Bubbling up in Jersey: What does it take for a microbrewery to make it?
Craft beer is booming in the U.S., but breweries face big challenges on the path to profitability. New Jersey Beer Co. isn’t backing down.
Hockey fan Paul Silverman was on his way to his New Jersey Devils season-ticket seat last spring, when a woman with a microphone and a man with a video camera approached him to ask what he thought of the venue and its food and drink. Silverman, a Jersey City real-estate developer, didn’t have anything to say about the food because he ate at restaurants outside the arena. But the drink selection, he said, could use some work. Newark’s Prudential Center didn’t have any craft beer on tap — just the big brands.
Silverman pulled out his business card and shoved it in front of the camera. Two years earlier, in 2012, he had invested in a small microbrewery less than 20 minutes from the arena, in North Bergen. Now the chairman of New Jersey Beer Co., Silverman told the interviewer it was the “best beer in the state.”
The woman worked for Legends Hospitality, the company that runs the food and beverages at Yankee Stadium and holds a slew of contracts at other arenas across the globe. Silverman received a call from her boss the following day. Legends planned to bid on the concessions at the Prudential Center, and if it won the contract, he wanted to put New Jersey Beer Co. on the menu. Three months later, on a warm June night, Silverman received the email: Legends got the job.
Today, Devils fans and parents who bring their children to see “Disney on Ice” can buy New Jersey Beer Co.’s beer in the arena. The single venue has doubled the five-person brewery’s sales, further boosting brand recognition and inspiring at least one liquor-store owner to pick up the product, said Silverman.
“We had a big plus this year,” he said. “They have all these national and international brands, and we’re the only craft beer that’s served there, so it’s a big account for us.”
By the end of 2013, more than 2,800 breweries had opened in the United States, nearly 98 percent of which were craft. The $14.3 billion craft-beer industry had grown by 20 percent since 2012, with a 14-percent share of the beer market, according to the trade group the Brewers Association. Twenty-six New Jersey breweries sold nearly 49,000 barrels of beer — or 686,000 cases of 12-ounce bottles — in 2013.
Craft beer isn’t an easy business. Equipment such as brewhouses and fermenters cost tens of thousands of dollars. Add the need for well-trained employees, industrial space, and innovative recipes, and a brewer must raise about $500,000 to $2 million to open. Local, state and federal laws regulate everything from production limits to the disposal of waste to zoning. And even the best beer vies with not only its small-time counterparts but with the major players, like Budweiser and Miller Lite, which are often a couple of dollars less expensive.
A bit more than three years ago, New Jersey Beer Co., founded in 2010, had run out of money. Its gas company had turned off service, its landlord had filed for eviction and there wasn’t enough cash to buy grain, an essential ingredient for beer.
“They didn’t really have enough capital upfront, hoping that with the partial capital that they had they would be able to sell enough beer to keep paying the bills,” said Silverman. “But it didn’t work.”
He decided to step in. Silverman, the former social chairman of his college fraternity, first tried craft beer around 2004, during a charity event in Montclair, New Jersey, where he lives. Several years later, his newfound joy pushed him to try to break into the business. He stopped by the New Jersey Beer Co. site, an easily overlooked warehouse on a side street near the Meadowlands, to ask for advice, where he found a floundering company and an investment opportunity.
Silverman plunked down enough cash to settle the company’s debts, hire a second brewer and solve the brewery’s inconsistencies from batch to batch. He also found a new distributor to sell to retailers.
Allied Beverage Group, which mainly handles liquor and wine, buys from suppliers like microbreweries and sells the product to bars, restaurants and liquor stores at a markup. Patrick DeRespinis began working for the wholesaler in March 2013, when he was in his mid-20s, and became a “craft beer specialist.” He buys the beer at a discounted rate from New Jersey Beer Co., and a dozen other foreign and domestic suppliers.
“We’re putting more emphasis on craft beer, but it hasn’t really been the major driving force of the company in the past,” he said. “If you go into any liquor store these days, you can see the popularity of the product, and obviously we want to be a part of that as well.”
Most microbreweries have little manpower to sell or transport their beer, but distributors have systems: Allied Beverage Group has 225 sales representatives in New Jersey and 100 to 200 employees who load and drive the trucks that deliver the goods, said DeRespinis. New Jersey Beer Co. has just one full-time salesman.
Getting a six-pack on the shelf is just one aspect of the job. People who sell beer must also provide product information to retailers. Because craft beer doesn’t have a strong advertising presence, and many people are not familiar with its confusing range of flavors and styles, the people who directly interact with customers must know their stuff, said DeRespinis. The success of New Jersey Beer Co. — which Silverman said relies on slow and steady growth — partly depends on bartenders and liquor-store clerks. If they scratch their heads after a question from a customer, “you’re going to be like, ‘Eh, I don’t know. I’m probably just going to get a Budweiser, because I’m not sure,’” said DeRespinis. He hits the road often, traveling to pubs and liquor stores throughout the state, offering lessons and tips to retailers.
Microbreweries usually sell a few staples that draw attention to their business. From there, they experiment with different ingredients — anything from coconuts to whiskey-stained casks to chocolate — to pump out seasonal brews. New Jersey Beer Co. first introduced LBIPA, a floral India Pale Ale with hints of citrus, as a summer beer in 2013, with about 30 kegs. DeRespinis said he sold them in two weeks and urged the brewery to make the hot product a mainstay. Silverman and his team agreed and last year made LBIPA a year-round offering. It has won two awards and is now one of the company’s best sellers, alongside the Hudson Pale Ale, said Silverman.
The right decisions mean everything in craft beer, especially as business begins to pick up, according to Steve Hindy, co-founder and president of Brooklyn Brewery. He launched his brewery in 1988 with three employees and $500,000 raised from friends, family and former colleagues at Newsday, where he worked as a foreign correspondent. At the time, imported beers held about two to three percent of the U.S. beer market, and microbreweries nibbled on the crumbs. It took the brewery six years to make a meager profit, and it didn’t start making “solid profits” until 2004. Its survival depended on its distribution arm, which represented not just Brooklyn Brewery but about 15 American microbreweries and European breweries.
Brooklyn Brewery sold the distribution branch of the company in 2004. Although the additional distribution work hindered the growth of the Brooklyn Brewery brand, it ultimately proved vital to the survival of a company that saw about 30 New York City breweries close during its first 15 years of business, said Hindy.
“If we had not self-distributed, I don’t think I’d be talking to you about the success of the Brooklyn Brewery today,” he said.
Now, Brooklyn Brewery is an international business with hundreds of employees, and it was headed for $60 million in sales in 2014, said Hindy.
These days, it’s hard to pull a stool up to a bar in New York City without seeing Brooklyn on tap. The brand blossomed under Hindy, and the revival of Williamsburg, Brooklyn, where the brewery is based, further helped business. Social-media efforts and shoe-leather marketing, like providing free beer to community and artist groups, built an invaluable brand image, he said.
“The dream is kind of wrapped up in the brand,” said Hindy, who learned to homebrew while reporting in Middle Eastern countries that forbid alcohol.
Like The Boss or the TV show “Jersey Shore,” New Jersey Beer Co. uses its name to draw in curious new customers. In addition to Devils game sales, it’s featured at Garden State outlets of the chain restaurants On the Border and Buffalo Wild Wings, and it took home awards from competitions in Atlantic City and Weehawken. It plays the Jersey card, and people seem to like that, said Silverman.
“That’s a good sense of pride for us and for people in the state,” he said.
Laws governing microbreweries in New Jersey and New York have eased up in recent years. In 2012, New Jersey Gov. Chris Christie signed a law that allowed microbreweries to sell package goods during brewery tours and to host on- and off-site tastings. In fall 2013, New York Gov. Andrew Cuomo signed a law that enabled microbreweries to hold tastings and increase their sales volume.
Chris Gallant, the 34-year-old co-founder and general manager of the Bronx Brewery, said new state regulations allow his company to sell full pints of beer in the tasting room. In the past, glasses were limited to sampling sizes. That gives customers a better experience, which is good for on-premises sales, and represents a big improvement from the “antiquated” laws that Gallant faced when he first tried to open.
“It was tough when we started, but I think that they’re making a lot of strides and making it better for us,” he said.
Even so, it will take some time for Gallant and his company to turn a profit. They hope to reach that milestone in the next couple of years, to start paying back friends and families who invested an initial $500,000 in the business. In 2014, Gallant expected to pump out roughly 96,000 cases of beer.
New Jersey Beer Co. has yet to make money either, but sales improved dramatically in the past three years, giving Silverman hope that 2015 will be the big year.
Bruce Springsteen songs played in the large, open brewery on a Tuesday afternoon in November, during an industry event held by the company. Employees poured glasses of beer behind a cozy, wooden bar and talked shop. Guests sipped their pints as they toured the production area. Craft-beer insiders — mostly dressed in flannel and just as happy to drink as they are to brew — chatted and laughed. Silverman, a charismatic man in a fresh suit, cut through the conversation and gathered everybody in a circle. He thanked them for their support thus far and, in a sort of barroom pep rally, reminded them that it must continue for New Jersey Beer Co. to thrive — because it takes so much more than good brew for the band to make it.
