ADA — Matt Michiels has known for the last two years that he needed to expand his growing West Michigan craft brewery.
But as the sprawling Ada redevelopment project took shape around Gravel Bottom Craft Brewery & Supply, it became clear to him that paying retail rents for an expanded beverage manufacturing facility and taproom did not make economic sense.
So Michiels has scaled back those expansion plans in Ada, where the company will lease 2,500 square feet in a new building at 452 Ada Drive for a brewery and 75-seat taproom with a kitchen. The site, which is adjacent to a new Kingma’s Market grocery store, will maintain the brewery’s ties to the village of Ada, where Gravel Bottom started four years ago and maintains a base of loyal customers, Michiels said.
“We’ve chosen to align ourselves better with the type of area that (Ada) is by keeping our size very similar to what are today and focusing on a taproom there, which makes sense with that retail real estate,” he said.
To expand production capacity, Gravel Bottom looked west to Grand Rapids, where the company has a purchase agreement on an undisclosed property where it plans to move the homebrew supply store, install a 15-barrel brewhouse and open a taproom with a restaurant. The move not only will help Gravel Bottom scale up its brewing capacity “in a much larger facility that’s more aligned with what rates should be for a production facility,” but also will put the company “much more in that Beer City loop,” according to Michiels.
“Originally, we were going to do everything in Ada,” Michiels said. “But as you go through that due diligence, you realize that I’m not going to be competitive in production if I have to pay retail prices for my manufacturing space. So we split off the big expansion.
“We really want to keep our presence and our ties to Ada because it’s where we started and we have a great following there. The move to go outside Ada really is to get to a place where we can do production and be competitive with our overhead.”
The company is in the middle of a 120-day due diligence period for the Grand Rapids-area location, he added, noting that the plans could still change.
The planned two-part expansion comes during a period of growth for Gravel Bottom, which sold 330.1 barrels of beer in 2016, an increase of 124 percent from the prior year, according to data from the Michigan Liquor Control Commission.
To date, the brewery and homebrew supply store has operated from a 2,000-square-foot facility and did not offer food. The company will stay in its current building until the new taproom is completed around the end of the year. Michiels expects the move in Ada to be fairly easy, with existing staff carrying over to the new facility. However, adding a restaurant at both locations will be a new challenge, he said.
“I know what I don’t know, and the restaurant is something that I’m going to need help on,” Michiels said, adding that he hopes to leverage connections at Grand Rapids Community College and within the industry.
By expanding production capacity with an off-site brewhouse, Gravel Bottom will be able to serve its own taprooms as well as start to get product into distribution, particularly on the west side of the state.
Michiels acknowledges that “it’s a dynamic and changing market” currently for craft beer, for which the pace of growth has started to slow.
According to the Boulder, Colo.-based Brewers Association, the $23.5 billion craft brewing industry grew by 6 percent last year, the industry’s slowest pace of growth since 2011. As well, distribution — which has lower margins — has become increasingly challenging as the number of breweries continues to grow and more companies try to squeeze their products onto already crowded store shelves.
At Gravel Bottom, Michiels is taking a measured view when it comes to distribution, which he sees as a way to get the company’s name out and as a branding tactic “as the market allows,” rather than as a requirement to support the expansion plans.
“We’ve set ourselves up so we can support our investment with taproom sales. We’re not relying on that distribution side,” he said. “We have capability and we plan to do that, but we’re not relying on that distribution to be successful.”
