Victory Beer

Tiny microbrewery Victory Brewing Company is an interesting study in contrasts: its bold, brash HopDevil India Pale Ale has been wildly successful, while its safer, more mainstream Lager has not.

As at any other microbrewery, total annual production at Victory amounts to no more than a single eight- hour shift at Budweiser, and total annual sales are less than .5 percent of Budweiser s advertising budget. Rather than attempt to challenge Budweiser and other deep-pocketed industry heavyweights head-on, Victory s founder and president, Bill Covaleski, and his partner and brewmaster, Ron Barchet, chose the unique strategy of making beers that were intensely flavorful and different from anything else in the marketplace . They bet the success of the company on a number of unproven assumptions: that there existed a sufficiently large future market demand for such beers, that they could identify the demands of this market, and that their beers would not only create demand in this expected market but also sell at a premium price.

HopDevil

One of the beers in Victory s initial introduction in 1996 was HopDevil. Rated at close to 70 on the International Bittering Unit scale of beer bitterness, HopDevil is five times more bitter than and almost twice as expensive ”$24 per case ”as mass-marketed American standard beers, such as Budweiser. Consumers are seldom indifferent to this distinctive brew; they either love it or hate it. Those who love HopDevil buy it, praise it, recommend it, and accomplish through word of mouth what the company cannot afford to do through paid advertising: create a cult following among a select group of beer drinkers with a high willingness to pay.

Lager

Providing an interesting contrast is Victory s Lager, which Covaleski and Barchet launched concurrently with HopDevil. The Lager was formulated as a fine beer, light in color and made with the best possible ingredients . As similar to traditional American lagers like Bud and Miller as a superpremium beer could be, Covaleski and Barchet expected it to be an immediate, albeit somewhat modest, success. Unlike HopDevil, no one hated the Lager; at the same time, no one loved it, which created a problem for Victory.

While sales of HopDevil have grown approximately 40 percent per year for the last seven years and now represent over half of total sales at Victory, the Lager has been a marketplace failure.

Leadership Lessons

Victory is a story of two beers launched at the same time by the same company with dramatically different outcomes . The launch of HopDevil embraced risk and made a full commitment to capturing a market segment necessary for survival; the apparently safer Lager failed to stand out in the eyes of beer drinkers. Victory s experience suggests an interesting paradox: for a small player, boldness may very well be essential, and in many instances being conservative may prove to be an unsafe strategy.