Craft competition: More froth fanatics try to make it in Brew City

Cover Story

Nick Reistad and Scott Kelley of Raised Grain Brewing Co. in Waukesha.
Nick Reistad and Scott Kelley of Raised Grain Brewing Co. in Waukesha.

Over Labor Day weekend, a former member of the U.S. cycling team, two physicians and a seasoned entrepreneur took a leap that many wort worshipers before them have taken and moved their best beer recipes from the kitchen to a public tap room.

Located in a 1,500-square-foot space in a strip mall in Waukesha, Raised Grain Brewing Co. is one of southeastern Wisconsin’s newest craft breweries, but certainly not its last. Several new craft breweries have opened recently, or plan to open soon, in the region.

The small operation brews its 10 types of beer on site, with the capacity to make 750 barrels per year. Nick Reistad, one of the company’s four partners, said that in the four months since Raised Grain opened, the brewery has made about 125 barrels.

“So far, the response by both the community and the craft beer community has been outstanding,” Reistad said. “We are a startup company with limited resources and a lot of capital invested, so we have to be smart about what we do so we don’t spread ourselves too thin.”

MillerCoors may still be king on the local scene when it comes to size and volume, but with 121 craft breweries in the state, Wisconsin ranks 13th overall for the number of craft breweries in the country.

Raised Grain Brewing Co. opened in Waukesha over Labor Day weekend. It is one of 121 craft breweries in Wisconsin.

In 2014, Wisconsin’s craft breweries employed just more than 14,100 people and had a $1.7 billion impact on the state’s economy, according to the Brewers Association, a trade group for craft brewers.

And while Wisconsin may rank fourth-slowest for growth in the number of craft breweries, according to the Brewers Association, that doesn’t mean the industry is slowing down here. Far from it.

“It’s only natural that you would grow slower than states with more potential room for growth,” said Bart Watson, chief economist with the Brewers Association. “Wisconsin is traditionally a strong brewing state with a history of major brew presences. Not only do you have a good beer culture, but you have a great pool of talent.”

The Brewers Association classifies a small brewer as one that has an annual production of 6 million barrels of beer or fewer. A regional brewer is one that produces at least 15,000 barrels annually, such as Milwaukee-based Lakefront Brewery Inc. or Sprecher Brewing Co. in Glendale.

Raised Grain has a 70-seat tasting room at 2244 W. Bluemound Road and is also available at one of the five locations the company recently signed agreements with: Bernie’s Tap Room in Waukesha; Draft and Vessel in Shorewood; Champps Americana in Brookfield; and World of Beer and The Malt Shoppe, both in Wauwatosa.

Other members of the Raised Grain team include brewmasters Dr. Scott Kelley, a dermatopathologist with Quest Diagnostics, and Dr. James Gosset, an internist with Froedtert & The Medical College of Wisconsin, and former entrepreneur Kevin Brandenburg.

PC230158Reistad was a professional cyclist and worked in advertising before giving up his day job to work for the brewery. He acknowledged the business has its challenges, particularly raising awareness of the new brand, but said once people learn about the beer, it’s an easy sell.

“We’re competing to grow the pie – to get people to experience different types of beer who maybe only drink wine or macro brews – we’re not fighting for shares of the smaller pie,” Reistad said.

Long before craft brewers began opening their doors, the region was viewed as the beer capital of the United States. Milwaukee was once home to the Jos. Schlitz Brewing Co., which closed its Milwaukee brewery in 1982, and Pabst Brewing Co., which closed its Milwaukee brewery in 1996. Miller Brewing Co. parent company SABMiller and Denver-based Molson Coors Brewing Co. entered into a joint venture in 2008 and became MillerCoors LLC, which is now headquartered in Chicago, but still brews much of its beer in Milwaukee.

With the closing of the macro breweries and the formation of Sprecher Brewing Co. in 1985 and Lakefront Brewery in 1987, Milwaukee was left with one major brewer and newer options. According to public filings, MillerCoors has seen its sales volume decrease close to 10 million barrels since the joint venture formed due, in large part, to increased competition from many smaller independent breweries that have expanded consumer choice.

The total number of U.S. breweries reached a record level in 2015, according to a year-end review from the Brewers Association. There are now 4,144 breweries in the country, topping the historic high of 4,131 breweries in 1873. In 1996, there were 1,000 breweries.

PC230167When Russ Klisch started Lakefront Brewery 28 years ago, he set out to revive the brewing industry in this country. Today, his brewery distributes Lakefront products to 35 states, Israel and Canada.

Lakefront produced 46,000 barrels of beer in 2015, an 8 percent increase over 2014. Klisch said he recognizes that there is a lot more competition in the market than when he started, but he views it as good competition.

“If you work hard and do the job you are supposed to do, you are going to have enough customers,” Klisch said. “It’s not too much different than being in a band; you can’t just sit there and hope there is only going to be one.”

3 Sheeps Brewing Co. in Sheboygan has found great success in its first three years of operation. Since opening in April 2012, the brewery has gone from 560 barrels the first year to 4,000 in 2015.

3 Sheeps is relocating to a former Coca-Cola distribution plant in Sheboygan early this year to expand its operations. The new location will allow the brewery to increase production to up to 80,000 barrels a year, expand distribution and feature experimental beers.

Founder and brewmaster Grant Pauly believes he opened his business right before the surge of craft breweries began in the state.

“I think it’s a lot harder to start now because there is no time for a learning period,” Pauly said. “At this point, there are so many great options that if the first batches are not exceptional, you are probably not going to get someone to come back and try a second beer.”

PC230171With so many new craft breweries open in the area, not all of them will experience great success in an increasingly competitive marketplace.

Jeff Garwood spent 21 years working in a variety of roles at MillerCoors before opening Big Bay Brewing Co., a tasting room and brewery at 4517 N. Oakland Ave., in Shorewood, in 2011 with a business partner.

By April 2014, Garwood and his partner had parted ways and he revamped his business model, closing the tasting room and scaling back production from 1,500 to 2,000 barrels a year, to 120 to 150 barrels a year.

He also found a day job, making brewing more of a hobby than a career.

“The overall vision and plans didn’t work out and I needed to make a financial decision,” Garwood said. “It’s a much smaller scale and I self-distribute now. It may not be big, but it’s a lot more fun.”

Garwood still has relationships with several retailers, including Otto’s Wine & Spirits, which has three locations in the Milwaukee area, Ray’s Liquor and The Malt Shoppe in Wauwatosa, and Sendik’s.

“I like to shop craft beer and I like going out and finding something I haven’t seen before – so do other craft beer drinkers,” Garwood said. “I think small craft brewers are going to have a very difficult time maintaining a business. I found a way for this to be fun and sustainable.”

Since 1980, 51.5 percent of the brewpubs and 76 percent of the microbreweries that have opened are still open, according to the Brewers Association. Comparatively, about 40 percent of new restaurants are still open after the first three years.

Jim McCabe, who opened the Milwaukee Ale House in the Third Ward in 1997 and is now producing 13,000 barrels of beer annually with Milwaukee Brewing Co., said one of the biggest challenges of being a craft brewer is staying relevant.

“What a great time to be a beer drinker – there are so many choices,” McCabe said. “When you are a brewer, it’s tricky to build brand loyalty.”

Raised Grain brews 10 types of beer, which are served at its 70-seat tasting room.
Raised Grain brews 10 types of beer, which are served at its 70-seat tasting room.

As McCabe was speaking, his fellow brewers were experimenting with the Sheepshead Stout, creating a possible raspberry or cocoa stout.

Knowing that IPAs are the biggest selling craft beer, Milwaukee Brewing is planning to offer a year-round seasonal citrus IPA and four different seasonal IPAs, in addition to its regular seasonal beers, in 2016.

“It’s challenging and it’s truly a lot of constant screwing around,” McCabe said. “We’re lucky because we started with the Ale House so we have some built-in brand loyalty, but right now every home brewer seems to be rushing to the table like musical chairs.”

McCabe has seen exceptional growth over the last few years and says he has outgrown the 15,000 square feet the Walker’s Point brewery is in at 613 S. Second St. Milwaukee Brewing Co. also has another 10,000-square-foot building for storage in the Walker’s Point neighborhood, but space is tight there, too, McCabe said.

“We’re looking at our options,” he said. “We’re committed to staying in Milwaukee.”

McCabe said he believes that only a small handful of the new craft breweries that are opening will make it, if they are well capitalized and know how to sell. He said beer consumers will not be patient while brewers are trying to figure out their recipes.

“I do wish them well,” he said. “Some people will hit it on all cylinders, others won’t. Overall, the pie is going to keep growing and the thirst is going to continue.”

McCabe will be one of the speakers during Milwaukee’s first brewery incubator program, which is being hosted by brewery resource provider The Crafter Space.

COV-INS-Glasses-TFP-PC230160The 10-week program, Barley to Barrel, begins Feb. 2 at Company Brewing in Milwaukee’s Riverwest neighborhood. The purpose is to provide beer enthusiasts with training on everything from business plans to beer brewing.

“We’re seeing the craft bubble building and think it will pop,” said Michael Anderson, co-founder of Crafter Space. “You could have a great beer and bad marketing, or awesome marketing and not so great beer. We want to find a way to put that together. And at the end of the day, Milwaukee should be the Napa Valley of craft beer.”

Kevin Wright is one of two brewers planning to open a craft brewery in the Menomonee Valley in Milwaukee this year.

Wright has invested $1.8 million to open Third Space Brewing at 1505 W. St. Paul Ave., on the site of the old Geuder, Paeschke & Frey manufacturing facility in the Menomonee Valley.

He and his business partners are leasing about 15,000 square feet for a tasting room and outdoor beer garden.

Third Space will start with six beers and rotate in new seasonal beers. It will have equipment to brew up to 3,500 barrels per year.

For the past six years, the Thiensville native has been head brewer and director of brewing for a 40,000-barrel-per-year operation at Hangar 24 Craft Brewery in Redlands, Calif.

Wright knows the industry is competitive, but believes Third Space will be successful.

“We’re creating a brand, a brewery and a beer people can respond to,” Wright said. “Our quality will be a big differentiator. The formal training and education I have, plus my experience, will set us apart.”

The second Menomonee Valley craft brewery in the works is City Lights Brewing Co., which is renovating the former Milwaukee Gas Light Co. red brick water tower to use as a brew house and tasting room.

The company is spending about $1 million on equipment and another $750,000 to $1 million to build out the five-story tower.

City Lights started in 2012 as 4 Brothers Blended Beer Co. in Waukesha, contract-brewing its beer at Sand Creek Brewing Co. in Black River Falls.

The long-term goal was to develop relationships with distributors and develop a financial history before starting a craft brewery of their own, said Jimmy Goshman, co-owner of City Lights.

City Lights is now working with St. Paul, Minn.-based Johnson Brothers Liquor Co. to distribute its beer.

Goshman anticipates brewing 7,000 barrels by the end of the first fiscal year and eventually brewing 15,000 barrels.

“We want to get demand up in the state and then our distributor will move us into Minneapolis,” Goshman said.

What will set them apart and how will they try to succeed?

“We’re only going to be available in cans,” Goshman said.

“We’re also as prepared as we can be. That’s one advantage of starting out as a contract brewer – we were able to make mistakes but on a smaller, less expensive scale,” Goshman said. “I’m not saying we won’t make mistakes in the future, but hopefully not as many.”

Sign up for BizTimes Daily Alerts

Stay up-to-date on the people, companies and issues that impact business in Milwaukee and Southeast Wisconsin

No posts to display