Friday, 20 September 2013 14:53

Craft beer scene grows in Southwest Michigan

Written by  Nathan Peck
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Brian Steele, co-owner of Boatyard Brewing Company Brian Steele, co-owner of Boatyard Brewing Company PHOTO: Erik Holladay

The growth of the craft beer scene in Southwest Michigan means that from Kalamazoo to Paw Paw or from Marshall to Battle Creek, drinkers can find beers to fit their palates, whether it's the wild experimental brews at Dark Horse or summer wheat beers like Bell's Oberon and Arcadia Ales' Whitsun.

From established breweries such as Bell's Brewing Inc., Dark Horse Brewing Co. and Arcadia Ales to new players such as Boatyard Brewing, Gonzo's BiggDogg Brewing and Latitude 42, the breadth of breweries emerging and the community among brewers is proving fertile ground for growth in Southwest Michigan.

As demand for craft beer grows, homebrewers and investors are seeing opportunity as Americans' palates change. In a local craft beer market long dominated by the early entrants like Bell's and Arcadia, Southwest Michigan is now seeing its share of new entrants, mirroring the industry's expansion in other areas of the state.

More than 136 breweries are in operation across Michigan, up from 68 a decade earlier. Those breweries contribute $133 million in economic activity to the state, according to recent analysis by Bridge magazine. Michigan ranks fifth in the nation in the Brewers Alliance tally of the number of craft breweries, part of a $10.2 billion craft beer segment. While the $99 billion beer industry dominated by major players such as InBev and MillerCoors grew at just a 0.9 percent rate in 2012, craft beer sales grew 17 percent.

As Dan Gilligan and Brian Steele expand their beer list at Boatyard Brewing Company, just blocks from Bell's Brewery's tap room in Kalamazoo, Steele reflected on the decision to have his avocation turn into his vocation. Over the years, the friends had brewed good beer, a little "horrible beer," and began brewing larger batches of home brew at Saugatuck Brewing Co. through its "brew-on-premises license," which led them to consider opening a brewery of their own.

"As we looked around, we realized people were making good money in craft brewing and their beer is not that good. Doing the math, (realizing) what they're getting for a pint, there's good money to be had," Steele said. "In our market, Bell's laid the footprint for this part of Michigan — and people realized there is something beyond the InBev or MillerCoors products. I don't want a bit of Bell's business, I want a bit of InBev and MillerCoors' business."

Boatyard anticipates brewing 1,200-1,400 barrels of beer in its first year of operation, but is planning the purchase of a 25-barrel brewhouse and has optioned 40,000 square feet of additional space to allow for expansion in the industrial area around its taproom. In planning for future growth, Steele is hiring a brewer to handle production so he can focus on growing the business.

"We don't want to stay a small local brewery, but we want to grow where I can continue to keep up quality. We have a polluted piece of land we're trying to get a brownfield (designation) for. That will give us space to up our production by 31 times and give us the opportunity to start expanding our footprint," he said. "We have people who can take over brewing, and I can focus on growing the business and expanding."

The craft brewing community provides a deep bench of expertise as well as opportunities for collaboration. When developing a new beer, Boatyard sends kegs to the Kalamazoo Beer Exchange, a bar and restaurant featuring craft beers with prices updated based on the demand generated by its patrons, to see how it will be received by consumers. Steele and Gilligan are looking to partner with other smaller brewers to get greater economies of scale as they purchase grain and hops. Additionally, Boatyard and other new breweries in the area chose Kalamazoo-based Imperial Beverage for distribution within the state.

In Kalamazoo Township, experienced brewmaster Greg "Gonzo" Haner has partnered with investors to open Gonzo's BiggDogg Brewery, a $1.5 million brewery that will open in October. As head brewer at the Olde Peninsula Brewpub in Kalamazoo for eight years and later as a consultant to breweries around the state — including Paw Paw Brewing and Frankenmuth Brewery – Haner had been looking for the right opportunity to open a brewery of his own when investors approached him.

"I would have done this 20 years ago, but didn't have the investors. I followed the market for a really long time. It is booming and I believe that it will continue to boom," Haner said. "They got a hold of me, heard that I brewed good beer — that is how that evolved. I was working at Kalsec at the time, put a business plan together, and we will go from there."

Southwest Michigan provides a great climate for growing hops, and Haner has volunteered with Hop Head Farms to help farm 44 acres of the bittering agent for beer.

"Southwest Michigan is finally catching on. People's palates are changing and they want beers that aren't watered down," Haner said.

As Arcadia Ales expands from its base in Battle Creek to a new location in Kalamazoo, president Tim Suprise sees opportunities as new players enter the craft beer scene.

"We know we have to step our game up with the new players coming on and the expansion of the existing players. That's why we're adding three new positions to the sales team. We have to be sure we are creating value for retail customers and our distributors," Suprise said. "Customers will win the day for everyone."

The new $6.5 million brewing facility and taproom represents a $6.5 million investment and is expected to come online in mid-January 2014, which will bring Arcadia Ales' capacity to 30,000 barrels immediately, up from 12,000 barrels in its current location in Battle Creek. The brew system is capable of reaching 60,000 barrels of capacity and will help the brewery return to markets it had previously withdrawn from two years ago as its orders outstripped production capacity.

"We are scaling our game plan up from a sales perspective. We're not looking for huge, huge numbers; we are looking for measured growth," he said. "We are gearing up our sales team and adding a few more members to that group to accommodate that extra capacity."

The health of the craft beer industry is reflected in the new brewers and investors flocking to them, Suprise and others said.

"It adds that critical mass from the consumer perspective and helps generate that rising tide effect.

I am excited for what it means for the beer culture in the Midwest and the whole country," Suprise said. "I'm always a little hopeful that the new players coming online have that same fraternal and profound commitment ... toward the sustainability of that quality product, and have a business plan and model that will keep them in the game long enough to carve out their own niche. They'll have to do this much like all of us had to before these so-called halcyon days."

Bell's Brewery Inc., one of the elder statesmen of the craft beer in the state, is in the midst of a more-than $12 million expansion to expand its brewing facility that will add new fermentation tanks, a canning line and a wastewater treatment plant.

"We are preparing ourselves for steady, controlled growth. Our model has always been about controlled, meaningful growth. We don't want to grow too fast or too slow," said director of marketing, Laura Bell.

She's not overly concerned about newcomers to the industry, believing the market will continue to gravitate toward quality.

"I think in the long run, the breweries that are focused on making a quality product are going to stand out," Bell said. "We will focus on what we've always done and we'll pay attention on keeping that going."

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