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ED Now Feature: How to Raise the Bar in Your Craft Beverage Cluster
Eli Dile   on Monday, August 7, 2017 at 9:02:00 am

By Eli Dile

If you recently woke up from a long coma, perhaps one of your biggest shocks was the variety of beer brands now available to you. Not just breweries, but small, independent wineries, distilleries, and cideries have proliferated over the past two decades. In areas where they’re strongly concentrated, they exhibit all the characteristics of traditional industry clusters.

No place understands this better than Hudson Valley, New York, where small craft beverage-making is big business. The Hudson Valley Economic Development Corporation (HVEDC) nurtures the growth of these firms through the Food and Beverage Alliance, which supports the sector through business courses and an annual summit. And while breweries or distilleries may seem like small potatoes compared to advanced manufacturing or corporate headquarters, they have at least one distinct advantage.

“In today’s economy, there are very few businesses you can anchor to an area,” said Laurence Gottlieb, president and CEO of the Hudson Valley EDC. “Given the digital nature of business, work can be done from anywhere in the United States or around the world. There’s a great benefit to feeding the growth of these firms because they tend to stay where they’re established.”

The benefits of a pour economy

Curiously, the Great Recession is partly to thank for the Hudson Valley’s many boozy businesses. A lot of food and beverage entrepreneurs decided against re-entering the corporate world after losing their jobs in the post-2008 downturn, and instead used their experience and business acumen to launch a company.

“We saw all these entrepreneurs coming through our doors that were very sophisticated, had rather good business plans, and were self-financed or supported by friends and family,” Gottlieb said.

At first, not everyone was sold on the idea. “Why do we want to create a bunch of bars?” was the question HVEDC kept hearing, and had to tame quite a bit of pushback from skeptical community members. Gottlieb and his team made the case that these wouldn’t be “dive” bars but sophisticated operations run by second- or third-career entrepreneurs with capital and business experience. Making the pitch required putting editorials in local newspapers and lots of meetings with community and government officials.

“We repositioned it as a way to put us back in the manufacturing business,” Gottlieb said. “These folks are making products that will be sold not just in the tri-state area but across the country, and in some cases around the world.”

Beyond generating tax revenue, breweries and distilleries have been powerful agents of revitalization, opening in sleepy, post-industrial communities that haven’t seen that level of investment in decades. Craft beverage makers are popping up in former factories, schools, churches, and farmhouses. The cluster has also been a boon to tourism, drawing droves of visitors from the New York City region.

Listen and learn

Gottlieb contends that the best way to grow a cluster is not to expend excessive time and resources on deep-dive research, but simply to lend an ear.

“It wasn’t paralysis by analysis,” he said. “We jumped into it without blue ribbon panels and five-year studies. It started with a conversation.”

HVEDC began by learning about the marketplace and doing some basic asset mapping. Staff went on a listening tour to learn what challenges they were facing and what barriers were preventing growth. The strength of the sector surprised even them, as HVEDC began uncovering businesses they didn’t know existed.

“These cluster initiatives are magnets that draw entrepreneurs out of hiding,” Gottlieb said.

The value of listening cannot be overemphasized, Gottlieb notes, who believes that companies will tell you what they need to be successful better than any market research or external consultants can.

“We try to find out what those businesses feel they need for growth, rather than us telling them what we’re going to do for them,” he said.

Advocacy is another key service HVEDC provides. The alliance gives entrepreneur a voice in Albany, so they can weigh in on state legislation, rules, and regulations that affect the craft business industry.

“It’s both being proactive and reactive,” Gottlieb said. “We’re constantly listening and learning.”

“These cluster initiatives are magnets that draw entrepreneurs out of hiding.”

From good to great

Although craft beverage entrepreneurs make excellent products, they do not always have the business acumen to take their companies to scale. The “Bet on My Business Academy” is one of the alliance’s signature programs, which helps turn lifestyle businesses into serious companies. Bet on My Business is not a startup academy, but advanced business training for established firms with employees. In each class, 10-12 entrepreneurs receive executive-level education on topics such as sales and management, on par with the training that executives of major corporations would receive. But the most important component is job shadowing, in which participants get hands on with another entrepreneur. If he or she, for example, wants to introduce product to a new market, they might shadow a distributor. Or if they want to start selling food at their establishment, they can visit with a restaurateur. The program has helped craft beverage entrepreneurs add tasting rooms to their production space, attract tourists, launch new products, and hire more employees.

The annual brouhaha

When the first Hudson Valley Beer, Wine, and Spirits Summit was held in 2013, 75 people showed up. Last year, that number topped 600. A signature program of HVEDC, each fall hundreds of industry professionals gather for the summit – whose title now includes “Cider” to reflect this segment’s growing popularity – held at the Culinary Institute of America in Hyde Park. The event features the who’s who in New York’s craft beverage industry, including producers, sellers, restaurateurs, and major distributors.

Networking with fellow entrepreneurs is a critical component, but there’s also an educational component with sessions on various aspects of running a small business. Initially, access to finance was a hot topic, but as the sector grew in sophistication and banks warmed up to beverage entrepreneurs, other issues came to the fore. Now, entrepreneurs want to learn about accounting, contract law, intellectual property, branding, and perhaps the hottest topic of all – social media. One of the most popular sessions is a panel with representatives from the state liquor authority, which serves as a valuable forum to sound off on regulations that impact the industry.

Inspiration, not replication

About two years ago, inspired by the sector’s success and resulting tourism, a movement emerged among some Hudson Valley leaders who wanted to rebrand the region as “Napa Valley East.” Gottlieb wholeheartedly rejected this idea.

“Let Napa Valley call itself Hudson Valley West,” he said. “I want the Hudson Valley to be its own thing and develop its own personality.”

Individuality is at the core of HVEDC’s approach to economic development. Though Gottlieb and his team are always taking inspiration from other initiatives, they stay focused on their own assets.

“Trying to replicate in a petri dish what somebody else has done – I think that’s a terrible way to build a sustainable economic development model.”

As HVEDC’s clusters interact, they are beginning to cross-pollinate. The region’s 3D printing industry has helped brewers design unique taps for new product lines, and biotech companies are contracting beverage makers to cater large events. HVEDC originally sent newsletters tailored to each industry cluster, but then realized it didn’t make much sense to keep that information siloed. Now, all of Hudson Valley’s businesses get email newsletters that inform them of what’s going on with their inter-cluster counterparts.

“The ultimate in economic development is cross-pollination,” Gottlieb said. “I don’t think there’s anything greater than that.”

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The Hudson Valley Beer, Wine, Spirits, and Cider Summit won a bronze award from IEDC's 2016 Excellence in Economic Development Awards in the Entrepreneurship category.

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