One of Milwaukee's breweries is closing, highlighting just how tough the business can be.
A growing craft brewery scene in Milwaukee is a good thing. But with that expansion comes the unfortunate reality that not all breweries will survive. The latest closure announcement came from Matt McCulloch. The owner of D14 Brewery & Pub (2273 S. Howell Ave.) said that his brewery would end its four-year run just one week after its four-year anniversary party last Saturday (Oct. 20).
The brewery’s official last day is this Friday, Oct. 26.
“I’ve never been making money; I’ve been getting by,” said the affable McCulloch. “Last summer was the worst summer since I’ve been open. I was working with somebody over the past three months to build a kitchen — the absolute slowest time is the dinner hours. I put together a menu and business plan, and drawing for a remodel. Two weeks ago the partner informed me that he wasn’t going to do it or wasn’t able to. That put me in a situation where I was between leases and thought ‘do I keep fighting the good fight, or is now the time to walk away?’”
A Business, Not a Guarantee
The number of craft breweries in the United States jumped to 6,266 in 2017 and is expected to surpass 7,000 by the end of 2018. It is by far the most at any time in U.S. history. But with openings come closings. Last year, 997 breweries opened, but 165 breweries shuttered in 2017. To the beer-drinking public, opening a brewery may seem like a path to riches. Far from it.
“Very few people understand the major financial investment that goes into opening a brewery,” said Andy Gehl, co-founder of Third Space Brewing. “A typical brewery operation requires substantial investment in brewing and fermentation equipment, quality control equipment, lab equipment, real estate, insurance, utilities, labor, marketing, raw materials and countless other areas. There are many different business models in the brewing world that can be successful. There is no magic blueprint.”
Added Russ Klisch, founder of Lakefront Brewery: “Quality allows you to play the game, but cash is king. Everywhere you turn in a brewery there’s another piece of equipment that you need to buy or upgrade. More breweries close from bad cash flow than because of bad quality beer. Trying to run a brewery is really a business, and a hard one at that.”
To Distribute Or Not Distribute
McCulloch served a wide range of inventive beer styles at D14, but none outside of the brewpub. D14 had a relatively small three-barrel system, and because it was classified as a “brewpub,” it was prohibited by Wisconsin law to also brew off-site and essentially up its capacity to get its beer on store shelves. Taproom-only sales tend to require fewer expenses and therefore provide greater profit margins. But brand awareness is another issue.
“The brewery laws in Wisconsin as a brewpub don’t allow me to contract brew,” added McCulloch “I didn’t have that kind of exposure. Not only is having your beer in cans on store shelves exposure, but it adds a sense of legitimacy. I would have distributed. Having that market presence outside of my doors would’ve brought more people in.”
Changes in Demographics
The beer-drinking community has changed drastically in just the past decade. Consider that there were around 4,000 less U.S. breweries in operation in 2008. That’s means there were fewer places to imbibe and far fewer beer choices.
McCulloch also cites a changing demographic in the neighborhood as part of the reason his finances weren’t sustainable.
“Bay View is changing pretty rapidly and the cost of housing is growing exponentially,” said McCulloch. “The people moving in certainly figure into the craft beer demographic, but they are professionals not likely to be in the bar until 2 a.m. on a Tuesday. Those who’d be in the bar four nights a week are moving out. I feel that had something to do with it.”
One Less Member of the Brewing Community
Regardless of the reasons, the closing of D14 is a blow to the robust (and relatively new) Milwaukee brewing community.
“It is super sad to see,” said MobCraft founder Henry Schwartz. “Matt has been a huge asset to the Milwaukee brewing scene. He constantly brought passion, excitement and great ideas. He’s definitely one of the brewers I’ve grown closest to over the years. I’m sure we will see more breweries close, just as we have always seen bars and restaurants, shops and cafes come and go. Sometimes things work out as planned, and sometimes they don’t. I don’t think it’s an effect of a bubble popping, because there’s still interest in beer. There will just continue to be a culmination of causes that force people to close their doors from time to time.”