Cover Story – Beer, here!

Posted on Mar 1, 2015 :: Cover Story
Sean P. Johnson
Posted by , Insight on Business Staff Writer
Brent Weycker, Titletown Brewing Co.

Brent Weycker, Titletown Brewing Co. Photo by Shane Van Boxtel, Image Studios

 

Brent Weycker vividly recalls the day he realized beer would be his future.

An avid home brewer, it was a visit to Chicago in the early 1990s to see his sister where the idea of a career in beer began fermenting in his mind. It was during that trip Weycker visited the original Goose Island Brew Pub and began to wonder if Green Bay would support such an establishment.

“They were in this great old warehouse building with great atmosphere, with great food and really great beer,” Weycker says. “My brother-in-law and I both said, ‘this would be a really great concept to try in Green Bay.’”

Turns out Northeast Wisconsin was more than ready.

In 1996, Weycker opened the Titletown Brewing Company brewpub in the old Chicago & Northwestern Railroad depot in Green Bay’s Broadway District, pairing artisan dishes with craft brews.

Soon, Weycker faced a big problem: The demand for local craft brews was booming. He needed to make more beer — fast. And he was running out of room.

“It started with people wanting different beers in the restaurant, then it was ‘Where can they get the beer when they are not at the restaurant?’” he says. “Pretty soon, you realize there is an opportunity there.”

Changing tastes

Turns out, it was a huge opportunity. He had to scramble.

Changing demographics and consumer tastes have made craft brewing the fastest growing segment of the beer industry, both nationally and in Northeast Wisconsin.

While overall beer sales declined almost 2 percent in 2013, sales of craft beers rose more than 17 percent, grabbing more than $14 billion in sales in the $100 billion-a-year beer marketplace.

Wisconsin was home to 90 craft breweries in 2013 — up from 73 just two years before – and several others have come online since. Those breweries produced nearly 450,000 barrels of craft beer in 2013 with an estimated economic impact of $856 million.

The Brewers Association, a national trade group, expects those figures surpassed $1 billion for Wisconsin in 2014.

As consumer tastes have begun shifting toward unique brews produced locally, established players such as Titletown and Appleton’s Stone Cellar have been joined by newer brewers —including Badger State Brewing and Sheboygan’s 3 Sheeps — in packaging and distributing their craft beers around the region and state.

“The growth has been staggering and it doesn’t show any signs of stopping,” says Gordon Lane, president and chief operating officer of Chilton-based Briess Malt & Ingredients Co., a national leader in producing specialty malts and ingredients for the brewing industry. “It’s grown about 100 percent a year for the past five years.”

That growth has not only been great for beer lovers, but also for the larger economy linked to the brewing industry, which includes Briess. The company has made several strategic moves in recent years to keep pace with the demand for its products, including investing in hop farms and expanding its malting operations in Chilton and Manitowoc.

To illustrate just how fast the craft beer market is growing, Lane referred to a forecast from the global market research firm Mintel, which in January 2013 predicted craft beers would capture $18 billion in sales by 2017. That forecast had to be revised in July of 2014 as craft beers were closing in on the $20 million mark.

“Our biggest challenge is keeping up with these guys,” he says of the craft brewers.

Even with the heady numbers, most brewing operations are small — Badger State is a three-person operation, for example.

Lane attributes much of the industry’s growth to shifting consumer tastes, particularly Millenials entering the market — nearly half of whom aren’t even of legal drinking age yet. “They want local and they want to know who made it,” Lane says.

Building a brewery

Back to Weycker’s challenge. If he did not expand, he would miss the chance to meet the demand for more beer. Competitors had entered the market and were vying for thirsty customers.

His solution: Invest $5 million to build a new production brewery.

He seems to have timed it just right. Across Donald Driver Way from the Titletown Brewing Co. brewpub sits the historic Larsen Cannery building, which had been the target of several unsuccessful redevelopment attempts.

The cannery had been empty for nearly a decade when Weycker and his investors put an expansion plan together in 2013. It was a perfect site, with plenty of space for the larger equipment needed for increased production and a bottling line, as well as amenities such as a tap room and rooftop beer garden.

The new tap room opened in October, and full-scale brewing and packaging began shortly after.

Titletown has signed agreements with distributors to make the beer available in all 72 counties of Wisconsin, including bottles of the brewery’s award-winning Boathouse Pilsner, Green 19 IPA and Johnny “Blood” Red. (He has not sought a distributor to sell outside the state.)

Out of the cellar

Tom, left, and Steve Lonsway celebrated Stone Cellar’s 10th anniversary in 2014. Since acquiring the brewpub, they have renovated the space and expanded the brewing facilities. Courtesy of Stone Cellar

Tom, left, and Steve Lonsway celebrated Stone Cellar’s 10th anniversary in 2014. Since acquiring the brewpub, they have renovated the space and expanded the brewing facilities. Courtesy of Stone Cellar

Small breweries have been part of the tapestry that is Wisconsin throughout its history, and one of the oldest buildings in Appleton is once again home to beer production, thanks to the father and son team of Tom and Steve Lonsway.

The Stone Cellar Brew Pub and related Stone Arch Brew House celebrated its 10th anniversary in 2014.

The beer history of the Stone Cellar and Stone Arch building is much older. Anton Fischer, a German immigrant, settled in the Appleton area in 1858 to help with the construction of the Fox River canal system. Adjacent to the Appleton segments of the canal, he built the Stone Cellar building, which has served as a brewery for most of its 150-plus year history — only shutting down during  Prohibition and the 15 years between the closing of Walter Brewing Co. (located there) and the opening of Adler Brau Brewery and Restaurant.

“The quality of craft brewing is higher now than it ever was,” says Steve Lonsway, who is also a brewmaster. “I don’t think this trend is going away anytime soon.”
His passion for craft beer began while studying at Rock Valley College in Rockford, Ill., when he began home brewing. In fact, Steve operated a retail store for home brewing supplies before he and his father teamed up to buy Stone Cellar.

Much like Weycker, it was travel that sparked the idea of brewing beer as a career. In Steve’s case, it was studying abroad for a semester in England and experiencing that country’s pub culture.

“I fell in love with the beer and the atmosphere,” Steve says.

The home brew store further exposed him to all the latest tools and techniques, and he later attended a brewmaster course in Chicago. He would also serve as a brewmaster for Fox River Brewing Co. — another venerable brewpub and craft brewer — before he and his father Tom were able to purchase Stone Cellar.

Within five years Stone Cellar also needed to expand its brewing capacity. That led to a major renovation of the Stone Cellar building — quite a task with four-foot-thick stone walls — to make room for additional brewing equipment.

Stone Cellar produced 400 barrels during its inaugural year in 1994. In 2014, that number has grown to 2,800 barrels. Any future expansion will likely require an additional building.

Tom Lonsway, who owned an advertising company before his son co-opted him into becoming a brewer and restaurant owner, has a pretty good idea what’s behind the growing popularity of Stone Cellar and other craft beers.

“I think people are moving away from drinking a beer just to drink a beer,” Tom says. “Now, they are looking for the flavors and the gourmet aspect of it.

“You have seen the same thing happen with artisan bread and artisan cheese,” he adds. “You can drink two or three of them, enjoy the flavors, and not be all pie-eyed.”

 

As fresh as it gets

 

Founders, from left, Mike Servi, Andrew Fabry and Sam Yanda grew Badger State Brewing from home brewing experiments in Yanda’s garage to a full-scale production facility located in the shadow of Lambeau Field. Image Studios, Inc.

Founders, from left, Mike Servi, Andrew Fabry and Sam Yanda grew Badger State Brewing from home brewing experiments in Yanda’s garage to a full-scale production facility located in the shadow of Lambeau Field. Image Studios, Inc.

Stone Cellar, Titletown and other early craft brewers tend to have strong ties to food, where the beer was initially available only at the restaurants. As demand for craft beers grew, they expanded into production breweries and signed distribution deals to sell their beer in stores.

Many new breweries have simply opened as production breweries, with a tap room attached for the public to enjoy the beers fresh from the source.

That’s the route Andrew Fabry and his partners took when they launched Badger State Brewing Company on Canadeo Run in the shadow of Green Bay’s Lambeau Field.

“I think initially the brewpub was a way to hedge your bet in the craft brew market,” Fabry says. “Now we see that people want to get as close to the tasting room as they can get. You feel like you are sitting 20 feet away from the brew house because you are.”

Barely two years old, Badger State Brewing Co. has grown from home brewing in brewmaster Sam Yanda’s garage to incorporating in February 2013 to opening an expanded brew house and tap room this past September.

Fabry wrote the business plan for the brewery following graduation from the University of Wisconsin while exploring other career opportunities and contemplating law school.

“We all just kind of laughed at first, but were spending our weekends working on the home brews and getting a lot of positive feedback,” he says. “The more we looked at it, the more we saw it as an opportunity.”

Badger State currently has 12 beers in production, seven of which are distributed in kegs to taverns and restaurants from Door County to Neenah. The brewery is also starting up a canning line for its most popular labels.

While the brewery’s growth has been dramatic, Fabry says it’s important the quality of the beer never takes a back seat to growth. One of the few things that could hurt craft beer’s popularity is bad beer, he says.

“People who get into it just to make money will not survive long,” Fabry says.

 

Quality counts

 

By offering high quality beers, craft brewers can get consumers excited about trying different styles, says Grant Pauly, founder and brewmaster of 3 Sheeps Brewing Co. in Sheboygan.

“It’s very similar to what happened in the wine industry where it took a long time after Prohibition for a new generation to get comfortable with all the different varietals,” Pauly says. “We are about where they were 15 years ago. People are now willing to try different things and pay more for those unique tastes.”

That desire for unique tastes was essential in Pauly’s 2011 decision to leave his family’s pre-cast concrete business and launch 3 Sheeps. By 2014, 3 Sheeps was being distributed in both Wisconsin and Illinois. In January, he signed an agreement for distribution in Minnesota.

Similar to Badger State Brewing, 3 Sheeps is not tied to a brewpub. In fact, it doesn’t even own the tavern that shares a building with it.

“We are getting more and more people excited about beer,” he says. “I just wasn’t interested in the kitchen part.”

 

Collaborative competition

 

beer salesWhile Northeast Wisconsin’s craft brewers are certainly a competitive bunch, there is also camaraderie among them.

For example, when Stone Arch was facing a challenge with its bottling line, the folks from Appleton Beer Factory stepped in to help. When Titletown Brewing was having issues with its steam lines, the founders of Badger State Brewing were quick to recommend a contractor they had success with.

It’s part of the greater passion that drives those in the craft brewing industry, Pauly says.

“If any one of us is able to sway the consumer to drink craft beer, then we all win,” Pauly says. “We all share a passion for beer. If we can help each other make better beer, it’s better for everyone.”

Craft brewers also look to those who built craft brews into nationally known brands for inspiration, names such as Fritz Maytag of Anchor Brewing and Ken Grossman of Sierra Nevada. Also on that list is Jim Koch of Boston Brewing Co., who in 1985 debuted his Samuel Adams Boston Lager in a handful of Boston restaurants and grew it into a nationally recognized brand.

beer productivityRemembering the challenges he faced starting out, Koch has established the Brewing the American Dream fund to help brewers and other entrepreneurs launch their startups with loans, coaching and educational opportunities. He also shared needed ingredients with small brewers during a recent shortage that could have threatened production.

Normally, the brewers of Northeast Wisconsin don’t need to look that far, since almost all of the materials in the industry supply chain, from grains to packaging to equipment, can be found within the state. The lone exception is apparently bottle caps, which are sourced from Canada.

“It’s sort of an odd thing, but everything else is right here in Wisconsin,” Titletown’s Weycker says.

 

A crisp finish

 

Much like Titletown’s award-winning pilsner, Weycker expects a good clean finish to the brewery’s expansion plans.

The renovated cannery — a joint project with SMET Construction — not only houses the new tap room and expanded brewing capabilities, but several smaller companies occupy the office space on the second floor. A public market and retail space are in development for the remaining space on the first floor.

Titletown’s brewing capacity will increase from under 2,000 barrels a year to an estimated 7,000 barrels, with a maximum capacity of 35,000 barrels of beer annually. Jim Kratowicz, an experienced executive with stints at U.S. Venture and ShopKo, joined the brewery as chief operating officer in 2013 to help with the expansion and marketing.

For Weycker, the expansion was a chance to contribute to the growing vitality of Green Bay’s Broadway District, an area where Weycker grew up and worked in his grandparent’s Sno-Cap drive-in restaurants (the root beer recipe from those drive-ins is brewed and served at Titletown).

It was always about more than the beer, he says.

“Part of it is bringing the industry back to this part of the state. But it was also important to play a role in revitalizing the Broadway District here in Green Bay.”

Small breweries the toast of tax relief

It seems both sides of the political aisle love craft beer.

A bipartisan bill in the U.S. Senate known as The Small Brewer Reinvestment and Expanding Workforce Act, or Small BREW Act, would reduce the excise tax on each barrel of beer brewed by small brewers and change the definition of a small brewer for the first time since 1976.

Under current federal law, brewers producing fewer than 2 million barrels annually pay $7 per barrel in federal excise taxes on the first 60,000 barrels they brew, and $18 per barrel on every additional barrel. Under the Small BREW Act, the rate would be $3.50 per barrel on the first 60,000 barrels. For production between 60,001 and 2 million barrels, the rate would be $16 per barrel. Then, the rate would be $18 per barrel. Breweries with annual production of 6 million or fewer barrels would qualify for these new tax rates.

It is estimated the Small BREW Act would enable Wisconsin’s craft breweries to reinvest over $1.5 million into their businesses each year.


Just what is a craft brewer?

The Brewers Association, a national industry group, defines the American craft brewer as small, independent and traditional using the following criteria:

Small — annual production of 6 million barrels of beer or fewer.
Independent — less than 25 percent of the craft brewery is owned or controlled by an alcoholic beverage industry member that is not itself a craft brewer.
Traditional — a brewer that has a majority of its total beverage alcohol volume in beers whose flavor derives from traditional or innovative brewing ingredients and their fermentation. Source: Brewers Association

Craft Brewers in Northeast Wisconsin

3 Sheeps Brewing Co., Sheboygan
Ahnapee Brewing, Algoma
Appleton Beer Factory
Badger State Brewing Co., Green Bay
Courthouse Pub, Manitowoc
Door County Brewing Co, Bailey’s Harbor
Fox River Brewing Co./Fratellos, Appleton and Oshkosh
Hinterland Brewery, Green Bay
Legends Brewhouse and Eatery, Green Bay and De Pere
Railhouse Restaurant and Brewery, Marinette
RockPere Brewing Co., De Pere
Rowlands Calumet Brewing Co., Chilton
Shipwrecked Restaurant & Brewery, Egg Harbor
Stillmank Brewing Co., Green Bay
Stone Cellar Brewpub/Stone Arch Brewery, Appleton
Titletown Brewing Co., Green Bay
Source: Brewers Association