E-Malt.com News article: US, WI: Milwaukee Brewing Company expanding thanks to a new equity investor

The Milwaukee Brewing Company, which produces beer sold at the Milwaukee Ale House and Grafton Ale House, and several beer brands that are sold in liquor and stores throughout the Milwaukee area, will soon make improvements to its facility, expand production and develop new marketing programs, thanks to the involvement of a new equity investor, BizTimes.com reported on April, 1.

Jim Hughes, a former institutional equity broker at Robert W. Baird & Co. Inc., invested in the brewery in December.

“I caught wind that Jim (McCabe’s) former equity partner (Robert Tenges), who had been with him since 1997, wanted to sell,” Hughes said. “I started the due diligence process and got excited about it pretty quickly. I made my offer in June (of 2010).”

Neither Hughes nor McCabe would disclose the amount of Hughes’ investment in the Milwaukee Brewing Co. However, Hughes said he is investing additional capital on top of his purchase of Tenges’ shares.

Part of that investment is a new line of credit with US Bank and a new banking relationship with Brookfield-based Spring Bank, which will help it complete improvements to its facility and new marketing plans.

The marketing effort will help raise Milwaukee Brewing Co.’s local profile – the brewery’s weekend tours, launched several months ago, continue to grow in popularity, but it still suffers from some lack of name recognition in town, Hughes said.

“The biggest challenge is building our own local reputation independent from the Ale House,” he said. “The brewery’s name recognition has a way to go, but we’ll get there.

“The big challenge is that we want people to think of the Milwaukee Brewing Company standing on its own.”

Hughes and McCabe said the brewery hopes to begin work on its façade improvements in several weeks. Its redevelopment plans, which include a large grain silo that will be mounted in the center of the building’s façade, as well as large glass windows, a new glass overhead door and a mezzanine walkway for the front portion of the building, have been ready for several months.

The plans include a tasting room and restaurant, which was previously going to be operated by the owner of Soup Bros., a nearby restaurant. The brewery is still in negotiations with several other potential operators of the tasting room, McCabe said.

“The tours have been such an important exposure for us, and the tasting room will amplify it,” he said. “It’s a great way to get people in here and get them excited about what we’re doing.”

The brewery will soon also expand its production capacity by about 50 percent. Last year, it produced about 4,300 barrels of beer between its own facility and its small brewing operation inside the Milwaukee Ale House – about 2,850 barrels were produced in the brewery and another 1,400 were brewed at the Ale House.

This year, McCabe and Hughes hope to produce 4,000 barrels inside the Milwaukee Brewing Company.

“That’s a stretch goal, but we’ll have the tanks to do it,” Hughes said.

Beechwood Distributors, the New Berlin-based distributor that handles Milwaukee Brewing Co.’s beers in retail stores and bars, is also helping to raise the brand’s profile, both McCabe and Hughes said.

“We’ve had a number of in-depth meetings with Beechwood and both parties are working hard to enhance our relationship,” Hughes said.

Milwaukee Brewing Co. only distributes its products in the Milwaukee area at the moment. Before it expands its distribution, the brewery needs to iron out its marketing strategy in the metro area. Beechwood will be particularly important in that process, McCabe said.

“Beechwood has, probably, 99 suppliers and 500 to 1,000 products to get out there. We need to be in their fore-brain.”

Milwaukee Brewing Co. is poised for growth because of the growing consumption of craft beer in the Milwaukee area. According to Beechwood, craft beer consumption grew 40 percent in the area last year, from six to nine percent of the total beer sales in the area.

“They (Beechwood) are saying there is an opportunity to leverage that growth,” McCabe said.

That potential has made it easy to make decisions about investing additional capital into the brewery, Hughes said.

“In terms of our capacity and growth opportunities and what is happening in craft beer specifically in Milwaukee, we are at a very significant inflection point for the Milwaukee Brewing Company,” he said.

Unlike many equity investors who plunk down a chunk of their own money in exchange for a stake in a privately held business, Hughes isn’t thinking of his investment as a pure money-making venture. He says his passion for beer, the brewing process and a budding interest in marketing will make this a long-term project.

Hughes’ son my soon become involved in the brewing company, and McCabe’s brothers are also involved in the business, making it a family affair for both partners.

“It’s a family business, and I think we both hope that our families want to keep it going,” McCabe said.


06 April, 2011