Craft Beer: Keys to brewing a Wisconsin success

By Brian Mulvaney & Drew Slocum, WisBusiness

wibeertapsWisconsin has long been known as the epicenter of America’s beer scene. Wisconsin has been home to iconic beer giants like Pabst, Miller, Schlitz and Blatz, and while the mega bottlers romanticized by Laverne and Shirley are still around, it is the meteoric rise of craft brewers that is changing the marketplace in a dramatic way.

Now making up 12.2 percent of the entire U.S. beer market and generating over $22 billion in sales, craft beer companies have rocketed into the beer drinking scene leaving many of these new brewers scrambling when trying to scale their businesses and meet increasing consumer demands. With craft beer becoming available in more places—from food trucks to fine dining restaurants—brewers will want to invest in the infrastructure to deliver their products to retailers and consumers in an efficient manner. The following are best practices on expanding your craft beer distribution network and can be applied whether you’re trying to start a local brewpub or become a mainstay at Lambeau Field.

Local, Regional and National Brewers

With 121 craft breweries here in Wisconsin already, and more starting every day around the state, craft companies typically fit into three categories based on size: the small local brewpub, the regional brewer and the national production brewery. Each has unique needs when it comes to production and distribution.

The local brewpub typically sells most of its beer on premise or at the brewer’s restaurant. This reduces the need for distribution and allows the brewpub to recognize profits quickly. A regional brewer, on the other hand, typically requires more equipment, such as tanks, as well as a larger amount of real estate to produce and store inventory. The regional brewer might be selling out of a tasting room, with revenue and growth coming through selling their brand into other accounts. Between 2014 and 2015, regional craft breweries grew by nearly a third (31.9 percent) nationally. At a much larger scale, a national production brewery may have several operations and requires a more sophisticated and robust distribution system.

To Grow or Not to Grow
In a market where Wisconsin craft breweries are producing over one million barrels of beer each year—or 7.6 gallons per drinking-age adult—expansion is often a matter of choice rather than survival. Each category of brewery has its advantages and drawbacks, and each has the ability to deliver a good profit. It’s important for investors and owners of breweries to align on objectives when it comes to growth targets and appetite for expansion. Once brewers and investors agree on business objectives, they can set priorities for investment and determine the amount of capital they’ll need to build their infrastructure. If a brewer aims to slowly expand a brewpub, for example, he may not need to purchase a new warehouse to store beer right away; instead, he can gradually scale up distribution. As part of this evaluation process, brewers will also need to consider operational needs to maintain equipment, including maintenance and upgrades.

Breweries like Lakefront Brewery in Milwaukee serve as a great example of knowing their strengths and when to use those strengths to grow. Slow and steady from their founding in 1987, Lakefront grew from just 72 barrels in 1988 to just under 13,000 in 2009. Then Lakefront took advantage of changing beer tastes and the move towards craft beers and production jumped to 45,000 barrels in 2015. Today they are also one of the highest rated brewery tours in the U.S. and operate a beer hall complete with a Friday fish fry and a polka band. Read more …

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