What is a running (or any) club worth to a brewery?

I don’t listen to music while I run, so often I think about random things. This last run, aside from making wrong turns, I was thinking “What is the value of this club?” So let’s dive in and figure this out!

Sources of value

My running club meets every Monday night, the first Saturday of the month at the sponsoring bar (Mikkeller), the third Saturday at a different bar, and various ad-hoc events such as races, trail runs, etc. After our runs, we often gather for a beer or some food at the bar; on the first Saturday, that beer is even free! So, the first source of value will be the buts in seats of everyone coming to the bar, often during off-peak times.

In addition to showing up to the runs, we all festoon ourselves with Mikkeller running gear. Ignoring the potential merchandise profits, these shirts, hats, shorts, and other branded items act as mobile billboards for the bar. So the second value source is free advertising for the bar.

Next, outside of the times we are running, many club members will go to the bar for their various events, or just to hang out. Let’s call this additional patronage.

It’s also worth noting that the founders of Mikkeller have some strong personal feelings and sense of value from the running club (you can learn more about it in this excellent audio clip). Emotional value is certainly important; just think of someone who happily sinks money into their boat, car, or favorite money pit. Though emotional value is entirely valid, for the purposes of this exercise, we’ll ‘hand-waive’ it to zero.

Finally, by having a successful running club, the bar has access to the running community. This community value manifests whenever the running club goes to a race, interacts with other clubs, posts on Strava (activity tracking app/social media site), or other running community activity. Each member generates word-of-mouth for Mikkeller every time they tell a fellow runner to join them Mondays at 8 or signs up for a race under the MRC LA ‘team.’ Unlike the free advertising of running around DTLA with Mikkeller logos on our bodies, the run club lends credibility and relevance to a whole group of potential customers.

But first, what does it cost?

Before we look at the benefits, let’s briefly look at what this club costs Mikkeller.

Direct costs:

1 beer per person, once a month
Signage, flags, other material for the club

Indirect costs:

Opportunity cost of reserving a space for the run club (if we’re sitting there, someone else can’t sit there)
Organizational effort
Brand image effects (what if someone’s a jerk or the brand isn’t compatible with a run club)

In general, these costs are fairly low. If the club has 50-100 people attend a run, the beer cost is less than a keg (a 1/2 barrel keg is about 124 pints), and a 6’ banner costs under $50. In all, you’re looking at about $100/month or less in direct costs.

The indirect costs are also generally low. At Mikkeller, Monday nights are typically slow, so we’re not displacing other customers, the club runs itself, and club members are nice. This is due to our great running club captains that both set a positive, friendly tone as well as manage social media, routes, and all the other logistics of the club. I’d estimate this effort is between 5 and 10 hours a week, so at a high end, this could cost about $800 of time per month (10 hrs/week * $20/hour * 4 weeks). This is not insubstantial, but as I mentioned, our club runs itself, so this is effectively $0 for Mikkeller.

So, what’s it worth?

Now for the best part, estimating the value! As reminder, we have buts in seats, free advertising, additional patronage, and community value (remember, emotional value is $0 for this exercise).

Buts in Seats

First, when our running club is at the bar after our runs, we buy drinks and food. Our typical runs are about 30-50 people, and about 25 people hang around after. If each of these people get a beer, and 5 of them get food, that’s $250 in beer revenue ($10/per beer *25 people) and $100 from food ($20/ticket *5 people). Assuming a 50% gross margin on beer and a 20% on food, the bar nets $145 per night our club is there. If we’re there 5 times a month (4 Mondays and 1 Saturday), the bar is getting $725/month of contribution, compared to our $100/month direct cost estimate above. Not too bad, but there’s another good reason to have our buts in the seats.

My mom refuses to eat at a restaurant that has no one in it, and for good reason. Restaurants can be empty because you went at the wrong time of day, or because the last customers are still fighting off their food poisoning. This empty restaurant phenomenon is even more impactful at a bar. Bars sell drinks, but mostly, they sell the environment and atmosphere in which you consume those drinks. Since most bars sell easily accessible products, getting the atmosphere right is all the more important and having people in the bar is often critical to this experience. Even when you’re not interacting directly with the running club, having a lively, packed table increases the energy of an otherwise empty bar. This encourages other customers to enjoy themselves or remember Mikkeller as a lively/fun place.

Free advertising (shirts, shorts, hats, etc.)

We’re all running around with Mikkeller Running Club gear, and since Mikkeller is in the name, this should be great for advertising, right? This gear is essentially ‘branded merch,' which is great for brand awareness. This awareness can generate new customers, increase customer loyalty, keep the bar top-of-mind, and more. But it probably won’t actively affect people’s purchasing habits. But, as the title states, it’s free, so any value is a net positive. There is a small amount of brand risk associated with people wearing your logo and being a jerk to factor in, but this hasn’t been an issue for our club.

Additional patronage

While each run is about 30-50 people, the running club has 100+ members when you include infrequent members. Let’s say there are 150 total members and 10% of them choose to go to the bar 1 additional time per month than they otherwise would. If these 15 people spend about $30 per visit at a 35% gross margin, the bar nets $157.50 per month.

Community value

Here’s where much of the running club value lies. Members of the club are frequently participating in races, events, attending other clubs’ runs, etc. This embeds the Mikkeller brand in that community, dramatically increasing brand awareness, and assuming the club is a good member of the community, creating a positive brand image within the community. Inside and outside the running community, Mikkeller is now a brand that’s associated with running, activity, fitness, healthy lifestyles, and related concepts. This opens up a lot of possibilities for Mikkeller. They can authentically sponsor races, release a beer marketed towards runners (they did), licence/sell running merch (they do), and more. In case you still aren’t convinced, Dogfish Head and Merrell just came out with a limited edition running shoe!

To a running enthusiast patron Mikkeller can demonstrate that they have shared values and this will increase brand affinity/perception. For non-running enthusiast patrons, there may be a halo effect as that patron may like the concept of running/activity and can vicariously engage in running through the club members over at their table.

The social media activity can also be a big boost, especially for bars that may not have an advertising budget. The Mikkeller Running Club LA posts on Facebook and Instagram at least once a week ahead of the Monday run, an often 3+ times a week. On Instagram, these posts go out to about 1,500 people, many of whom have never run with the club before (last night, we had 5 new runners join us, most of whom found the club on social media). If any of these new runners become regular patrons of Mikkeller, the customer acquisition cost is quite low; basically zero!

So is the club worth something? Final tally:

Short answer, yes! The club is likely a net positive for Mikkeller.

We estimated the club costs about $100/month. Aside from intangible value, the estimated direct additional contribution of the club is $725/month from direct sales after club runs and $157.50 from additional visits from club members. The resulting net ‘profitability’ of the club is $782.50/month. Not bad!