This week we speak with with Ben Summons, CEO of Fermentum, and Stone & Wood General Manager, Nick Boots.

Over the last few months Stone & Wood founder Jamie Cook has retired from the Fermentum board and Ben Summons has stepped up from managing director of Stone & Wood into the role of CEO of the Fermentum group of companies, the overarching business. Nick Boots has in turn been promoted from Stone & Wood’s head of sales to General Manager.

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The changing of the guard comes at a significant time for the business, as the industry faces crowding at the smaller end of the industry, and takovers at the larger end. Overseas, the largest craft breweries have run into headwinds, the craft beer segment is fragmented with a rapid proliferation of styles and competition from other categories and new and emerging categories such as hard seltzer.

As you’ll here both Ben and Nick have extensive careers in and out of the beer industry, including time at CUB overlapping with founders Brad Rogers, Jamie Cook and Ross Jurisich.

All in all there was a lot to talk about including the origins of craft beer and whether Stone & Wood represented a lost opportunity for CUB, the opportunities and challenges facing Stone & Wood, and the challenges they face as the next generation of managers, the changing beer market and staying disciplined in in a time of change.

Enjoy the conversation. Full transcript below.

 

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You can also listen to our conversation with Jamie Cook after he’d announced his decision to step back from the business.

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Beer is a Conversation: Transcript

Matt Kirkegaard:  Ben Summons, Nick Boots, welcome to Beer Is A Conversation.

Ben Summons:  Thank you very much, Matt. Good to be here, hello listeners.

Matt Kirkegaard:  Guys, look, there’s a lot, basically we’ve started to see, or we have seen, the generational change coming through in Stone & Wood. We wanted to talk a little bit about the Fermentum Group, wanted to talk a little bit about that. But before, with everyone knowing the founders of Stone & Wood so well, maybe we can just start with one of the questions we often throw to our guests is who is Ben Summons? And who is Nick Boots?

Ben Summons:  Who the hell are these guys?

Matt Kirkegaard:  Yeah. So tell us about your careers in and out of beer.

Ben Summons:  Sure. Probably a bit over 20 years across sales, marketing, kind of general management roles, and I think 13 or 14 of those years have been in beer. The other have been more in selling snacks and chocolate and things like that. So I’ve made sure I’ve kept my vices close to my career along the way. And a mixture, really, of working early days in CUB and got to learn the ropes a little bit there in some of the sales and marketing spaces and insights.

Matt Kirkegaard:  I found a photo not so long ago of you proudly launching Cascade Green in the mid-2000s.

Ben Summons:  That was ahead of its time, that beer, I must say.

Matt Kirkegaard:  It absolutely was. It was funny, I went looking for the beer, with all of the talk about sustainability, and then suddenly there was this photo of a very young looking Ben Summons.

Ben Summons:  Very young, long curly hair. It had Galaxy hops in it, too.

Matt Kirkegaard:  It was, and then they said there’s too much flavor in these hops and you ended up with another brewery that really expressed them.

And Nick, how about you?

Nick Boots:  Not greatly dissimilar to Benny, actually. I mean I fell in love with the industry 20-odd years ago while at Uni doing Ag Economics, and started working in bottle shops part time and absolutely loved it. From there, went into a buying role for a chain, very early days. And from there I recognized, look, I want to be on the other side of the table. So wanted to work for a supplier, so yeah, I had some CUB time as well for eight or nine years in a variety of roles in a variety of states, which was a great grounding, and then progressed out of there into my own businesses and small family businesses where I identified were a nice fit for me and my style to utilize my skills.

Matt Kirkegaard:  I think I saw on your LinkedIn profile that you were even involved in consumer insights, data, information very early in your career?

Nick Boots:  Yeah, that’s right mate. I had a couple of years with Nielsen in there. Actually Lion were one of my big clients, so that was great to understand how they tick and the value of insights, and then I went over to CUB. That was my first two or three years in CUB in a hybrid strategy category-style role, which was fascinating. It gave me really great exposure and grounding. And then I took that into senior sales roles, etc. etc., and then I stepped out into non-alcoholic beverages, coconut water and the like, for some time, which was great fun. And then got pulled back in by Adam Trippe-Smith into Kegstar for a number of years, where a number of listeners might recognize my name.

Matt Kirkegaard:  Did you know Adam beforehand?

Nick Boots:  No I didn’t. No I didn’t at all, I just got a call one day and the rest is history. I had nearly two great years there and I met at a CBC a couple of years ago now, it was very early morning, we had a few chats over there with the Stone & Wood guys and I noticed Benny perusing my LinkedIn profile too, and I rang him up in the guise of being a key customer of mine, of Kegstar, and then the conversation’s, “Well, seeing you’ve rung…” and the rest is history.

Matt Kirkegaard:  So Ben you haven’t got that fake profile that, when you’re sort of scanning–

Ben Summons:  No definitely not. There’s too much hassle. No need for that.

It’s funny, Nick and I shared a few similarities in our career path, and the insights and analytics piece was on of the… My first job at CUB way way back was in the insights department, and I actually rolled out the AC Nielsen program across the business and taught all the thousand marketing guys how to use it. It was–

Matt Kirkegaard:  I didn’t see that, I obviously need to dig a little deeper into the LinkedIn profile.

Ben Summons:  No no, that’s way beyond that. There’s a love of numbers in there.

Was CUB your connection to the Stone & Wood founders?

Matt Kirkegaard:  With Stone & Wood the founders famously met during their time at CUB, and you both spent time at CUB in the early- to mid-2000s. Is that how you guys connected with Brad, Jamie and Ross? Was that the start of it?

Ben Summons:  Yeah I had worked with those guys in various capacities over the years, whether it was when I was a junior marketer on some small brands and Ross was the trade marketing guy in Queensland, I’d come up and harass him to give the brand some support. Or whether it was Brad who was sitting, mentoring me when I was doing some work on Cascade on brew development, or Jamie who was kind of like an overall boss in the premium and craft team at one stage. I had various overlaps with them during that time, so we got to know each other reasonably well.

Matt Kirkegaard:  How about you, Nick?

Nick Boots:  Yeah in my case I knew them, but it was more probably the social drinking capacity other than direct work capacity. But certainly when a workshop or drinking occasion came along we seemed to migrate to each other and had a great relationship. And I watched the Stone & Wood evolution over the years. I still remember, actually, Jamie whispering to me at a workshop, “Hey my CUB time, I’m out in a few weeks. I’m off to explore something next,” and I remember thinking to myself, “Oh boy he’s got a great job. That’s a bloody crazy thing to do.”

Anyway, the rest is history, isn’t it? Fortune favors the brave.

Matt Kirkegaard:  So you guys weren’t aware, there wasn’t kind of like, “We’re gonna go off and plan, cut the root, and we’re gonna come back for you guys later”?

Ben Summons:  No.

Nick Boots:  Well played, mate.

Ben Summons:  Not at all. And I think, around the time that Jamie left, I left to go to Kraft Foods Cadbury, and I went off there for several years. So I was aware of their journey and loosely connected on Facebook, and I think the year before I went over to Malaysia for four years I had a holiday in Byron with my wife and rode my bike out the brewery to say g’day to Brad, and I left with a six pack of Pacific Ale which I drank at Watego.

Matt Kirkegaard:  And a job?

Ben Summons:  No, no, no, perhaps that was just a seed that was planted, but I was happily on a different journey at the time, and it was purely coincidental that I came back on their radar when they were looking for someone to join and lead Stone & Wood a few years back.

Was Stone & Wood a lost opportunity for CUB?

Matt Kirkegaard:  Okay. So even though you weren’t part of the initial plan and it wasn’t even on the horizon at that stage, you were all at CUB at the same time. And you’re now working with the largest independent craft brewery in the country. Was that a missed opportunity for a business like CUB? Was it their loss that this talent moved on and didn’t stay on and apply these skills internally?

Ben Summons:  CUB as an employer in Melbourne and Sydney and beyond attracts a lot of great talent, and they come and go. I worked with and met a lot of great people when I was there and learned a lot from a lot of good people as well, so it’s one of those places that does attract people and retain a lot of good people. But not everyone is aligned with every organization that they spend time at, so I can’t speak on behalf of individuals except for myself.

I was looking for broader horizons and experiences. I wanted to work overseas, I wanted to work for different categories and different channels altogether. That ultimately drove me down a different path and probably helped me get the job that I landed today, to diversify a little bit. But maybe the lost opportunity was not seizing the craft opportunity at that time. And it’s understandable, it’s a huge business with lots of different priorities and has to make sure it pays the bills through some of the big categories first.

Matt Kirkegaard:  Yep. Nick?

Nick Boots:  Yeah, I certainly subscribe to those thoughts that there’s wonderful opportunities in those big businesses, regardless of which one it is. And I think in the time in your career you have roles in different businesses and you recognize it’s time to move on, and you take the good bits and you leave behind the learnings that you don’t want to apply in the future. And I think we’ve been really fortunate in Nestle and CUB and Benny’s craft and CUB so we’ve been able to take the really rich stuff that we were lucky enough to learn, and the opportunities we got in those businesses, and then apply them into Stone & Wood. But in Jamie’s words, leave behind some of the corporate baggage that goes with some of those businesses and just use the good stuff.

Matt Kirkegaard:  I think as a young beer writer, I don’t think I was a very young beer writer, it came too late in my career for that, but as a younger beer writer full of piss and vinegar and hot air and things like that, I used to be very critical of seeing the big breweries and you’d see this procession of marketers come thought. They’d leave Unilever or Cadbury-Schweppes or spend a bit of time in one of the brewing companies and then move on. And I always felt that there was never an understanding, and I feel a bit guilty because you guys would’ve been lumped into an amorphous group.

Ben Summons:  Don’t take it personally, mate.

Matt Kirkegaard:  Well it certainly wasn’t, it was an observation. And one that I’m critical of myself these days. But the criticism was that beer seems to be this category, and particularly craft beer, we saw the early potential for craft beer, you almost needed to have that empathy with the product itself to really drive it ahead. And I’m just picking up on something you said, Ben, that maybe we’re a little bit slow to realize the potential for craft beer.

Do you think that was the size of the business? Or do you think it was that you had people that were very talented marketers but weren’t necessarily invested in a particular product and wanted to move units as opposed to cultivate something for the future?

Ben Summons:  I think on the category side of things, the rock stars were the big brands with the big bucks, and everyone wanted to work on those. And there was less passion and involvement with what’s inside the bottle on those sort of brands, and there was a big merry-go-round of packaging changes and sexy ads and those kinds of things, and I think–

Matt Kirkegaard:  Don’t you remember, for some reason, do you remember the car chase ad for–

Ben Summons:  Yes I do. Was it Carlton Draught?

Matt Kirkegaard:  Carlton Draught. And they sort of, in the bank, and it was all of the tropes from police chase movies but guys running down the street holding a beer. And even now I still think it was such a brilliant ad, but my criticism back then was that CUB was if they could sell the ads, that would’ve been the best business. Because they were better at that than they were–

Ben Summons:  I think it was kind of the peak of one of the things you’ve talked about before, where I think over the journey in the last few decades, there was a steady commoditization of the beer category and a bit of the soul vacuated out of it. And it got driven by marketers and it was all about who could shout the loudest with the coolest ad and the sexiest packaging and those kinds of things. And it morphed that way. I think the emergence and the opportunity in craft is zig-zagging the other way, and that was what ultimately the guys took advantage of.

But I also pick up on a point you made earlier around the procession of marketers. I think it’s, I was there during some of those times, and I lament at the turnover that goes through those businesses and there’s no one there to steward the brands. It’s a huge stable of brands, great brands, and not every one of them is going to get as much oxygen and care and attention as it possibly needs.

Loss of institutional memory

Matt Kirkegaard:  You’ve also got the situation that I think very strongly happened with Crown Lager, where you had one marketer passing on to the next marketer, and you had this Chinese whispers of the history of the brand. And they’re talking about, “This is the most important brand in Australia.”

Ben Summons:  It can happen.

Matt Kirkegaard:  And they actually didn’t even know the history of the brand themselves, and it just became this completely made up–

Ben Summons:  That’s the point. You get a high rate of turnover of the, perhaps the people that might be working on the brands, but people overseeing them. And there’s less, perhaps, attention to care on stewarding those brands. And so it can zig-zag and flop about and be inconsistent and that gradually eats away at consumer connection.

So yeah, having lived in and seen it and also being someone who’s passionate about brands, I kind of lament that that can happen to such good brands within a certain business. And why it’s great to be at Stone & Wood where you kind of go, okay, we’re just long term, looking at the future, and let’s slowly nurture this as our thing, and not one of many.

The commoditisation of beer

Matt Kirkegaard:  It’s interesting you talked about the commoditization of beer and craft beer was a zig. It was almost that commoditization of mainstream beer that made craft beer possible in a way. That it was almost a reaction against that.

Ben Summons:  Agreed.

Matt Kirkegaard:  And I look at Germany, for example, which has never had a huge diversity of beer, but they’ve always had much more diversity and many more brands to provide that choice. There doesn’t seem to be that same rebellion against something to drive a craft beer.

Ben Summons:  There were some pioneering few who really championed that. Perhaps the drinkers didn’t know that’s what they wanted yet, but it’s thanks to the pioneers who brought it to life, you know, folks like you guys who talked about it and raised its profile. Then all of a sudden the drinkers go, “Yeah, this is what I want.”

Nick Boots:  Yeah and there’s probably a generic evolution of some of the liquid as well, as well as some of the branding. So then ultimately you got that rebellion, people saying, “Hey I wanna try something different.” And that promiscuity in the basket of beers they drank each week increased, increased, and that has borne 700 breweries in Australia and still growing very strongly.

Matt Kirkegaard:  The other thing that Ben talked about with the zigging, it reminded me straight away of something that Jamie would’ve said to me maybe eight, 10 years ago, that the big brewers, it was just like match racing was the analogy he gave with sailing. One tacks, the other tacks, because you never want to give the other one a potential advantage and so you automatically follow.

Are we starting to see that a little bit in the craft beer space as well? As it becomes more crowded, brewers don’t want to let a potential opportunity go and so you see a school of fish all darting the same way?

Ben Summons:  A little bit. I think they’re different games though. The one you’ve mentioned, CUB and Lion-Nathan, long time powerful competitors in a largely duopoly scenario. It was important, who’s got the greatest market share? Who’s winning versus each other? Red versus blue kind of thing, and that’s the reference point there.

But I do see a little of it play out in the good beer space. Not by trying to one up each other, just by, I think everyone looks across the shores to the States and what are the trends? And everyone copies what everyone else is doing. No one’s doing something completely different and going out in a big wide open space, it’s like, “Okay well they’re going that way, let’s all go that way.”

How did you come to be at Stone & Wood?

Matt Kirkegaard:  Turning to Stone & Wood now, looking at the business, you guys have both stepped in as the founders after 10 years have gradually, they’ve had a very orderly transition to the next generation of managers, or custodians of the brand. How involved have you guys been in that? Have you been active participants in it? Or has it been very much, “Come on guys, we’ll bring you in”?

Ben Summons:  Yeah it’s been steady and it’s unfolded over time. I think I joined as the Managing Director three and a half years ago and we didn’t know at the time that Jamie had a plan to step back at 60 and get into non-exec duties, but through that time was to essentially get me across the business and intimate with the business and potentially one day step into the Fermentum role after that. So it’s been slow and steady and at the right point in time I’ve been steadily more involved across Fermentum matters, such that when Jamie put the cue in the rack in December, I was easily able to pick it up and start playing.

Matt Kirkegaard:  Did you feel like it was a little bit like Survivor, where you were being set a series of challenges to prove yourself and get points over the last couple of years?

Ben Summons:  Sometimes it was like Survivor. It’s quite funny, you know, tell some good stories about stepping into a founder-led business. And the three of them are fantastic guys and so supportive all the way along. But there is that interesting transition period where we’re learning how to dance on the dance floor and we’re stepping on each other’s toes and which way do we go? There’s growing pains working all that out, but all in good spirit and good intent and great support for each other through that journey.

Matt Kirkegaard:  How about you, Nick?

Nick Boots:  Yeah, I’m very lucky. I’ve had nearly 18 months in the business now and, as I said, knowing the founders for 12, 13 odd years and watching the progression of Stone & Wood over that time too has given me a great opportunity to understand the business both from afar and then actually get inside and get into the DNA over the last 18 months.

I came onboard knowing succession was in the future, but there was certainly no promises and no guarantees. It was, here’s an opportunity of this role today, and see where the business goes in the future and if you’re in the right place at the right time then it all lines up nicely. So I’m stoked that the guys and Benny have given me that opportunity to fill some very big shoes and be a custodian for their baby.

Matt Kirkegaard:  It’s interesting you call it custodian of their baby, because you’ve never, you would never describe starting a nationally relevant brewery as being an easy task, but when you look at what’s happened in the US with the headwinds that the craft leaders over there have sailed in to, there seems to be a real challenge in having a successful brewery and taking it to the next level.

I’m actually wondering if you guys haven’t been sold the harder job. “Here guys, we’ve got this really successful, growing brewery, keep it going.”

Ben Summons:  No not at all, not at all.

The guys have been really deliberate the whole way through their journey in terms of building the brand, being patient on distribution, cautiously investing in capital only when we need to, building up the team around them so the team can actually take on and immerse themselves in the DNA and take ownership of it and lead everyone else around them.

Building people, building capabilities in the business so it actually happens organically, and probably one of the parting initiatives we’ve done in the last six months with Jamie involved is a long term plan for the next five years. So we’re all aligned on where we’re going, and there’s great underlying momentum in the business, so we’re up for it, aren’t we, Bootsy?

Nick Boots:  Absolutely.

Does Stone & Wood have escape velocity?

Matt Kirkegaard:  I know you’re up for it, but there does seem to be that challenge of you’ve got Launch and to take it to the next level it seems to almost be a, in aeronautics they call it the terminal velocity, or the velocity to escape the gravity. And it does seem to be, with some of the big breweries, and famously we saw it with New Belgium recently, they took on debt and didn’t get the growth that they were forecasting.

Ben Summons:  Well look, I’m no rocket scientist and my feet are on the ground, but I think one of the things we talk a lot about is about building the business sustainably. And that’s about pace growth, saying no when you need to, and not overstretching the people or the balance sheet, and the brand too fast either, sometimes. Making sure we do things at the right pace is really really important. And it’s not as if the guys have said, “See ya later, we’re out of here.” I mean Jamie, Jamie is still Chairman of the Ownership Board, Brad and Ross are still very heavily involved and there to support us and the rest of the team on the journey. And over time they’ve been great at creating 150 other co-owners in the business who passionately can carry the business forward.

One of those things that they’ve drilled in with us along the way, which has been part of their journey, is don’t grow for growth’s sake. Just do it smart, do it quality, be patient because we’re playing a long game, and we can afford us to make some decisions like that and that way we can, as best as we possibly can, avoid getting ourselves into trouble where you might be too burdened by debt or some other issue might elevate and you have to then do a New Belgium.

Matt Kirkegaard:  But at the same stage, Nick, in a very dynamic business as craft beer is, standing still or even growing slowly can almost be the same as going backwards to some extent. When you’ve got 600 collabatition competitors, people who are all in it together but at the same time potential competitors, when you’re no longer the sexy new business, people start seeing you everywhere and so you start wearing the stigma of being big even though you’re still a fraction of what is genuinely big. You start carrying baggage when you’re still a relatively small business.

Is that a challenge that you guys are going to face? Or are facing already?

Nick Boots:  We’re conscious of those factors, Matt, but I’d argue that perhaps over the last five years Stone & Wood has largely been out alone pushing through eight, 10, 12 million liters and there’s not a lot that have come with us today with their own proprietary branding. So there’s no particular rule book that we open each monthly meeting and say, “Okay, this is the next step to grow this baby to 20, 40, 50 million.”

We know we’re forging new ground in this country since Cooper’s did it many many years ago. So that’s really exciting and we’re gonna make mistakes as we go. But we’re also a target and a tall poppy for lots of others, whether it be the craft guys or the big corporate guys. And that’s okay, we just stick to our game. Sustainable growth, we know what we’re good at, Hottest 100 result would suggest we’re still doing a fair job of staying relevant, and being great partners with our community members and our team.

Ben Summons:  And it was only six months into our business life journey that we were told we were already in too many places in Brisbane with only five venues. “You guys are everywhere, we’re not putting you on tap.”

So it really depends on who you’re talking to and what game you’re playing.

The peloton effect?

Matt Kirkegaard:  Nick, you said that there’s no rule book and there isn’t. I’m a big believer in there’s no such thing as a great plan, because it’s all about execution. But at the same time, one of the things I’ve commented on the podcast in the past is, because the Australian market has been a year or two, three, behind the American market, Stone & Wood seems to have been very good at looking at the trends that’ve been going on in the US and seeing those headwinds hitting over there and almost consciously making steps to avoid some of those.

And I call it the Peloton Effect, you know, when you’ve got the cyclist up front, he dodges a pothole, everyone knows that there’s a pothole coming and can be ready for it. Maybe this is a Fermentum question, Ben, I’m not sure, but Stone & Wood were very quick to start to look at diversification. Rather than just throwing out an IPA, they created Fixation. Invested in kombucha early. Cider. And broadening the base of the business without being in Stone & Wood.

Was that part of that conscious awareness that we can’t grow exclusively as Pacific Ale?

Ben Summons:  A little bit. A little bit about diversification but also wanting to maintain integrity and purity of the brand. Because Stone & Wood, for example, are approachable and different beers, and having an IPA as part of that would’ve been convenient just as a line extension, but it wasn’t the right thing for the brand and it wasn’t the right thing to seize that opportunity of IPAs emerging, hence the birth of Fixation.

Similar for Treehouse Cider, for example. So yeah, we like to see ourselves as being creative and still having an entrepreneurial mindset, but will fit the purpose, we’ll go for. So Stone & Wood serves a certain role, as does Fixation, as does Treehouse, as does the kombucha business, for example. We’ll stay open minded to that going forward as well.

Nick Boots:  And we keep them very much, to Benny’s point, as a single brand plays. So they maintain their autonomy within the broader group, and hence my focus is solely on Stone & Wood, as is our Stone & Wood sales team, our marketing team, etc. etc., so we can, to Benny’s point, we can be pure to what’s got us to here, and hopefully we’ll continue to push us forward.

Matt Kirkegaard:  I remember speaking to Tim Cooper probably a decade or so ago, when they were trying to find a lager play, trying to find some of the other things that they could bring in, and the explanation was, “We’ve got a great pale ale, we’ve got Sparkling Ale, we’ve got the stout, but you need a portfolio of products. So if you want to go in, you need to solve more than one problem on their tap.” And so they were really looking at broadening their selection.

How important is that for Stone & Wood to have to be able to go in and say, “Well we can give you a cider, we can give you an IPA, we can give you a dirty kombucha, we can give you something–”

Ben Summons:  We go the market with those respective products via our Square Keg team, led by Garry Hastings. He looks after all those new business aspects and nurturing those new brands and other things, so we have a dedicated sales force to talk to that suite of offering while Nick’s broader team will talk just Stone & Wood.

Nick Boots:  Yup, absolutely. So our guys are those core three, so Pacific Ale, the Green Coast lager and the Cloud Catcher pale is the majority of our Stone & Wood business, but certainly with those second and third brands, Green Coast and Cloud Catcher, we’re seeing some great growth out of there. With Cloud Catcher at 23 on Hottest 100 the other week, which is wonderful, so we’re getting great momentum there. And then we’ve launched The Gatherer in that fruit, tart and spice space, and then obviously Counter Culture we’ve launched in the last year with some great response from the market as well. But they’re all very much Stone & Wood plays, so the Stone & Wood sales team is always on the lookout for perhaps a cider or an IPA opportunity, and then they might share that with their Square Keg colleague, but that’s where their focus ends, it’s just very much Stone & Wood.

Matt Kirkegaard:  It wouldn’t be a business advantage? What’s the thinking behind that, it wouldn’t be a business advantage to be able to go in with a portfolio directly rather than just sort of–

Ben Summons:  Oh you could easily say yeah, put it all together and you’ve got one big, multi-bev business, but you’re at risk of homogenizing and blending everything together, and I think you need to give the appropriate sales and marketing support especially to build up separate brand of entities and make sure they have their own personalities and own identities and focus purely on those.

There’s, sure, synergies if you did some stuff altogether at once, but you’re at risk of losing focus for each of the individual opportunities, so we’ve made the decision to keep those separate.

Back of house there’s some stuff which obviously makes sense, in finance and stuff like that, but really sales and marketing wise we believe that it’s stronger if they can have their own voice and identity.

Is Stone & Wood too big to be nimble?

Matt Kirkegaard:  Stone & Wood really marked itself out, I wrote a piece for Flagship February recently talking about the market that Pacific Ale launched in to, it really was a zig when everybody else was zagging, and bring it back down and looking at balance, looking at drinkability, and pioneer to market then. So it really stood out in market and it had great growth.

Has Stone & Wood reached the, there was a great consumer insight, but has Stone & Wood reached the scale now where it’s little bit harder to have a big launch like that and come out with something? It’s much easier to have that little launch in one of the brew pubs, trial it, get that feedback, see whether you’re willing to back it?

Nick Boots:  Certainly staying nimble and staying close to our drinkers is–

Matt Kirkegaard:  That’s a much better way of putting it, thank you for asking my question better than I did.

Nick Boots:  There you go, four years of wasted time at Uni. I thought it was wasted, anyway.

You’re right, mate, so that’s really important to us so we often remind ourselves you’re either a small, nimble business, or you’re a large behemoth. But don’t get stuck in the middle, because that’s how businesses die. We’re conscious that we’re scaling, however we want to stay nimble so if we see an opportunity we can react on it, we can get a product to market in a matter of weeks rather than…

You know, we’ve lived through the lives in big businesses with multiple years, and we think perhaps Pacific Ale was borne out of that opportunity and we’ll make sure our other beers that we subsequently launch, we continue to use that competitive advantage that we have of being close and being small enough to see something that, perhaps it’s in the US at CBC in coming months or somewhere else, and go, “You know what? That’s an opportunity, let’s get something in tank.” So it works for us.

Ben Summons:  You don’t get too many Pacific Ales in your lifetime. You know, there’s not many, like Nick said earlier, brands or breweries, per se, who’ve punched through that 12 million liter mark and have kept going. So it suggests that it still does resonate really well and is a highly relevant brand in its own right with drinkers. And yet there’s still so many people who’ve never tried it. So it does enter a new phase in its life cycle where we’re actually, it’s not just about building distribution, it’s actually about continuing to introduce it to more drinkers over time and keep building that brand steadily and keep supporting it.

At the same time that’s a slightly more scale game relative to the rest of the world, but we’ve gotta be playing that game but also being nimble, experimenting and nurturing other little things along the way. Hopefully we’ll cast the fishing line out and catch another great fish at some stage in a different direction, with a bit of zig-zagging on the way.

What role does hospitality play?

Matt Kirkegaard:  What role does the growing hospitality focus? You’ve got the Byron Bay brew house, you’ve got the brew house here, you’ve got Fixation in Melbourne. What role does that play in staying nimble in the market?

Nick Boots:  It certainly gives us a good read on what drinkers are saying and what they like, and we can see those numbers on a weekly basis, what’s pulling through. But we’re very conscious that they’re a marketing exercise for Stone & Wood brand, and in the case of Melbourne, for Fixation. We don’t necessarily want them to be huge brew pubs pulling huge volume, they’re an opportunity to connect with drinkers and educate them, and then get them out into venues that pour our beers to enjoy then in volume with food, entertainment, etc. etc. All things we consciously don’t offer but are certainly relevant in other types of venues.

So they play an increasingly relevant role, is the answer, and we can trial things that we typically might not launch nationally first hit, but we’ve even got our League of Extraordinary Brewers internally and we’ve got some great internal competition where, might be the customer service team or the finance team, or everyone brews beers, so a lot of passionate home brewers, and you get some real gems fall out of that, and then we have an unofficial pipeline of, well, what might we do next? We might do it in the pilot kit in Byron and get a dozen kegs out of that, put that in the taproom for two weeks, rest it for six months, and then let it bubble from there.

So if you like, we have an MPD pipeline, which is a dirty word, we wouldn’t use that out of corporate land, but it’s unofficial on the back of a coaster and it seems to work quite well for us.

Matt Kirkegaard:  It sounds like a lot of small brands don’t have a distribution footprint, their taproom is a financial lifeline for them. Cash flow, immediate pay. It sounds like the venues are much less that for you, and it’s much more a touchpoint for consumers.

Ben Summons:  We’re still learning a bit more about the hospitality side of things and seeing some of the benefits of what you just mentioned. But yeah, fundamentally it’s about connection with the drinker and Stone & Wood sees itself first and foremost as a regional brewer, so having a footprint in Brissie was the obvious next step for us. It’s a great way to build a direct conversation with the drinker, Byron gets a lot of visitors from tourists and some may have heard of Pacific Ale, some may not. A lot of them have never heard of Green Coast or Cloud Catcher or The Gatherer, so it’s a great opportunity to actually build awareness and trial some of your brands. And tell the story.

Matt Kirkegaard:  I was just going to say, Green Coast is one of the most underrated beers in the country, from mind.

Ben Summons:  I’m with you on that, mate.

Matt Kirkegaard:  I find myself drinking much more of that than Pacific these days.

Ben Summons:  It’s amazing how many people you hear that, actually.

Nick Boots:  Yeah.

Matt Kirkegaard:  Will we see more venues? As Stone & Wood grows, are we going to see the need for more touch points to keep that relevance?

Ben Summons:  There’s no rapid rollout plan, but we would like to see more in our backyard, for sure, yeah. Probably Sunny Coast or something we’d like to be at at some stage.

Matt Kirkegaard:  Talk to us about beer styles and where you see the market going. Stone & Wood has jumped on some of the trends with maple syrup beers and a whole lot of interesting things that are great for engagement. Do you see them as a passing fad, or do you think that there will be a continuation of that style of…

My next question is whether we’re trivializing the beer segment.

Ben Summons:  Obviously those things you’re mentioning came under the Counter Culture brand, and that’s, Counter Culture for us is about scratching our creative itch, but also talking to those drinkers and the customers in the trade who are really at the sharper end of what’s going on and really like to explore across different beer styles and we like to throw something different out there. They get probably more noise than they are in terms of scale in the, in the end of the day in business and volume and forward looking strategy, but they’re about having fun and building connection with that.

Which is ultimately a smaller group of drinkers out there, whereas there’s another bunch of drinkers out there who are after some flavorsome, approachable refreshment, where continuing to build your Pacific Ales and your Green Coasts play a huge role. But I think what’s interesting in the market now is just the hybridization that’s happening across different categories, and we’re part of that, obviously, with the Lovely Bubbly when we used Chardonnay juice and Champagne yeast to–

Matt Kirkegaard:  Again, one of the beers I’ve seen the most positive response for from last year.

Ben Summons:  A lot of the people interested in something new and different are loving that kind of stuff. Whereas again, on the other hand, some drinkers who have been drinking a lager most of their life actually having quite a good journey on just a pale ale or a Pacific Ale. You’re walking two lines there, and I think beer needs to keep reinventing itself a little bit, I think, going forward. Keeping in mind though that one of its core jobs to do with a drinker is refreshment.

Nick Boots:  We’ve got an important role to play as a leader in that craft space to actually keep that category growing and healthy, and obviously by volume we’ve seen it drop off a lot over the last decades, so we find ourselves taking some pressure on board to try and play a role in reversing that and growing engagement, whether it be with new drinkers or females, etc., and those who might not traditionally like beer. We see that’s certainly part of our role is to get them into the category to the broader benefit of everybody.

Matt Kirkegaard:  One of the things I was very critical about in the first decade of the century, the 2000s, was the whole push for low carb beers. And it wasn’t the flavor or anything, but it was the way that they were positioned as being the healthy beer, or the beer if you were conscious of not putting on weight, when it wasn’t entirely true. It played to a negative perception about beer that wasn’t entirely well founded, it wasn’t entirely true. And I always worried it was going to have a big blow back longer term because you sort of saying, yes, these beers will make you fat and these are the ones to drink if you don’t. I think to some extent that has occurred now, where we’re seeing the wellness trend and beer is being held as the alcohol that’s bad for you.

Is there a risk with the noise that some of these more novel beers, pastry stouts and things like that, because they do get so much attention? And craft beer does have a bit of a perception to it already, that it can trivialize the category and it can hurt beer, or craft beer, longer term, because it’s seen as a novelty that can be easily dismissed to the broader market?

Nick Boots:  I think perhaps it is novelty in some way, and purposely in some cases. But it garners attention and it might get some industry media, but then it gets some mainstream media and, again, if it gets someone to explore that category in their local bottle shop that they wouldn’t normally walk over to those fridges, then I think that’s a win.

Are some of them hugely sessionable? No. But again I think it’s engagement, and that’s very much what we’re trying to drive there. And I think beer has a different definition for everybody, so to actually try and make it generic is to, and once upon a time our fathers and grandfathers were like, “This is VB, this is Carlton Draught, this is the definition of beer.” I think times have changed and that’s probably a good thing.

Matt Kirkegaard:  And I guess when I’m talking about hybridized beer wine blends or things like that, but it’s the things that do whale vomit as an ingredient–

Ben Summons:  That does no one any favors. Wild and wacky doesn’t really help the category on large.

Nick Boots:  There’s a limit, isn’t there?

Matt Kirkegaard:  And it’s always trying to work out where that line is.

Ben Summons:  We see it from a perspective of, we need to have a range of beers which talks to all different types of drinkers out there, but the whale vomits of the world aren’t necessarily going to pay the bills for 150 families in our brewery, and nor will it provide sustainable growth over time, so I think it really depends on which–

Matt Kirkegaard:  But it shows you can be down with the kids, and it gets you the headlines. It’s that quick sugar rush of attention.

Ben Summons:  I think there’s enough really good craft breweries out there now who are building strong brands who are cutting through that, and I think you walk into a bottle shop or a bar and you’ll see consistent ranging and clear branding and they’re starting to communicate. So they’re slowly building brands, it’s starting to happen, it’s not just a merry-go-round of wacky stuff.

A Stone & Wood hard seltzer?

Matt Kirkegaard:  The big trend that we’ve seen that’s caused all of the discussion in the US over the last year is the hard seltzer market. Is that something we’re gonna see either Stone & Wood or the broader–

Ben Summons:  You look at, again, everyone is looking across to the US and it’s not just a two or three year lag now, it’s almost instantaneous. I was lucky enough to be at the Craft Brewers Conference last year, and it was coming up really quickly. There were only a few players then and we talked to Oskar Blues at the time, we were in having a brewery tour, and they’d just launched Wild Basin and that had gone to their third largest skew in four months, for example, so it was just going gangbusters.

I sat in on a Growing Into The Headwinds panel discussion and there was Matt from Firestone Walker and couple others including one of the founders from Russian River, and those two in particular were still sitting on the fence, like they were taking the more purist route saying, “It’s not beer and we’re sticking to beer,” and all those kinds of things. But I think Firestone Walker just had 805 lager just going gangbusters and they didn’t have capacity.

Whereas a lot of other brewers did have capacity and they kinda pushing it out there. So I think this’ll be one, there’s gonna be a tsunami of seltzers coming for sure, and whether that water subsides around the consumers or sits at a higher level and stays, will depend on how well it resonates with the drinkers, whether they understand what it is an they like the flavor and it does the job for them. But one thing’s for sure, there’s going to be a heck of a lot of them coming.

Matt Kirkegaard:  Will one of them be coming from–

Ben Summons:  We’re having a look at it, for sure.

Matt Kirkegaard:  Having a look at it?

Ben Summons:  But not from a Stone & Wood point of view, it doesn’t have a play there. But certainly in that new business portfolio that Garry runs so well in Square Keg, that’s where it would logically fit were we to go down that track.

Matt Kirkegaard:  So we won’t have water from Watego? Alcoholic water from Watego or something like that? I’m trying to think of a seltzer from S, somewhere down that way, but I couldn’t think of any of them.

Ben Summons:  It’s a bit of fun. If you look at the category over there it’s made a huge impact, so you go well, probably worth listening to that. Let’s have a think about what that may mean for us. We’re more passionate about what else hasn’t been done before, as opposed to adapting something that’s working somewhere else.

Matt Kirkegaard:  When you start seeing a brand, whether it’s a Stone & Wood or the broader Fermentum businesses becoming multi-beverage companies, which was one of the terms that CUB used–

Ben Summons:  Sounds a shiver down somebody’s spine.

Nick Boots:  Don’t talk about it.

Matt Kirkegaard:  On one hand you have, again, you need to step back and say from a business point of view you need to buttress your core business and make sure that you’ve got all the other things, because we’ve got a responsibility to employees. And so they’re purely business decisions. But do some of those decisions to become broader beverage companies hurt the emotional investment that consumers have in craft beer?

A multi-beverage drinks company

Ben Summons:  That’s exactly why we’re keeping Stone & Wood separate. A lot of us have lived through a multi-beverage day at the big house years ago, and you had sales reps walking in who were used to taking an order for pallet-loads of VB trying to sell him some wine. It just didn’t work.

Nick Boots:  Want a bottle of Grange with that?

Ben Summons:  And the call side. You go into the venue or the bottle shop and the list of things you need to talk through is not practical. So there’s a couple of reasons why we’re keeping it separate, but that emotion one you talked to and keeping some of those plays pure and separate is really important.

Number one in Hottest 100

Matt Kirkegaard:  I just suddenly realized that we’ve come up to 45 minutes, so we’ll talk Hottest 100. You mentioned that, despite the growth that Stone & Wood’s had, its popularity, its availability, still managed to come out as number one, which is obviously great testament. But it was obviously something that mattered to you as a business?

We talked a little bit about this on the live podcast, but it was obviously something that, as a business, it mattered to you. There was a big investment I think the day that Balter sold, we first started seeing–

Ben Summons:  Just coincidence, mate. Coincidence.

Matt Kirkegaard:  But there was something came up in my Facebook feed–

Ben Summons:  There’s so much pride in the business from all our team, and we don’t set out to win awards and we’d particularly much prefer to win beer awards as opposed to popularity contests, but there’s pride in the place. So to take that out, there was a good feeling in the brewery that day, you know? Good vibes, few high fives, few cheers, it was good fun. And that’s what I think this contest is, it raises a bit of profile for the industry and it’s good fun to be part of, but at the end of the day it’s 30,000 votes and there’s probably 13, 14 million beer drinkers out there, so–

Matt Kirkegaard:  But it’s 30,000 votes from highly invested beer drinkers who are, I guess, opinion leaders. And it’s easy to say, “It matters, source of pride,” but I’ve seen sponsored posts in drinks industry magazines. I think anyone who works in the industry would’ve seen the headlines that you’d won, but you’ve still followed that up with sponsored content in publications to remind people that you were number one. So obviously it’s not just a little bit of pride, there’s a business outcome for you as well.

Nick Boots:  A little bit from a trade perspective, mate. But not necessarily from a drinker perspective. You’re not gonna see a decal in a pub with Pacific Ale and then tap talker saying “Number 1 Hottest 100”, that’s a bit in your face, that’s not our style. So yes, relevant to a degree for trade, but from a drinker point of view, it’s lovely when they discover it. But we’re conscious that a lot it might not be relevant to. They go, “What’s Hottest 100? I thought it was on TripleJ music?”

So we’re tactful about how we might get a bit of leverage out of it.

Matt Kirkegaard:  It’s interesting you say you wouldn’t display it on a tap decal or anything like that. The independence logo you proudly display in that space, so being an independent brewery is more important than being the most popular brewery?

I think that’s fair. Absolutely. We’ve got a lot more planned in that regard, too. It’s a great community, we’re very proud to play a leading role in it, and I think really we’ve only scratched the surface as to drinker awareness, and even trade to that point. So many I speak to have never seen the logo and they don’t appreciate the different between an independent and a corporate brewery.

Nick Boots:  I think as an industry body we’ve got a lot to do there, and Benny and I and the founders still have some involvement in those as well, to actually grow the whole franchise for indie beer.

Matt Kirkegaard:  I don’t expect you to give me any scoops or insights for what you’ve got in your tanks at the moment, you’ll have a media plan for that, but just generally what are we going to see from Stone & Wood and Fermentum over the course of 2020? What are the key trends that you guys are identifying that you’ll be looking to?

Ben Summons:  We talk a lot at the moment about consolidating a lot of the core business we’ve built. We’re still early early days on building a lot of those brands, and Nick mentioned Green Coast and Cloud Catcher, for example. We only really started giving them more oxygen in the last year or so because we’ve been capacity constrained with Pacific Ale. We’re doing steady work on building those brands up and consolidating what we’ve put in place so far without trying to spread ourselves too thinly.

And it’s the same situation with Fixation, with Tommy leading the charge there, and also Treehouse Cider. So a lot of consolidation, but of course we’ll keep innovating on the smaller end to see what tickles our fancy for the future.

Matt Kirkegaard:  I know that I asked this on the Hottest 100, but in all the kerfuffle I can’t remember what the number was, but what percentage is Pacific Ale in terms of the Stone & Wood volume, Nick?

Nick Boots:  Mate, we’re sitting roughly in the 80s at this point in time, and that’s progressively coming down. We’re also conscious, we could get it into the 60s if we took our foot off Pacific Ale, but we don’t want to do that. So we’re giving it and the other two beers that make up our core three plenty of oxygen and grow them all concurrently, and I think naturally Pacific Ale will probably finish somewhere, well probably never finish, but somewhere probably about three-quarters of our Stone & Wood brand, would be a nice position for us to be in in a few years. And that’d be achieved by some ongoing strong growth of Pacific Ale, but also some more rapid growth on Green Coast and Cloud Catcher pale.

Building a portfolio beyond the flagship

Matt Kirkegaard:  How hard is that from a business point of view, you’ve got a very strong flagship that you’re known for. In fact people, when I’ve done activations of craft beer and I’ve had Stone & Wood on, they just sort of ask for a Stone & Wood. And you sort of say, “Well, which one? We’ve got three.” But Pacific Ale and Stone & Wood are so closely associated, how hard is it to keep the momentum going for Pacific Ale but bring in Green Coast and bring in Cloud Catcher and give them a little bit of love?

Nick Boots:  From an execution point of view? There’s some education, certainly, of the road crew. But we’re really conscious that Pacific Ale is not necessarily the beer for everybody. While we’ve certainly done a great job in satisfying that market, that those who are looking for a lager in that Helles style, or a pale ale, we didn’t have a really strong offer for them previously. So that’s completely new space for us, and that we’ve only, as Benny suggested, we’ve really only scratched the surface of taking those brands out for a spin around the block, if you’d like, and giving them the oxygen they need to grow and fulfill their potential.

Matt Kirkegaard:  In asking that question I was thinking of the tap situation, where if a venue’s got 10 taps a percentage of those are going to be contracted. If there’s one Pacific Ale there’s often the one independent tap you’ll see when you walk into a pub. If you’ve only got the opportunity for one tap, do you just default to Pacific Ale? Or do you say we want to give the lager a bit of a push, so we’ll encourage them to put that on?

Nick Boots:  It’s a good question, mate, but the answer is, it’s Pacific Ale. The drinker relevance and engagement with the brand, and just the VPO that the beer does far exceeds our other brands.

Matt Kirkegaard:  Volume per outlet?

Nick Boots:  Yep, sorry, volume per outlet, yes. Another bloody acronym. Blame CUB.

Matt Kirkegaard:  I just have to do the translation to listeners.

Ben Summons:  It does also depend on what venue, though, right? By and large drive Pacific Ale as the priority, but not every venue has that set of consumers. The more pointy end venue goes, “Well no I don’t want Pacific Ale, we’ll have something from Counter Culture,” for example. But by and large, priority Pacific Ale, and if we can manage to get a second tap, then it’s an arm wrestle between Green Coast and Cloud Catcher.

Nick Boots:  Yeah, depending on the geography.

Matt Kirkegaard:  Are you finding that venues are saying that either Lion or your former employers wanting to put 150 Lashes on, and, oh you can’t have Pacific Ale, or we want to put 4 Pines Pacific Ale on? And you’re sitting on the same bank of taps as another Pacific Ale?

Nick Boots:  Yeah you do, you get that in some venues, absolutely. And competition’s a good thing. So we’ve got no problem with it, and if in their portfolios of 80 different beers they don’t have another option other than another Pacific Ale, then that’s up to them.

Matt Kirkegaard:  Little bit of snark in that?

Nick Boots:  No, not at all mate.

Matt Kirkegaard:  I wish I could’ve got the expression as you said that. I wonder if it came through in the voice, I’ll let the listeners decide that.

Again, having worked for the big house and been involved in saying, well business is business, we’re gonna lock down taps, do you have a slightly different opinion about things like tap contracts as you’re working for a company that’s trying to prise publicans out of that model?

Selling against tap contracts

Ben Summons:  Like the other 700 craft breweries in the country, we’re just trying to get on as many taps as we can. We’re in the right kind of places, and each venue is different, each venue operator is different, some are contracted, some aren’t. Some want a basic offering, some want a more diverse offering, I think it’s horses for courses and we’re just trying to get where we can in the right time and right place.

We don’t play the contract game.

Matt Kirkegaard:  I wasn’t actually coming at it from that point of view, it’s more a case of, do you find yourself arming your sales reps to go in and tell the complete opposite of what you once told the same publicans in championing the Stone & Wood cause?

Nick Boots:  They’re not quite as wonderful as we once thought they were, Benny, let’s face it. I mean I remember when they started. Crikey, it was about 1999 in Sydney when we at CUB were locking in taps for the Olympics at venues.

Matt Kirkegaard:  Pushing Fosters back then?

Ben Summons:  Great product.

Nick Boots:  Absolutely. And they really, my history ends there, but my understanding was that was the start of that way of doing business. What we’re doing now is having to re-educate the trade that actually, at the right wholesale price with the right sell price, that a great independent beer can often be more profitable for a venue than a contracted beer with a nice rebate paid each quarter. Net net them out, whether it be our Pacific Ale or any other beer, can actually be as or more profitable, and that’s just an education process we need to work through with the trade, to try and undo all the damage we did 20 years ago.

Matt Kirkegaard:  It’s interesting you talk about the profitability, because it’s one of the things that I’ve been looking into, and when you’re lucky enough to see the wholesale cost, the invoice cost of beers from some of the large breweries, it’s at a par or sometimes significantly more expensive than the list price from Stone & Wood. And yet they get their $2 a liter rebate back, $3 on occasions, and yet the price that the consumer pays is often calculated on the invoice price. So there should actually be a much bigger difference. It almost, whilst the ACCC has found that they’re not anti-competitive, it does seem to be costing the consumer more.

Ben Summons:  We don’t control price. So it’s ultimately up to the bottle shop owner or the venue operator, what they charge for it.

Matt Kirkegaard:  But again, it’s one of those hidden costs. And it’s something that came up is that publicans can actually make a better margin by charging more by the provenance of the brand and those sorts of things, and the beer is often cheaper. But is that coming out of the consumer’s pocket?

Nick Boots:  Perhaps in some cases. I think different customers, different trade, utilize their funds in different ways. Some I think include a rebate or some type of kickback in their ultimate LUC and that’s reflected in their retail price. Others not and they might use that to pay down debt and they scribe it off to another account or what have you, has been my experience.

Matt Kirkegaard:  Or they accept a trip to the Melbourne Cup.

Nick Boots:  Yeah, absolutely. And that’s their prerogative. But yeah, we don’t spend much time on it, to be honest, we just focus on great beer at a really fair price that can be sold at a price that delivers a great margin to the trade. And the proof’s in the pudding over the last 10, 11 years.

Matt Kirkegaard:  I think that’s as good a place as anywhere to leave it. Nick, Ben, thank you very much for joining us on Beer Is A Conversation. And all the best for Stone & Wood for 2020.

Ben Summons:  Pleasure, thanks for having us Matt.

Nick Boots:  Thanks Matt, cheers.