Craftily brewing up an investment storm

“Beer is an affordable luxury.”


Truer words were never uttered, and they were spoken recently by Carl Nolen, the former president and CEO of the Madison-based Capital Brewery.

Nolen has made news twice in recent weeks, once for leaving (he was asked to leave) the company that has been brewing since 1986, and again for announcing that he and brother Mark Nolen are leading a group of local investors who would like to acquire it.

Carl Nolen understandably declined when I asked him to chronicle any “palace intrigue” that led to his departure, but his statements of intent might yield a few clues about why there was a parting of the ways. He obviously has very strong opinions about the company’s future direction in a real time of opportunity for the 1,753 brewery-strong craft brewing industry.

Full disclosure: I have on many occasions sampled the brewery’s Wisconsin Amber product. Fuller disclosure: Yes, I’ve also inhaled it and, in so doing, I’ve enjoyed the heck out of it. Thanks to New York Mayor Mike Bloomberg for providing the template for that truthful admission.

Now that I’ve firmly established myself as “pro-beer” in this most hyper of hyper democracies (how else does one describe Madison, especially in 2011?), let me make a modest suggestion. With Capital Brewery celebrating its 25th anniversary, maybe this milestone is a good time for the company’s shareholders to take stock, or perhaps give this proposal a fair hearing.

Thanks to a more discerning beer consumer, who Nolen contends is “drinking less and drinking better,” there has never been more demand for craft beer, especially if it’s locally brewed. His views are backed up by the Brewers Association, which pegs the increase of craft beer sales volume at 11% in 2010, while overall U.S. beer sales decreased 1% in volume the same year.

A key operational question involves how to finance the expansion that will be required to accommodate that growing market share, including for regional players like the publicly owned Capital Brewery. Most significantly, the Nolen brothers prefer an infusion of investment capital to taking on more debt.

Their group, called Viola Ventures, LLC, vows to soon tender, in its words, a “fair and equitable offer” to all 1,400 Capital Brewery stockholders.

There is still work to be done to qualify potential investors for the group, but Carl Nolen believes that initial conversations with Capital shareholders have been favorable.

For them, he has a simple, and I would argue compelling, message: “The winners in the craft brewing industry will be those who grow with a strong balance sheet and not go into a debt-based expansion.”

Given what’s unfolded in Washington, D.C., where Republicans and Democrats have both driven us toward a debt cliff, albeit at different speeds, this emphasis on capital formation could well resonate. I realize it’s not a perfect analogy, but it’s hard to argue the point in an era where total debt – government and private sector and consumer debt – has reached frightening levels.

It’s an approach I can raise a glass to … filled with Wisconsin Amber, of course.

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