Beer gets bought faster than bottler can make it

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By John Eckberg jeckberg@enquirer.com February 21, 2009

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Too much of a good thing jammed beer production last year at Mount Carmel
Brewing Co. in western Clermont County.


The only craft brewer in Greater Cincinnati and Northern Kentucky with a local
brewery and local ownership, husband-and-wife owners Mike and Kathleen Dewey
knew in January that demand had outstripped their ability to produce.

The company, founded in 2004, had given up selling their craft beer in large
growlers, which were jugs of beer bought for parties. They decided, instead, to
sell six-packs of 12-ounce bottles for $8.99.

"We sent out the first six-packs on January 5 this year," Kathleen said. A week
later, when it was time to restock, the brewery owners got a big surprise:
"There was no beer left on the shelves. We went 'Oh my!'"

The hand-bottling system that had worked so well for four years for the
half-gallon growlers could not handle the demand from 37 Kroger stores, 11
bigg's and 25 bars/restaurants - not when it took co-brew master Anthony
Robertson of Newtown about 14 seconds to fill and cap just one 12-ounce bottle.

So, last month, the Deweys went looking for a chief executive to lead an
expansion and found Bill Cunningham, formerly executive-in-residence with
CincyTech, a public-private group that provides seed money for local start-up
technology businesses.

Cunningham also had production experience as former chief executive for
Cincinnati-based Diamond Fiber Composites, which manufactures copper- and
nickel-coated carbon fiber used in the aerospace, automotive, electronics,
biomedical and defense industries.

"Mike makes great beer, and Kathleen sure can sell, but they needed somebody to
help out with everything else," Cunningham said. "They didn't have time to plan
to do everything they need to do to get growth."

The company would not reveal revenues but produced one metric: Mount Carmel sold
1,000 barrels last year. After new tanks, a new bottling line and other changes
are implemented this year, the company projects it will sell 3,000 barrels in
2010 - a threefold increase.

Each barrel is equal to 31 gallons of beer, and that output represents a retail
value of $750,000 to $800,000 annually, an industry expert projected, based on a
value of $750 to $800 a barrel. But Mount Carmel gets far less than that because
it sells beer to retailers at wholesale prices.

"We currently have four varieties: blond, amber, nut brown ale, India Pale Ale,"
Cunningham said. "As soon as we can satisfy demand on those, we'll add seasonal
products."

Despite a national recession in its second year, craft beer consumption
continues to grow, according to the Brewer's Association, a trade group based in
Boulder, Colo.

The association estimated craft beer sales in 2008 grew by about 4 to 6 percent
in volume and by 10 percent in dollars spent compared to 2007. And 2007 dollar
sales were up about 16 percent from 2006.

Recession? What recession?

"Intuitively, you'd think people would trade down from premium to discount beers
but that's not happening," said Paul Gatza, director of the Brewer's
Association. If anybody is trading down, it's happening in restaurants.

"People may not be buying that $25 bottle of wine but they are spending for a
craft beer in a bottle," he said. "Mount Carmel has grown from a brewery in a
basement to 1,000 barrels; that's pretty impressive."

Mount Carmel started as a hobby in 2001 when Mike could not buy his favorite
Oldenberg beer anymore because that Fort Mitchell brewer went out of business.

So Mike cranked out 10 gallons of brew in his basement, soon enlisted the help
of former Oldenberg brew master Ken Scheirberg as a mentor and by 2004 beer had
gone from hobby to passion to vocation. He moved production out to a garage-type
building in back of the family house on Mount Carmel-Tobasco Road, a building he
built.

The second move came in 2007 when an addition to the back of the house was
created to hold new tanks.

Cincinnati's century-old brewing history makes this region a pushover for a
brewer, right?

"Uh, no - not really," Mike said. "In recent years, four brewers have gone under
in Cincinnati. You look at those closures and you have to say: Cincinnati is a
tough market."

The next expansion - which will boost production by 400 percent and needs an
estimated $300,000 in investment - is planned for this spring.

The Deweys and Cunningham agree that growing market share in Cincinnati is top
priority. But the siren song of the rest of the Midwest may be hard to resist.

The first hurdle now is to knit up expansion financing without giving away too
many shares of the company to get it, Cunningham said.

"What we need is people who like to invest in liquid assets."

http://news.cincinnati.com/apps/pbcs.dll/article?AID=/AB/20090221/BIZ01/902210345/

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