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09.2004

Massachusetts Beverage Business

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Locals Breaking-Out!

Article By: Lew Bryson

There are two small Massachusetts breweries that are edging up toward a break-out point - Berkshire Brewing, in South Deerfield, and Wachusett Brewing, in Westminster, passed the 1O,OOO bottle a year mark in 2OO3, and both are sustaining steady growth.

Interestingly, both have reached that mark largely within the state borders, and ardently desire to stay here, seeing the state market as one that has plenty of room for them to grow. This is a story that is being repeated across the country as small brewers dig deep in their home turf and find surprisingly strong support.

I talked to Ned LaFortune of Wachusett and Gary Bogoff of Berkshire about where they've been, how they got to where they are, and where they're going.


LEW BRYSON How did you get started, and why did you do it?

Ned LaFortune We opened in 1994. We opened because I had two perfect partners to found a business with, Kevin Buckler and Peter Quinn, and we were extremely passionate about making beer. We love beer. We loved beer in college, we loved beer outside of college. We were interested in it, fascinated by it. We bought beers from stores that had the interesting stuff, we got to be known there. We'd pop in the door, do you have this or that? We started homebrewing because of our interest. We weren't content with just brewing a five gallon batch on the kitchen stove, we built what was essentially a pilot system for recreation purposes, so we could make enough to make it worth our time. It was all on my parents' farm, here in Westminster. That's how we ran the well dry, and got kicked off the property.

I had a lot of experience with mechanics, which was directly applicable to brewery construction. We were able to design a lot of our own original equipment, and build it, which kept the overhead low and still created what we need to make a quality product.

Gary Bogoff We went into the public market on October 1, 1994. My partner, Chris Lalli, and myself were avid homebrewers and loved beer. I had always worked for myself as a general contractor. Chris had been a laser technician, working with welding lasers - he used to make pacemakers, things like that.

We both loved beer. We were brewing 10 gallons at a time, and that wasn't enough. We first thought we'd open a brewpub, then realized that neither one of us had ever been a restaurateur, or a brewer. We figured, well, let's do one, and then if it works, we'll try the other. We started off with a little 7 barrel brewhouse, and in the past ten years it's been nothing but constant state of change. As we speak, we're doing our third major renovation. We're doubling the size of our facility, and we should be able to triple our brewing capacity. We're expanding tanks and giving ourselves more production area - our brewhouse is still the same 20 barrel brewhouse.



LB What beers do you brew, and why those beers?

NL Wachusett Country Ale is our flagship. It's our best seller, what most people get when they order a "Wachusett". We designed it as our first beer because we thought it was a beer we could sell in our local area, and it's proven to do so, it's one of the best-selling ales in central Massachusetts. Our newest beer has had a huge impact for us - Blueberry Ale. Blueberry has just been an unbelievable, phenomenal performer for us. I didn't expect it - I'll be honest, I didn't expect this beer to come out as good as it did.

It's very drinkable, it's a good combination, and it's a point of differentiation for us. It's our biggest seller in North Shore, South Shore and the islands. It's something different. We get tons of reactions like this: people don't want to try a fruit beer, blah blah blah, then they try it, and they say it's unbelievable. It's got serious staying power.

Black Shack Porter is our darkest beer, definitely one of our most complex beers, designed for those that are really looking for something. And from my perspective, it's just a phenomenal porter. It is of the caliber of a Deschutes Black Butte, but there's such a small porter market in Massachusetts. We're going to invest in the brand to try to keep it cruising along.

We spend a lot of money on our IPA. It's dry-hopped in the tank, and it ages longer than the other beers. It's our most special product. We're seeing about a 50% increase in that beer this year. People are starting to understand it.

Summer Breeze is our summer seasonal, a wheat-based beer. It's our biggest selling seasonal, which I think is typical, it's the longest season. Oktoberfest is ridiculously short, but it sells well, it's worth doing it.

GB Our number one seller is our flagship, Steel Rail Extra Pale. We did that as our original beer - an American-style extra pale - and in 1994, people on the East Coast weren't real familiar with what a micro or a craft beer was. We knew if we did something like a pale ale, or something amber, we'd just turn a lot of people off, just because of the color of the beer. We did an American-style ale, we basically tried to bait and switch them. We got them into drinking our light beer, so to speak, the Extra Pale, and then we started adding styles. Now we have about 15 different styles, ales and lagers, all the way from a kolsch, which is really our Berkshire light beer, to an imperial stout, barleywine, beers of that nature. We try to do something for everyone. There's a tremendous amount of diversity there, and we try to keep them all very separate in their flavor profile so that people are getting a good representation of what that particular style of beer should be. It's sort of like a bit of juggling, to keep everything in inventory and on the shelf. But we've gotten pretty good at it.

The retailers enjoy it. They're always looking for something new. And what's really different about us from most of the other people on our side of the industry is that after 10 years we still continue to bottle in the 22 ounce bombers and the 64 ounce growlers. We've stayed away from the six-pack market. If you walk into any of the local package stores you'll see anywhere from six different beers to the whole Berkshire family there on the shelf. It's quite a nice sight to behold. We often think that to do that with six-pack facings we'd need twice as much space as they've given us now. Space is always an issue in off-premise sales.



LB Wachusett self-distributed for a number of years, Berkshire still does. Why did you make that decision?

NL I feel it was absolutely necessary to establish the brand. We couldn't have realistically expected a wholesaler with large, profitable brands in their portfolio to take on a start-up. It was our responsibility to grow the brand. We needed to understand distributing, we needed to learn to sell beer, because we didn't know any of this stuff. We've been there now, we know how incredibly difficult wholesaling beer is, we can relate to that to the core, with all the guys who are doing sales calls. We self-distributed the whole state from 1994 to 1998. Then we said to ourselves, "This is something valid." When I called Joe Salois at Atlas Distributing, five years, almost to the day, after we opened, and said it's time for us to talk, he called me back in under two minutes. That, right there, was an indicator that Atlas was the right company. You have a whole other aspect of your business. You have all the responsibilities that a wholesaler has - equipment to get it there, staff, billing, collections - all of that. We did it for five years, for the maximum that this building allowed. We ran a profitable distributorship out of here, but it got to the point where we had to make a decision: keep doing both the brewery and distribution business or not. The facility was the limiting factor.

Right now we ship two to three trailer-loads a week. We have five refrigerated trailers, soon to be six. As we brew, we're loading these trailers with the orders we have. We ship beer out every week, and on Fridays there's almost no beer here. Often our retail store is out of beer, the wholesalers get it before we do! It's great, it actually works out well. It's not ideal, but. Today we're bottling. All that packaged product will go in the trailers, and by Friday it will be hauled out of here to the wholesalers. We only keep a one to two week inventory at the wholesalers. Some of the imports send multiple containers, and they're in the warehouse a long time.

GB It was a big decision, but at the time, with our economics - and because I kind of grew up in the trucking industry - it wasn't anything new to me. I was able to get it out there.

It was kind of funny. Back in 1994, instead of having salespeople go out and knocking on doors, we telemarketed to 95% of our customer base, and we were able to kind of make our introduction over the phone. When Chris and I went out to deliver the beer, that's when we made our real sales call. We did it a little bit backwards, something the industry wasn't quite accustomed to, but it's worked really well for us over the years.

We were also eliminating that middleman, and not necessarily from an economic standpoint, from a business relation standpoint. We're still connected right to the heart of our customer base, so if there's a problem with anything, whether it's a broken bottle, a bad cap, whatever, we're right on top of it. It doesn't get lost in the loop of going through a distributor and coming back to the brewery, we're right on it all the time. If someone's beer isn't flowing quite right, or somebody says there's something wrong with the beer, we're right there to check it out.

We do use wholesalers in some markets. We're in the state of Vermont, which we entered about a year and a half ago, and we also have a small distributor in the metro Boston area that we've been working with for about a year now. But we sell 95% of all our beer within a 60-mile radius of the brewery. That was the original plan. We adopted the European mentality of the local brewery. When we came here in 1994, and we told people what we were, a lot of the response was, "well, gee, we don't have that micro beer, or any of that stuff." We said, "don't think of us like that, think of us as your local brewery." That's what we've always tried to be, western Massachusetts' local brewery.



LB Eventually you'll have to start moving out into other markets. Few people outside central Massachusetts know your brand. How do you launch a brand that's almost dominant in its home market and practically unknown outside of it?

NL What do we do in a new market? Get a qualified wholesaler to distribute our brand in an effective manner. Once you get your draft lines, they'll get your product there and supply solid sales support. We're about one-quarter of one percent of the total Massachusetts beer market. We have no reason to go outside Massachusetts. If we get to 1%, we'd be a 40,000 bottles a year brewery, that's four times larger than we are now. That could take us 30 years! I don't know, it could take us ten, it could take us five, but I'd still like to do it all here if we can. How do you get people in new markets to know about us? There are still plenty of people in this state who don't know about us! Why would I want to put beer on a truck and ship it out somewhere that we can't watch over it and keep it fresh?

GB We use the 'pebble in the center of the pond' philosophy. It's not how far away we go away from the brewery - we're trying to get as many places between here and the farthest one out. The farther people from their home location, the more energy it takes, the more marketing money it takes to get yourself introduced into the market. We do very little advertising. The majority of our advertising is word of mouth. That's pretty much how it' s worked for the past ten years.

We're looking at the I-91 corridor in Connecticut. We're getting a lot of people from Connecticut who know our product, we're right on the line there. We've got the "Connecticut Connection", the guys who run up to the border liquor stores and take stuff home, so we do have a little bit of recognition. We're getting calls from restaurants who would be interested in carrying us if we got there.



LB A lot of small breweries haven't made it. Why did you do so well?

NL We've designed beers for the palate of Massachusetts. No styles with crazy ingredients and incredibly high hop contents or billion percent alcohol. It's incredibly fresh, flavorful beer to be sold here. We don't really fit in all that well in the circle of the geeks. It seems like right now it's a constant barrage of hops and alcohol levels in that circle. That's not what we do. I do feel that this portfolio of nine beers is a good one. People ask us when we're going to make something new. With the growth we have, why do we need to?

I've been to the Yuengling Brewery (in Pennsylvania), I've met Dick Yuengling, and that is the brewery I have the most admiration for. That's what we look at as the true successful brewery in this country. Locally, they outsell Bud in their home market. They make what sells, people love it, and they're behind it. We feel like we're the mini-Yuengling of Massachusetts. There's passion behind it, Dick's committed, and it sells. That's what we do, that's the example we follow, not the breweries that do the crazy stuff.

As we go along, things become more clear - this is what we do. If people want craziness, they'll have to look elsewhere. That's a struggle for us, because we're also passionate, we appreciate the same things they do, we are geeks. But it's not a sound business decision for us to make those beers.

GB Anyone in business has to be smart. We've been fiscally prudent, very conservative in the way we've gone about expanding. Our debt has always been manageable, which I think is a critical aspect of any business. We've also been basically putting every nickel back into the company instead of taking it out. So we've been growing Berkshire Brewing from within. As a result, I know that Chris and I have given up certain things - we joke that we have enough sweat equity in this place to float the Titanic.

Our motto is "No Hype, Just Good Beer". The beer comes first. We've never pushed anything out of here that we wouldn't drink ourselves. We are very quality conscious. If the customer is coming back to us, he expects what he had the time before. So we're very conscious about trying to maintain good quality control over all our beers, all the time.

It's sort of like raising a baby. At the beginning you have to really take care of it, nurture it, you know. Then it learns to crawl, and then it learns to walk, and then it learns to run. We're kind of at that point, where we've developed this entity that's beginning to move on its own. Everybody is still working really hard, but there's this energy that's kind of built in to Berkshire, an energy we feel is starting to take us along with it. If we play our cards right, there's a tremendous opportunity here. It's a great feeling. It's a very humbling experience.

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