All The Shiny Stuff: Starting a Brewery

Gary Arndt: 00:00:05

Hello everyone.

Gary Arndt: 00:00:06

And welcome to another episode of Respecting the Beer.

Gary Arndt: 00:00:08

My name is Gary Arndt and with me as always is Bobby Fleschman and Alison McCoy.

Gary Arndt: 00:00:13

And so far in the podcast, we've talked about the science of beer.

Gary Arndt: 00:00:18

We've talked about the history of beer, talk a little bit about the culture of beer.

Gary Arndt: 00:00:22

And so today, and for the next few episodes, we're going to talk a little bit about the business and the economics of beer.

Gary Arndt: 00:00:28

Cause I think a lot of people either don't even think about this.

Gary Arndt: 00:00:31

When they have a beer or maybe they're a home brewer and they've thought about maybe expanding what they're doing and they're really not sure what goes into it.

Gary Arndt: 00:00:41

So let's go back and we've touched upon this a little bit earlier.

Gary Arndt: 00:00:45

You guys decide you're going to open a brewery.

Gary Arndt: 00:00:49

What goes into that?

Gary Arndt: 00:00:51

I mean, once you've, once you've made that decision, like there are a lot of upfront costs that go into creating a brewery and I've been around like your brewing room, there's a lot of stuff.

Allison McCoy: 00:01:01

Shiny stuff is expensive.

Allison McCoy: 00:01:03

Yeah.

Gary Arndt: 00:01:03

So what, what, how does that start and what goes into it?

Gary Arndt: 00:01:06

What are the costs that you, before you even brew the first batch of beer that you have to start considering?

Allison McCoy: 00:01:15

Yeah, we're just looking at each other like, okay, but that kind of the moment that you're like, I don't know, let's say you're on a cliff and you're like, you know, we're going to bungee jump.

Allison McCoy: 00:01:23

This is cool.

Allison McCoy: 00:01:24

And your friends right there with you and kind of give that eye to each other.

Allison McCoy: 00:01:26

And you're like, are we really going to do this?

Allison McCoy: 00:01:28

That was the look Bobby and I just gave each other.

Bobby Fleshman: 00:01:30

You have to let go of the wing.

Bobby Fleshman: 00:01:32

I think that Will Smith gave a speech at a college once, climb out on the wing and then let go.

Bobby Fleshman: 00:01:37

Just let go.

Bobby Fleshman: 00:01:38

Yeah.

Allison McCoy: 00:01:38

But I think that, It's not necessarily, it's gonna sound strange, but it's not a decision that we made.

Allison McCoy: 00:01:44

And like at just one moment, it involves getting our families together, getting enough financing together, getting the bank to agree that they thought we knew what we were doing enough, writing that we knew what we were doing, learning what we didn't know, which we still don't know a lot.

Allison McCoy: 00:02:00

And so it was almost like there were these little bitty small steps.

Allison McCoy: 00:02:04

It wasn't climbing Everest in just one, one jump, I guess.

Allison McCoy: 00:02:09

It was getting to continual base camps along the way.

Bobby Fleshman: 00:02:13

One thing we should say right off is that making beer is not owning a brewery.

Bobby Fleshman: 00:02:18

Those are not commutable.

Bobby Fleshman: 00:02:19

And that's why we were

Allison McCoy: 00:02:20

So naive.

Allison McCoy: 00:02:21

Oh my God.

Allison McCoy: 00:02:22

How much we didn't know.

Gary Arndt: 00:02:23

Well, there, there had to have been a point though where you signed a loan or there was something where there was a point of no return, right?

Gary Arndt: 00:02:31

What this was like.

Allison McCoy: 00:02:33

I would say the big loan, but it actually didn't work out that way.

Allison McCoy: 00:02:37

We we purchased the building first and then, so we own the building, which is a huge win for any small business because rent can't just all of a sudden go up.

Bobby Fleshman: 00:02:46

Yeah.

Bobby Fleshman: 00:02:47

And if you do really well in business, your landlord often decides to triple your rent and I've seen that happen.

Allison McCoy: 00:02:52

Yeah.

Allison McCoy: 00:02:52

And some breweries have suffered from that.

Allison McCoy: 00:02:54

But for us, we bought the building first.

Allison McCoy: 00:02:56

So then now we just have, Real estate that we could get out of.

Allison McCoy: 00:03:00

Then we got what was called a construction loan to where we didn't actually, we only drew from it as we built.

Allison McCoy: 00:03:07

And so we were continuously like basically putting that money into investing into a property.

Allison McCoy: 00:03:13

And so when the business finally started, I think that's, Gary, to your question of like when was the actual point of no return, I think it's when we formed the LLC and linked it to a loan.

Allison McCoy: 00:03:24

I think that's when we were like, okay, now we got to pay this loan back.

Bobby Fleshman: 00:03:27

Well, I, I think...

Allison McCoy: 00:03:29

Beyond the collateral of the building.

Allison McCoy: 00:03:30

I

Bobby Fleshman: 00:03:30

don't want to say point of no return, but I think one of the most important moments in the history of the company is when I decided to go to brewing school and move away from home in 20, it was 2012 at that point where we were doing that.

Bobby Fleshman: 00:03:45

And that set in, in motion the dominoes that would become the brewery.

Allison McCoy: 00:03:51

It wasn't a monetary.

Allison McCoy: 00:03:52

It's, I mean, you can, you could go and then consult for a brewery.

Allison McCoy: 00:03:56

You, I mean, you consulted for Stone Arch Brewing Company just down the street for a while.

Allison McCoy: 00:03:59

And so I, I don't think that that's necessarily the.

Gary Arndt: 00:04:02

But it's sweat equity, right?

Gary Arndt: 00:04:03

It's time that you put in, it's an investment that most home brewers are never going to do that.

Gary Arndt: 00:04:09

Right.

Gary Arndt: 00:04:09

That's a step beyond what, what they were, you know, whatever they do.

Bobby Fleshman: 00:04:12

And I, and I sort of left and I did leave another career in the process.

Bobby Fleshman: 00:04:16

So for me personally, whether it was to open a brewery or just be part of the industry, it was.

Bobby Fleshman: 00:04:20

Definitely a fork in the road.

Gary Arndt: 00:04:23

But then you, okay.

Gary Arndt: 00:04:24

So you, you get a building and I understand you, you could have rented this building out if things didn't go up or sold it or whatever.

Gary Arndt: 00:04:32

But then you got to build by the shiny stuff in the back, right?

Gary Arndt: 00:04:35

So what, what did you have to buy?

Gary Arndt: 00:04:38

Did you make a list of like, Oh, here's, we need this and we need this.

Gary Arndt: 00:04:41

We need this.

Gary Arndt: 00:04:42

And what was that list based on?

Gary Arndt: 00:04:44

Because you'd never done anything at this scale.

Bobby Fleshman: 00:04:47

Right.

Bobby Fleshman: 00:04:47

I spent a long time building, writing a business plan and.

Bobby Fleshman: 00:04:51

It's several hundred pages, there's several hundred pages that are not in it.

Bobby Fleshman: 00:04:55

It was so long that the, that the banks, when I handed it to them, just basically gave us a loan.

Bobby Fleshman: 00:04:59

They said, no one puts this much into it without having done their research.

Bobby Fleshman: 00:05:02

It did help,

Allison McCoy: 00:05:03

and it frustrates me to no end that you have a PhD credential that they just like, oh, PhD, Okay, we'll give you money, which is crap because PhD in astrophysics has nothing to do with PhD in business.

Bobby Fleshman: 00:05:15

Yeah.

Bobby Fleshman: 00:05:16

But it does mean perseverance.

Bobby Fleshman: 00:05:17

It does mean that I'm able to persevere.

Bobby Fleshman: 00:05:20

It does mean that I'm able to problem solve.

Bobby Fleshman: 00:05:22

And I think that that's what those three letters should, that they should translate.

Bobby Fleshman: 00:05:26

And also,

Allison McCoy: 00:05:26

I think at least for, it shows that you don't know things and know how to find those things.

Allison McCoy: 00:05:32

You can teach yourself.

Bobby Fleshman: 00:05:33

You learn that you don't know and then you Gary's point, what was the list of things?

Bobby Fleshman: 00:05:38

And so it would be comical to look at what we thought was going to be that list versus what we actually ended up no matter how much work I did on that business plan to be to compare the reality and the expectation.

Allison McCoy: 00:05:50

But in the year it took you to write that business plan, I just want to paint a picture for everyone.

Allison McCoy: 00:05:55

Bobby's probably the most work ethic centric person I've ever met.

Allison McCoy: 00:05:58

Or in the world, maybe.

Allison McCoy: 00:05:59

There you go, I'll raise that challenge.

Allison McCoy: 00:06:01

as in like, 5 a.

Allison McCoy: 00:06:03

m.

Allison McCoy: 00:06:03

he gets up, he goes for his run, 6 a.

Allison McCoy: 00:06:05

m.

Allison McCoy: 00:06:06

he's got his coffee and he's starting to work on his business plan.

Allison McCoy: 00:06:08

And this was before we had a kid, and so he would continue to work on that business plan.

Allison McCoy: 00:06:13

I mean, there are like divots in the rugs of where he never moved the chair because he worked from about 6 p.

Allison McCoy: 00:06:17

m.

Allison McCoy: 00:06:18

I am to about 8 p.

Allison McCoy: 00:06:19

m.

Allison McCoy: 00:06:20

or so while

Bobby Fleshman: 00:06:20

I was studying for an exam around that time too.

Allison McCoy: 00:06:23

And every day like clockwork and I'd go out with friends, go to the pub, have some beers and enjoy.

Allison McCoy: 00:06:29

And he's like, Nope, I got to go back and work on the business plan.

Allison McCoy: 00:06:32

It was every day.

Allison McCoy: 00:06:33

This

Gary Arndt: 00:06:34

is fascinating for me because I've had several successful businesses in my life.

Gary Arndt: 00:06:39

I never had a plan for one of them, I've never raised money for one of them, I bootstrapped every, I funded it through poverty, it's how I basically did all of them, but I also had no, you know, no family, no kids or anything but it was a completely different approach than that, and of course all my businesses had no capital equipment.

Allison McCoy: 00:06:57

Yeah, the shiny stuff.

Allison McCoy: 00:06:58

Oh, my God,

Bobby Fleshman: 00:06:59

It's hard to bootstrap that you see a lot of breweries try to and the ones that succeed are few and far between.

Bobby Fleshman: 00:07:05

I mean, succeed on the level that they can be profitable.

Bobby Fleshman: 00:07:08

There, there are very few that can do that.

Allison McCoy: 00:07:10

And not only that, the creativity of we are in a small building for a manufacturing facility and a whatever this is called hospitality space.

Allison McCoy: 00:07:19

Yeah.

Allison McCoy: 00:07:20

And so it's a ship in a bottle.

Allison McCoy: 00:07:22

And to be creative and how do we maximize capacity and it's something that's bitten us in the rear end a little bit.

Bobby Fleshman: 00:07:28

We were just talking this morning about mistakes we made and how we do it differently.

Allison McCoy: 00:07:31

And I think this building is too small for the growth that we probably need to see.

Allison McCoy: 00:07:36

Which then opens up, well does that mean that you're gonna either move locations or go bigger?

Allison McCoy: 00:07:40

Which we would never leave this location.

Bobby Fleshman: 00:07:43

But that was point to the positives.

Bobby Fleshman: 00:07:45

Of being here.

Bobby Fleshman: 00:07:45

So it's never, it's never black and white now to Gary's point about not writing a business plan before opening a business.

Bobby Fleshman: 00:07:52

You don't have to open.

Bobby Fleshman: 00:07:53

You don't.

Bobby Fleshman: 00:07:53

In fact, a business plan is just.

Bobby Fleshman: 00:07:56

An exercise.

Bobby Fleshman: 00:07:56

It's not the dots.

Bobby Fleshman: 00:07:58

It's so, so we've gone through an exercise.

Gary Arndt: 00:08:01

When people ask me about traveling, I always say your ability to adapt is more important than your ability to plan, right?

Gary Arndt: 00:08:06

Cause your plans are going to go, Hey, why are they one?

Gary Arndt: 00:08:09

Right.

Gary Arndt: 00:08:10

And then you just need to figure out how you can adapt from there.

Gary Arndt: 00:08:12

And I assume it was the same way.

Gary Arndt: 00:08:14

This was like a guide, right?

Bobby Fleshman: 00:08:15

I did not in year three, put year two.

Bobby Fleshman: 00:08:18

Was it, that we would have a pandemic.

Bobby Fleshman: 00:08:20

I didn't, how in the world does anyone make plans for that?

Bobby Fleshman: 00:08:23

So we just.

Bobby Fleshman: 00:08:24

We, we had a plan and in some ways we sort of match what we expected, but in other ways, we're distributing brewery now because of the pandemic.

Bobby Fleshman: 00:08:33

And so that's wildly different.

Gary Arndt: 00:08:34

Going back to the plan, how much beer did you assume in the plan that you were going to make year one?

Bobby Fleshman: 00:08:41

If I recall, I'm digging back into that fictitious prediction.

Allison McCoy: 00:08:47

Don't look at me.

Allison McCoy: 00:08:47

I never read it.

Bobby Fleshman: 00:08:48

I feel like it was, I feel like it was a couple of hundred barrels.

Bobby Fleshman: 00:08:52

That's all.

Bobby Fleshman: 00:08:52

Yeah.

Bobby Fleshman: 00:08:53

In the, in year one.

Bobby Fleshman: 00:08:54

And that was going to be double that the next year and then double again the next year.

Bobby Fleshman: 00:09:01

And that actually was kind of tracking right until the pandemic hit.

Bobby Fleshman: 00:09:07

maybe it was more than just an exercise.

Bobby Fleshman: 00:09:10

Maybe we were pretty close.

Bobby Fleshman: 00:09:12

There were some things that changed.

Bobby Fleshman: 00:09:14

we thought we'd have more to go sales by way of growlers, these glass jars, people bring into breweries that didn't happen.

Bobby Fleshman: 00:09:19

People stopped doing that, but otherwise it was pretty close.

Bobby Fleshman: 00:09:23

we, Expected to be having to be building onto the building by year between years three and five to deal with the capacity that we would need

Allison McCoy: 00:09:32

Well and we have expanded because we rent a large part of there's a warehouse behind us It's owned by another individual that we rent a large Part of where we have a very large cooler that we store all the beer

Bobby Fleshman: 00:09:44

And it's worth mentioning appleton beer factory next door to us.

Bobby Fleshman: 00:09:47

They there are spiritual partners and all this and they Rent us space Lona space to do a lot of stuff we could never do if we had to rely on our own footprint.

Bobby Fleshman: 00:09:59

Now the expansion to the brewery would would be where our stage now sits and where our beer garden is grown in.

Bobby Fleshman: 00:10:06

And so we don't think that's touchable.

Bobby Fleshman: 00:10:09

We don't want to really mess with that.

Bobby Fleshman: 00:10:10

We want it to evolve that and more beautify that space as it is.

Bobby Fleshman: 00:10:14

But I think our next move, we got a few options on the table, but we can't stay here forever.

Bobby Fleshman: 00:10:19

Even if, okay.

Bobby Fleshman: 00:10:20

Even if we could squeak out a lot more beer, let's say 20 percent more beer, it's going to tax people.

Bobby Fleshman: 00:10:26

You know, I don't want to tax people.

Bobby Fleshman: 00:10:27

I want things to get a little bit more breathable in terms of space and efficiencies.

Allison McCoy: 00:10:31

Well, but I always, I, I think that this will, this facility for lack of a better phrase will always be our pilot system.

Bobby Fleshman: 00:10:38

Yeah, exactly.

Bobby Fleshman: 00:10:40

And I do have some ideas on the table, but the market's really volatile right now in beer.

Bobby Fleshman: 00:10:44

We should say that.

Bobby Fleshman: 00:10:45

And the time capsule that, that this podcast is, is that right now with all the competition in, in RTDs, which are ready to drink flavored malt beverages, and you have seltzers and ciders and on it goes on and on and on non alcoholics, there's so many different things happening in that sphere that used to not be that beers is taking the brunt of it.

Bobby Fleshman: 00:11:06

And actually, so is wine at this point.

Bobby Fleshman: 00:11:09

And spirits are also getting a little bit nervous too, because there's so many alternatives But that's just an aside note, but it, but it kind of speaks to the volatility of owning a business.

Gary Arndt: 00:11:18

I want to go back to the plan again and the shiny stuff.

Gary Arndt: 00:11:21

When you purchased the fermenters and everything well, for starters, how much of what you have today was bought initially versus, you know, added subsequently after you started?

Bobby Fleshman: 00:11:34

I would say as far as the shiny stuff, I would say we're probably probably bought about 60 percent of it.

Bobby Fleshman: 00:11:39

And now we're about 40 percent of what we have.

Bobby Fleshman: 00:11:41

We bought since we opened.

Allison McCoy: 00:11:42

We should add, it was not shiny at all.

Allison McCoy: 00:11:44

And no, that is exactly the opposite of what it was.

Allison McCoy: 00:11:47

Use.

Allison McCoy: 00:11:48

It was used.

Allison McCoy: 00:11:48

Yes, we bought it.

Allison McCoy: 00:11:49

It was a, a family in Seoul, Korea wanted to rebuild Castle Prague from Prague in Czech Republic.

Bobby Fleshman: 00:11:58

People don't know.

Bobby Fleshman: 00:11:59

That's, it has a sort of a, it's a clock tower and I think there's some astronomical symbols.

Gary Arndt: 00:12:05

That's it.

Gary Arndt: 00:12:05

That's not Prague Tower, but I know what you're referring to.

Gary Arndt: 00:12:08

The astronomical clock is in kind of the.

Gary Arndt: 00:12:10

Town Square.

Bobby Fleshman: 00:12:10

Gotcha.

Bobby Fleshman: 00:12:11

Yeah.

Allison McCoy: 00:12:11

So anyway, so this, they, they basically built this Czech Republic system brewing system for, this place in Korea.

Allison McCoy: 00:12:21

And then the Korean family said, okay, we're, we're done with this.

Allison McCoy: 00:12:25

They love, they love

Bobby Fleshman: 00:12:25

Czech beer.

Allison McCoy: 00:12:26

They did.

Allison McCoy: 00:12:27

And they brewed it and everything.

Allison McCoy: 00:12:28

And then they decommissioned it.

Allison McCoy: 00:12:29

And then it went on the market.

Allison McCoy: 00:12:30

And so we got it from a broker out of, I believe it was Seattle.

Allison McCoy: 00:12:33

Yeah.

Allison McCoy: 00:12:33

He lives in hop country.

Allison McCoy: 00:12:35

And so then we had it shipped to us.

Allison McCoy: 00:12:37

But it was.

Allison McCoy: 00:12:38

Built by, in Europe, but installed in Korea, and then now we had to get it to match a U.

Allison McCoy: 00:12:46

S.

Allison McCoy: 00:12:46

electric.

Bobby Fleshman: 00:12:47

Oh, there's a whole podcast on that, but there's four continents in the story.

Bobby Fleshman: 00:12:51

It had a sister system that ended up in South Africa.

Bobby Fleshman: 00:12:54

Yeah.

Bobby Fleshman: 00:12:54

And we're going to do a hemispherical collaboration.

Allison McCoy: 00:12:56

It was funny because when we were installing the system, we were texting, or not texting, but emailing back and forth, and it was like, 24 hour delay every time we had a question on how to install it.

Allison McCoy: 00:13:03

But the system was, it was completely corroded.

Allison McCoy: 00:13:06

It was like, okay, no, but we got it.

Allison McCoy: 00:13:08

Well,

Bobby Fleshman: 00:13:09

it's not corroded.

Bobby Fleshman: 00:13:10

So it's a, it's a copper clad brewing system.

Bobby Fleshman: 00:13:13

And copper oxidizes.

Bobby Fleshman: 00:13:16

And this is the beauty of copper.

Bobby Fleshman: 00:13:18

Once it has oxidized, it doesn't further oxidize.

Bobby Fleshman: 00:13:20

It's a protective layer.

Bobby Fleshman: 00:13:22

So they decided that they wasn't worth the fight of keeping the copper clean.

Bobby Fleshman: 00:13:26

So they let it oxidize.

Bobby Fleshman: 00:13:27

And that was a good thing in the end.

Bobby Fleshman: 00:13:29

It protected the copper.

Bobby Fleshman: 00:13:31

But then we, then we spent the time to clean it and

Allison McCoy: 00:13:33

There were four large fermenters with it and, or five.

Allison McCoy: 00:13:36

Yeah.

Allison McCoy: 00:13:37

And then we have.

Allison McCoy: 00:13:38

Since then, we actually used, how did this work?

Allison McCoy: 00:13:41

During COVID, we could get money to put into the company for both payrolls to keep our employees employed, but also to put money into the business to adapt to this new, Environment.

Allison McCoy: 00:13:56

And so we qualified for some money to then buy another fermenter because we had to increase our production for distribution because the

Bobby Fleshman: 00:14:04

margins are smaller.

Bobby Fleshman: 00:14:05

We had to increase our volume.

Gary Arndt: 00:14:06

I never even thought to ask this.

Gary Arndt: 00:14:07

I mean, we've talked about how the pandemic hurt, obviously.

Gary Arndt: 00:14:10

People coming to the pub.

Gary Arndt: 00:14:12

Yeah.

Gary Arndt: 00:14:12

Were you now eligible for these covid loans?

Gary Arndt: 00:14:15

We were, yeah.

Gary Arndt: 00:14:15

Yeah, absolutely.

Gary Arndt: 00:14:16

Yeah.

Allison McCoy: 00:14:16

And we, yeah, so we were eligible for those and so we used them to help basic, and then we justified it by, we

Bobby Fleshman: 00:14:23

kicked ass in 2020.

Bobby Fleshman: 00:14:24

We, we actually grew over, over 19, which was be our third year.

Bobby Fleshman: 00:14:28

20.

Bobby Fleshman: 00:14:29

Yeah.

Bobby Fleshman: 00:14:29

But then it bit us in the ass, but then that bit us in the ass because we actually outperformed 19.

Bobby Fleshman: 00:14:34

And so we were in, in a lot of ways, we were penalized.

Bobby Fleshman: 00:14:38

And not given like

Allison McCoy: 00:14:39

There was some loan, there was some, federal money that would go to a business if they didn't gross as much as they did,

Bobby Fleshman: 00:14:46

Even if you're a 1 less than the year prior, then it was, it was all sort of non, it was, it was a grant instead of a gross more, but we

Allison McCoy: 00:14:53

didn't net more because we were canning every definition of a loan by hand.

Allison McCoy: 00:14:57

Yeah.

Bobby Fleshman: 00:14:58

Yeah.

Bobby Fleshman: 00:14:58

Yeah.

Bobby Fleshman: 00:14:58

Yeah.

Allison McCoy: 00:14:59

One at a time, 24, seven.

Bobby Fleshman: 00:15:01

So, but you know, we did that and it grew us into the company we are now.

Bobby Fleshman: 00:15:05

And you've got the exposure we have now, but these are the things you don't think about that they came out of COVID.

Gary Arndt: 00:15:10

Let's talk about distributing beer versus selling it here in the pub.

Gary Arndt: 00:15:15

Kind of, I would assume, generally speaking, the two arms of the business.

Gary Arndt: 00:15:20

You run this facility and then.

Bobby Fleshman: 00:15:21

Right.

Bobby Fleshman: 00:15:22

We're even doing our accounting that way.

Bobby Fleshman: 00:15:23

Now we're splitting those up.

Bobby Fleshman: 00:15:24

Yeah.

Bobby Fleshman: 00:15:25

Yeah.

Gary Arndt: 00:15:25

Where, just as a percentage, what percentage of the business involves the pub and what percentage of the business now involves selling and distributing beer?

Bobby Fleshman: 00:15:34

60 percent of the, of the revenue is from the pub, but 60 percent of our volumes in distro it roughly, it might be more like 70, 30, but it, the point is they're opposite because the revenue, the margins are so low and wholesale, but they're necessary because they fund the operations of that side of the business.

Bobby Fleshman: 00:15:53

The, the rest of it's funding all the, the embellishments and all the front of house costs.

Bobby Fleshman: 00:15:58

Yeah.

Bobby Fleshman: 00:15:58

That's, that's kind of a broad stroke.

Bobby Fleshman: 00:15:59

Yeah.

Allison McCoy: 00:16:00

Due to taxes and wholesale and just the, the, the multi-tier system of the distributor versus the consumer or the, then the, the place that sells the retailer to really support a brewery, buy a, at the, buy the beer at the bar.

Allison McCoy: 00:16:14

That is the best way.

Bobby Fleshman: 00:16:15

Hell yeah.

Gary Arndt: 00:16:15

That's the reason we do, I would assume that your margins here are much better

Bobby Fleshman: 00:16:19

Four times.

Allison McCoy: 00:16:19

Yeah.

Allison McCoy: 00:16:19

So amazing.

Bobby Fleshman: 00:16:20

And, and, and.

Allison McCoy: 00:16:21

But it's not so amazing as in like, we're making so much money.

Allison McCoy: 00:16:24

No, it covers all of this, all the overhead, the costs and the employees.

Allison McCoy: 00:16:27

And, Bobby and I were talking earlier about if you could sum up, like, you know, if, if someone wants to go into the brewery business, you know, what would you tell them?

Allison McCoy: 00:16:36

It's like, get ready to just barely make a living.

Allison McCoy: 00:16:39

You're not going to make a fortune because the margins are just so small.

Bobby Fleshman: 00:16:43

It also sort of explains panning out why we're seeing a bubble burst in, in beer, apart from all the other things you have COVID.

Bobby Fleshman: 00:16:50

And I mentioned these other products that are competing with beer, but a lot of people got into beer.

Bobby Fleshman: 00:16:55

Because it was hot in like 20 years ago.

Bobby Fleshman: 00:16:58

It was really hot ramping up into about a 10 year period where it was just 20 percent every year.

Bobby Fleshman: 00:17:03

People would take a lot of money, angel investors and try to double and triple that.

Bobby Fleshman: 00:17:07

And they were doing it pretty well, but quickly that bubble burst that bubble burst a long time ago.

Bobby Fleshman: 00:17:13

So people have asked about when's the bubble on a burst?

Bobby Fleshman: 00:17:16

Well, that one probably did 10 years ago.

Bobby Fleshman: 00:17:19

Out of that, you saw those people that were in it for the quote, right reasons, persevere and onward through a pandemic and everything else as rising Costco and all this stuff.

Bobby Fleshman: 00:17:29

So I think the bubble did burst.

Bobby Fleshman: 00:17:31

It was replaced by a different craft beer.

Bobby Fleshman: 00:17:33

A movement or different decade just because of the turnaround going to not 100%, not even 10%.

Bobby Fleshman: 00:17:40

This is a long game.

Gary Arndt: 00:17:42

Now, the fact that the pub has higher margins makes perfect sense.

Gary Arndt: 00:17:46

You're not no one's getting a cut.

Gary Arndt: 00:17:48

It's all you guys, but this building is of a finite size.

Gary Arndt: 00:17:53

I've been here where it's been packed some nights of the week, not so much, and you've done some expansion.

Gary Arndt: 00:17:59

We're sitting in the second floor of this building right now, which was not open six months ago.

Bobby Fleshman: 00:18:04

Gary should take credit for this idea.

Bobby Fleshman: 00:18:07

Gary helped us, brainstorm how to make this happen.

Gary Arndt: 00:18:10

But district distribution, it seems like, well, you could double, triple, quadruple that, you know, because it's kind of like almost infinite in terms of how much you could conceivably sell.

Gary Arndt: 00:18:21

So going forward, what, what is the plan?

Gary Arndt: 00:18:25

Is it to do more with the pub, a higher margin business, or to do more with distribution, which potentially lower margins, but more potential revenue?

Bobby Fleshman: 00:18:37

Right.

Bobby Fleshman: 00:18:38

Great question.

Bobby Fleshman: 00:18:39

And that's the fork in the road we're at.

Bobby Fleshman: 00:18:41

And I would say that the piece you left out was how competitive wholesale is.

Bobby Fleshman: 00:18:46

It is extremely competitive out there.

Bobby Fleshman: 00:18:48

It's not just infinite.

Bobby Fleshman: 00:18:50

I mean, it is infinite, but the investment on marketing and branding, you, if you want to the next level is a significant.

Bobby Fleshman: 00:18:57

So when I think about wholesale, I think we're probably going to grow it in tandem with the tap room.

Bobby Fleshman: 00:19:05

But right now we're, we're going to focus on this tap room.

Bobby Fleshman: 00:19:08

I told Alison, I've been meeting with a consultant to help me figure out the answer to your question.

Bobby Fleshman: 00:19:14

And I think at this point in time, we're going to double down.

Bobby Fleshman: 00:19:19

We degreed 90 days.

Bobby Fleshman: 00:19:20

I'm going to double down on making this tap room.

Bobby Fleshman: 00:19:23

even more popular than it is do as much as I can to polish this flagship.

Allison McCoy: 00:19:28

She told you don't think about another tap room expansion for 90 days, which I was best advice you've ever been given.

Bobby Fleshman: 00:19:35

Yes.

Bobby Fleshman: 00:19:36

So, and I was asking her to

Gary Arndt: 00:19:37

By tap room expansion, like expanding.

Gary Arndt: 00:19:39

Okay.

Bobby Fleshman: 00:19:40

Well, yes.

Bobby Fleshman: 00:19:41

Right.

Bobby Fleshman: 00:19:41

Let's dial this one in.

Bobby Fleshman: 00:19:42

And I keep saying this.

Bobby Fleshman: 00:19:43

We have got to dial in our SOPs.

Bobby Fleshman: 00:19:46

Our, our, standard operating procedures to the point that we can treat this as a franchise and replicate it.

Bobby Fleshman: 00:19:53

And it's good advice for anyone, even if you only intend to own the one spot.

Bobby Fleshman: 00:19:57

It just speaks to the health of the company and its ability to run on its own.

Bobby Fleshman: 00:20:01

So I want to continue to refine our operations here.

Bobby Fleshman: 00:20:04

That's like I said, in the next 90 days.

Bobby Fleshman: 00:20:06

And then after that, if we've been able to do it here, we'll think about what it looks like elsewhere.

Bobby Fleshman: 00:20:12

Although

Allison McCoy: 00:20:12

there are cheaper options because we have contract brews.

Allison McCoy: 00:20:15

So we have, the large Oktoberfest that goes downtown Appleton.

Allison McCoy: 00:20:19

So we've done the craft, the special craft beer for that.

Allison McCoy: 00:20:22

But we can't.

Allison McCoy: 00:20:23

it possibly make that much beer.

Allison McCoy: 00:20:25

So we contracted out some other breweries and they made, they took our recipe and they made the beer for us.

Allison McCoy: 00:20:29

So we've done that a few times.

Allison McCoy: 00:20:30

So we could, we could expand that way.

Bobby Fleshman: 00:20:33

I would say that I would say now we're up to almost 30 percent of our volume.

Bobby Fleshman: 00:20:37

We're brewing elsewhere at this point.

Bobby Fleshman: 00:20:39

It just speaks to the capacity we have.

Allison McCoy: 00:20:41

And there's a lot of companies that are just contract brewers.

Allison McCoy: 00:20:43

So there's a lot of beer that you might be consuming that actually wasn't brewed at the one place.

Allison McCoy: 00:20:48

Top

Bobby Fleshman: 00:20:48

notch technical brewers.

Bobby Fleshman: 00:20:50

Top notch.

Bobby Fleshman: 00:20:51

That, to be a contract brewer, you really, you're not, you're not concerned with marketing and branding.

Bobby Fleshman: 00:20:55

You're, you're a technical facility that's able to match scientifically fermenters

Gary Arndt: 00:20:59

for hire.

Bobby Fleshman: 00:21:00

Yeah.

Bobby Fleshman: 00:21:01

Yeah.

Bobby Fleshman: 00:21:01

Yeah.

Allison McCoy: 00:21:02

Exactly.

Gary Arndt: 00:21:02

Let's talk about some of the taproom business because I've seen since I've started coming here and evolution in the business I would come in and you'd occasionally have beer from another brewery on tap, you know, you do some swap.

Gary Arndt: 00:21:14

I don't see that that much anymore.

Bobby Fleshman: 00:21:15

And we just added eight lines this year.

Bobby Fleshman: 00:21:17

And

Gary Arndt: 00:21:17

I was going to say the, the number of beers you're providing has increased and they're all beers that you make.

Bobby Fleshman: 00:21:25

Yeah.

Bobby Fleshman: 00:21:25

And not just beers.

Bobby Fleshman: 00:21:26

You know, it was ciders and, and NA products and hop.

Bobby Fleshman: 00:21:30

hop water.

Bobby Fleshman: 00:21:31

It's on and on.

Bobby Fleshman: 00:21:32

Yeah.

Gary Arndt: 00:21:32

So what goes into those decisions about, I suppose the number of beers that you serve?

Gary Arndt: 00:21:40

Cause you have a pretty extensive menu at this point.

Gary Arndt: 00:21:42

Yes.

Gary Arndt: 00:21:43

Yeah.

Gary Arndt: 00:21:43

And what you choose, and this might be a good time to bring it up.

Gary Arndt: 00:21:46

We had a question from someone in the Facebook group, you know, you, there's this decision you have to make between, are you making beers for Public, you know, general consumption that people want to buy because I've literally been sitting at the bar a few days ago.

Gary Arndt: 00:22:01

A woman comes up and says, what do you have that's closest to a Bud Light?

Gary Arndt: 00:22:05

And I know a little bit of you dies inside when you hear that.

Gary Arndt: 00:22:08

But it's also probably not an uncommon thing.

Bobby Fleshman: 00:22:12

We even have that beer at this point where I'm thinking about brewing it again.

Bobby Fleshman: 00:22:15

We call it state street light lager.

Bobby Fleshman: 00:22:17

So we make one for that person too, which is not on tap right now because we only have 24 lines now.

Allison McCoy: 00:22:23

So.

Allison McCoy: 00:22:23

so the hazy IPA, I think is the big example, at least of, of, of late.

Allison McCoy: 00:22:28

because for the longest time we were like, we are never going to brew a hazy.

Allison McCoy: 00:22:32

Why?

Allison McCoy: 00:22:32

Well, that's a great question.

Gary Arndt: 00:22:34

Yeah.

Gary Arndt: 00:22:34

What is the

Allison McCoy: 00:22:35

Well, from a technical standpoint, hazes are actually going against all of the work that you do to keep a beer clear.

Allison McCoy: 00:22:42

All right.

Bobby Fleshman: 00:22:43

I, for, I'm on record on other podcasts saying that every style was new before it was traditional.

Bobby Fleshman: 00:22:49

Bye.

Bobby Fleshman: 00:22:49

At some point.

Bobby Fleshman: 00:22:50

That's fair.

Bobby Fleshman: 00:22:50

And I feel like we may be at that place with Hazy's.

Bobby Fleshman: 00:22:53

Hazy's.

Bobby Fleshman: 00:22:53

Yeah.

Allison McCoy: 00:22:54

Anyway, it was a craze.

Allison McCoy: 00:22:56

It was all of a sudden Hazy's were everywhere.

Allison McCoy: 00:22:58

And I'm going to let Bobby continue to talk because I don't want to hurt our brand at all.

Bobby Fleshman: 00:23:03

No, I, I love brewing every style, even if I don't drink them because A, we're not going to put out a shitty product.

Bobby Fleshman: 00:23:09

It's going to be top shelf.

Bobby Fleshman: 00:23:11

every time.

Bobby Fleshman: 00:23:12

But B, I mean, we're, we're, that's sort of an, an aside, but the primary thing is I love challenge and I like, I think we learned something from going down these, these other pathways.

Bobby Fleshman: 00:23:22

Well, and actually,

Allison McCoy: 00:23:22

Can I, I'm not even going to ask, I'm just going to do it.

Allison McCoy: 00:23:25

So one of our most famous hazies that we make, the blazey, it's a blood orange hazy.

Bobby Fleshman: 00:23:30

Yeah.

Allison McCoy: 00:23:30

That was a,

Bobby Fleshman: 00:23:31

it was, it was spelled blase.

Bobby Fleshman: 00:23:33

There was some,

Allison McCoy: 00:23:34

we know.

Allison McCoy: 00:23:35

Oh my God.

Allison McCoy: 00:23:36

Yeah.

Allison McCoy: 00:23:36

Every time they try and name inside jokes.

Bobby Fleshman: 00:23:39

Yeah.

Allison McCoy: 00:23:39

And they're like, let's be cute.

Allison McCoy: 00:23:40

And I was like, no, if people can't pronounce it, they're not going to buy it.

Bobby Fleshman: 00:23:43

If you put umlauts, they won't order it.

Bobby Fleshman: 00:23:44

We've learned.

Allison McCoy: 00:23:46

But.

Allison McCoy: 00:23:46

In the Blazeys, Blood Orange Hazy, there was something, there was one hop addition you didn't like in the Hazy that you were trying to do, and you were like, gosh, I just, I'm not happy with this product, but if we sweeten it, maybe, what if we had Blood Orange and Blazey was born?

Allison McCoy: 00:24:03

And you've since tweaked it.

Bobby Fleshman: 00:24:04

Yeah, well, it was, it was an accident turned into a success, yeah.

Bobby Fleshman: 00:24:09

And that's, that's something as an owner you have to do.

Bobby Fleshman: 00:24:12

to you can't you can't just make these homebrewer type decisions on 3, 000, 5, 000 worth of liquid.

Bobby Fleshman: 00:24:20

You have to just dump and start over and that's, you've got to figure out a role with dry, good

Allison McCoy: 00:24:24

ingredients that goes into the beer.

Bobby Fleshman: 00:24:26

Yeah.

Bobby Fleshman: 00:24:26

Yeah.

Allison McCoy: 00:24:27

So each beer that we make

Bobby Fleshman: 00:24:28

And also take time right now we've tied up the tank for 10 percent of our beer.

Bobby Fleshman: 00:24:31

Tank year, if you would call it that, what are we going to do with that time and send that down the drain too.

Bobby Fleshman: 00:24:36

So there, there are considerations you have to make and you can't send a shitty product out either.

Bobby Fleshman: 00:24:41

So you got to figure out how to thread that needle.

Bobby Fleshman: 00:24:44

And that's where you get some, some innovation, I think, at the end of the day about the primary question that was asked about deviating from brand and making hazies.

Bobby Fleshman: 00:24:54

I would say that if we lived in, and I say this a lot, if we lived in a big city where we could focus on one thing and be one thing, then we wouldn't make hazies.

Bobby Fleshman: 00:25:02

We wouldn't have to.

Bobby Fleshman: 00:25:04

And that would be like 12 beer engines and we would have every flavor of Cascale you can find in the UK for example.

Bobby Fleshman: 00:25:10

That would be one business model for us to, to pursue.

Bobby Fleshman: 00:25:13

But when you live in Appleton, you have to make everything because you have to make sure you get enough people in the door to keep the lights on.

Allison McCoy: 00:25:20

And there's been some beers, like one of my favorite beers is our oatmeal stout, it's called Square Mile.

Allison McCoy: 00:25:26

I absolutely love it.

Allison McCoy: 00:25:27

It's 3%.

Allison McCoy: 00:25:28

It's like rich and thin at the same time, and no one else drank it except me.

Allison McCoy: 00:25:33

And so I don't think we're gonna brew it again.

Allison McCoy: 00:25:35

So that was pretty devastating.

Bobby Fleshman: 00:25:36

I think we'll brew it again.

Bobby Fleshman: 00:25:37

Yeah.

Bobby Fleshman: 00:25:38

There, there's a, there's a low alcoholic movement now.

Allison McCoy: 00:25:40

Well, yeah.

Allison McCoy: 00:25:41

Well, I guess it was two or three years ago.

Gary Arndt: 00:25:43

We, we were a little bit ahead of the, oh, I'll, I'll be very honest.

Gary Arndt: 00:25:45

I've been drinking the gsa Yeah.

Gary Arndt: 00:25:47

The last few times I've been here.

Gary Arndt: 00:25:48

Yeah.

Gary Arndt: 00:25:49

It's like what?

Gary Arndt: 00:25:49

3.

Gary Arndt: 00:25:50

4 percent alcohol.

Gary Arndt: 00:25:51

It's another one in that.

Gary Arndt: 00:25:52

It is a more acidic tart type beer that I kind of like and yeah, I've been, I've been kind of getting that all the time.

Gary Arndt: 00:25:59

Exactly.

Gary Arndt: 00:26:00

I agree.

Bobby Fleshman: 00:26:00

And 547, we'll probably talk about that a little more later.

Bobby Fleshman: 00:26:04

It has a little sister now that we're calling the little Tornado.

Bobby Fleshman: 00:26:07

if anyone wants to know the reference, 547 is the address whose name is Tornado.

Bobby Fleshman: 00:26:11

It's a bar in San Francisco, 547 Haight street.

Bobby Fleshman: 00:26:15

But, Gary kind of cringes.

Bobby Fleshman: 00:26:16

He doesn't want us to to sell our brand out, but, but we pay homage to a lot of other companies that inspired us here.

Bobby Fleshman: 00:26:22

And reason I bring it up is 'cause that's a lower low alcohol 5 47.

Bobby Fleshman: 00:26:26

We want to have two or three in drive home and that's not allowable with a 5 47.

Bobby Fleshman: 00:26:31

Yeah, it's not

Gary Arndt: 00:26:32

Just to give a shout out to who asked the original question was Tim Summers, who's a listen the show.

Gary Arndt: 00:26:36

Great.

Gary Arndt: 00:26:36

Yeah.

Bobby Fleshman: 00:26:36

And I think he's planning his own, I think I've convinced him to do a distillery, so he and I are kind of on the side talking a lot about this stuff.

Gary Arndt: 00:26:43

One of the things I always heard is like, Robert Downey Jr.

Gary Arndt: 00:26:46

He does Iron Man.

Gary Arndt: 00:26:48

Because it gives him the, the, the money and the opportunity to then do indie films.

Gary Arndt: 00:26:52

Yeah, that's a good one.

Gary Arndt: 00:26:53

How much of this is like, okay, we're going to do the, you know, the, the hard side or citrus or whatever, the

Gary Arndt: 00:27:01

dinosaur, which I've seen, you know, people come in order because those are popular, right?

Bobby Fleshman: 00:27:06

We do 20 percent of our sales in seltzer.

Bobby Fleshman: 00:27:08

It's crazy.

Bobby Fleshman: 00:27:09

Yeah.

Bobby Fleshman: 00:27:09

Really?

Bobby Fleshman: 00:27:10

On a, on a weekend.

Bobby Fleshman: 00:27:11

Now when you get your, your week.

Bobby Fleshman: 00:27:12

Yeah.

Bobby Fleshman: 00:27:13

We can, we can tell by the data if

Allison McCoy: 00:27:15

it's well, like who's there.

Bobby Fleshman: 00:27:18

Yeah.

Bobby Fleshman: 00:27:18

If it's a weekend crowd, they're going to crush those filters.

Bobby Fleshman: 00:27:21

But

Allison McCoy: 00:27:21

they're not your Monday through Friday.

Bobby Fleshman: 00:27:22

No, those crowds like our, our, our IPAs and our English sales and our lagers

Allison McCoy: 00:27:27

cause

Gary Arndt: 00:27:27

I, I can always tell if I'm sitting at the bar I hear someone to order what they order.

Bobby Fleshman: 00:27:32

Yeah.

Gary Arndt: 00:27:32

If someone's getting a tall mast or something, or, or even, you know, a triple debauchery or something like that, I can always tell kind of how sophisticated a beer drinker they are

Bobby Fleshman: 00:27:42

Or how acquainted they are with us.

Gary Arndt: 00:27:44

All right, well, let's wrap up this episode.

Gary Arndt: 00:27:46

We still have a lot more to talk about.

Gary Arndt: 00:27:49

I want to thank everyone for listening to another episode of respecting the beer and make sure to subscribe to the show and check out the Facebook group and Patreon page to receive updates about future episodes.