Michigan Brewing Company Failure - Local Implications
When I was back home visiting family over the Fourth of July, my brother broke the news to me that Michigan Brewing Company was no more. This news blew up bigger for me than any fireworks display (with the possible exception of San Diego this year - those 15 seconds were pretty unbelievable). Not only had Michigan lost its fourth largest brewery, but the Lansing area and the state lost a company that was dedicated to staying local in all ways, shapes and forms. MBC was located in the village of Webberville (2010 census population of 1,272) and put a couple hundred pounds of local wheat (local meaning purchased from a grain elevator a few hundred yards up the road from the brewery) in every batch just so they could be sure Michigan grain was a part of every one of their beers. To put this news in perspective for the Portland market, MBC produced over 9,800 barrels last year. Assuming all those pints were sold in the state, this level of production would have placed them between Rogue (14,500 barrels) and Hopworks (6,700 barrels) on the OLCC's list for last year (December 2011 YTD amounts).
Michigan Brewing Company actually was inspired by Portland's beer culture. Michigan's beer scene was still in its infancy in the mid 90's - its first brewpub, Detroit's Traffic Jam & Snug, did not receive its license until late in 1992. In 1994, Bobby Mason visited Portland and discovered craft beer. Upon returning home, Bobby started homebrewing out of his basement. After four months, his beers were so well received by family and friends that he ordered a 30 barrel system, acquired a license and MBC was born in December of 1995. From those humble beginnings in his basement, Bobby grew MBC year over year. Here are some of the highlights of MBC's run:
- 2002 - MBC purchased the Celis Brewing Company from Miller. Celis was started by Pierre Celis, who founded Hoegaarden and is credited with reviving the wit style in his native Belgium, in Austin, TX in 1992. MBC continued producing Celis White, Raspberry, Pale Bock and Grand Cru as part of their regular line-up.
- 2007 - MBC moves into a new 76,000 square-foot facility, an increase of almost 7 times, with a 3,000 square-foot patio. The new facility not only housed the brewery, but also MBC's own pub and homebrew supply shop called Things Beer. The brewery's boilers were fueled with biodiesel produced onsite in partnership with Michigan State University. In addition to the biodiesel partnership, starting in 2007 MBC had an agreement with MSU's artisan distilling program to host their distilling classes, workshops, bio-refining and commercial production of vodka and brandy under their commercial license.
- 2009 - MBC reaches an agreement with rocker Kid Rock to contract brew his American Badass Beer.
- 2009 - MBC opens a brewpub in downtown Lansing. Although the brewpub is technically a completely separate business from the actual brewery and remains open today, they operated as a direct seller under a license that only allowed them to sell beer brewed by the brewery or at the pub.
- 2010 - MBC negotiates with the city of Fenton to purchase their old firehouse and turn it into a restaurant, brewery, distillery and winery. The deal including the purchase of the building for $1 and for the city to finance 33 percent of the cost to rehab the building (city contribution limited to $400,000).
All of this came crashing down when Bobby Mason found himself being evicted from his 76,000 square-foot building last April. Bankruptcy followed and it all came to an unfortunate end on June 20th when an auction was held selling off all assets to pay off creditors. From a strictly beer industry perspective, the two big winners at the auction turned out to be MillerCoors and the family of Pierre Celis. Pierre's daughter Christine Celis and her partners bought the Celis brands and trademark, which they plan to start brewing at an existing facility as soon as possible. MillerCoors acquired the other MBC brands and the brewing equipment. MillerCoors primary intention was the acquisition of the equipment to support the "rapid expansion of a number of Tenth and Blake brands", and they "haven’t decided what, if anything, [they] might do with the brands at this point" according to a statement released by spokesman Peter Marino. In case you were wondering, Tenth and Blake is MillerCoors craft and import division and is probably best known for Blue Moon, but they also happen to have Henry Weinhard's in their stable.
'How does this impact the Portland beer market?' you may be asking yourself at this point. I am not about to call Michigan Brewing Company's failure the canary in the craft beer coal mine or a sign that the rapid expansion in breweries and brewpubs is truly a bubble about to burst. MBC's failure seems to have a lot less to do with the market than with the poor financial management skills of Mr. Mason. The Lansing State Journal has a great series of articles detailing the rise and fall of MBC, including a blow-by-blow account of the various financing agreements that ultimately brought the company down. However, there are some important lessons that local breweries can take away from the whole fiasco. MBC was a well established brewery in a very small town with an excellent reputation that had reached a level of production where economies of scale should have really been tipping in the company's favor - best local comparison would probably be Terminal Gravity in Enterprise. The addition of Kid Rock's beer brought publicity to the brewery and used up excess capacity - although not a perfect comparison, I am reminded of Full Sail contract brewing Henry Weinhard's. They negotiated a favorable deal with a city to build a new brewpub in a historic property, which is right out of the McMenamin's playbook. MBC started distilling their own spirits and took great pride in sourcing at least some of their ingredients locally, a la Rogue. Lastly, they made their own biodiesel to fuel their brewery just like Hopworks. As you can see, MBC shares many traits with some of Oregon's most successful breweries. However, it is important to remember that even though we focus on these types of traits and ultimately on the quality of the beer, running a brewery is a business. The margins on beer are relatively high and volume can hide poor management skills for quite a long time, but an owner really needs to have a handle on their finances in order for a business to survive.
The other takeaway from the fall of MBC is related to the acquisition of the brewing equipment and brands by MillerCoors. When Anheuser-Busch InBev bought Goose Island last year everyone was asking if this was the future strategy of the big boys to get a bigger piece of the growing craft segment. Even if MillerCoors does not decided to resurrect any of the MBC brands it now owns, they could not be accused of killing the company. However, it will be interesting to follow what happens in the Michigan craft beer market with MBC going away so suddenly. I hope and assume that the volume will be absorbed by the other large production craft breweries like Bell's and Founders. However, if those drinkers turn to Tenth & Blake brands like Blue Moon and Leinenkugel's, then that could guide future decisions. Then if MillerCoors starts making MBC beers again somewhere other than Webberville, would the drinkers return for something that most definitely would be an altered product that represented something entirely different than Bobby Mason's vision for MBC? The best way for Portland beer lovers to avoid having to answer these questions is to continue drinking locally and to just hope that their favorite brewery owner has taken Management and Accounting 101.
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