Schell’s Plans $2 Million Brewery Expansion

Left: current space available behind the brewery. Right: a mock-up of the planned expansion.

Add New Ulm, Minn.-based August Schell Brewing Company to the long list of small breweries investing in expansion projects.

Kyle Marti, Schell’s director of sales and marketing, told on Wednesday that the company plan to break ground in May on a $2 million expansion project that will increase brewing capacity by 100,000 barrels before the end of 2013.

Fueled through a combination of reinvested profits and bank loans, the project will expand Schell’s existing packaging facility and allow for the installation of new equipment including a new canning line, four new 720-barrel fermentation tanks, a new yeast propagation system and an energy recovery system. Brewing capacity will increase from 150,000 barrels to 250,000 barrels, Marti said.

Schell’s produced 131,600 barrels of beer in 2012 and Marti said the expansion will allow the company to capitalize on growing consumer thirst for craft beer.

“Every year we get into a pinch around summertime and we need to find tank space for our Oktoberfest beer” he said. “This expansion will not only increase our capacity but also update equipment allowing it to run more efficiently.”

Schell’s, which has remained a family owned and operated business since 1860, is only distributed in seven states (MN, WI, IA, ND, SD, NE and PA) but Marti hopes the expansion will allow the company to eventually enter new markets.

“We’d like to expand distribution, but right now we are going to focus on growing deep instead of wide,” he said.

Roughly 70 percent of the brewery’s production is currently dedicated to its Grain Belt line of lagers, sales of which were flat in 2012, Marti said. But Schell’s craft offerings were up 7 percent, including 18 percent growth for Maifest, a spring seasonal, and 22 for Oktoberfest. The expansion project will give Schell’s the ability to shift the fermentation of Grain Belt beers to the new 720-barrel tanks, making room for increased production of Schell’s craft beers.

But growth hasn’t come without its own set of challenges.

“For us, the big challenge is just getting our beer in people’s hands,” Marti said. “We have pretty good coverage, but everyone wants share of mind from a distributor. It can be tough staying at the top of their list, especially with all of the new players coming into the category.”

So in an effort to remain top of mind with its wholesale partners, Schell’s also plans to add four new employees to its sales force.

Marti is hopeful that the expansion will be completed before the start of the fourth quarter.

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