Why This Entrepreneur Scaled Back His No. 1 Product
This story appears in the July 2017 issue of Entrepreneur. Subscribe »
Sam Calagione is used to getting love in his hometown of Milton, Del. He created Dogfish Head Craft Brewery, one of America’s hottest breweries, and is a major employer in town. People wave and say hi. Out-of-towners ask to take selfies with him. So it came as a surprise when a liquor store owner ran over with tears in her eyes.
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“I have customers walking into my store trying to buy your 60 Minute IPA and then yelling at me for not having it stocked,” she said. “Then they’re leaving without buying anything. I’m a local entrepreneur, you’re a local entrepreneur -- can’t you help me?”
Calagione had heard this before. 60 Minute IPA was his most popular beer. It was the sort of hit craft brewers would kill for. And yet he tamped down on production. He turned down sales. And he did it for years. Many entrepreneurs would consider this unthinkable. But Calagione was thinking ahead: Rather than push one giant hit, he believed his company would be better off in the long term by pushing a diverse range of smaller products. Now, 14 years after that hit beer debuted, he can evaluate whether it paid off.
The story begins in 2001, when Dogfish created a beer called 90 Minute IPA. It’s powerful -- at 9 percent alcohol by volume, almost twice as boozy as a Budweiser. “Our distributor was like, ‘This is great, but it’s strong for the average drinker,’ so we said, let’s do a more approachable, 6 percent version,” Calagione says. That became known as the 60 Minute IPA, which he released in 2003.
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This new beer took off. By 2006, it could have constituted 70 to 80 percent of all Dogfish sales. Calagione was excited, but also worried. He wanted Dogfish to be thought of as an innovator. But if the brewery became known for one product, that’s all every store and bar would carry, and nobody would know about its other beers. Then if people’s tastes changed, and drinkers lost interest in IPAs, they’d think of Dogfish as old news.
So in 2005, Calagione made the decision: This hit beer would never pass 50 percent of all Dogfish sales.
Retailers and distributors immediately complained. The Dogfish team worried about straining relationships, so they tried to turn the restriction into a positive. “It gave us a pretty unique soapbox to stand on in a crowded marketplace. We can say, ‘We want to stand for something different,’” Calagione says.
When Amtrak asked to carry the beer, Calagione persuaded the train service to offer only his 90 Minute IPA. (Amtrak is now that beer’s largest buyer.) Dogfish trained its sales staff to act as a “beer education force,” showing retailers its new beers and explaining that the limited supply meant everything was always fresh. Calagione and his staff listened sympathetically to unhappy retailers and found other ways to satisfy them. When that liquor store owner approached him in his hometown, for example, he offered a few free hats for customers and more of his other beers. “I’m not saying your business isn’t important to us,” he told her, “but we believe in this business model. Please bear with us.”
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Today, Calagione has a lot to show for his restraint. Dogfish is the 14th-largest craft brewer in the U.S. by volume, and people travel from across the country to visit its brewery and nearby Dogfish-themed hotel. And beer-drinking trends are moving in his direction. A recent Nielsen study found that the younger a (legal-age) drinker is, the more likely they are to want new and different beers. Only 44 percent of Gen Xers want that, for example, but the number jumps to 51 percent for 29- to 36-year-olds, and to 61 percent for 21- to 28-year-olds.
Dogfish’s most popular beers are also looking different. 60 Minute IPA is still on top, with 43 percent of Dogfish’s sales. But three of its top five beers are new creations. “One or two of them could overtake 60 Minute in the next five to ten years,” Calagione says. And he’d be fine with that.