Friday, 07 October 2016 10:43

West Michigan brewers carve out space in $22.3B craft beer industry

Written by  John Wiegand
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Central Michigan University offers a brewing certificate program that gives students real-world experience in breweries, including at the participating Mountain Town Station Brewing Tap Room in Mt. Pleasant. Central Michigan University offers a brewing certificate program that gives students real-world experience in breweries, including at the participating Mountain Town Station Brewing Tap Room in Mt. Pleasant. Courtesy Photo

When a teetotaling lawmaker introduced legislation last month that would have more than tripled state excise taxes paid by craft brewers, opposition to the bill was quick and fierce.

Angry craft brewers chided state Rep. Tom Hooker, R-Byron Center, for embarking on a religious crusade against their homegrown companies. Business groups immediately condemned Hooker’s proposal as potentially damaging to a key West Michigan industry. Even The Detroit News took aim at the bill in an editorial calling the tax hike “lawmaking at its worst” and encouraging Hooker to leave the Legislature and take up ministry if he’s so concerned about craft beer drinkers’ morals. 

The outrage against the bill shows how far Michigan’s nascent craft brewing industry has evolved in recent years. 

What began with hobbyist homebrewers in basements and garages two or three decades ago has grown into a nearly $2 billion chunk of the country’s overall $22.3 billion craft beer market. For Michigan brewers, the bill was an attack on the industry they built from the ground up and an assault on the American Dream itself, where small family-owned companies have taken an active role revitalizing neighborhoods, creating new jobs and generating millions in new tax revenue. 

“You have an industry that’s growing up and becoming successful. I just think it’s so short-sighted to pounce on it and tax it. Let’s nurture it,” said Jason Spaulding, co-founder of Brewery Vivant in Grand Rapids. “We are, as an industry, creating significant jobs and making a difference.”

Every time a company like Brewery Vivant expands or another newcomer opens its doors, a small business is creating more jobs and adding investment in the area, he said. It also creates economic activity in the supply chain as craft brewers source raw materials like hops and malted grains or their equipment from Michigan-based producers. 

“We have 62 employees — and almost all of them are full-time — that we provide benefits for. We feel we’re creating solid jobs,” Spaulding said. “Many breweries are focused on getting things locally. It’s something we live and breathe here every time we source new equipment or furniture. We’re always looking for ways to source as close to home as possible. It does ripple out to all sorts of things.”

As a whole, the Brewers Association — a Colorado-based trade group that focuses on craft breweries — estimates that Michigan craft brewers generated $1.85 billion in economic impact in the state during 2014, or roughly $260 per capita. 

That number will likely continue to grow as entrepreneurs open breweries in untapped neighborhoods and small towns, and as existing local breweries expand to meet demand. 

In the last year, more than a dozen new craft beverage producers have opened in West Michigan. Meanwhile, 38 breweries, cideries and distilleries remain in the planning stages across West Michigan, according to an analysis by Revue

As a state, Michigan was home to 205 craft breweries in 2015, ranking sixth in the nation for the number of producers, according to a conservative estimate from the Brewers Association. That’s 2.9 breweries per 100,000 adults of drinking age. The Michigan craft brewing industry also ranked 10th in production, turning out nearly 770,000 barrels of beer in 2015.

But craft brewers say their companies do more than produce and sell beer: They’re engines for giving back to their communities. 

For example, when The Mitten Brewing Co. began operations in 2012 at 527 Leonard St. NW in Grand Rapids, founders Max Trierweiler and Chris Andrus made it a point to be active members of the West Side neighborhood. 

“The community had seen better days and there’s a lot of money being invested into it, especially in the Leonard corridor,” Trierweiler said. “I think if it hadn’t been for our involvement in our community, we wouldn’t be where we are today. We said that if we wanted people to embrace us, we’d need to embrace the community.” 

Mitten Brewing has steadily increased the size of its brewery from modest roots — it began on a three-barrel production system — and expects to reach 1,500 barrels of production this year, Trierweiler said. 

For Brewery Vivant, investment in its surrounding community in the East Hills neighborhood is something the company has embodied from the start. For one, it’s part of a handful of companies certified as a B Corporation — a designation that shows a business has adhered to stringent environmental and social standards, including employee pay and sustainable sourcing practices. The brewery also works closely with community organizations and has several active initiatives with Congress Middle School, located across the street from its facility. 

To Spaulding, Brewery Vivant’s work in the community illustrates the positive influence breweries have on their neighborhoods. 

“When we were first opening, we attended a lot of public meetings to get proper zoning permits and there were people who showed up that were very concerned there’d be drunk people falling in the streets and it would become a haven for crime,” Spaulding said. “They weren’t craft beer people and didn’t know the vision we had. Instead, we talked about the community and how the community could get to a better place and I think we’ve done it with some of our partnerships and initiatives.” 

 


Selling Out?

Brewers are a fiercely independent bunch. To that end, most craft breweries remain locally owned and operated by people in the community where the business is based. However, as the craft beverage industry has grown, it’s attracted investors ranging from private equity firms to large multinational breweries, as well as other craft producers looking to gain scale and market share in new areas of the country. Here are several examples from West Michigan where craft beverage companies have sold all or part of their businesses to outsiders. 

Founders Brewing Co. (Grand Rapids) — The pioneering Grand Rapids craft brewer sold a 30-percent stake in the business to family-owned Mahou San Miguel Group, a Spanish brewer, in December 2014. According to Founders executives, the deal will help the company access international markets and get the funding it needs to ramp up production. Since the deal, the company has expanded distribution to a total of 38 states and the District of Columbia, plus built a secondary production brewery in Grand Rapids that’s expected to open this year.

Perrin Brewing Co. (Comstock Park) — Founder Randy Perrin sold his namesake brewery in March 2015 to a group including former West Side Beer Distributing co-owner Keith Klopcic and Oskar Blues Brewery of Longmont, Colo., which itself is funded by private equity firm Fireman Capital. At the time, Perrin only sold beer on draft in Michigan, but it has since expanded with a canning line and limited-edition bombers, plus distribution in Colorado, Ohio and Indiana. The brewery expects to reach production capacity of 55,000 barrels by the end of this year. Actual production could hit 27,500 barrels this year, nearly double the 14,000 barrels from 2015.

Virtue Cider Co. (Fennville) — Faced with a growing load of operational, marketing and financial challenges, founder Greg Hall sold a 51-percent stake in Virtue Cider to Goose Island Beer, a portfolio company of Anheuser-Busch InBev’s High End Division. In fact, Hall had history with the multinational brewer: His family sold Chicago-based Goose Island to Anheuser-Busch in 2011 for a reported $38 million. The deal gave Virtue access to Goose Island’s bottling and kegging lines and its sales personnel to drive growth in new and existing markets. Virtue has since launched its Michigan Brut cider in 12-ounce bottles, in part to target sales to big box chain stores. In a previous interview, Hall said the company could look next year to add tasting rooms around the state, potentially in Grand Rapids, Ann Arbor, Detroit and Traverse City.

Coppercraft Distillery (Holland) — Coppercraft launched in 2012 with a plan to focus on barrel-aged whiskeys, which by nature take time to bring to market. Before its whiskeys were available, the company also produced and sold vodka, gin and rum on its two production stills. But as it waited for the whiskey to become available, Coppercraft reportedly ran into cash flow challenges, which led it to explore various partnerships. The company ultimately opted to bring on an investor in Grand Rapids-based Windquest Group, the family investment office for Amway scion Dick DeVos and his wife, Betsy DeVos. Backed by the new investment, Coppercraft expects to add a full kitchen with food service, as well as to build its stockpile of aging whiskeys. 

—Compiled by Joe Boomgaard, Revue

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