Wednesday, November 7, 2007

Interview with President of Capital Brewery

A recent article in Dane County's Business Watch magazine included an interview with Capital Brewery president Carl Nolen. I mentioned Capital in the previous article, so I thought the interview would be illuminating to those of you who try Capital's beer, as well as to beer drinkers in general. The article is no longer available online, so I've chosen some highlights to share.

Business Watch: Why are there so few craft-brewed lagers compared to ales?

Carl Nolen: The cost of doing business is one factor. An ale brewery takes less than half the aging time for its beer than a lager brewery. For ales, it takes 10-15 days. We have a doppelbock called Autumnal Fire. It's an outstanding beer, but it takes nine weeks to get through the production cycle....

BW: What exactly is a craft beer?

CN: The textbook definition of craft brewing is varied. From a revenue perspective, a craft brewery generally pays lower taxes than a large brewer. In Wisconsin, all brewers, including Miller, are taxed 50% less on the first 60,000 barrels of production, meaning that craft brewers who produce less than that - and that's all of us - pay a lower tax overall.

From a production definition, craft brewers are also those that have a full, natural process with no additives. That's certinaly the case for us. We use malted barley and wheat in our production. We don't add rice or corn or anything of that nature.

From a consumer standpoint, however, craft beer is something totally different. To the consumer, the fascination is the experience. A few years ago coffee was limited to regular or decaf. Talk to a manager at Barriques (a Madison wine and coffee shop) and you realize there are more than 1,000 different varieties of of coffee. This translates to the variety in our category as well.

BW: The craft-brewing industry is exploding in varieties, brands and breweries. Is there a point when there will be too many brands and not enough consumers?

CN: The chances are likely that we'll reach a saturation point. Right now, the craft segment constitutues about 3% of production, while the industry growth in total is flat. It's been flat for a long time and what's never talked about is that the industry is actually shrinking on a per capita consumption basis....People are drinking less, but they're drinking better.

In Wisconsin, we're ahead of the curve. Here in Madison, craft brands constitute closer to 7% of the market. I would think that Wisconsin can handle about a 10% market share of craft brands. The majority of that percentage will come from in-state breweries and consumers who want to drink what's locally produced.

BW: I've heard that, while farmers make wine, engineers make beer. Is there a sense of terrior with beer similar to that of wine? What's the attraction with drinking locally?

CN: When you think about Wisconsin brewers like Russ Klisch from Milwaukee's Lakefront Brewery, Deb and Dan Carey from New Glarus Brewing, Bo Bellanger from South Shore Brewing in Ashland or Tom Porter from Lake Louie in Arena, you realize that they're personalities in their communities. They put everything they've got into it. I don't know one of them that talks about making money; they all talk about making beer. You get to meet them at these local beer festivals and taste their beer. I think that's what puts a face on local production.

Capital Brewery's business strategy is not to be a regional or national brewer. That's different from what would have been the case years ago, when success would have been determined by how quickly you spread from coast to coast. Before that however, everything was local. There was a corner brewery in every small community in America, and your market was about as far as you could see from the tallest building. When things changed and everyone went national, a lot of very good breweries went out of business. But now things have gone full circle again.

Links of Interest:
Capital Brewery
Business Watch Magazine

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