Published in Economic Development
Erik May, President, Pilot Malt House LLC Erik May, President, Pilot Malt House LLC MiBiz File Photo

Pilot Malt seeks growth in craft beverage supply chain, as signs of strain emerge in industry

BY Sunday, December 25, 2016 05:31pm

Byron Center-based Pilot Malt House LLC, a supplier of malted grains to the beer and distillery industry, has experienced only growth since its founding in 2012. In that time, the company has expanded from 10 acres to 3,000 acres of barley and could break the 4,000-acre mark in 2017. Earlier this year, Pilot Malt signed a deal with ingredient supplier Country Malt Group to have its products distributed nationwide, which could open new possibilities for continued growth, according to founder and President Erik May. He told MiBiz he’s bullish on the craft beer and distilling industries, even as some signs of weakness emerge. 

What does 2017 look like for Pilot Malt? 

I hope more of the same. As we sit down in the last few weeks and really try to project what our 2017 looks like, it’s such a roll of the dice. The game changer for us is the Country Malt deal. More than anything else, the logistical side of that is going to help us greatly. For us, it’s going to be finding more farmers and growing our supply chain and then growing the customer base.

What industry shifts have you noticed taking shape that could affect next year? 

What’s really been surprising is we built ourselves on being the local option, and what I’ve found in the last couple of years is the definition of local (has shifted) to mean that you just know who you’re buying from. Geography is secondary. For us, it’s been really cool. We’re selling all over the country now. That’s where Country Malt really helps us get our product to places that aren’t nearby. 

With the new distribution, do you look to develop any new markets? 

We’re looking at doing some acreage in other states and selling it back to them. Northern Indiana is a good market and Wisconsin may be.

What are your plans for acreage in Michigan?

We’ll do more. We haven’t nailed down our plans for next year. A lot of it hinges on how much throughput we get with Country Malt, and having just started this, we don’t have a lot of history or data to have metrics on how much can they sell. So it will be an increase. I’d guess we’d add another 1,000 acres. 

You’ve talked previously about the difficulty Pilot had in signing up farmers to grow barley when you launched because you were new and couldn’t match the prices they were getting for other commodities. How has that situation changed? 

Corn and soybean prices dove, which is bad for a lot of people, but good for us. It’s a lot easier sell (to get farmers to grow barley), and now there’s some traction, some history. Our first growing year was 2012 and we had one grower grow 10 acres for us. This year, we had over 3,000 acres.  At this point, we’re sort of turning away farmers because we can’t afford it, really. That’s a big change.

How’s access to capital in your industry, given the track record for growth? 

We’re in the crossroads that I think all companies are as they move from one stage to the next. … The difficulty is knowing which category of money to go find. Private investment isn’t really geared for a company like us. We’ve grown thus far pretty organically. The negative of the way we operate is we buy all of our raw material once a year. That sucks in most ways, so I try to look at it in a positive in that it frees us up for the rest of the year to grow some cash. It is what it is — it’s just the nuance of our business. 

As you sit today, looking ahead, what are your concerns for 2017? 

I think it seems like there’s a little bit of panic — and that maybe is not the right word because it seems extreme — with Stone (Brewing Co.) having laid off people and (the growth in) beer sales having dipped. I’ve been asked questions for years now about the bubble here in Michigan and beyond. The way I’ve always answered is that the weak swimmers are going to die off, but that doesn’t make sense when you have Stone laying people off. That’s a confusing move. I think there’s some level of panic on what is the cause of that. Are they just too overhead-heavy? Everybody hopes that. 

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