In the mix

Small beverage manufacturers carve out their niche

Posted on May 14, 2021 :: Cover Story
Posted by , Insight on Manufacturing Staff Writer

Grant Pauly enjoyed making beer, so when it came time to open 3 Sheeps Brewing Co. in Sheboygan, he knew one thing: To get his product in the hands of consumers, Pauly would need help.

At a bar event in Sheboygan, he met someone from a New Berlin-based distributor and the two began talking about beer. “We found that we thought the same way about craft beers and he promised to take my product idea back to his boss,” Pauly says. “After a few meetings, we signed to have them distribute our beer.”

Initially, 3 Sheeps produced only kegs of beer that were sold to restaurants and bars. Eventually, the brewer decided to get into the retail game and produce six-packs.

“That created a whole new challenge since we needed to think about packaging, how it looked, how it functioned,” Pauly says.

Managing product flow turned out to be a learning curve for 3 Sheeps. “As a manufacturer, you want to make sure you have the right amount of product at the right time. Grocery stores don’t like it when they run out of your product,” Pauly says. “I think this is the area where most people struggle — knowing how much to produce and when.”

3 Sheeps is just one of several beverage manufacturers that have taken their product from idea to regional and national markets. To make the dream happen, manufacturers rely on distributors, consultants and mentors.

For many beverage and food startups, deciding to sell their products in the retail marketplace brings a steep learning curve, says Shelley Jurewicz, chief FaBricating officer with FaB Wisconsin, a Milwaukee-based economic cluster organization for food and beverage manufacturers that serves the entire state.

“Deciding to sell products in the retail marketplace is a real eye-opener. There’s a lot of daunting work businesses need to figure out, such as sending their products to a lab to get the exact nutritional content for the label,” she says.

Finding a distributor also can prove challenging for beverage and food startups, Jurewicz says. “It’s a little elusive — what distribution channels are you looking at? Do you want to stay local or regional or go state and nationwide?”

Getting the word out about its product is a top priority for Ledgerock Distillery, which is located between Fond du Lac and Eden. The entire process to make the distillery’s bourbon, vodka and gin happens on the farm, starting with planting and harvesting wheat and corn and then distilling and bottling it. Ledgerock has an onsite retail store but also uses distributors to get the word out about its products. Finding a distributor to work with was a challenge initially, says owner Heidi Retzer.

“As a smaller craft distillery, it was tough. We eventually were picked up by one, but we’re definitely a small fish in a big pond,” says Retzer, adding that she, her husband and oldest son all work at the distillery but have outside jobs as well.

Carbliss, a low-calorie hard seltzer developed by SNFood & Beverage in Glenbeulah, was able to find a distributor, but the challenge came initially in finding a reliable manufacturer to work with. One of its contractors had mechanical issues, leaving Carbliss unable to produce its product for a couple of months, says co-owner Adam Kroener. That wasn’t something his clients wanted to hear.

“Now we are working with another manufacturer and working to build up our inventory so that won’t happen again,” Kroener says.

Getting the word out

Kroener, who had experience in food manufacturing, began working on a formula before settling on a recipe that included vodka and sparkling water. “I actually Googled ‘How do I bring my beverage to life?’ since I didn’t really know where to go,” he says.

After he found a mix he liked, Kroener sent out a sample of what he created to a lab to get the precise formula so it could then be replicated by a manufacturer. “I took some of my samples and met with Badger Liquor since I knew I needed a distributor, and they signed on,” he says.

Over Labor Day weekend in 2019, the first Carbliss products appeared in stores and nearly sold out in just that short period of time. “As soon as we made it, it was out the doors,” Kroener says.

Carbliss is now offered in eight states and sold at Festival Foods, Walmart, HyVee and other chains. “It’s been important to us to focus on those chain relationships,” Kroener says.  

Pauly agrees maintaining relationships is essential to success. Since 3 Sheeps beers are available on tap, he says it’s important for bartenders to understand the brewery’s story so they can share it with customers. 

“That way, they have a better chance of remembering the 3 Sheeps name and asking for it the next time or looking for it in stores,” he says. “They’ll remember they liked the taste and our story.” 

3 Sheeps’ products are distributed throughout Wisconsin and northern Illinois. Pauly says that wouldn’t be possible without the company’s distributor. “They have really helped us get our beers out there so we can focus on what we do best — make beer,” he says.

Sharing its story is one way Ledgerock has found success as well, Retzer says. “(Retailers, bars and restaurants) hear it — how we do everything on the farm — and they take us in,” she says. “The key is to have them reorder us.”

Ledgerock uses word-of-mouth and social media to attract visitors to the distillery, where they hope to develop lifelong fans. “We do a lot of events and activities that bring people in,” Retzer says. “We also partner with other businesses, such as Five Cent Cupcakery and LaClare Family Creamery, for an event here and people can experience our products along with theirs. It’s a good partnership.”

When the distillery switched to making hand sanitizer in the early days of the pandemic in 2020, that also garnered attention for Ledgerock and led people to visit, further spreading the business’s name.

“People come out and see the green field next to the distillery and know that wheat is going to be next year’s bourbon,” Retzer says. “We stress our business is a mix of agriculture, manufacturing and science.”

Help for startups

After selling her own successful food business, Tera Johnson says she felt too young to retire, so she became involved with helping other food and beverage entrepreneurs succeed. She founded the Food Finance Institute, which is housed at the University of Wisconsin-Extension in Madison.

“Raising money is often the hardest part for these entrepreneurs. We provide training and consulting to help them succeed,” she says. “There’s a lot of innovation around beverages, and people come to us when they need money to grow.”

If a beverage or food manufacturer starts to grow quickly, Johnson says entrepreneurs need outside hands to find a manufacturer or help identify a distributor so they can continue to grow their profit potential.

FFI runs the Food and Beverage (FaB) Wisconsin Accelerator along with FaB, which receives financial support from the Wisconsin Economic Development Corp.

The nine-month program annually accepts 10 companies that receive coaching, mentoring, a $10,000 award and an invitation to participate in a pitch event. Companies also can take part in the accelerator workshops even if not selected for the program. Of the 40 companies that completed the program the last four years, 39 are still in business and are generating $35 million in annual sales.

Johnson says it’s easier to find investors for biotech and software startups than fledgling food and beverage companies, but some food industry and manufacturing veterans see a lot of potential.

Another benefit for food and beverage startups is they can use debt financing since their equipment carries a great deal of collateral value. “We have some great food and beverage manufacturers in this state, and many businesses have experience (with them), so they’re interested in working with other food and beverage manufacturers,” Johnson says.

FaB Wisconsin was developed on the strength of Wisconsin food manufacturers, including big names like Sargento Cheese and Johnsonville Sausage, Jurewicz says.  “We work with businesses of all sizes, from entrepreneurs to legacy companies,” she says. “We also look to raise visibility of how and where we can lead.”

Jurewicz points out that food and beverage manufacturers have their unique challenges. For those looking to sell their products in a retail setting, they need to think about product safety, having their nutrition label in order and ensuring the shelf life of their product matches what the label shows.

“Those manufacturers who work strictly with wholesale — selling to bars, restaurants and other businesses — were all affected when everything shut down,” Jurewicz says. “Suddenly, the places where they sold their products were gone.”