Heady Topper: The journey from a small brew pub to the most elusive beer in the U.S.
How a small brewery in Waterbury, VT was able to become world-renowned by emphasizing quality, freshness and community in every aspect of their business.
The Alchemist is a small brewery in Waterbury, VT, owned by John and Jen Kimmich, that grew from a small local brew pub to become a world-renowned brewery with a cult-like following. Their growth and success can be attributed to the effective alignment between their business and operating models. The Alchemist sells Heady Topper, a double IPA, that holds the highest ranking, a perfect score of 100, on the Beer Advocate. Heady Topper is an unfiltered, unpasteurized beer that stands out among other IPAs because it provides an accessible, high-quality hoppy taste.
The Alchemist creates value by focusing on quality, freshness, and staying connected to their local roots. Heady Topper is only sold in a select number of stores, mainly mom and pop shops, all within a 30-mile radius of Waterbury, VT. Staff from the Alchemist package the beer themselves, deliver the beer to each store in their own refrigerated trucks, and personally put each case into the cooler at the store. This gives the company direct control over how fresh the beer is and ensures that the quality of the beer is maintained throughout the delivery process. They do not ship beer and deliver all beer within three weeks of being canned. To demonstrate their commitment to quality and ensure the best taste experience for their customers, the Alchemist outwardly insists that Heady Topper be served fresh and at a cool temperature, even writing multiples times on their cans “Drink from the can!” Their operating system has been designed to allow the company to guarantee the fresh and high-quality taste that is unique to their beer.
Since Heady Topper is only sold in a select few shops in VT, it has become an exclusive commodity and something that people travel from far and wide to obtain. The Alchemist’s website lists when deliveries are made to each store, often causing there to be long-lines to purchase Heady Topper. Consumers are only allowed to buy one case, usually of four 16oz cans, at a time. The beer often sells out within three hours of being delivered and every barrel made is sold. The Alchemist’s decision to only sell their beer locally not only allows them to gurantee the quality of the beer, but creates more value through the exclusivity of Heady Topper. The beer has become so revered that there is even a website and twitter account, HeadyStopper, dedicated to “the hunt for the most elusive beer in the country.”
The Alchemist’s distribution system directly aligns with their desire to stay connected to their local community, by bringing in new consumers to Vermont businesses and allowing their community to have more access to Heady Topper than anyone else. While the brewery is mainly focused on Heady Topper, the brewers experiment with making different beers in small batches. Those beers are made available to the local community through truck sales that often happen in conjunction with town events.
The company’s emphasis on community is not just a result of its strong local roots; it is good business. The Alchemist differentiates itself by not just demonstrating a respect for the quality of their beer, but by respecting their community and their consumer. The Alchemist has relied fully on word of mouth promotion, which is driven by building positive experiences for and relationships with consumers. Their insistence to only distribute locally and emphasis on contributing to the community enables them to build better relationships with their biggest advocates. Even though they have the opportunity to set a high margin on Heady Topper, they further demonstrate empathy with their customers by maintain a relatively standard price for premium beer of around $14 for a four pack. This community focus counters the backlash that the company could foreseeably receive for its exclusivity.
A common inclination for companies that have high demand for their products is to grow as quickly as possible. But instead, the Alchemist has chosen to expand in a responsible way that stays true to their values of quality, freshness, and community. Their decision to focus on Heady Topper almost exclusively and to control their entire distribution process have been instrumental in ensuring that their business model is directly aligned with their operating model. Just recently, they announced the groundbreaking on a second production brewery of equal size with a large-capacity retail space attached. It will be incredibly interesting to see how they adjust their operating system to accommodate this increase in volume, while striving to stay true to their business model.
Sources:
- WCVB: Heady Topper: Sacred Beer http://www.wcvb.com/chronicle/heady-topper-sacred-beer/33092380 May 19, 2015.
- Lorre, Rossa Maura. Munchies by Vice: This is What It’s Like to Make the World’s Most Sought-After Beer http://munchies.vice.com/articles/this-is-what-its-like-to-make-the-worlds-most-sought-after-beer June 2, 2015.
- Ramos, Nestor. The Boston Globe: Craft Beer Fans Go to Great Lengths to Buy Top-Rated Brew https://www.bostonglobe.com/metro/2015/01/25/atop-beer-food-chain-heady-topper-spurs-vermont-liquid-gold-rush/BLlk4nHgfBXkD9std009pI/story.html January 25, 2015
- Kristi. Boston.com: How to Get Your Hands on Heady Topper Beer http://www.boston.com/travel/new-england/road-trip-where-find-the-wildly-popular-heady-topper-beer/KbDEBQe020VHFOa0NxkrZI/gallery.html#slide-1 September 16, 2014
- The Alchemist’s website. http://alchemistbeer.com/
- The HeadyStopper website: http://www.headyspotter.com/
- Heady Topper review on the Beer Advocate: http://www.beeradvocate.com/beer/profile/27039/16814/
Great article! I think another reason some craft breweries remain local is that they don’t want to deal with distributors. Under the 3-tier system, producers can only sell their products to distributors and distributors sell to retailers. It seems that there is some exception in VT that allows Heady Topper to bypass distributors and directly sells to retailers. Most of the distributors control the supply chain of beer sales. Especially, under some state franchise laws, breweries can only work with one single distributor and it’s almost impossible to fire the distributor even if this distributor provides a terrible service.
You are completely right Ni. The Alchemist has found a way to by-pass the distributors by staying local and have been able to further build their brand be developing their own relationships with the community. It will be interesting to see if they stick to this operations system after the second production sight opens-up. I think that they face a huge risk in steering away from their hyper-local, in-house distribution, but maybe they will be able to find a distributor who understand their value proposition and is committed to keeping it in tact.
Nice job! This post highlights the complex challenge of how to effectively scale a small businesses whose customer value proposition is directly linked to its size (i.e., low production volume and scarce availability) and whose operating model is tailored to support that value proposition (i.e., high-touch and hyper-local). If The Alchemist has growth aspirations for Heady Topper, it will be interesting to see what pieces of the current operating model the brewery decides to sacrifice to achieve them. I have a hunch that maintaining in-house distribution (for both legal and logistical reasons) and only holding 3-weeks of work-in-process inventory will tough to uphold as the geographic footprints expands. As well, it is hard to predict how customer will react to additional Heady Topper expansion. In a highly fragmented craft beer market, The Alchemist has nonetheless carved out a gold-standard reputation for quality, and I worry they even a small move towards more mass production will put that brand equity in jeopardy.
I love that you chose to look into this business–I have a friend who is part of the Heady Topper cult and never fully understood it myself :).
It’s really interesting to see a business exercise so much control over growth when there is such a high demand for its product. You hit the nail on the head by identifying that this controlled growth allows for operations that tightly link to the customer value proposition. Given the growing appeal of IPAs to beer aficionados, the valued provided by this unwavering commitment to quality is probably magnified quite a bit.
One thought on expansion: I know it would be difficult to maintain consistent quality if they grew out of their VT brewery and used distributors, but do you think they might be able to expand geographically by replicating the brewery model in other cities (say, Denver or Portland)? It would be interesting to see if there would be other communities that would pair well with this operating model while still not detracting from the cult-like following in New England.
That is a really great point about expansion. I think it would be hard for them to bring Heady Topper specifically to other regions, but maybe they could expand by opening up breweries in other states that focus on different beers for each state/region. That way they could continue to optimize operations for one specific beer but maintain the exclusivity of their beer.
Great post – now I’m thirsty.
Similar to other commenters, I’m curious as to what you think about The Alchemist’s prospects. Is it a labor of love, or could it be a sustainable business? I know that I for one would love to have greater access to Heady Topper, but I don’t know how much of the perceived quality is just due to the scarcity. You are absolutely right in saying that organic growth is right choice for The Alchemist, but at what point with the mystique that surrounds Heady Topper disappear, and how much of sales are attributable to the mystique?
Interesting — I wouldn’t call myself a craft beer connoisseur, but I certainly enjoy the good ones and had never heard of this.
It seems from your post that one of the key drivers of the products value proposition is its exclusivity. Now that the craft beer market in general has begun to mature, I wonder whether the company’s current approach towards exclusivity is prudent. When the market was in its infancy, the process of discovering new beers became a point of pride amongst aficionados — however, now many of those beers are marketed nationally, and there appears to be a handful of clear winners in that category (abita, floyds, dogfish head, Goose Island and flying dog come to mind). The differentiators for these businesses appears to be quality of product, marketing success and broad distribution. As the market for craft beers becomes more mainstream and the beer-snob mentality becomes more of a caricature within the culture zeitgeist, do you think that the elements of heady topper’s business model that have lead to its sucess to-date, as well as the key element of its operating model (controlled and small distribution), are appropriate to drive the company forward?
It seems like a big part of how Heady Topper is maintaining their quality is through distribution (on top of a high quality brewing process). I wonder if this means that they are committed to only being regional players, wherever they set up shop (as their current strategy would imply), or if they would ever consider investing in a distribution system that allows them to maintain this level of quality while achieving broader reach?
If they go to the regional route, I think something else they would have to consider is how being in different geographical areas might impact the taste of their product. For example, I know that New Belgium Brewery in Colorado (whose most well-known beer is Fat Tire) had to search far and wide in the U.S. before they found a state where the water did not adversely affect the taste of their beer. Given how devoted Heady Topper is to consistency and quality, I wonder if they are similarly geographically limited, or alternatively, if they would think about producing different lines of product from its different locations. Overall, I think this is an interesting case of how the business and operating models are aligned, but the operating model produces substantial constraints on the business model.
I thought you did a great job outlining what makes Heady Topper so unique in a space where craft beers are currently all the rage. As you point out, it will be very interesting to see how the company handles expansion without compromising on quality. Additionally, I wonder if they came keep the same cult following that has people lined up out the door for a new shipment, or if the brand loses some of the luster it currently has of being so unique.
Very interesting post! I now feel obligated to try this beer! One thing is still unclear though, how does the company manage to sell directly to mom-and-pop stores? I thought that the “tree-tier system” forces all alcohol manufacturers to sell to retailers solely through distributors (alternatively, they can sell directly to consumers in the manufacturing facilities with a special permit).
On another note, it seems that scarcity for the Heady Topper has fueled word-of-mouth. I am curious if they have deliberately avoided expansion because of this. If so, I would be disappointed. At this point, they have created a lot of value: a great product that makes people travel and stand in line to obtain. Avoiding price increases or expansion is not being able to capture such value. This obviously affects the company’s profits but it also affects consumers as well. I want one and it kinda sucks that I can’t have one in Boston!
Thank Bernardo- so I actually looked this up because I was curious as well. Turns out that Vermont allows brewers to obtain a license to self-distribute. (Source: The Brewers Association https://www.brewersassociation.org/government-affairs/laws/self-distribution-laws/) This has a large implication on the use of this strategy by other breweries and the ability of the Alchemist to expand their operations strategy to other states. In some states this operations strategy will not be relevant because breweries would not be able to get around the regulations.