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Sunday, 27 May 2018 08:44

Brewery equipment suppliers embrace growth, diversification

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Greenville-based Psycho Brew sells a line of small brewing systems popular with small neighborhood breweries. Greenville-based Psycho Brew sells a line of small brewing systems popular with small neighborhood breweries. COURTESY PHOTO

With the craft brewing industry continuing to grow — albeit slower than just a few years ago — many West Michiganbased equipment suppliers are honing their product niches to get ahead of any future market corrections.

That’s true at Greenville-based Psycho Brew LLC, a manufacturer of brewing systems for small microbreweries. As co-founder Chris Breimayer sees it, being a manufacturer of small brewing systems comes with its share of advantages given the current market.

“We are really focusing on the smaller equipment right now, and we’re super busy,” he told MiBiz. “What we are seeing is every town is going to have a small brewery, a neighborhood brewery, and that’s kind of our niche. I see the market going more toward that, as opposed to the bigger, larger breweries trying to distribute because that’s a little more difficult to get into.”

So far, the niche is proving successful for the company: Just a few months into 2018, orders of the Psycho Brew’s 7-barrel brewing systems are double what they were for all of last year.

After recent sales to West Michigan-based customers including Greyline Brewing Co., ELK Brewing LLC and TwoGuys Brewing Co., Psycho Brew is now “bursting at the seams,” Breimayer said.

“We only want to be so big, so we are trying to keep our sales at a certain area,” he said. “I don’t see any downturn going on at this point. There was a bubble last year and sales really dropped for six months, then that news went to the side and (sales in the industry) took off again.”

Total U.S. beer sales continued to decline last year, dipping about 1 percent, according to the Brewers Association. The decline was slightly more pronounced in Michigan, where overall sales were down 1.9 percent.

While small, independent craft brewers remain a growing segment nationally, their growth has levelled off in the recent years, according to the Brewers Association. Even so, companies meeting the organization’s definition of a “craft brewer” grew an overall 5 percent last year.

Given the deceleration in growth, local companies in the brewing equipment supply chain have started diversifying their offerings as well as improving their existing products to give them another sales proposition.

Chicago-based Malt Handling LLC, which operates a manufacturing plant in Baroda in Berrien County, has redesigned its products to improve their efficiency for customers. The company supplies breweries and distilleries with material handling products, including roller mills, hoppers, bins and other custom equipment.

“We’re constantly trying to improve the products that we offer and set ourselves apart in that way and by developing new products,” President Rusty Riley said. “We take feedback from customers on a regular basis and apply that to our mills. We are trying to make them more user-friendly, more robust. … We are looking at ways where one of our machines can do the function of two or three.”

Malt Handling has customers in 48 states, Riley said, adding that business activity has been up so far this year.

“I think like most businesses, we would always like to do more business, but we have positioned ourselves well in case a downturn does occur,” he said. “Hopefully, our customers will continue to evolve. Even though it may not be building a new brewery, it could be expansion projects and capital improvements, and that’s where we could sort of help them stretch their dollar and get more return.”

The 19-employee company generates annual sales of around $10 million, and counts among its clients a number of West Michigan producers, including Bell’s Brewery Inc., Right Brain Brewing and Dark Horse Brewing Co.

“We are a small enough company that we can pivot if we need to,” Riley said. “We have a lot of knowledge within the industry that we work with, but we are not afraid to branch out and look for new ones either.”

GETTING PINCHED

Aside from market pressures, the brewing equipment supply chain also has faced price increases related to the 25-percent tariff on imported steel and 10-percent tariff on imported aluminum President Trump imposed in February.

The move sent ripples through the supply chain, as manufacturers adjusted costs to balance out the higher prices of steel.

At Psycho Brew, Breimayer said costs of steel piping have increased by 5 percent. For a company of eight employees that generates around $2 million to $3 million in annual sales, Breimayer said the cost increase is a big deal.

“It was expected,” he said of the tariffs. “However, my biggest concern is everyone is buying blocks of steel and are buying everything up, and now it’s supply and demand. If I don’t buy a bunch of it at one time, I am not going to get it … so then the price increases more than it should be increasing.”

Although Psycho Brew isn’t increasing the price of its goods yet, others have, including Malt Handling, which raised prices 10-20 percent.

“We did a price increase recently to offset some of it,” Riley said. “We hadn’t done that in a couple of years anyway, so we were due for it. We don’t like to do that, but it was necessary.”

SPREADING THE WORD

With its products now in about 100 stores across the country, Grand Rapids-based Coldbreak Brewing LLC has seen its business grow based on the popularity of its jockey boxes — the modified coolers that brewers use to pour beer at festivals — and its homebrewing equipment.

The company also is ramping up its presence on e-commerce platforms, including Amazon. com, which President Boyd Culver expects will contribute to sales growth of 50 percent this year

“We will take growth where we can get it, but 50-percent growth in back-to-back years is hard enough to keep up with,” Culver said. “Our growth mostly comes from word of mouth. In Michigan at the Winter Beer Festival, we had 64 of the breweries pouring out of our boxes. It’s all based on a brewery going to a festival and looking next to them and seeing how much nicer their jockey box is and they ask, ‘Where did you get that?’ It’s a tight-knit community, and everybody knows everybody.”

While the company initially was founded to serve the niche of home-brewing equipment, Culver said most of Coldbreak’s growth is coming from the sales of jockey boxes, which it custom- wraps with the graphics and branding that customers request.

“We work with Founders, Bell’s and Deschutes,” he said. “Every week there seems to be a dozen festivals going on just in the state, and that’s where the jockey boxes come in — it’s a necessity. Right now, we are the only company I know to fully wrap branded jockey boxes.”

While the days of heady growth may be behind it, the craft brewing industry still continues to attract new suppliers like Kentwood-based Advantage Label and Packaging Inc.

JUMPING IN

While the days of heady growth may be behind it, the craft brewing industry still continues to attract new suppliers like Kentwood-based Advantage Label and Packaging Inc.

As an extension of the company’s labels for the food and automotive industry, it recently made inroads in marketing its capabilities to companies in the craft beverage sector, including breweries, distillers and coffee roasters.

“I think the reason people choose Advantage and why we have gone more to (craft beverage) is because of our experience,” President Brad Knoth told MiBiz. “We’ve already solved this problem in a plant processing green beans, (so) how can we use that knowledge we’ve learned in other industries to … benefit the craft beverage industry? That’s why we are doing this.”

Currently, Knoth said the 53-person company is on pace for $16 million in sales this year, up from $13.7 million in 2017.

By embracing new technology that prints on-demand — including investing $1.7 million since last fall in digital printing equipment and workflow software, Advantage Label has added technology to make the printing process easier, reduce turnaround times and benefit cost efficiency.

“We don’t ever have to offer inferior solutions to our customers,” Knoth said. “We have it covered from very short runs to very long runs using any one of our five digital technologies.”

Read 1627 times Last modified on Sunday, 27 May 2018 21:09

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