The owners of The Explorium Brewpub and Milwaukee Brewing chat about beer.
Brew City has been riding high in recent years. More than a dozen breweries opened in 2016 and ’17, a few of which have become major players in the local beer scene. But that trend has slowed, with fewer openings in 2018 and three local brewers closing their doors since late 2017. Mike Doble was part of that 2016 wave, opening The Explorium Brewpub at Southridge Mall, in what he calls the suburban “donut hole” of breweries. Jim McCabe, meanwhile, is part of the city’s landed gentry of craft beer. Milwaukee Brewing Co. started with the Milwaukee Ale House in 1997, and in September cut the ribbon on an enormous, sparkling new facility on Ninth Street, just three blocks from Fiserv Forum. Their conversation, with MKE Brewing’s new brewhouse and fermentation tanks just over their shoulders, began with a question: How many breweries is too many? – Moderated by Chris Drosner
Mike Doble, owner, The Explorium Brewpub
Jim McCabe, owner, Milwaukee Brewing
Brew City has been riding high in recent years. More than a dozen breweries opened in 2016 and ’17, a few of which have become major players in the local beer scene. But that trend has slowed, with fewer openings in 2018 and three local brewers closing their doors since late 2017.
Mike Doble was part of that 2016 wave, opening The Explorium Brewpub at Southridge Mall, in what he calls the suburban “donut hole” of breweries. Jim McCabe, meanwhile, is part of the city’s landed gentry of craft beer. Milwaukee Brewing Co. started with the Milwaukee Ale House in 1997, and in September cut the ribbon on an enormous, sparkling new facility on Ninth Street, just three blocks from Fiserv Forum. Their conversation, with MKE Brewing’s new brewhouse and fermentation tanks just over their shoulders, began with a question: How many breweries is too many? – Moderated by Chris Drosner
A condensed version of this conversation was published in the January 2019 issue of Milwaukee Magazine’s cover story: Let’s Talk It Out.
Barreling On: Mike Doble and Jim McCabe
MD: In general I feel that our market can support more breweries. But the days of starting a brewery to put a bunch of beer out to the market in package, that’s winding down. The physical amount of shelf space available can’t support the number of packaging breweries that are out there.
But if you look at the great beer cities like Portland, Maine, and Portland, Oregon, and Boulder, Colorado, and Denver and San Diego, there are blocks with 10 breweries on them, and all of them are fine. What it really comes down to is there are two opportunities to open a brewery in a crowded market: Do it in an area where there are a bunch of breweries, so that your collection of breweries become a destination; or be the neighborhood brewery, in an area where you become a neighborhood gathering spot and part of the community.
In the end, not everybody who opens a brewery is going to make it. The market is becoming completely intolerant of mediocre breweries. We’ve had three breweries close in the last year: Like Minds, Brenner, and now District 14. That would seem to indicate that maybe there’s too many breweries. But the reality is, is that the more breweries we get, the bigger the culture is, and guys making the best beer will continue to rise to the top. The guys making the worst beer will continue to diminish.
You have to make an excellent product, you have to do some things that are different than the other breweries. An excellent example of this is St. Francis Brewery. They found a neighborhood that was kind of devoid of good restaurants and a good brewery combined, and they’ve been able to do quite well in their little corner of the market by becoming the neighborhood brewpub.
So, my short answer is there is room for more breweries, but I do think it’s going to be very difficult for some of those guys who want to open a brewery to become a packaging megabrewery or even a regional brewery. Over at Third Space, they were so hyper-focused on putting out a very limited amount of very high-quality packaged beers that they were able to overcome that.
What I like to see is the 1840s, and Eagle Parks, and Raised Grains and those guys that are making superb-quality beer. They’re focused on hospitality. They’re focused on getting people to their taproom, and creating a culture and those sorts of things. That’s what I love. I’m a hospitality guy. We’ve been in business less than two years, and we’ve made 103 different beers. That just speaks to my “Look, squirrel!” My attention deficit. I just love making a huge variety. I do that because I see that there’s a diminished opportunity to do this, because this is hard. Jim, you know it’s hard to have the credibility and the market to be able to grab that shelf space. Shelf space is really tight.
In the end, for a new guy trying to break into the market with limited resources and whatnot, you have to find an inexpensive space, start out small and start building a following for your beer. Don’t overextend yourself, and keep enough capital that you can expand over time. If your product’s worthy, it works out just fine. That’s where I see the opportunity in the market. A lot of people, my wife included, disagree with me and think that there are too many brewers, but I do think there’s opportunity there for the new guys.
JM: It’s really about the beer drinking public. In the time I’ve been doing this, 21 years, Milwaukee’s gone from, “Where’s my chilled mug?” to a very educated, savvy craft beer market. Are there too many breweries? There are too many breweries from a consumer standpoint, from a retail standpoint. When you walk into one of our larger retailers, when you see that many brands, it’s proven that the consumer gets overloaded and makes less choices when they have an easier decision. So that’s gonna shake out, and it’s gonna be the better breweries [remaining]. The liquid’s really important, but it’s also the whole company and the brand.
We’re in this crazy dynamic – you talk about the squirrel thing and your 103 beers in two years. I mean, that’s directly in line with how our consumers behave. As brewers, we keep feeding that thing. It’s sorta like the military. We clear a room. Every kind of IPA you can imagine, and then we move to the next room, and now we’re doing sours, and we’re doing these cloudy beers.
But you’re right. The hyper-local, like our friends at Eagle Park, and some of that incredible – it looks like orange juice that they’re brewing – those are incredible efforts. I see the market is those hyper-local guys with a taproom. Then there’s guys like you, who run a legitimate, serious restaurant. You had to be able to fill those seats. … I mean, your beer has to be good, but you’re a restaurant as well. There’s a different approach there. There’s a huge appetite for more of that hyper-local, hospitality-oriented thing.
If you have mediocre, subpar beer, you’re gonna be out because the consumer has too many great choices. To get into this industry, the ante to get to the table now is awesome beer and something differentiated. That’s what the consumer expects. They’re knowledgeable.
And you gotta know how to tell the story. Mike’s an Instagram guy. You gotta be able to connect with your consumer now, and not just on the liquid.
MD: It’s hard for an old gray guy to connect with the crowd that I need to be successful. It really is.
JM: But it’s rewarding. Once you do it, it’s not so bad.
MD: You said something interesting, Jim. You said the consumer has gone from the chilled mug to now, “Where’s my snifter?” You did that. Guys like you and Jim and Russ [Klisch, Lakefront Brewery founders], and Randy Sprecher [founder of Sprecher Brewery]. You created that culture here.
JM: It was a beer culture that we all loved. As a Milwaukeean, there was a lot of pride in the brewing industry here for my entire time in Milwaukee. Shifting to these full-flavored beers from the industrial-style beer was [done] one glass at a time, just like you do at Explorium. That’s the thing that hasn’t changed about the craft industry even now, even when you’re this size. When you’re trying to push a packaged product out the door, it’s still the same thing. You’ve gotta sell the consumer one glass at a time.
MD: Yep, education. My family’s been in the brewing business for 20 years. I have three brothers, we all own breweries in different states. My brother David and my mom and dad own Tampa Bay Brewing. They’re doing about 16,000 barrels [a year]. My brother Mark owns Aviator Brewing. He probably does 24,000 barrels. Why did Mike start a brewery in Milwaukee in 2016? It’s because the market was ready, right? You guys did the hard work. When I say you guys, you know the original guys who created the beer culture in Milwaukee. I’ve been going to Milwaukee Ale House since probably about ’99. Fast-forward now almost 20 years, and you guys kind of laid the ground work. As a guy who had been into craft beer and brewing beer since the late ’80s, I would watch how this was developing and I finally saw the point where the consumer was ready for a good brewpub. Milwaukee Ale House has been my staple forever and ever. The parking always sucks but, you know, it’s just the function of the location.
JM: But that’s the difference in your model. Instead of wanting to be Downtown on the river and part of the urban setting, you’re satisfying what isn’t there, which is getting out to the burbs. That’s what’s interesting about the craft beer culture is there’s a lot of forms you can take, and you chose one that is in your comfort zone. That’s a little bit higher-end, casual dining.
MD: You’re just assuming that. I didn’t want to compete with Milwaukee Ale House Downtown. You’re in a donut hole. There’s nothing out there.
JM: That is a good thing. The Third Ward used to be all fine dining restaurants. Now it’s much more casual, so it’s a different scene. That’s what’s different. When we opened the Ale House, you had to go to the Ale House to get full-flavored beer, because most people just had industrial brews on. Now, we’re competing with everybody else who has 40 tap lines.
Milwaukee is different than those other markets. Maybe this is something we see a little differently on. Milwaukee is, and I blame this some on our distributors, they’re not as loyal to local, which is stunning because they used to be. And every Sunday, the Pack’s always back and we’re still gonna make the playoffs, and look what happened with the Brewers. We’re very loyal to things local, but now everybody’s exposed to all the products that are available nationwide and worldwide. They expect that here. They expect the same quality, but the distributors haven’t made a press for local like you see even in Madison. In Portland, they take care of local first.
MD: I just think it’s a function of scarcity making things more desirable. If you look at all of our breweries as a collective, we make better beer in this city than a lot of the sought-after brands from outside of the state.
JM: I agree.
MD: It’s just the issue is that people think it’s far away, so it must be better. Our market is very much like that.
JM: But our distributors do the “deal of the day” with every bar. They’re not helping the cause.
MD: Put on Founders, you’ll get CBS.
JM: Exactly. I’ll give you a case if you put this on. So that dilutes the local story a bit.
JM: Competition is totally different for our businesses.
MD: Anybody who makes craft beer and is in a different company is a competitor. That’s the bottom line. There’s a finite number of dollars available in the market, and I’m trying my best to get them to buy my beer over Jim’s beer. The way I do that is I try to make a cool environment for people to want to come to my place to drink beer. So instead of going and buying a six-pack at the store and going home, they want to come and sit and hang out, and I’m there and they can talk to me. “Oh you made this beer? What’d you do to it?” That’s just kind of my thing. That’s how I view my draw: to try to get people in to consume on premise.
The reality is, though, none of us wins if we become competitors that try to sink each other. The best way to describe it, in my view, is we’re benevolent competitors. Yeah, we compete for the same dollars, but we try to work together. I’ve done collaboration beers with 1840 and MobCraft and District 14 and others. We come together and do some cool things, and we do shared events. Just last week I did a collaboration brew with Lion’s Tail [in Neenah]. I mean, I compete with taps at Champps all the time with Lion’s Tail. “[Champps owner] Tony [Lewanovich], buy my New England IPA, don’t buy Lion’s Tail’s IPA.” I don’t say that, but that’s kinda what’s going on. I compete with those guys.
But in my view of the world, I view us more as working together as craft beer producers against the big beer companies. The big beer companies sell $3 tappers. I can’t sell a $3 tapper and stay in business. They do a lot of things on the market to try to hold us back a little bit, and you alluded to it with the distributors to a certain degree. The distributors fall into this as well. “Hey, if you keep brand X IPA on, we’re gonna give you this great barrel-aged stout when it’s time to come, and if you sell so much, we’re gonna give you multiple variants of it.” It happens all the time.
So I view my real competitors as Goose Island and Founders and all of these “crafty” beer companies that are owned by big beer. Now Wicked Weed and Elysian and Terrapin – all these beers that I [respected once] that I won’t drink anymore or buy anymore. I view them as the competitors because now you have big beer forcing them on the distributors, and the distributors are doing things to make sure that the bars buy those beers, and it takes away tap lines that are available for a guy like me.
JM: I think that’s true. Also, as the craft beer industry has grown to be a larger piece of the pie, we’re still relatively small. We’re still barely into double digits in terms of the amount of craft beer to the total beer market, but these “crafty” craft brewers, the global companies that have bought out craft beers, the consumer doesn’t necessarily – they used to care so much about authenticity. “I’ve met Mike and I love going there and hearing him talk about the beers.” Now the newer consumer in craft beer isn’t necessarily that concerned about authenticity. They care that this got the most likes on Untappd or Instagram. So sometimes that’s where these guys are being successful, and we independent breweries are still better off trying to pool our resources in terms of telling that story about authenticity.
MD: When I talk to beer geeks about this same issue, they look at me like I’ve got three heads. Like, “What the hell’s wrong with you?” Those guys at Founders, I’ve met [brewmaster] Jeremy [Kosmicki] at Founders, and he makes great beer, and when you walk in there it’s a craft brewery, and whatever else. That’s not my point. I have nothing against those guys. I just have something against the way they do business. I choose to point out to everybody that they’re owned by a big beer company, and they have massive leverage and massive resources to pinch out the smaller guys. I’ll never embrace that. Should they be legally allowed to do that? Absolutely, I’m about free markets. Doesn’t mean I’m not gonna rag on ’em.
JM: We’re after the consumer that looks at this as like you would if you care about the food you eat. It’s like, “I want to know what I’m putting in my mouth.” And a lot of these purchase-craft beers, Founders not being the example probably, but they are taking different approaches to making beer than they did when they were little guys like us. The industrial breweries will simplify their processes, use alternative ingredients, things like that, that we’d never do. So that’s a competitive thing that we have. It’s incumbent on us to tell that story correctly.
JM: But I also think that we’re going to see some weird pressures as we talk about the winners and losers. There’s people who have leveraged their lives to build their dream, and for whatever reason it’s not going as well as expected with the competitive market. It could be the liquid, it could be the marketing, it could be a combination. But in that desperate, cornered moment of reality, we’re seeing people start to undercut price. And it doesn’t work for anybody in the industry, because when you’re a small manufacturer like us, you can’t sell that $3 a pint.
MD: Yeah, no. And Wicked Weed is a great example. They make phenomenal products. They were approached and, that one individual that owned Wicked Weed was offered more money than I could say no to.
JM: Oh, I don’t blame them individually.
MD: I might do the same thing.
JM: But once that transaction goes down, it’s still –
MD: It changes the game.
JM: It changes the game, and we still have to tell our story correctly: Why is it different? Because right now, a lot of consumers don’t see the difference, and they don’t really care.
MD: They still think Terrapin comes from Athens, Georgia.
JM: How did it end up at Summerfest? I just can’t figure that out?
JM: [The beer industry] is a real business now. Twenty years ago, it was fairly automatic because it was literally wide open, and even mediocre beers were surviving for a while. But it’s much more of a business-like approach than it was in those days, so there’s a lot of opportunity. There’s a ton, because this is a consumer enthusiast category. You have to do great on your communication and marketing. If you’re doing something innovative, you’ve got to figure out how to tell that story quickly. Like the New England-style IPA, everybody’s running to this spot because consumers care about it, and the numbers say “make a hazy IPA.” But you should be also thinking about the next thing, because there’s going to be another one.
And we just read this morning, it probably came out last week, the Brewers Association, our national organization, just eliminated from the definition of a craft brewer a paragraph that talked about “traditional.” Under pressure from craft brewers, they said get rid of that, because we’re not doing anything traditional anymore. The idea that flavored malt beverages [like hard seltzers] and other things should be a craft beer, I can see where there’s an opportunity there if you’re doing it from an authentic base, and you’re using the right ingredients. So I guess there’s a lot of runway for people that have great marketing, and creativity, and quality.
MD: And there’s room in the market for the neighborhood brewer.
JM: And I would say, a whole bunch of Exploriums. There’s other suburban markets that would gobble it up, literally.
MD: You look at little breweries like Biloba [in Brookfield]. They make great beer, they don’t put beer out in the market much, but they have a great local following, they draw from the whole city. Everybody wants to go visit them at some point, but their crowd is very hyper-local to their brewery. [Owner and brewer] Gordon [Lane] seems really happy with his choice to be a neighborhood taproom. And it’s working out really well. It’s a good time when I stop in there – it’s fun, I see people I know.
JM: With your social media efforts, do you track the demographic rings of how far your customers are from Explorium?
MD: I track in great detail, down to the ZIP code level where people come from and visit.
JM: And is it 75 percent of them are all in that corner of metro Milwaukee, southwest?
MD: I’d say about 80 percent of my customer base is within 3 miles. The other 20 percent are out-of-town visitors, visitors from Madison –
JM: People like me that’ll just drive because of the beer, that kind of thing?
MD: I’d say probably 5 percent is everywhere else in the city. People just come in randomly, whatever. I’ve seen a really interesting trend, in that I get a tremendous amount of people coming from Lake Country to us.
JM: Which tells you, there’s another spot.
MD: Which tells me there’s an opportunity to go to a market that’s already attracted to my brewery. But it’s like, well why aren’t they going Downtown? Because getting from Pewaukee to Southridge, vs. Pewaukee to Third Ward, to me, is not much different.
JM: And we’ve seen that amongst, certainly as our audience matures – the success out in Mayfair, for example, all that retail there. That’s directly, “I don’t feel like dealing with parking Downtown.”
JM: So there’s different audiences for craft beer. We had talked about things like Eagle Park, some of those hyper-local Downtown ones, are pulling from primarily Downtown. If they did the same type of tracking, they’d probably find that they don’t pull from Oconomowoc very often.
MD: My biggest pressure on a daily basis is staying busy enough. The beer-drinking crowd wants to drink on Thursday night, Friday night, Saturday. That’s the beer-drinking crowd. So if I was going to survive on my tap sales alone, I would be open Thursday, Friday, Saturday. I would close on Sunday, I wouldn’t open for Packer games, and that would be it. But the reality is, that’s not my brand, that’s not what I do. I want to be that reliable place that’s always open. You know, my brother Bob’s in town, and he loves hazy IPAs, I know on a Sunday afternoon at 4:00 I can go to Explorium and they’re going to be there, and there’ll be people there, I can sit down, I can have a snack, I can drink some beer, and I’ll have good parking, and whatever.
So my whole stressor is, because I’m open 86 hours a week, making sure I get enough bodies in the door to pay for the staff that I have to have there, because labor’s our biggest cost. So I have to make sure I get enough people in there to pay for the labor that I have to have available to be open. It’s as simple as that.
JM: We talked about the categories, where we’re primarily in production and distribution, you’re in the better end, hospitality, upscale casual. Then there’s the straight taproom. Do you worry about what happens in other markets? Like, somebody with a chain restaurant or something else comes plop, right down across the street, and you end up dividing up their customers? It seems like you guys own that wedge right now out there.
MD: It’s happening to us already. We’re in chain land. In the last 12 months we’ve had a new Outback open, we have a Portillo’s that’s opened. We have whatever the great mac and cheese place is. We’ve had a Cafe Zupas.
JM: Those aren’t, other than one of those, Outback, they’re not beer-serving locations, though.
MD: No, but see, here’s the thing: In order to cover my cost on a daily basis, we have to operate as a restaurant and compete with Ruby Tuesday and Applebee’s, right?
JM: Of course.
MD: And I have to find some way to draw some of that crowd, and I can’t live on beer alone. What’s nice is that people are attracted to our place because everything we do is house-made. We have a full scratch kitchen, I have a chef on site, we make all of our own bar mixes, we make all our own cocktail mixers, we make all of our own beer. I barrel-age cocktails. I mix them up myself and put them in the barrels.
We do all that stuff, and people appreciate it, and over time I’m getting more and more of those customers that normally might have gone to Olive Garden or Red Robin, and they come in by us, because they appreciate the fact that we buy our meat from a close supplier. It’s organic. All those things that we do to have a super high-quality product, and we don’t cost that much more. And people are starting to realize that. My mom warned me, she said, hey, it takes three years. It takes three solid years to get enough customer base that you’re not stressed out about putting butts in seats, in order to pay the cost of being open all the time, so that you can focus on just running a good restaurant and then a variety of beers, and getting people in to drink the beer, and bottling beer, and all those things you have to do to stay relevant.
JM: Our challenges are a lot different because we’re in the distribution channels that we need to support this brewery. That’s where a lot of the battle in the industry’s being fought right now. So we talked about how there’s craft-like beers that are owned by big breweries. We have to compete with those within our own distributor’s house, and that’s a tough thing to keep the mind share of our sales force out there, making sure that Milwaukee Brewing Co.’s being pushed as a local option.
So we’re going to continue to feel that pressure. I’ve been saying it’s about a five-year rocky road here, where you’re going to see some weird behavior in our industry, and then it’s going to normalize. It has to. It’s a business cycle we’re in right now. But that’s where we’re seeing the pressure, and we won’t knuckle on price and we won’t play any of those games, so we’ll take our lumps to get through this period, and it will settle out. There’s real money behind [the industry], and people will do the right things to protect their investments.
MD: I see a lot of local breweries falling into that trap.
JM: Yep, the price games.
MD: “We’re doing $3 pours during the Packer game to try to get bodies in the door,” and it’s folly. If you have to do $3 pours to get bodies in seats, then you’re giving your beer away. My cost on a pint of beer is nearly $2 a pint. I sell some of my beer for less than that per pour in kegs to bars. It’s super expensive to make this beer.
JM: I blame our industry association back in the day, because I always say they were leading the sheep off the cliff. There was stuff they used to publish about the profitability of opening a craft brewery, and they’d say, “It’s 27 cents a glass.”
MD: For ingredients, yeah.
JM: Just ingredients, but there’s a lot more that goes into it.
MD: There’s a couple brewers, there’s equipment cost, energy. Yeah, it’s expensive. I’ve done some detailed analysis, so I know really what it costs for us to make a pint of beer.
JM: [Points to his brewhouse] Look at all that shit.
MD: Crazy. Honestly, when I walk through here, I just have a cash register going off in my mind. Cha-ching, cha-ching, cha-ching. Green wall, that’s awesome, cha-ching.
MD: This is unbelievable. This is probably one of the nicest breweries I’ve walked into. I mean, look how much space there is for people, and how big this bar is, and that the brewhouse is right there, you can see it, and we’ve got views of the arena, and event space, and you can cordon off spaces with overheads. This is incredible.
JM: And I feel the same way when I look at your business, is that the hospitality side, and doing it at that scale. I mean, the Ale House is what it is, but doing what you’re doing, and with the idea of opening more of those, is a different whole type of endeavor. I’m the same way, when I think about those bodies that you have to get in on a Tuesday night. But do the numbers on this [brewery] keep me up at night? Of course. But that’s part of the gene that’s missing that causes us to move forward in these things.
MD: I’ve put 100 percent of my savings from the last 20 years of working as an engineer at a really high-paying job into my brewery. It’s all in. Failure is not an option, and I have a little sticker on my refrigerator at home that I see every morning when I open it to pour my coffee at 5:30 am, and it says, “Proceed as if success is inevitable.” And that’s how I proceed. I don’t have a dime in the bank account, but I need bottles for a bottle release, I figure out how to pay for them and get them in, so we can get that bottle release done, and boom, we have bottle release that’s super successful. And we’re back in the black.
And that’s an awesome feeling. It’s hard. That’s the biggest thing I don’t think people realize. And I know, when guys like Jim and I talk, or other brewery owners, we understand. We don’t even have to articulate it to each other. But I think when we talk to people that are considering opening a brewery, I don’t really think that 95 percent of them realize how hard it really is, to not only get it open and get it operating and get a good product out the door, but how hard it is to continue that, and keep that excitement going.
JM: You’ve got to have infinite passion. Because if you burn out, your brand burns out. That’s whether it’s a brewpub, a tasting room, or this. You’ve got to somehow stay fired up about it and be that passionate about it. It’s part of the nature of the hyper-competitive phase that our industry’s in.
MD: But I’ll be honest, I love the hell out of what I do. Me grabbing one of Jim’s beers, and sucking it down at 11:00 in the morning, it’s great. I love it. I’d get fired from my engineering job if I was drinking beer at 11 a.m., even though I wanted to every frickin’ day.
Everybody goes, “Oh, it looks like you have a wonderful life, and you’re always drinking beer and hanging out with fun people.” It’s like, “Yes, I am, and it’s fantastic,” but you know what? You don’t see the other 22 hours of the day, literally on social media at all hours of the day – and I do all my own social media. I’m just anal retentive. I let somebody touch it once, and I decided, I took away the password. I don’t know if I’m a control freak as much as I’m so passionate about my brand and the way it’s presented, and that it be authentic. And that people understand why we’re doing what we do, and see value in what we do, that I don’t trust anybody else to touch it. Long term, I don’t know if that’s sustainable, but you don’t get away from it. I don’t ever have a separation between working and playing and drinking beer, because for me it’s all the same. My job is hanging out and drinking beer.
JM: But you probably missed few high school performances or sporting events with the kids. We work when others are playing, because we’re hand-selling our beer. You work all day on the business, and then when it gets to happy hour, it’s time to kick into selling mode, and if you think you can get away from that, you’re wrong. When we talk about this being an enthusiast category, we have to be the champions of that enthusiasm, which can be tough.
MD: Yeah, and we have to be the primary enthusiast for our own brand. It takes a lot of hours. I used to go to work at 8 in the morning and be home by 5:30 and dinner would be ready by the time the family got home and we would hang out, go to football games and whatever. But that’s all been set aside, you know? I’m hopeful in the future it’ll change, but you know, who knows?
JM: There’s a part of it that just doesn’t go away. I used to be that way on everything, and you have to force those steps at some point if you’re going to do the bigger production thing. You’ve got to peel off the marketing, some of that stuff. You can’t do everything.
MD: Yeah, and I recognize that me handling as much as I do, probably limits my ability to do more, more of what I probably should be doing. My business model is to have an Explorium, and then maybe open another Explorium, and maybe a third one. I don’t know if I could open more than three. I don’t know if I have enough energy, or if my wife does. But that, at some point, I’m gonna have to let go of some of that. That’s the hard part.
JM: Milwaukee’s an interesting market, because we aren’t Portland. We’re definitely different, and how our distributors are handling it is affecting all of us. But we’re also a very savvy beer market, and there still is a pride in the fact that we used to be the king of beer. You know, the amount of liquid that used to flow out, and the fact that there’s a scene that’s coming back – there’s a lot of pride in that. So the upside and the runway is there for the right moves. There’s going to be more stories like we’ve heard in the last week [with breweries closing]. Used equipment – if someone had a big warehouse, we could sit on a bunch of equipment.
It’s interesting when Miller puts $50 million in five blocks from here [into its Tenth Street Brewery], and like you said, we got Terrapin, Blue Moon, Revolver, help me out, more.
MD: All the Leinie’s brands, the Summer Shandy.
JM: That’s well advertised on the side of the building, that it’s a Leinie’s brewery, but I don’t think people realize that they’re also rolling out all those other drafts.
MD: Is that Athens, Georgia, right over there?
JM: Yeah, exactly. Honorary. Yes.
MD: A little piece of Athens right in Milwaukee, you know? It’s interesting.
JM: I think in this mid-market size of where we [Milwaukee Brewing] are, is where you’re gonna really see some more noisy crashes. Where some bigger ones that’ll shock people. I mean, we saw that Green Flash was the hottest thing you could imagine a few years ago, and they crashed and burned on a second brewery location investment. Now they’re in financial triage mode, where the source of their money has all these things that kick in if in distress. They shut this down, shut that down, fired that guy, boom, boom, boom. It’s not what that brewery founder had imagined. There’s more of that coming. It’s a business.
If I wake up anytime between 1:30 and 3 in the morning, I’m up. Because my mind starts thinking about, just like Mike said, walking through there and running the debits and credits on that thing. But when I opened the Ale House for the first time, I had quit the day job and for that phase of my life it was like launching a bomber off an aircraft carrier, dragging the wheels. You’re ready for that. This is not an automatic “build it and they will come,” flip the switch. It’s work.
MD: A lot of work. And dumping beer in the river to make a point.
JM: I might’ve done that once, yeah. We somehow avoided legislation in this whole conversation. Because that’s another factor that weighs on Wisconsin, is that our climate’s not ideal. We’re not the worst of the 50 states, but we should really be better, for our agricultural background, our love of beer in this state. We should be top 5 in exporting craft beer out of the state. But the legislative climate makes that not a very feasible thing. The paths to growth are limited. In 2011 there was a big change, but it basically created a destiny clause. You want to be Mike and a retailer? You do? OK, well then you’re capped: 10,000 barrels max [annually] in your life. You want to do what I’m doing? Well, then forget your idea as a retailer. I had to actually sell a restaurant because I was planning to get past 10,000 barrels in the next 24 months. Had to divest of an investment before it saw its day in the sun.
The organic way to sell craft beer against the big guys is everything we’ve talking about, it’s a hand-sell. It’s one glass at a time. The ideal situation to grow a craft brand is you’ve got this production brewery but also have some retail outlets. If you look at the brands that have been acquired by the big guys, especially on the West Coast: Elysian, Ten Barrel, all these guys. They all had production brewery but satellite retail. And that satellite retail helps develop the brand.
MD: It’s the economic engine.
JM: Between our Tavern League, who thinks that craft breweries have an unfair competitive advantage at retail, and the big brewery forces and the distributors who want their life to be easy, those models have been kind of snipped out. You can’t grow like Goose Island or Elysian or Golden Road or Ten Barrel, or all those breweries that have done so with some retail presence. That’s just one example. That’s a big one. They also did some things with locking down the value. If I was to want to switch distributors, I’d have to buy out the contract at outrageous multipliers. It’s punitive to the point where it’s –
MD: Not feasible.
JM: That contract becomes more expensive than the cost of the brewery. But again, people will be clicking their computers off when they get to that part of the conversation. If we start talking too much on this legislative stuff, people glaze over it.
I mean, how cool would it be is if [Mike] gets three places open. And then he’s got 3 or 4 beers that are being clamored for and he wants to start contract-brewing them and shipping them out. It’s so popular he gets to 11,000 barrels. Oh my god, well, now what? Do I just stop selling?
MD: Real simple, I’ve thought about this. If I got to that point where I have three locations doing 10,000 barrels and our beer was that popular, people from out of state will be starting to try and pull it through trading and everything else. I’d just go out of state and I’d start making my beer out of state. Because it’s not a federal requirement [the 10,000-barrel limit], it’s a Wisconsin requirement. So I’m gonna take my beer jobs out of state to produce it and distribute it to surrounding states, rather than producing it here.
JM: That’s what happened with Like Minds, that whole nightmare.
MD: So I’m allowed to produce 10,000 barrels in Wisconsin because that’s the Wisconsin law. Doesn’t mean I can’t set up the Explorium Brewpub, Raleigh, North Carolina, and make 150,000 barrels there. And then even have that brewery ship it and distribute it in Wisconsin. The way the law is set up now, like Jim said, it just hurts our ability to organically grow here in the state. At some point I’m capped.
Probably the path of least resistance for the legislators is to put some appeasement into the law for the loudmouths, but they’re not realizing the kind of impact that it could have on a small business like me. If I make a 1,000 barrels this year, I’ll be lucky. Am I gonna get close to 10,000 barrels anytime soon? No. So I’m not really squawking about it too much right now. But if I had three locations open and we were banging, I could pretty easily get against that 10,000 cap.
JM: The Great Dane [Pub and Brewing, based in Madison] had to create a bill in 2007 that helped them grow, and they didn’t realize that it was gonna turn into a 28-page bill that had a lot of negative impact on breweries like ours. That wasn’t their intent, they were just trying to straighten something out for their own business model. It’s tough for a little organization, that’s another reason we pool our resources, is to have a better voice. We’ve historically not had a great voice in the Capitol.
But we muscle through all this stuff because of our passion for this industry, and our belief that Wisconsin should be a leader in this industry and that eventually we’ll find the opportunity or the right way to make that happen. Maybe my kids will make that happen.