December 1, 2017 Martin Hintz  M Magazine

Is Milwaukee’s craft brewery market reaching near saturation?

What It Takes to Open a Brewery

Opening a craft brewery is more than discoursing about beer. It involves plenty of grunt work. Even with that caveat, however, comes success.

“First-timers tell us we need signs out on the road, but we keep filling the taproom,” laughs Nick Reistad, a former professional cyclist and business partner of home-brewing fans Drs. Scott Kelley and Jimmy Gosset and entrepreneur Kevin Brandenburg. Their popular pub, Raised Grain Brewing Co., is located near Goerkes Corners in Waukesha.

Working from their own designs and with assistance from Reistad’s wife, Kim, the foursome performed a lot of work themselves, even proudly tiling a bathroom. “We think we did a good job with that. Looking around the room, we see smiles,” Reistad says.

The group met in September of 2014, and a year later held their soft opening. Multiple business models were considered before settling on one, then came space leasing and buying equipment. Within that quick trajectory, the partners were licensed, and eventually launched with eight tap beers.

“Take what you think you will actually need, then double that number,” Reistad suggests of the financing process. “We have found that to be true, and then some. There are always unforeseen expenses. But our beer is selling very well, so we’re able to support our growth.”

The gang raised their glasses when Raised Grain’s first beers came out of the tanks, and then everyone went back to work. “(The) same thing (happened) when we won a gold medal at last year’s Great American Beer Festival,” recalls Reistad. “We had about 15 minutes to celebrate.”

For Andy Gehl, co-founder of Third Space Brewing, retaining the charm and authenticity of space are among the pros of reinventing an existing building. “We were really excited to rehab an old factory building from the height of Milwaukee’s manufacturing heyday,” he says. For Gehl, it was also an effort to help revitalize the Menomonee Valley.

“Another major pro of rehabbing is the cost,” he continues. “It is much more economical to find an existing space and fit it to your needs than to build from scratch.”

Planning for Third Space took about three years, from initial concept to opening, but it was an entire two years of full-throttle development, with construction alone taking almost a full year, Gehl adds.

The brewery name comes from a sociology concept that humans need third spaces in their lives, outside of the first space that is home and the second space that is work, Gehl points out. “We all need a third space where we can relax, have a good time, connect with friends, and engage with the community,” he enthuses.

Gehl is grateful that he and his team raised most of their capital from savings as well as from debt financing from two lenders, allowing flexibility in running and growing the business. Third Space’s primary lender is First Bank Financial Centre, and its secondary lender is the Milwaukee Economic Development Corporation.

Big Head Brewing Co. in Wauwatosa was launched with about $100,000 in capital investments. The money was put to work immediately, as its owners worked to secure and renovate a former cabinet shop. For co-owner Pat Fisher, location is more important than the building type. To hold down costs, a corps of volunteers pitched in to flesh out the space. It helped that the rehabbing became a big party, with free beer, pizza and prizes. But the work is ongoing, he says. “As soon as we opened, we started making improvements,” Fisher adds.

Is Milwaukee’s Craft Brewery Market Near Saturation?

Local beer columnist Kathy Flanigan has plenty to say about the conundrum of perhaps having a plethora of Milwaukee area craft breweries. She’s also the author of “Beer Lover’s Wisconsin: Best Breweries, Brewpubs and Beer Bars.”

“Too many breweries? Nah. I don’t believe the market is saturated. I think it’s a matter of what kind of brewery you’re shooting for,” Flanigan points out, indicating that the facilities are well spread out. Even in clustered areas, there is a diversity of styles, she adds.

“In a lot of ways, breweries and taprooms are the new corner bars. I think there will be a shakeout of sorts, but I don’t know that it will be radical,” she postulates. From Flanigan’s professional perspective, the future of craft beer in Milwaukee looks good. “We were late to the boom, (and) we’ll probably be late to any bust,” she predicts.

“People have been talking about saturation in the market for a decade now,” says Nick Reistad of Raised Grain Brewing Co. in Waukesha. “Are we there? Are we getting close? Who knows! There is a lot of good beer made in Milwaukee, which is incredibly exciting.”

He adds that, at some point, there will be a contraction in the craft beer market, and the break will be on good vs. great beer. “If you’re going to start a brewery, make sure you’re making great beer,” he warns.

For Reistad, as long as Milwaukeeans drink local beer, there is room for market expansion. “If people want their local craft breweries to keep growing, to be able to continue innovating, and to continue to support the local economy by employment and making charitable donations, they should drink locally brewed beers,” he says. “But that only makes sense to our customers if we, the breweries, make beer they enjoy.”

Third Space Brewing’s Andy Gehl agrees. “We think there is a lot of room in this market for growth, but new breweries have to find their own niche,” he says. Gehl sees a major shift toward consumers choosing to drink local, which creates space for new start-ups. “However, if everyone is doing the same things, it will be hard to survive,” he points out.

“We try to differentiate ourselves with our focus on quality and in creating flavorful yet balanced beers. That is a bit more of a mainstream approach, but it works for us because we have a highly experienced brewmaster at the helm,” Gehl explains. “Other breweries will focus on just sour beers or on creating unique styles, and that will work for them. Everyone has to find their niche.”

Conversely, Pat Fisher of Big Head Brewing Co. sees a crowded market and predicts an eventual shakeout. When is still up in the air, he says, emphasizing that each facility needs to continue to work to set itself apart. Big Head hosts private parties, Packer nights and other activities to draw in folks who also truly appreciate great beer. An emphasis on the latter is most important, Fisher affirms. Subsequently, Big Head is always looking for new brews, such as those gleaned from customer requests, he adds.

A Day in the Life of a Brewmaster

By Scott Kelley, brewmaster at Raised Grain Brewing Co., as told to Martin Hintz

5:30 a.m.
Wake up, so I’m at my 8- to 10-hour day job by 6 a.m., as a practicing physician at a dermatopathology lab. I then head to the brewery around 4 p.m.

4 p.m.
Check on fermentation, monitor brews already started, oversee operating the bottling line, order grain for the next week’s brews, make sure everything is running to our standards. There is always something unexpected. Troubleshooting is part of the fun. My schedule is on-the-fly, but I’m backed up by a great team (who’s) all on the same page, making everything flow easily.

4:30 p.m.
Snack. Grain deliveries always come with a couple of candy bars tucked between grain bags. Usually the person who accepts the delivery gets them, but sometimes one is saved for me.

7 p.m.
Eat dinner at the brewery. We have a small grill out back, and our own food truck has an amazing chef who can whip up something while we’re working.

9 p.m
Pop into the taproom and have a beer with people. They are always eager help out with quality control — I wonder why?

10 p.m.
One last check on everything for quality, check the temperatures on the tanks, (and) make sure everything is cleaned up.

10:30 p.m.
Close and lock the doors, head home, (and) hit the bed by 11 p.m.