Schlafly plans expansion in St. Louis
There’s always a rainbow after a storm.Â Here’s one for the folks in St. Louis.
Maker of Schlafly beer sees opportunity in InBev takeover
By Jeremiah McWilliams
ST. LOUIS POST-DISPATCH
Walking through the Schlafly Bottleworks brewery a few weeks ago, Dan Kopman found himself half-apologizing for what looked like controlled chaos. Hoses snaked across the floor. Water gushed from equipment and spilled onto the floor. Pieces of a dismantled boiler sat in a box as bottles of pale ale whizzed by on a nearby conveyor belt.
“A bit messy in here,” said Kopman, chief operating officer of St. Louis Brewery Inc., as he eyed spilled kernels in the grain room.
The scene at St. Louis’ biggest small brewer stands in stark contrast to the digital industrialism of theÂ mega-brewery down the street.
But St. Louis Brewery â€” maker of Schlafly beer â€” is about to get more sophisticated. The company plans to roughly double its production capacity by this time next year by modernizing the Bottleworks, which is tucked into downtown Maplewood.
The quirky upstart will be sleeker, better organized and bigger, able to produce about 45,000 barrels a year, thanks to a modernization project that could cost about $600,000. The planned improvements span the entire brewery â€” from temperature control and liquid storage to packaging.
“There’s just a lot to do,” Kopman said.
There also is a sense of urgency. The Schlafly operation will become St. Louis’ biggest independent brewery later this year, when InBev of Belgium expects to finalize its $52 billion takeover of Anheuser-Busch Cos. and its flagship brewery in Soulard.
The buyout has rocked St. Louis. Managers of bars around town say they have been peppered with questions from drinkers about which “American” beers are still available.
“We have this unique situation with A-B in St. Louis,” Kopman told dozens of bar managers, grocers and restaurateurs at a beer panel at Bottleworks last month. “It probably doesn’t go beyond 50 miles. But people are saying, ‘I want to drink something else.’”
The folks at Schlafly smell an opportunity: The company’s accelerated expansion plans are aimed at capitalizing on the turmoil and angst caused by InBev’s ascension.
If all goes according to plan, a significant amount of new brewing capacity will be added at Bottleworks during the last three months of this year. Two big fermentation tanks are on the way, squeezing more beer storage capacity into the facility. Installation originally was supposed to happen next year, but InBev’s purchase of A-B â€” along with the strong demand for locally made craft beers â€” sped up the plans.
Over in the brewhouse, a new kettle will help ease a bottleneck created by the slow extraction of a hot, sugary liquid â€” called wort â€” that is eventually fermented into beer.
Automated systems run from a control room will replace the manual systems that now regulate the temperature of fermenting beer.
This year, Schlafly plans to make about 23,000 barrels of beer, or 713,000 gallons. The changes this year will raise its production capacity to about 30,000 barrels â€” what Anheuser-Busch’s St. Louis facility could crank out in roughly 17 hours.
Six other fermenting tanks are to be installed next year if demand holds up for Schlafly beer. That could bring capacity to about 45,000 barrels.
For small brewers, these are uncertain times to dive headfirst into major expansions. The craft beer industry’s dollar sales were up 11 percent in the first half of the year, but costs of ingredients such as barley malt and hops are stratospheric compared to just a few years ago.
In the U.S. beer industry, the top of the food chain is undergoing an unprecedented wave of consolidation, with Miller and Coors combining their operations and Anheuser-Busch succumbing to InBev’s advances.
Anheuser-Busch and other major brewers also keep churning out beers that compete directly with little breweries’ main specialties, such as wheat beers and ales.
“The challenge for the smaller brewers is to keep that panache, that mystique,” said Chris Wong, category manager for beer at Schnuck Markets Inc.
The Brewers Association, a Colorado-based trade group of small brewers, worries that the MillerCoors combination and InBev’s buyout of A-B could make it harder for small, independent craft brewers to get their beers on shelves.
By many accounts, it’s been the beer industry’s craziest year since Prohibition. And no one seems to know exactly how small brewers should adapt as the biggest and most powerful brewers become even more formidable.
Over in Kansas City, Boulevard Brewing Co. â€” one of the country’s biggest craft breweries â€” is pouring money into its operations, adding a $6 million bottling line and planning to install fermentation tanks to take its capacity up to 250,000 barrels.
A few years ago, Boulevard jumped into the expansion game with guns blazing. Faced with strong demand but strained capacity, managers had a choice: stop shipping beer to some promising markets, or make a big, potentially risky investment. They chose the latter, opting for a $25 million expansion in 2006.
Boulevard now sells beer in 13 states from North Dakota to Texas and expects to brew 140,000 barrels of beer this year, up from 46,000 barrels in 2000. Its growth slowed this year as a weaker economy cut into spending, but the company still expects sales to rise between 6 percent and 10 percent.
“You have to be pretty confident that you’ll continue to grow to make that kind of investment,” Bob Sullivan, vice president of sales and marketing, said of the 2006 expansion. “We were maxed out â€” we couldn’t make any more beer.”
Schlafly is firmly anchored to the St. Louis region, hemmed in by Boulevard to the west and Chicago’s hyper-competitive beer market to the north. About 95 percent of its beer is sold within 50 miles of St. Louis.
Now, with InBev’s takeover calling A-B’s all-American credentials into question among some drinkers, Schlafly hopes more local consumers and retailers will give craft beers like Schafly’s another look. Maybe bars will install an extra tap of Schlafly brew, or groceries will hang a little more Schlafly signage.
“We’re going to be saying to folks: ‘Hey, we’re here, we’re happy to be St. Louis’ local brewer,’” Kopman said recently. “St. Louis deserves products and companies that are unique to St. Louis, that are not ubiquitous. â€¦ That’s what we do well. We’re going to tell that story more and more.”
The company is walking a fine line, hoping to promote its beers but careful not to be seen as kicking sand in the face of Anheuser-Busch. This is St. Louis, after all, and Anheuser-Busch’s brewery on Pestalozzi Street is still one of the biggest games in town.
“We have employees that are married to A-B employees,” Kopman said. “We don’t need to do anything to insult the work they’ve done and the work they’ll continue to do.”
But starting with its name, St. Louis Brewery has always been a bit of an upstart â€” a little beermaker happy to scratch out a living in the giant’s shadow. It uses poetry nights, oyster festivals and bluegrass shows to build buzz. At least one brewmaster works in a kilt. The brewery has no advertising agency.
Ben Bruker, sales manager with Koerner Distributor Inc., said he still runs into grocery shoppers who don’t know about Schlafly beer â€” as close to St. Louis as Fairview Heights.
“There are still folks who say, Oh, where’s that from?’” Bruker said of Schlafly beer. “I say, ‘Over in St. Louis.’ And they say, ‘Where can I get it?’ And I’m like, ‘everywhere!’”
From the Schlafly brewery’s early days, the little outfit encouraged a David and Goliath storyline between itself and Anheuser-Busch. The media gleefully ran with the theme. In a book about the microbrewery, Tom Schlafly â€” the company’s co-founder â€” likened the business to “a new religion in Mecca.”
But the Schlafly brewery has nurtured a cooperative relationship with its huge neighbor in the last few years. Anheuser-Busch has been the driving force behind the St. Louis Brewers Heritage Festival, which showcases local brews and has attracted thousands to Forest Park over the last two years.
“In one sense, there’s competition,” said Schlafly, an attorney with Husch Blackwell Sanders. “But not really. That’s like saying my softball team is competition for the Cardinals. We’ve benefitted from being near them because they’ve made a great name for brewing in St. Louis.”
When InBev made its offer, the folks at Schlafly offered to ride to A-B’s rescue. Professing to like A-B as much as everybody else in St. Louis, the little brewer launched a fundraising effort aimed at making a counteroffer for InBev. It raised a few hundred dollars.
Tongue planted firmly in cheek, Tom Schlafly personally tried to deliver an offer to purchase InBev to its headquarters in Leuven, Belgium. No response.
On the night of July 13, when Anheuser-Busch’s board said it had approved InBev’s $52 billion takeover, Kopman sent an e-mail to the crew.
“We now work for the largest locally owned brewery in StL,” he wrote. “I cannot predict what this is all going to mean for us.”