Craft Breweries and Managing Risk

Craft brewers can spend hours searching for the perfect balance of hops and malt, sampling new ingredients and dreaming up their distinctive, signature beers. Part art, part science and all passion, many craft breweries are growing into expanded operations, adding taprooms and growing their distribution. Beer trails that attract a growing base of ardent consumers are putting once-obscure breweries on the map. While homegrown brewers may understand what goes into making a quality brew, they may be unaware of some risks that their growing craft breweries face, according to Reese Cann, a Travelers Risk Control Liability Specialist, who works with craft brewers on identifying and managing risks, from hosting special events to handling product recalls.

“Brewers typically understand how important it is to have clean tanks and production lines because the impact can be immediate and spoil an entire batch,” Cann said. But there are other risks to consider. Master brewers can quit a brewery with a popular beer recipe in tow if contracts are not in place to protect the brewery’s intellectual property. Lack of proper liquor liability training can lead to the brewery facing legal ramifications if, for example, an overserved patron causes a car accident.

Protecting Your Brewery as it Grows

Heath Kidd, Travelers’ Food Manufacturing INDUSTRYEdge Manager, says that craft breweries need to practice diligence as they expand from a homegrown company. This diligence includes being aware of changing food safety regulations.

Food facilities are required to have a food safety plan in place that includes hazard analysis and risk-based preventive controls (HARPC) to minimize or prevent identified hazards.2 In addition to these risks, craft breweries face more common business risks, including premises liability, fire, theft and equipment breakdown.

Here are seven ways to help protect your craft brewery from risk:

1. Protect your supply chain. Do all of your hops for a seasonal brew come from one supplier? That could leave you vulnerable to supply chain issues. Ensure you have a steady and available supply of ingredients in the quantity you need. Contracts with growers in a specific geographic area where hops flourish, can be competitive. Have a backup supply plan in case there’s a problem receiving a shipment in time.
2. Plan your response to a product recall. Suppose there’s a problem with a label, and an allergen, such as wheat, is not mentioned, or you find a foreign material in one of your bottles. Have a plan for everything, from how you will notify customers and get products off the shelf to how you’ll engage a lawyer and address consumer concerns on social media.
3. Ensure employment contracts protect your IP. Contracts should ensure that if a master brewer leaves the brewery, all recipes remain property of the brewery and can’t be replicated at a competing brewery.
4. Train staff on liquor liability. If you are holding tastings on your property, train staff on serving alcohol responsibly to patrons. Assign volunteers to other tasks rather than serving alcohol if they do not have training.
5. Consider liabilities when holding special events. Events can present risks from injury to patrons who might slip in an area not intended for visitors to security issues. Consider adding lighting and warning signs and blocking off areas of the brewery that might present tripping hazards or attract children. For events with more attendees, an event management company can provide security and help manage risks.
6. Understand advertising liability risks. Be aware of using names and logos that under copyright in your advertising and packaging. Trademark your own beer names as early as possible to avoid duplicate names.
7. Work with an insurance company that works with craft brewers. Working with an insurance carrier with locations in multiple states and a global presence can help brewers as they expand.

Having resources around the country ready to help can be valuable for responding to issues such as product recalls. Insurance brokers have a mass torts team that can handle food contamination losses, bringing both Risk Control and Claim professionals who understand the venues and laws affecting craft brewery customers.

How effectively a craft brewery handles a product recall can affect how well it recovers from it, according to Kidd. “We can help brewers respond quicker, setting up hotlines and call centers so we can gather information quickly and consistently.”

Immediately starting the intake process on information eliminates any lost time where information can fall through the cracks, and it also provides resources to gather this information where a smaller company may not have the resources to handle mass call volumes.

Brewers will also want to make sure that they have a variety of skill sets as part of their staff. In addition to craft brewing expertise, it can be helpful to have employees with business savvy, from bookkeeping to marketing. 

Sources

1 https://www.brewersassociation.org/press-room/stats-faqs/

2 https://www.fda.gov/Food/GuidanceRegulation/FSMA/ucm334115.htm

3 https://www.travelers.com/resources/business-industries/manufacturing/breweries-and-the-craft-of-managing-risks