stagnation of beer sales within the US. Dogfish Head has found success by not trying to compete directly with major brewers (Coors, Budweiser, Miller). The company instead focuses on producing niche beer. Dogfish Head uses combinations of ingredients and brewing techniques that have never been tried before to produce unique products. The company’s motto is “off centered beer for off centered people.” Here are lessons that any business can learning from the success of Dogfish Head:
Don’t be afraid to target a niche
Dogfish Head has found great success by aiming at niche markets. Over 85% of the global production of beer is comprised of light lagers, despite the fact that there are hundreds of known varieties of beers. Dogfish Head founder, Sam Calagione, started the company because he felt that a large niche beer market was not being served. Calagione realized that many people wanted stronger and more flavorful beers. Typical light lagers usually have an ABV (alcohol by volume) between 4-5%, The majority of Dogfish Head beers have an ABV above 6% and it not unusually for that number to be over 10% and even as high as 20%. It is important that small businesses competing against large companies should find a way to differentiate themselves so that they do not have to directly compete with companies that have more resources than them.
Try old techniques
Companies should look to the past for innovation in the present. Many techniques for producing things are forgotten for reasons that are entirely clear but not necessarily because they are ineffective. Beer brewing is perfect example of a lost art in many places in the world. Dogfish Head executive, Sam Calagione, reads history books to rediscover recipes used by ancient societies to brew beer. Dogfish Head has line of “Ancient Ales” based on historical drinks. The first of the “Ancient Ale” line was Midas Touch. The recipe for the beer was based on the ingredients found in an ancient temple in Turkey thought to possibly be the tomb of king Midas. Another interesting revival by Dogfish head was Kvasir, a beer with a recipe based on ingredients found in 3500 year old Danish drinking vessel. Turkey stopped brewing beer because of the influence of Islam. Danish beer recipes were largely forgotten with invention of distillation. It is important for any business owner to remember that things are not always forgotten for a good reason.
Sell affordable luxury
Dogfish Head experienced remarkable growth even during the recession of 08-09. The company capitalizes on the fact that it it sells affordable luxury. People deciding between commercial and craft beer do not need to spend much more on a six pack to have a greatly upgraded experience. A six pack from a commercial brewer usually costs between $7-8. Dogfish Head is not much more expensive, usually cost between $10-12 for a six pack. A luxury “upgrade” is much more affordable with beer than with wine. People who purchase wine will not see an appreciable increase quality if they increase what they are willing to pay by $3-4 a bottle. The rise of the craft beer market shows that people are will to splurge for luxury if the price is not too steep.
Dogfish Head is in an interesting position for the future. The company has production challenge in keeping up with demand for the company’s products. Calagione’s goal is to maximize growth without taking on outside investors. It will be interesting to see if the company can expand its line of offerings further. Only time will tell if Dogfish Head produces more than beer, sausage, mustard and dog treats.