During the pandemic, some of the U.S.’s most popular breweries are selling beer farther from their home geographies than before. Could the impact of COVID-19 finally force New Glarus—Wisconsin’s most popular craft brewery, and available only in-state—to sell beyond The Badger State?
If so, it would join a sizable cohort in inking new distribution deals. In the past year:
Vermont’s The Alchemist opened Colorado distribution
Jester King Brewery, based in Austin, Texas, is now available in Wisconsin
Chicago’s Half Acre Beer jumped across the border to Indiana
Schilling Beer Company started shipping beer 2,500 miles from New Hampshire to Montana
If ever there was a time for New Glarus to sell beer to ardent fans in Illinois or Minnesota, this could be it. Certainly, other breweries have already set the precedent, and are looking outside their typical distribution footprints for much-needed sales during the pandemic. But New Glarus, for many reasons, isn’t like other breweries.
“No. Never.”
That’s what Drew Cochrane, New Glarus’ chief operating officer, has to say about the possibility of out-of-state distribution. He says the last time New Glarus sold beer outside of Wisconsin was in Illinois in 2003; it pulled back from that neighboring state because it couldn’t meet demand in its home state. Wisconsin would always come first.
Even as New Glarus doubles down on sales exclusively within its home state, a move into neighboring markets would make financial sense for the brewery—at least in the short-term.
Thanks to the pandemic, New Glarus’ overall beer sales were down about -12% during 2020 compared to the year prior. It had expected to grow production +2-5% in 2020 to roughly 240,000 barrels, keeping it among the 20 largest Brewers Association-defined craft breweries in the country. Instead, it ended last year at 206,000 BBLs.
Part of that drop was due to sales declines at bars, restaurants, sporting events and concerts, and the brewery; normally, New Glarus sells 40-45% of its beer on draft. (The brewery estimates that percentage was cut in half last year.) Disruptions in production were also a factor. New Glarus’ co-owners Deb and Dan Carey chose to split brewery employees into three cohorts to promote social distancing and to make it easier for employee groups to quarantine, if needed. But that reduced the speed of production at New Glarus’ two brewing facilities.
“We are growing as fast as we can, but we can’t even meet the demand in Wisconsin,” Deb Carey told The Chicago Tribune in 2002 when New Glarus announced it would pull out of Illinois distribution.
Cochrane says that’s still true today. Last year, during the pandemic, New Glarus divided production employees into cohorts from April to nearly September. That meant fewer people working each shift, which reduced beer production enough to cause some supply issues. Essentially, New Glarus was struggling to brew enough beer to meet distributors’ orders. So even if it might seem like the brewery could have sold more beer by opening in new markets, Cochrane says that’s not the case.
“Even if it seems like, ‘Hey, you made 12% less beer this year, couldn’t you have sold that beer out of state?’ The reality is that we sold every drop we made,” he says.
But a 12% drop in sales doesn’t necessarily equate to a 12% drop in revenue. New Glarus declined to share details of its 2020 revenue, though the company describes itself as “sound financially despite the COVID-related blip in sales volume.” Staying close to home is part of why it’s been able to weather the storm. By keeping freight costs low and not having to pay sales reps in far-flung states, New Glarus reduces costs incurred by breweries with larger distribution footprints.
Cochrane says the Careys’ priority, since the beginning of the pandemic, is keeping workers safe and employed. (New Glarus said Deb and Dan Carey were not available for comment for this story.) The brewery didn’t furlough or lay off a single one of its 110 employees during the pandemic, and it also continued to pay the entirety of employees’ health insurance during that time. According to the brewery, those health care costs totalled $1.5 million in 2020.
“Every single person in the brewery was paid 40 hours a week for the entire year. Everybody kept full health insurance and nobody got seriously ill,” Cochrane says. “So we’re just ecstatic, frankly, about how the year went.”
Chris Drosner, executive editor at Milwaukee Magazine and beer writer for the Wisconsin State Journal, calls prioritizing employee health and happiness over potential sales “a very New Glarus thing to do.” In 2011, Deb Carey was named Wisconsin Small Business Person of the Year and was also runner-up for the 2011 National Small Business Person of the Year contest sponsored by the U.S. Small Business Administration.
The Careys are so known for creating a positive work environment that Drosner says it’s inconceivable to him that they would do anything less during the pandemic. Asking employees to work more or longer shifts in the face of health risks to produce beer to sell out of state would be anathema to New Glarus, in Drosner’s view.
In fact, the idea that New Glarus could make up for pandemic losses by selling beer across state lines never even occurred to him.
“I don’t think [the Careys] want to be rich. They want to make good beer and have good employees and take care of them. I think that’s their goal,” Drosner says. “I guess it’s telling how much we’ve internalized that, that [New Glarus opening up distribution] never even occurred to me.”
There are also logistical reasons New Glarus remains firmly rooted in Wisconsin. Maintaining close relationships to distributors and retailers is one of them.
Last spring, when bars began to reopen from the on-premise closures enacted in March, New Glarus launched its “Fresh Is Best” program. Through its sales team and in partnership with distributors, the brewery replaced half-drunk kegs with new, fresh ones. In total, it replaced 3,150 kegs for free. Similar to programs from other large breweries, the keg replacements ensured beer freshness and quality, but were also gestures of support to suffering bars and restaurants. (Last spring, national beer companies Molson Coors and Constellation did offer their distributors 50% and 70% buybacks, respectively, on untapped kegs.)
“We had full buy-in from distributors on the program, and obviously we needed their help to do this,” Cochrane says. “If you’re nationwide, you just can’t do that.”
Because of relatively short geographic distances and distributors’ willingness to swap out old kegs, drinkers returning to bars and restaurants were greeted with fresh New Glarus beer. The brewery had the money to spend on such a program, and that program furthered business goals: to keep the freshest beer—from New Glarus—at the top of draft menus.
Even outside of the pandemic, New Glarus’ long history with its distributors, combined with the volume it moves in a single state, helps keep the relationship simpatico. It’s a reason you’ll find New Glarus beer in every corner of the state, from gritty gas station coolers to supper club taps. In 2019, New Glarus produced 81% as much beer as Oregon’s Deschutes Brewery—and sold it in just one state, versus Deschutes’ roughly 30. Cochrane says New Glarus represents about a third of all craft beer sold in Wisconsin, and about 6% of beer, total.
“They’ve made a shitload of money because they’ve managed their local market,” Bob Sullivan, president of Sullivan Sales & Marketing Solutions, says of New Glarus. “You make more money when you sell it at home.”
Most breweries find out-of-state distribution to be a law of diminishing returns. The further afield a brewery tries to sell its beer, the smaller percentage share of the beer market it captures there. Sullivan says the main reason breweries expanded their distribution in the past year is for cash flow, often stemming from financial problems at home.
“Revenue has been hurt in the last year because their taprooms have been affected, and they’re not successful enough in their home or core market to pay their debt,” he says. “So they’re going to ship beer elsewhere and try to build revenue there.”
New Glarus has done the opposite. Knowing it owns 6% of the market at home, the brewery is focused on going deep in Wisconsin, where Cochrane still sees more runway for growth. He says drinkers are walking away from Molson Coors and Anheuser-Busch InBev, and potentially toward easy-drinking, but locally made, beers. Indeed, Nielsen data shows packaged craft beer’s growth in the Midwest outpaced all domestic beer segments last year, excluding flavored malt beverages (e.g., hard tea and hard lemonade), hard seltzers, and super-premium products (namely Michelob Ultra). Drinkers are generally walking away from mass-market Lagers, but whether they’re trading them for craft beer, hard seltzers, or spirits isn’t entirely clear-cut.
“If they walk to craft, and we get a third of those people that walked away from a larger [company] to craft, then we keep growing,” Cochrane says.
Growing so large in one state is a title no other brewery can claim. All 16 Brewers Association-defined craft breweries that produce more beer than New Glarus distribute to multiple states. The closest brewery to New Glarus in size, based on 2019 production numbers, was Atlanta, Georgia’s SweetWater Brewing Co., which currently distributes to 27 states and the District of Columbia.
This quirk defines New Glarus nearly as much as its beer does, and it’s not about to give up that built-in mystique. New Glarus doesn’t pay for magazine ads or radio commercials, but in a way, it doesn’t need to. Beer drinkers in the Midwest already do enough publicity for the brewery, by making New Glarus beer a must-buy souvenir from a Wisconsin road trip, or by talking up their state’s hometown hero.
“There is a pride in Wisconsin that this is our beer, and you other 49 states can’t buy it,” Sullivan says. “And that’s really enhanced their brand strength in their core market.”
If New Glarus wasn’t just for Wisconsinites, it’s likely they wouldn’t feel this same fidelity. Cochrane acknowledges that the marketing aspect of this choice is “self-evident,” but says the brewery isn’t just throwing up artificial sales borders to create more exclusivity. When it has no trouble selling all its beer inside Wisconsin’s borders, it simply doesn’t have to create any special strategy to prop up sales. Rather, the proximity to its customer base allows the company to literally show itself off to drinkers. Much of that happens at the brewery itself, which has been closed to the public since the pandemic began.
“We show people how beautiful the place is, how clean it is, how happy our employees are,” Cochrane says. “And they’re like, ‘Yeah, I can be proud to spend money on this product and I can be proud to tell my neighbors about it.’”
As the pandemic nudges smaller breweries to sell their beer in farther-flung states, Cochrane describes something more analog: Drinking local beer from a brewery you consider a good neighbor. It may not lead to sales growth every year, but New Glarus is betting the strategy works out well for the long-term. Deb and Dan Carey have seen it pay off so far, making their brewery one of the most uniquely successful beer companies in the country.
“Their goal is to make the best beer they can in a way that supports the people that work for them and the community around them,” Cochrane says. “Being big doesn’t have anything to do with that. And in fact, that’s kind of counter to some of those things, because as you’re shipping farther away, you lose control.”
Words by Kate Bernot