New beer consumption figures have confirmed New Zealand's growing fondness for high-strength craft beers.
The volume of beer with an alcohol content above 5% has doubled in the past five years.
What happens when your hobby and passion become your business? And what happens when business booms?
The incredible growth of craft beer in the past decade has created a difficult dilemma for many of the nation's craft brewers, who suddenly find themselves running multimillion-dollar operations.
The craft beer boom has transformed the industry.
Statistics released today show total beer consumption is growing again for the first time in years.
The high alcohol category - which tends to reflect the craft beer end of the market - has doubled in the past five years and rose 17 per cent last year.
In 2015 Garage Project topped the list with 664 per cent growth and fellow Wellington brewer ParrotDog saw 263 per cent growth that year.
It's reminiscent of the tech boom - although beer brewing is one of the oldest of industries.
It also has much more onerous capital requirements. And relatively low margins.
"It is very difficult," says Tuatara founder and brewer Carl Vasta. "Especially if you are doing it yourself. You run out of stainless steel tanks pretty quickly."
"When you are producing a high quality beer that requires expensive ingredients, it's not just the hardware, if you've got to buy a million worth of hops for next season and you have to pay for that today."
Vasta made headlines this month with the sale to DB, a move that will have disappointed some purist independent craft beer fanatics.
"We looked at a few options," says Vasta, who will stay on with Tuatara and is excited about putting his focus back on the beer making.
Those included crowd-funding, more private equity (Tuatara already had some investment from PE fund Rangatira) and even a stock market listing.
"We talked about it with the private equity company when they came in. That we could grow the business and then look at listing."
But after doing some research, he decided the costs of listing were too daunting.
"We'd still have been running the company too ... so if we were looking for help in running the company then listing didn't really help."
Tuatara beer selection. Picture supplied.
The corporate side of the business, let alone private equity, exit strategies and the rest doesn't sit naturally with many brewers.
It is an industry that has been built largely on passionate beer lovers scaling up their home brew operations.
Matt Stevens at ParrotDog - which completed New Zealand's most successful crowdfunding round last year - was a chartered accountant in his previous life.
But despite some experience on the financial side, he says he has never really considered what the exit strategy might be.
"We get asked all the time and none of us really have any idea what the end game looks like," he says. "We're just passionate about being in the moment. We get to turn up to work with our mates every day and make beer ... which is one of the funnest industries to be in."
Growth was initially debt funded by the founding shareholders, but they were keen to leverage their popularity and needed a new, bigger brewery.
"A large buyout was not really something we were interested in, stock exchange was too big ... so it [crowdfunding] was kind of between."
ParrotDog raised the maximum legal amount for a crowdfunding initiative, $2 million, in just 48 hours last August.
It is one of three breweries to go down this path, including Yeastie Boys and Renaissance.
The success of the crowdfunding round "was a flattering affirmation", Stevens says.
But it did mean that ParrotDog suddenly gained 792 new shareholders. It now runs its own share register, including a platform to facilitate share transactions.
ParrotDog went to the public with a nominal valuation of just under$10 million. That was based on an earnings multiple they felt was in the middle of the range for comparable businesses.
But that valuation might have been squeezed down by the market if it had been a full public offer, he says.
As it turned out, the strong demand meant they achieved a post-crowdfunding valuation of more than $11 million, even though shareholders were offered no prospect of dividends in the immediate future.
Vasta's not sure how much weight investors were putting on that valuation anyway.
"I like to think they all understood what they were buying but if you had the institutions scrutinising you, you just need that much more data about the business which is just more work than we wanted to go through ... less time making beer."
That beer-first philosophy is very much shared by Garage Project's Jos Ruffell.
Despite huge demand for its beers, which regularly sell out, Ruffell says he has resisted the temptation to dramatically expand production.
"We've had times where we've expanded and we've known that the expansion is not enough to sate the demand," he says. "When you are doubling and quadrupling in size, to say 'we need to go tenfold' is a pretty scary proposition."
Chasing volume has never been a focus, he says. Instead, Garage Project produces a huge variety of experimental beers.
It started out with just a 50 litre brewing system and produced 24 different beers in 24 weeks.
Those beers were a hit and proved there was a business model, says Ruffell.
So they did an angel investment round which included friends, family and some mentors who had been advising them.
Garage Project has since produced hundreds of beer varieties and has been able to fund further expansion with operating earnings, including a big move, just underway, to start producing at a new brewery in the Hawke's Bay.
Even that expansion is about creating the opportunity to do more experimental things, Ruffell says.
"Then if our customers respond to that, it creates a virtuous cycle and allows us to grow," he says. "We have beers that have become very popular and the traditional wisdom would be for us to devote 60 or 70 per cent of our capacity to them. But we're not willing to do that, we want to keep doing the things that people love about us."
But the fiercely independent approach doesn't necessarily mean a lack of ambition for the business.
Ruffell cites family business Whittaker's (whose chocolate Garage Project uses for some of its specialty beers) as a role model for the kind of business he'd like to create.
Eventually, a stock market listing could potentially be an exciting path to take, but that is a long way off, he says.
"If we got to a point where our fans and drinkers could come along for the ride, that would be really rewarding."
For now, though, New Zealand has just one publically listed brewer - Moa.
Chief executive Geoff Ross is a share market veteran, having successfully listed and sold vodka company 42 Below last decade.
"Years ago, both Lion and DB were listed here in NZ ... now we're the only opportunity for local investors," he says.
Moa Brewing CEO Geoff Ross. New Zealand Herald photograph by Jason Oxenham.
He can see why market listing is daunting to many brewers.
"There are pros and cons. There is access to capital. But the cons are a huge amount of compliance and a market which doesn't like variability and change. When you are in a growth business it's never a straight line."
Ross says he'd like to see the New Zealand stock market more open to growth companies.
But he's not sure the problem lies with the market itself. The challenge is with the broking and advisory community, he says.
"The KiwiSaver and a lot of the bigger funds just don't look at early stage or high growth businesses. I think it should be a component, even just 5 per cent. I think it should be more than that."
Ross says being listed works for Moa because it has big aspirations. It is seeking to challenge the distribution stranglehold Lion and DB have on the market.
"So we don't have a plan to exit now. We have a horizon which is much greater than that."
He can foresee a time when Moa will look to acquire smaller, more specialist beer brands to leverage its distribution network. He already has a distribution partnership with ParrotDog.
He remains upbeat about the outlook for the craft beer sector even though he can see risks of "gold rush fever" setting in.
"There will be a bit of a shakeout. There's a lot of brands but there is a lot of growth ... the next two to three years will see some consolidation for sure."
There will eventually be two tiers of brands, he says.
"There will be those that have made a conscious step to capitalise and get capacity and scale up ... and those who have chosen a more organic path."
And you could argue that depending on your aspirations, either route is a good one to take.
