St. Louis Brewery soon will be brewing its Schlafly beer at facilities in Tennessee and Iowa to help keep up with soaring demand.
The new arrangements will bring the brewery’s total out-of-state brewing contracts to three; production of Schlafly Summer Lager cans moved to Stevens Point, Wis., in 2010. By this time next year, as much as 20 percent of St. Louis Brewery’s beers could be made outside of Missouri.
“We’re already brewing at close to our maximum here,” said brewery co-founder Dan Kopman, referring to brewpubs Schlafly Bottleworks in Maplewood and the Tap Room downtown. The out-of-state brewing arrangements are not necessarily a long-term solution so much as “a way to give us some wiggle room to figure out how much more beer we need to make in St. Louis going forward.”
Small and regional breweries have increasingly turned to contract-brewing in recent years as sales of craft beer continue to climb and the shrunken credit market has made it harder to get loans to build new brewing spaces.
“There are – and will continue to be – many contract relationships and conditions as our bursting-at-the-seams industry continues its growth pattern,” said Jenn Litz, editor of the online trade publication Craft Business Daily. “There is just not enough money, capacity and time to do things another way in the interim.”
Contract-brewing is not new territory for St. Louis Brewery, which had a Minnesota brewery produce its bottled beers for years until Schlafly Bottleworks opened here in 2003.
Yet Kopman says the deals his company has recently brokered with Blackstone Brewery in Nashville, Tenn., and Backpocket Brewing in Coralville, Iowa, are unique in the beer industry. Although St. Louis Brewery has no ownership stake in Blackstone or Backpocket, the locations will operate like “Schlafly satellite breweries,” Kopman said.
Blackstone and Backpocket are both being run by former St. Louis Brewery employees – Dave Miller of Blackstone was the Tap Room’s original head brewer, and Jacob Simmons of Backpocket worked in the quality-control lab at Bottleworks. Both facilities are similar to Bottleworks in terms of size, brewing equipment and bottling lines.
“These partnerships go much deeper than, ‘Here’s our recipe. Make our beer,'” Kopman said. “We have been involved in everything from site selection to water analysis. And we’ve been able to do those things on our terms, with our people and our expertise.”
The first Tennessee-brewed Schlafly beers will roll out this year; Iowa production is expected to begin in late 2012. The out-of-state breweries will likely each brew about 5,000 barrels a year of Schlafly beer.
The beer packaging will disclose where it was produced, just as the brewery has done with its Wisconsin-brewed Summer Lager. Kopman said Schlafly beers made in Tennessee and Iowa will be distributed mostly in those areas and will not be sold in St. Louis.
“We still want to be able to make all of the beer that we sell in St. Louis in St. Louis,” he said. “I’ll always be wedded to the idea of running a sustainable, local business, not to being the biggest beer company we can possibly be.”
The brewery, founded in 1991, is on pace to make about 42,000 barrels of beer this year – equivalent to about 14 million 12-ounce bottles – up from 36,000 barrels last year and 30,000 barrels in 2009. Bottleworks and the Tap Room have run out of room to expand production, and Kopman said he’d like to watch how the beer landscape changes in the next few years before taking out a loan for a new facility here.
In the meantime, Kopman and St. Louis Brewery co-founder Tom Schlafly are still moving forward, albeit slowly, with a succession plan to hand off ownership of the company to local investors.
Kopman and Schlafly announced last summer that they had starting looking for a buyer, and a dozen potential candidates have signed confidentiality agreements to peruse the company’s financial records. A few of those investors have since lost interest, and no new ones have come forward, Kopman said.
“We’re not in any rush,” he said, adding that one step of the succession – an employee share-purchase plan – will go into effect by April.