Roll out the barrels: Sprecher Brewing riding a wave of popularity in craft beers

Talk to Sprecher Brewing Co. President Jeff Hamilton, and it’s clear that he really loves the beer biz. For one thing, there’s a fraternal feeling among small brewers that Hamilton, who has worked in everything from metal casting to industrial automation control, deeply appreciates.

“It’s probably the most fun industry I’ve ever been associated with because there’s so much camaraderie,” said Hamilton, the featured speaker at IB’s most recent Icons in Business presentation. “My colleagues in the state are some of my best friends. I talk to the president of New Glarus probably daily, and I talk to the other owners of brewing businesses around the state very regularly. So it’s a thing where we can pick up the phone and call each other. It’s a great industry to be in that way.”

Of course, that camaraderie is no accident – in large part, it’s born of common goals. For instance, when a provision in the most recent state budget threatened the ability of craft brewers to distribute their own beer or work together on distribution, small brewers were united in opposition.

“Distribution has been consolidated, and at the same time there’s more breweries,” said Hamilton. “If we don’t get more wholesalers, it restricts our access to market. So the only other alternative is to basically do it yourself or to get together with other small breweries. And before the governor signed that law, I could do that. And I could say in Milwaukee I’m going to sell New Glarus and Capital, and down in Monroe County, New Glarus can sell Sprecher and Capital, and here Capital can sell Sprecher and New Glarus.

“That’s something a year ago we could have done, although nobody had done it yet. But we were getting close to that point. Today we can’t do that. We’re fighting to get some of that back.”

A craft beer boom

In most respects, there’s never been a better time to be in the craft beer business. A surge in creativity among brewers and a curiosity among the public about new styles and tastes have combined to put the industry on surer footing than ever before.

And even though Sprecher touts itself as the oldest craft brewery in Wisconsin – “we started in downtown Milwaukee in a building that eventually fell into the Menomonee River,” quipped Hamilton – the company is clearly reaping the benefits of the cresting beer revolution.

Hamilton notes that craft beers are gaining market share just about everywhere, and in some markets, interest has exploded. Craft brews now account for about 5% of the total beer purchased nationwide, which is up significantly from just a couple of years ago. And while Wisconsin falls right in line with the national average, places like Oregon (30% market share) and San Francisco (23%) are on the vanguard of what could fairly be described as a sea change in brand loyalties.

Meanwhile, the country has more than 1,700 breweries and is adding around 80 a year. Go into any liquor store and you’ll see the results – everything from Moose Drool to Bitter Woman IPA to New Glarus’ own Fat Squirrel to Monty Python Holy Grail Ale help make browsing the beer section a whimsical adventure. Sprecher itself brews over 24 beers, along with 13 sodas, including the company’s popular root beer.

“All these things are basically driven by creative people,” said Hamilton. “If you meet craft brewers, they’re all entrepreneurs, and they have some crazy ideas, and they’re very driven by something very artistic or something very creative. That’s the kind of trend I see when I meet other craft brewers.”

That sense of creativity and energy is represented in Sprecher’s own beer lineup. In 2005, the brewery was named the Great American Brew Festival Small Brewery of the Year, and its Chameleon line boasts brands such as Hop on Top and Ryediculous.

But while the craft beer business is thriving, regulatory headaches – particularly when it comes to distribution – are to some degree damping enthusiasm.

For instance, “brand compensation,” a facet of the liquor laws that Hamilton sees as anti-competitive, has made it difficult for any brewer to switch distributors.

“That got put in six or seven years ago,” said Hamilton. “So if I want to leave my distributor, if another distributor wants to pay them for the business, that’s the only way I can get out. So I changed distributors in Milwaukee about five years ago, and it was a $2.5 million deal going from one distributor to the other. Today, it would be probably a $4.5 to $5 million deal if somebody else in Milwaukee besides my current distributor wanted my brand or if I wanted somebody else to have it.

“Most people don’t know anything about that, nor do they care.”

But despite the legislative hurdles that Hamilton sees, longer-term trends appear to favor small craft brewers.

“Beer consumption in general is going down, but the amount of good beer people are drinking has gone up,” said Hamilton. “That’s partly because people are starting to trend toward local things in almost all that they buy. If people have a choice, they’ll generally buy something local versus something that came from somewhere else, so we’re definitely taking advantage of that trend as well.”

More from Jeff Hamilton

On whether Sprecher, a more established craft brewery, ever finds itself fighting for market share with up-and-coming breweries the way that Budweiser and Miller do: “No, I don’t think that’s in the mindset of most craft breweries. Most people believe that there’s plenty of market share out there for all of us. We’re still looking, in the state of Wisconsin, somewhere around a 5% market share, so I think there’s room for plenty of breweries before we get to that point.”

On the demographic trends the craft beer industry is seeing: “We probably have a couple of different groups there. There are people that started drinking these things 25 or 30 years ago that have loved craft beer ever since, so we have those kinds of people, and we do have the younger crowd now that’s, I think, experimenting as more and more craft beers are available. I think the biggest expanding group is women. When you look at it demographically, women are not considered traditional beer drinkers, although half the craft beer drinkers are women. So I think that’s probably the most significant demographic that drinks craft beer that may not drink other beer.”

On the marketing of Sprecher’s traditional-style craft beers in an age when beer names and packaging are becoming more and more outlandish: “Our beers are traditional. We make a beer, it’s going to be pretty authentic to the style that inspired it, versus American beers now that are very creative and take a lot of latitude with the styles – they add things, they change them up a bit, which is a good thing. We’ve never been able to do that, really, because people don’t seem to want to drink those kinds of beers from us. That’s actually one of the reasons we started Chameleon, was so that we could start doing crazier, probably more creative beers, and get people to pay some attention to them.”

On the process of naming and packaging new beers: “Yeah, our Chameleon names are all clever and fun, I would say, versus just naming the beer for what it is. Most of the Sprecher brands, if it’s a stout, that’s what we call it. Our Chameleon brands all have clever names – Hop on Top, Fire Light, Ryediculous, Witty – those are all more of the American style. Same thing with the packaging.”

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