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May 22, 2018 Manufacturing insights

Medusa says financing is key to brewery growth

Photo | Zachary Comeau Keith Sullivan, co-founder and general manager of Medusa Brewing Co.

According to the Massachusetts Brewers Guild, there are 154 craft breweries in the state, with another 50 to 60 set to open within the next two years. Opening a brewery can be difficult, especially with finances, which will always exceed a brewer’s expectations, said Keith Sullivan, co-founder and general manager of Hudson-based Medusa Brewing Co. and vice president of MBG. Sullivan, who spoke at a guild event Monday, talked with WBJ about funding problems new breweries face and the rise of the craft beer industry.

What did you talk about at MBG’s conference?

We talked about some of the things we learned, and things we didn’t know that were available to us that we could have taken advantage of, like Small Business Administration programs and the importance of establishing a good relationship with a bank.

It’s not just a checking account. Massaging that relationship from the get go is a really important thing when it comes to asking them for a real loan later on down the road.

Very simplistically, it’s more expensive than you think, and everything takes longer than you plan.

Are these young breweries joining the growing craft beer industry asking about that?

One of the points I made when talking to a number of young breweries is loans are not a bad thing. For the last three years, we’ve expanded through cash flow. It’s a great thing to be able to do, but at the end of the day, that brings down your cash reserves and in hindsight, we probably would have grabbed a $50,000 to $100,000 loan to do improvements and buy equipment.

What are some other ways for aspiring brewers to raise money?

Depending on the structure of the company, you could sell equity and raise funds through structuring in a way that provides shares to sell.

Another thing nobody thinks about is if you have some friends or family with cash flying around, you could take out a super small personal loan or something to just get the doors open.

I have heard some talk that the rapid growth of craft beer isn't sustainable, and some say there's a bubble. Do you see any truth to that? 

Craft beer will undoubtedly continue to grow for the foreseeable future. It’s what people want. What’s happening is the domestic beer volume has stabilized overall, so in order to grow, the craft segment has naturally begun to consume the market share long held by the big, multinational brands like MillerCoors, Constellation, and AB-InBev. With that said, I do believe there will be a point in the near future where craft breweries will have to become more competitive and will be more subject to consumer criticism. It’s been very easy to be successful, especially in the retail/taproom space, but consumers are smarter and more demanding than ever. As more breweries open, a smarter approach to branding, market research, and customer understanding will be crucial to success.

How can brewers like yourself and other local Central Mass. groups help keep the industry going?

Our best shot at keeping this going is to remain united. Yes, we are competitive, it’s a natural part of owning a business, but we are all in this craft beer thing together. The only thing against us is the push-back from these enormous companies that don’t want their market share to diminish. In terms of Central Mass, I think we are doing a lot of things right. Taprooms create tourism and economic growth, and smart, tactful distribution of brands by our larger colleagues is further helping to shed light on the beer of this area. I don’t think the consumers will be close to satisfied until every town has a taproom. Let’s get there!

I recently spoke to the folks at Ground Effect in Hudson. Have you guys at Medusa been working to help them at all? If so, how is that illustrative of friendly craft beer industry?

Yes. We reached out with some advice regarding the process, as well as some specific hurdles we had to jump and could have avoided. Breweries really do tend to be successful in numbers, so we’re excited to have another destination added to our growing town. Whether it's because breweries do better together or because we’re just excited for another beer option (or both), openness and comradeship are sort of natural core values in the craft beer industry.

So, how does the MBG and the industry prevent that from happening?

The big concern of us as a guild – and the purpose of the conference – is we’re moving into an era where the breweries sticking around are not only good brewers, but they can run a good business.

There are great business owners that can’t make a good beer and good brewers that don’t know how to run a good business.

Inevitably, that hurts everyone.

This interview was conducted and edited by WBJ Staff Writer Zachary Comeau.

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