Brewbound Podcast: Pilot Project’s Dan Abel & Glenn Allen Share Plans for Milwaukee Brewery

[00:00:00] Jessica Infante: Heading to CBC? Kick things off the day before at Brewbound's meetup at Love City Brewing in Philly, Sunday, April 19th from 5 to 7 p.m. Connect with beer industry leaders, grab a drink, and catch up with the Brewbound team. It's free to attend and walking distance from the convention center. Head to Brewbound.com slash lovecity.rsvp. And don't forget to catch the Brewbound team at booth 956 during CBC.

[00:00:28] Zoe Licata: What is the Pilot Project doing with their new space in Milwaukee? Find out next on the Brewbound podcast.

[00:00:48] Jessica Infante: Hello and welcome to the Brewbound podcast. My name is Justin Kendall and I am the editor of Brewbound and we are finally rejoined by Jessica Infante, the managing editor of Brewbound. Welcome back, Jess.

[00:01:00] Justin Kendall: Oh, thanks. And to be clear, I was around last week. I just didn't sound very good. So I skipped potting with you guys, but it's good to be back.

[00:01:09] Jessica Infante: Yeah.

[00:01:10] Justin Kendall: You sound much better. Yeah. Great.

[00:01:12] Jessica Infante: I feel much better. And as everybody can hear, Zoe Licata, Brewbound Reporter extraordinaire, Generation Z consultant is here. How you doing, Zoe?

[00:01:21] Zoe Licata: Hello. Good.

[00:01:23] Jessica Infante: This is going to be a Zoe episode because you're leading the conversation today.

[00:01:28] Zoe Licata: Yeah, we had a fun conversation with Dan Abel and Glenn Allen over at the Pilot Project that a Chicago-based brewery incubator just bought the former Milwaukee Brewing Space over in Wisconsin. So had a really fun chat with them. Now you guys hear all about what they're doing with the space, their plans for future breweries, and all that fun stuff. Really great chat Justin and I had with them.

[00:01:55] Jessica Infante: Yeah, and we got to check out the Pilot Project space in Chicago just recently during the NBWA annual convention and got to hang out with Funky Town, who won the Brewbound Pitch Slam competition in 2021. And they are a Pilot Project brewery and they produce at Pilot Project. They're likely going to be doing some things in Milwaukee as well and are also going to be at Brewbound Live this year. What did you guys think of the Pilot Project space in Chicago?

[00:02:24] Justin Kendall: It was so nice. I loved it. It was really cool spot. So different from what I feel like you see in a lot of tap rooms. It was like bright and airy, you know, like community tables, which I know are common, but just like a really nice like welcoming space. Great outside patio. They had good times.

[00:02:41] Jessica Infante: Packed patio. That patio was packed. Yeah. Don't ask for the popcorn though anymore. Apparently they're not doing that anymore.

[00:02:48] Zoe Licata: Apparently no more popcorn. Yeah. That's a bummer. They're playing a lot of Harry Styles, which I enjoyed. So they get bonus points for that. Rich from Funky Town was texting me yesterday because it was a big Boston versus Chicago night yesterday for both Monday Night Football and Celtics versus Bulls. And we kind of lost both of those games. So congratulations to those Funky Town guys for both of their victories.

[00:03:13] Jessica Infante: Our condolence cards are on the way to you, Zoe. So we mentioned Brewbound Live and that is coming up November 29th and 30th at the Los Santa Monica Beach Hotel in California. We've announced even more speakers for that. We're going to have Kyle Ingram, the brand director from Sierra Nevada, Dustin Hines, the chief marketing officer for Firestone Walker, and Greg Gallagher, the VP of brand marketing for Modelo at Constellation Brands. They're going to be talking about building power brands, and then bolting onto those brands and building out those brand families. And I think this is going to be a super intriguing conversation.

[00:03:49] Justin Kendall: I'm really excited about this conversation. I think it's going to be particularly prescient for, say, you know, larger craft brands that are older than like 15 years, because you kind of sometimes reach a point with your main core brand family where not sure where to go. And sometimes maybe it does make sense to spin off a branch of the brand family tree and create something new. And that's a great way to introduce yourself to new drinkers. And then it's a great way to keep your current drinkers still in the family. It's been fascinating to see what Firestone has been able to do with like 805 and 805 Cerveza and Kyle Ingram was on our Beyond IPA panel at the last BrewTalks and we talked a little bit about the Little Things family and how that's how they were able to bring in hazy IPAs, which are a newfangled, I sound like an old lady, they're a newfangled kind of craft beer, but it's a way that they can still keep it Sierra, keep their DNA in it, but still introduce it to new drinkers under a different beyond pale ale. Yeah, I was trying to get like, like a like a masthead, but that's not right here. That's, you know, that's journalism and piracy.

[00:04:55] Jessica Infante: Yeah, and this is a route that a lot of brewers have taken. So, you know, we're going to be talking about the Little Things family, we're going to be talking about 805. And then, you know, Greg is going to give us a perspective from Modelo, which is a brand that in the past, they've been reluctant to brand extend, but they have done so with the Chilada line. And they're going to do even more with Modelo Oro, which is going to be a Michelob Ultra challenger. They're going to do a Ranchwater and some spiked Aguas Frescas. So a lot on the Modelo plate.

[00:05:29] Justin Kendall: A lot. Modelo had a wild innovation year. And that's not even everything. They did test markets earlier in the spring, where they rolled out several new products, one of them being Oro, one of them being Ranchwater, and then they had a few others. And they just introduced these new products in a handful of markets. And the winners from those trial periods were Oro and Ranchwater. So those will be rolling out much bigger.

[00:05:50] Jessica Infante: So that's just a few of the speakers who have been announced for Brewbound Live. So if you're interested in coming out to sunny California, hopefully sunny California in late November, and hanging out with us and doing some bigger biz conversations and networking, Go over to Brewbound.com. Check it out. Tickets are available now. So come out and join us. With that, let's get to the news of the week. And really, we're going to hit on one story, which is kind of like a bunch of stories all in one, which was Boston Beer's earnings call. And Jess, you sat in on that call. And there were basically three big takeaways that I got out of this, which was one, they have big ambitions of being the leader in the fourth category in the beer category.

[00:06:38] Justin Kendall: They want to be the number one beer category vendor in beyond beer offerings.

[00:06:44] Jessica Infante: Thank you. You're welcome. Number two, they took a, I believe it was a $27.1 million non cash impairment charge on Dogfish Head. And we'll get into what that means. And then three, they still are taking obsolescence charges on hard seltzers. They took some big ones last year where they had to destroy a bunch of product. And this year, it seems like this was more focused on getting old product out of market and getting the new reformulated flavors into market.

[00:07:16] Justin Kendall: Yeah, you got to give those fruit flies what they want.

[00:07:19] Jessica Infante: Exactly. Yeah.

[00:07:21] Justin Kendall: That was what? $8 million?

[00:07:24] Jessica Infante: Yeah, I think it was $8 million. And that they seem to have really shifted their focus on hard seltzer to lighter flavors, which we can talk all about here. Let's just start with the top and their ambitions.

[00:07:41] Justin Kendall: Well, I mean, I think they have reason to believe that they can do this. They've got Twisted Tea, and Twisted Tea is right now dominating the F&B category. So that makes sense. But when you zoom out, they also, you know, I know we've covered Truly's hard times of late pretty extensively, and that is a huge brand for them as well. But they've also got some innovation happening around Truly, including Truly Vodka Seltzers. So they've got that going. But one thing that we haven't seen roll out yet, a new product for next year, is their Jim Beam branded FMB, Jim Beam Kentucky coolers. So there really, it looks like they're putting all of their innovation eggs in that fourth category basket.

[00:08:24] Jessica Infante: That's all on top of Twisted Tea and the things that they're doing with that brand.

[00:08:29] Justin Kendall: Twisted Tea is just like... I hope there are Harvard Business School case studies about Twisted Tea. There should be. Twisted Tea is 20 plus years old. Maybe it's 21 by now. I feel like people kind of look at it like an overnight success story, which it's not. But it increased its own retail space this year by 35%, which is huge. But the thing is, it still has so much runway in front of it. Twisted T12 packs, which are their, I assume their lead pack format right now, they're only at 64% ACV, all commodities volume, which means they're at 64% of places where it can be sold. There's a lot left to go. They also single serve 24-ounce pounder cans, huge for tea too. Those are at 69% ACV, and that's only for original. They've also got other flavors in that can size, half and half, peach, raspberry. They have way less distribution, so they can certainly fill in all of those distribution gaps wherever those flavors aren't. I think Twisted Tea still has its sunniest days ahead of it.

[00:09:30] Jessica Infante: Which brings up a good question, which is you were at NACS. This is the place to be if you want to reach convenience stores. And that's where a lot of these large alcohol producers end up and they end up showing off new product or showing off their focal points. And last year, there was a big focus on Twisted Tea. And this year you were there and there wasn't a big focus on Twisted Tea and yet they have so much runway still to go in that channel.

[00:09:58] Justin Kendall: Yeah, that is interesting. I think, you know, their booth was very brand agnostic. Everybody seemed to be mostly kind of represented in some way or another. And I think they had Twisted Tea products, but I mean, they were really, it seemed to be, to me, seemed excited to talk about Truly Vodka Seltzer and the Jim Beam FMBs. New reformulated regular Truly, not there. So yeah, I don't know. Maybe they think that C-Store buyers all know it and they don't really need to meet it again. But I mean, C-Store buyers... If I learned anything from going to NACS is that that was an assault on all of my senses. And I think it can't hurt to remind people, hey, we have Twisted Tea. Twisted Tea is ours. You should buy Twisted Tea for your convenience store. People like it.

[00:10:47] Jessica Infante: CEO Dave Berwick said during the call that twisted tea is 90% of the hard tea category. I believe that's what he said. He was asked basically, you know, are they concerned about these challenger brands that they they see coming? And he said, not really, basically, you know, it's 90% of the category. It's been around for two decades. But you know, stranger things have happened, you know,

[00:11:15] Justin Kendall: Yeah, I mean, I think they see Twisted Tea the way that Mark Anthony looks at Mike's Hard Lemonade. It's like, challengers. Yeah, like, come on out, but good fucking luck.

[00:11:24] Zoe Licata: There's been challengers before, they will continue to be challengers, but they've seemed to hold their ground, no matter what.

[00:11:30] Justin Kendall: Yeah, I mean, those are like segment defining brands, like Michelob Ultra.

[00:11:35] Jessica Infante: So that brings us to Truly and in that fourth category quest and sort of what is going on with that brand. And we talked about the obsolescence charges there, the reformulation. And, you know, one of the things that really jumped out at me during the call was basically saying, you know, they are focused on lighter flavors. They're gonna focus on some of those original packs, which was really eyebrow raising for, I think a lot of us because we've seen they've released so much new product all over the last two years. And the hard seltzer consumer has been all about new, new, new, new, new. This is a self inflicted wound that they've done to themselves, which is a self inflicted wound.

[00:12:22] Justin Kendall: Dude, when Dave was like, the customers are just looking for new all the time. And there's too much new product. The first thing that I thought of is that meme from I think you should leave where Tim Robinson is like in the hot dog suit. And he's like, we're all looking for the guy who did this. And I've never seen the show. I only know this from the meme. But I sent that to like, four different group chats. And nobody laughed as much as I was hoping they would. But like, yeah, you're right. They did this. They are how we got here. White Claw didn't do this. White Claw was really slow to innovate.

[00:12:54] Jessica Infante: Yeah, it was rush-out fruit punch and rush-out iced tea, which is now dead, and rush-out... Well, I mean, they've got the margarita pack out now, and they talked about this last year being about fuller flavors, which seems to be one of the defining traits of the canned cocktails that so many people are gravitating to and this segment that's seeing so much growth, albeit on a small base compared to hard seltzer. But you've got a consumer over here who's screaming for full flavor. You've had seltzer try and play in that full flavor. And now to sort of walk it back and be like, Yeah, I think the seltzer consumer is all about light flavor. I don't know what's going on here at this point.

[00:13:44] Justin Kendall: I think trying to straddle the fence in that situation is really hard because you've got products like High Noon that are super popular and have real fruit juice. You can't really go fuller flavor on a malt base unless you start adding juice. And when you do start adding juice is when your calories and your sugars are going to have to go up. And that's not something that necessarily the original core seltzer drinkers were interested in. So it's just kind of weird. Are you going to just overdo it on your artificial flavorings? I think that's a turnoff for a lot of people. I guess it makes sense. I don't know. When Truly was brand new, when Truly and White Claw were new, you know, White Claw wasn't really that way. Truly, to me, always felt a lot more like a seltzer, whereas White Claw back in 2016 had the mouthfeel of a soda. And I don't know that I could explain in clearer words what the difference between those are, but Truly was very subtle. Flavors were really subtle. The first time they reformulated was to amp up the flavors a little bit. And I think doing that with flavorings rather than juice brings a lot more stuff that you don't necessarily want. So yeah, dude, this is wild. It's crazy to go from like, people want fuller flavors, so we're going to make punch to now, no, I don't know about that. They've got other stuff in their portfolio that can play to those fuller flavor occasions.

[00:15:00] Jessica Infante: Yeah. And they talked about margarita, but they, they seem to be like, yeah, you know, it's, it's doing well, but it wasn't, it didn't do as well as we thought, basically.

[00:15:10] Justin Kendall: Yeah. Well, cause now you can get real margaritas in cans from other brands. Yep.

[00:15:17] Jessica Infante: And I thought this reformulation was all about being more flavor forward. We've got a lot of mixed messages here on what's going on, you know, and it's pretty striking to go from that first quarter call with Boston to, you know, this third quarter call, and where things have landed this year.

[00:15:36] Justin Kendall: I'm just glad we're all finally admitting that Truly Tea is gone because that's something that we knew in July.

[00:15:42] Jessica Infante: Yeah, and that was the other thing. We've seen this skew proliferation.

[00:15:47] Justin Kendall: I mean, Truly Tea only existed so that they had something at spring resets because they knew punch was coming, but it wasn't ready yet. So it was like Truly Tea was just here to be a placeholder. And it's like, why would you even...

[00:15:57] Jessica Infante: It was more about defense.

[00:16:00] Justin Kendall: Yes. But why would you even run the risk of cannibalizing some of your largest product? Yeah.

[00:16:07] Jessica Infante: Talk about another test case story is, you know, hard seltzer. There's going to be a lot of interesting papers that are written in the aftermath of this. And not that hard seltzer is going away anytime soon.

[00:16:20] Justin Kendall: No, that's the thing. Everybody, I think people wish seltzer was dead, certain people. It's not dead. It's still a massive, massive segment. Plenty of people still drink it.

[00:16:31] Jessica Infante: It's just sounds like craft beer.

[00:16:33] Justin Kendall: Yeah.

[00:16:33] Jessica Infante: Speaking of craft beer, Boston took a $27.1 million non cash impairment charge on the value of Dogfish Head intangible assets. And that takes the value down to an estimated fair value of 71.4 million on those assets. Basically, what this is, is a write down of the value of what they've paid for an asset. 2019 acquisition of Dogfish Head was for what $300 million cash in stock. This is on the trademark. What happened was they did an assessment in September. And this is what they sort of came back with was, you know, the value of this trademark was, you know, $27 million less than what it was previously. And there was a lot of talk on the call of their commitment to Dogfish Head as a brand and a focus on cocktails.

[00:17:30] Justin Kendall: When we years in the future take a look back at this period of time in craft beer, I think this will be one of those moments where we can say like, oh, you know, like the valuation of these brands is just not what everybody thought it was. If you look back in what, 2015 when Constellation paid a literal billion dollars for Ballast Point, I think that was kind of the high watermark and everything else is downhill from there.

[00:17:56] Jessica Infante: It absolutely was. And this is not the first impairment charge that we've seen on one of these acquired brands. Bounce Point was written down massively off that billion dollar valuation or price paid, and eventually sold off to the kings and convicts, which is always fun to say. And then Logonitis has been written down as well by Heineken. I believe they paid somewhere close to a billion dollars for Logonitas.

[00:18:26] Justin Kendall: So yep, two different transactions.

[00:18:30] Jessica Infante: So this is anything out of the ordinary that we've seen with these.

[00:18:35] Justin Kendall: I mean, is the question like is the question that these like large multinational companies don't quite know what to do with these craft brands, and they ruin a little bit of the magic that made them so valuable. Maybe there's something there.

[00:18:47] Jessica Infante: Which you wouldn't think would be an argument with Boston Beer, though, with Samuel Adams. But here we are.

[00:18:53] Justin Kendall: Samuel Adams got name checked three times on this call.

[00:18:58] Jessica Infante: Yeah, because they are trying to be the number one fourth category producer.

[00:19:02] Justin Kendall: Sir, I am old enough to remember the days of everybody wanting to keep Boston Beer the main thing as the main thing is the main thing. And you'd leave with lager and all of that. And this is a different place now. I think Dogfish came into the fold in the beginning of what, like May 2019, which eventually became dubbed the summer of seltzer. Like you just, you can't compete with the rocket ship that truly was on at that time. And when you lose share of mind internally, you are certainly going to lose share of mind externally.

[00:19:33] Jessica Infante: And then you have a pandemic. Then you have what, as you said, this rise of seltzer, which led to a change in and they mentioned it on the call was a change in consumers palates. And what was what's the phrase that I love to use acquired taste? You don't have this acquired taste for beer. I think you've got a confluence of things that have happened all at once, post acquisition. Not to mention, I think a few months ago, when I had a conversation with Sam Calagione, he said that they are finally on the same ordering platform.

[00:20:09] Justin Kendall: That's crazy to me.

[00:20:11] Jessica Infante: Yeah, as the Samuel Adams products, these integrations take so much time often. And here we are, you know, finally on that that same ordering platform. That's crazy to me.

[00:20:23] Justin Kendall: Yeah, that's nuts. Yeah, it took a long time for them to get aligned. But can you imagine if you're, you know, a Boston Beer wholesaler, and you put your, you know, place your order for all your core BBC products, and then, you know, sign off and think you're done. And you're like, Oh, Philly, like, I forgot about Dogfish Head. I don't think wholesalers are really saying phooey, but I'm trying to be a lady. I guess we could see it now, but I don't know how well it's being studied. What this new crop of LDA drinkers you know, like, did they have to suffer through cans of Beast in frat house basements? Probably not.

[00:21:02] Zoe Licata: No.

[00:21:03] Justin Kendall: Which is too bad, because I, you know, think it builds character, but...

[00:21:06] Zoe Licata: I can confidently say, no, we were not drinking any of that. It was a lot of cans of twisted tea, or bottles, depending on who you're with, and Mike's hard lemonade. Wow.

[00:21:21] Justin Kendall: Or Bud Light.

[00:21:22] Zoe Licata: I mean, also, like, that stuff's expensive.

[00:21:25] Justin Kendall: Yeah. Like compared to like Keystone, like that's interesting to me that you guys were, were shelling out for that. Like my, my husband's fraternity, when our sorority would be over at their house, they would buy us Miller Lite because they liked us. Wow. Might be what this whole marriage is built on. Whereas usually it was like Keystone or Syracuse was Keystone. My first college was a lot of beast. I'm sorry, Milwaukee's best. Pardon.

[00:21:52] Jessica Infante: No, I think the folks listening probably get it. Yeah.

[00:21:57] Justin Kendall: Yeah. You know, like five years from now, maybe when like drinkers a little younger than you, Zoe, are like coming into having like actual disposable income, it'll be interesting to see what they go for.

[00:22:09] Zoe Licata: Yeah, I'm interested in seeing like the real, the true Gen Zers are the ones who are like, they're really starting with like a white claw or truly like what's gonna happen there because those are like their first drinks and like their only drinks for such, it seems like such a long amount of time.

[00:22:30] Jessica Infante: Boozy water.

[00:22:31] Justin Kendall: Yeah. Boozy water. To be clear, the marketing and strategy behind all of this was not for kids.

[00:22:38] Jessica Infante: I guess that brings us to the point that we're at now, which is a lot of nostalgia or products that come from a non-alcoholic place. moving into the alcohol realm. And that's where a lot of the NBWA's concerns have come about and Blue Cloud, which distributes Hard Mountain Dew, which is produced by Boston Beer. The NBWA has raised these concerns about where these products are merchandised, how they're cross-merchandised, confusion at the marketplace. And Blue Cloud has tried to beat back some of those. But I think there's definitely An interesting question, at least, of how these products sort of fit. I guess it comes back to something else that is non-alcoholic. I believe there's a Dr. Pepper flavor that is coming out that is bourbon flavored. And I feel like it's a non-alcoholic product and I think that puts us in even a stranger realm than we currently are because you're introducing an alcoholic beverage flavor into a non-alcoholic product, which I mean, not unheard of because we've done that with beer. But when it's a soda, I think that is a different line.

[00:24:03] Justin Kendall: Yeah, that's interesting. I mean, everything is so blurred, and the blurring mostly happened from non-alk coming into alk, but to see alk going into non-alk that way is kind of an oddball. I don't know, man. One of my favorite things in middle school when our parents would drop us off at TGI Fridays on weekend nights was those Jack Daniels chicken strips. They were delicious. Not that they taste anything like Jack Daniels, or is there any Jack Daniels left behind, but this is something we've kind of seen. It'll be interesting. But the one thing that I don't really get is, you're right, the nostalgia, which has targeted adults to remind them of when they were kids, but are you scooping up some kids in that really big net too?

[00:24:44] Jessica Infante: I don't know. It brings back a conversation we had with Lester Jones of the NBWA a few weeks back, and he was talking about just our acceptance level of where alcohol plays. Is so much different than it was you know it's at the barbershop and it's at you know these third space venues you know go carts or whatever it may be axe throwing and.

[00:25:09] Justin Kendall: The conversation of kids in tap rooms comes up all the time, but I mean, I think everybody's now just accepted like a Saturday, Sunday afternoon at the tap room is a perfectly acceptable family-friendly activity to the point where I just, you know, saw on Instagram, like our friends at Talea in New York City are having like a family-friendly Halloween party. And they're like, hey, bring the kids, put them in costume. We'll have a photo booth, like there'll be fun things to do. So, I mean, maybe we're getting to the point where, cause Europe's been like this forever. you know, this is normal in Europe. Like German beer gardens, people bring like whole families and kids drink those like, you know, really low ABV Berliner Weisses.

[00:25:47] Jessica Infante: So... That's not to say that I wasn't in a tavern in my small town, you know, with my parents, or at least my dad, you know, growing up. So it's not unheard of for kids to wind up in bars.

[00:26:01] Justin Kendall: No, not at all.

[00:26:02] Jessica Infante: Well, with that very insightful clip, we should get to this week's featured interview with the team from Pilot Project.

[00:26:12] Zoe Licata: Today, we are talking about The Pilot Project, a Chicago-based brewery incubator, which has helped start brands such as Funky Town Brewing, which you all might remember as being the winners of last year's Brewbound Pitch Slam. Pilot Project just closed an $8 million seed round to fund expansion, including the acquisition of Milwaukee Brewing's former production space in Wisconsin. So we're going to chat a little about that. Joining us to discuss is Pilot Project co-founder Dan Abel. Hi, Dan.

[00:26:43] Pilot Project: Hello, hello.

[00:26:45] Zoe Licata: And Chief Product Officer Glenn Allen. Hi, Glenn.

[00:26:48] Pilot Project: Hello.

[00:26:49] Zoe Licata: Thank you guys so much for joining us. And we're going to talk about Milwaukee Brewing a little bit, which you guys are talking to us from, which is very exciting. But first this kind of jump into what Pilot Project is about, what you guys do. Dan, you and I talked, I guess it was almost exactly a year ago now. And we talked about how you have a background from the music industry and that kind of what happens there and the structure there kind of informed what you wanted to bring to be here. Can you explain that and how that inspired the Pilot Project?

[00:27:21] Pilot Project: For sure. Yeah, it's funny. You and I kind of spoke at the budding of our expansion plan. So this is great timing. So as far as Pilot Project goes and being a brewery incubator, as you said, Zoe, the idea was inspired by music. I, prior to being in the beer industry, was actually in the music industry. I was playing as a, you know, quote unquote, musician, attempting to, you know, make a career out of it, and then eventually I found myself into music tech. But as a musician moving to Los Angeles, back in the aughts, without a dollar to my name, I was this creative being with a host of resources. I'm out there available to let me do what I did best or I thought I did best, which was, you know, create, write and perform music. And so if I wanted to record an album, I would go to a recording studio. If I wanted to syndicate my album, I would work with a music label. If I wanted to book a tour, I'd work with an agent. Then of course, if I wanted to complain about the music industry, I would talk with my manager. All of these different resources were available to me to, again, allow me to create. Fast forward a few zip codes later and a couple other jobs in music tech. My wife and I moved from, so I was in LA, then San Francisco, and then New York. Then my wife and I moved to Chicago when we had our first, I joined a company called Reverb. here or there, since we're in Milwaukee today, but there in the city. One of Glenn Allen my business partners, Jordan and I started homebrewing because when we moved to Chicago, we had our first daughter and I could no longer play guitar inside the house anymore because she was always sleeping. We picked up the hobby of homebrewing and very quickly realized how creative this industry is. Now, it's obviously very logical as well. It's similar to songwriting. There are engineers, there are chemists, there are people from all different types of scientific backgrounds in our industry. But creativity is a very important part. And so we thought about the prospect of what would it look like for us to launch our own brewery. And then we did our due diligence and realized, wow, this is super intense. If I want to launch my own brewery, I have to go out there and raise a whole bunch of money. do all the legal accounting and all of the due diligence required to run a business. And then maybe in my 24th hour, I'll get to brew some beer. And so we thought that was kind of crazy. And there are so many creative industries that have resources available to them. Why not the beer industry or the fermented malt beverage industry, which is I think what we align with more designing that's grain-based, And so we said, let's go build a recording studio for brewers.

[00:30:20] Jessica Infante: Nice. And so you built this recording studio, essentially, for brewers. You get hundreds of applications. People pitch you all the time, I'm sure, to be a part of the program. But what makes a brewery a potential good partner for you guys?

[00:30:37] Pilot Project: There are 3 different parts to the application audition process. First and foremost is just the online application. It's an opportunity for brands to talk about the what, since obviously we can't taste your product through the interwebs quite yet. But it's their opportunity to pitch what makes them special in their eyes. Then after that, if we like what we see, we'll jump on the phone. And then after that, we'll bring you in for an in-person interview with a panel of the likes of Glenn, Jordan, myself, and maybe some people from the outside. But it's in all of those conversations where we want to see that you have a creative edge. We want to see that you're looking to do something a little bit different, a little bit left of center, if you will. But we also want to still understand that you've got the chops to focus on growth and focus on branding and all of the other components that do come into consideration with growing businesses. We may just not necessarily need you to be the expert in all of them. I feel like... Feel free to chime in here too, but I feel like where we've seen success with The 13 brands that we've launched thus far, five of them are women-owned. Funky Town was only the second black-owned brewery to ever launch in Chicago. We have an Indian-inspired brewery, and we have people from all different walks of life that have kind of come our way.

[00:32:06] Milwaukee Brewing: I think, I mean, there's so many great products out there these days that it's such a saturated market that you really have to have a compelling story, I think, these days. And that's kind of what we're finding with our partners is they have a great story to tell. And then there's these people that are wanting to relate to the brewers of the products they're drinking. And I think that's been a big need, you know, diversity inclusion the last few years and beer as a whole. So I think we're really hitting that nail on the head right now. And that's kind of where we're seeing success.

[00:32:35] Pilot Project: To use another analog is I spent a couple years, or I spent five or six years at at YouTube. And one of the cool things that YouTube was it was entirely focused on, you know, decentralization taking power away from like the big networks and all the all the gatekeepers of who, you know, preventing creators to reach their audiences. What you never really saw with the growth or proliferation of YouTube is these super niche audiences developing. Someone that was obsessed with dogs on skateboards had a plan. place to entertain themselves. And so I think to akin to what Glenn was saying is, well, having these storylines behind them, but then ultimately being able to build an actual consumer connection is massive. So yes, Funkytown has an incredible product, but they also speak to an audience that is Less than 1% of our entire industry represents them. And so I think that that's supposed to be niche, which is hilarious in itself, but not hilarious, it's horrible. But so I think that that's the extra component. You're kind of getting into guns, sort of talking about like almost like the X factor, what everyone needs to bring to the equation.

[00:33:53] Zoe Licata: All of the brands that you guys work with have very, I think, unique identities that's part of who they are. It's a core of their brands. And you're also working with so many, like a range of products. You have hard kombucha. You have beer that's inspired by Indian flavors with azadi. There's so much going on. Glenn, for you on that product side, how are you balancing coordinating production and innovation for brands that have such a range of identities

[00:34:21] Milwaukee Brewing: Um, that's a constantly evolving process. I gotta be honest. That's probably the most challenging part of this, like for me on my end of the, of this business is just figuring all that out. Yeah, we probably, I was looking on our computer. I think we sourced, uh, we have like over 300 vendors we've worked with in the last three years. I've issued like 800 POs. We've made like 250 like unique products. So. It's a constant balancing act of that, but we're getting better day by day because we can kind of see like, hey, you're going to improve this beer. We want to reuse that yeast. We get better at aligning kind of the ingredients or doing a little bit of mass ordering and such. But I think personally, my background, I've always been like into cooking and kind of different in vendors endeavors that way. And, uh, I live in Albany park, which is one of the most diverse area codes in the entire United States. So I love exploring different foods from different cultures and checking it out. So I'm usually hip to the ingredients they want to use and can kind of lead into that too. If we want to pair something with a certain style of food or do something that way. So I feel like naturally it kind of fits my personality and then balancing all the rest of the buying and ordering is just kind of a crazy, crazy thing that we get to consolidate here now in Milwaukee and do it a bigger scale. So that'll help simplify some of it.

[00:35:36] Zoe Licata: I think we should mention too that this, I mean, you are no newbie to beer. I mean, you were a brewery manager at Revolution before this, like you've been in the industry. So you're bringing some prior knowledge to these new people entering the space.

[00:35:50] Milwaukee Brewing: Absolutely, like having those connections, and then having done it at that scale, it'll be it is completely different there, because you're, you know, what your schedule is for the year, you know, you're contracting, and you kind of already those ingredients are coming for the year, because you ordered them last year. And you know what your schedule looks like. So this keeps us on our toes, because we kind of go probably three months ahead, but we're getting better at having our partners plan ahead a little bit more just so we can shape out their schedule and their yearly calendar. And then we are able to, now year three, have a better idea of what we need.

[00:36:23] Jessica Infante: So let's talk a little bit about how the contracts work with the breweries you partner with. Are they like a traditional contract brewing arrangement or how much control do your partners have in what they're producing with you all?

[00:36:38] Pilot Project: They are not contract brewing style contracts. They're quite a bit more intense, I would say. And the reason being is not intense from a limitation standpoint, it's actually the opposite. It's allowing us to basically partner. When we think about any of the brands that we're incubating, it is truly a partnership. Some of the brands we even invest in. And so the way that that is oriented is when you come in as a partner brewery, you're not just paying us to produce your product. Basically, we are working together, sometimes as the form of in-kind investment, on the product, but also on the brand, on the legal, the accounting. Every aspect, to use another music analogy, is we basically treat that side of our business as the label, the label services. So everyone... And we are trying to streamline this a little bit because it is... Glenn talks about the 300-plus vendors we've sourced from. We have essentially bespoke agreements with each brand based off of whatever their needs or their aspirations are. Now that's from the incubation portion. As you grow, and right now we've been subcontracting brands to other breweries across Chicago, but we are consolidating those efforts into this Milwaukee facility. As you grow and get a better handle on where you want to be, the idea is that Pilot Project should be able to fill those gaps. And that's obviously production, but that can then be distribution, that can be recipe R&D development, that can be, again, all of the other aspects, more of the business administration. So it just kind of depends on where they want to fall.

[00:38:30] Zoe Licata: So you guys are a few years in now and you're starting to get to the end of some of these initial partnerships that you had, for example, like Luna Bay Boot Company just quote unquote graduated from the program. What does your relationship look like with partners like that after they have moved on to their next step?

[00:38:49] Pilot Project: So you're kind of catching us at this point where we don't totally know, because the intent of this facility, it's way bigger than our space in Chicago. And so, you know, once upon a time, you grew up to be a sustainable small brewery. And then we kind of graduated you and you had to go, in a sense, fend for yourself, though, with our support, obviously, which is what the likes of Luna Bay did. They went off and contract brewed in Colorado, and now they're back you know, in Southern Illinois. But in a perfect world, we're kind of calling shenanigans on the idea that you ever need to have your own facility unless you want that facility to be a specific type or aspect of your brand, like a brewpub or a tasting room. So in theory, someone, you know, validates their ideas with us in Chicago, and then they hit an inflection point where they can scale in our production facility. So I think that Now, when someone comes to us, we are the stupid corporate term that I keep using, but it's totally relevant. It's like frictionless go-to-market, but it's also frictionless growth. We should, in theory, be able to handle your idea and it's like fledgling phase, but also your flagships as they seek regional or national distribution.

[00:40:14] Jessica Infante: So Zoe teased it at the top. You guys acquired the production space that formerly housed Milwaukee Brewing up there in Wisconsin, did an $8 million seed round to get there. That's a fairly sizable production facility. I believe it's not far from where the Milwaukee Bucks play. What drove that decision to acquire that? Was it purely to scale up?

[00:40:40] Pilot Project: Definitely to scale up. I think We were at one point in time looking to build our own facility, and then we came to learn it would take 30 to 36 months to build. So we started shopping around for spaces or places to partner, what have you, just to consolidate since we were dispersed across so many different places. gap that this fills for us is absolutely production capacity. I think, and we'll see where Glenn wants to go next, but the idea would then be to launch smaller incubators, like lead generators of ideas and brands and other markets, but this where the void that this fills is you know, being able to scale brands nationwide.

[00:41:27] Milwaukee Brewing: Yeah, I think this really gets to take a lot of the stress off our brew house in Chicago because it is just a 10-barrel system. So when we get to open this new market in Milwaukee and do a beer, a batch of beer that's 60 to 80 barrels now and kind of split that across the two cities and distribute a larger part of Chicagoland as well, that just kind of gives us more opportunity to be creative back at home now when those two empty tanks and for breweries like Funky Town and who might eventually want to do their own space and have creative small batch stuff, we can still do their larger stuff like hip-hops. There are series that they have. We can take the flagships so that doesn't completely dominate your brewery. And you can do the fun stuff that you got into it for and what you want to do.

[00:42:11] Zoe Licata: Does this also change the number of clients that you could possibly work with or the types of future partners that you'll have? How does that affect plans moving forward?

[00:42:20] Milwaukee Brewing: It frees up a little space, definitely that we're finding they are growing at such a rapid pace though, that they are to keep their innovation going and keep their growth going. It is a bit of a challenge, but I think we will free up some space soon to add some people.

[00:42:34] Pilot Project: What I also like is that it's where we, I think our orientation of what a brewery was three years ago was, you know, you're a brewery, you've got your fried chips, you've got your seasonals, your limited, your limited releases, what have you. What it allows us to work with now is you might... Why does a brewery have to be all of these different brands? You may have an idea to release one product or stuff like that. And I know people have tried that in the past, but because of the demands of Again, overhead and all the things that may prevent you from focusing on what your goal is. I do think that these spaces, these voids that Glenn's framing out will allow us to be even more open-minded with the types of brewery partners that we work with.

[00:43:20] Jessica Infante: How many partners do you feel like you can comfortably work with once you have the new space up and running?

[00:43:26] Pilot Project: Per space? I think that's a big deal. You still wouldn't do more than like five in Chicago. Yeah.

[00:43:31] Milwaukee Brewing: Right? I think that'd probably be the max there is five. It's hard to say because like Dan said, each product can be so different. So depending on the demands, like a demand of a full brewery is a lot more than a single product. So I think it depends on the mix of products, but I'd say that five numbers stands pretty true.

[00:43:47] Pilot Project: I think it'd be nice to be, you know, in theory, you could have a different brewery for every tank that we have, but they also want their own flexibility to flex their muscles and do different things. So I think what actually would probably where the number is truly impacted is that your velocity of growth is going to increase. So. while we're only working with five breweries at a time in Chicago, that five breweries could change over twice within the span of one year as we're scaling other businesses up to the Milwaukee space. Now, how many brands do you work with in Milwaukee? That's a whole other question mark because that just comes down to logistics. So I think out of the gate, similarly, it'll probably be five, six different brands at a given point. But It doesn't mean that we couldn't do more. We just have to figure out how to handle the fine checkers.

[00:44:38] Jessica Infante: Well, and when you're making a quantum leap like that in size and scale, how are you guys sort of preparing for basically, I don't know, what are you doing? Like 2x'ing, 3x'ing, 4x'ing, 10x'ing what you can do in Chicago? 10x'ing for sure. More than that even. And we're drinking a lot of coffee. But does that lead to like a lot of like back of the house hires or like, how do you sort of prepare that internal infrastructure for that?

[00:45:09] Milwaukee Brewing: Yeah. Uh, here in Milwaukee, we actually hired the Milwaukee Brewing staff. So we do have a staff here and we are going to add team to the team, probably in Chicago as things move on as well. But that's, that's definitely a big part of it.

[00:45:22] Pilot Project: The fun challenge too. So like Glenn's entire team, Glenn operates as our chief product officer, head brewer, But his entire team is basically made up of head brewers. He's got Todd, who's overseeing innovation for us. He's got overseeing the incubator space. And then, you know, a lot of other people that have had the title head brewer and, you know. on their resume in their past. And so the reason being is that by design, we can't create in a single homogenous style. So we have to have totally unique brains helping to craft and expand our expertise. So we're going to continue If someone comes like putting together the mighty ducks, if someone comes forward with a great talent or a specific skill set, I feel like they're going to get a look from us.

[00:46:19] Milwaukee Brewing: Definitely different perspectives and walks of life are crucial to what we do, I think, and the kind of having those different perceptions helps everybody see everything as a whole, I think, but also. On top of adding to our team, we're adding to our sales team as well. So that team is growing quite a bit and hiring some people in Milwaukee as well to kind of start pushing the word out there of what we're doing, grow the reach.

[00:46:40] Zoe Licata: You mentioned Todd Howe, who you guys recently brought on to the team. And he is a big time beard and veteran. He's been in this space for a while, worked at lots of companies, including... Surly is one of them most recently. What is he bringing to the table for you guys?

[00:46:54] Milwaukee Brewing: Tremendous amount of experience, technical and creatively. I mean, if you told me 10 years ago, I'd be working with Todd Hogg, I would have kind of laughed at you probably, but it's pretty humbling and cool to work with somebody like Todd. But yeah, he just brings so much technical, his microscope on going through everything. It's just, it's that extra 20 years of knowledge he has on top of me that I'm getting to learn from him every day. So it's been a lot of fun so far.

[00:47:21] Pilot Project: Todd's also the kind of guy where he, because he's done, he's held so many roles in this industry that it's, when we started talking to him like over a year ago, just from a friendly perspective, not about trying to hire him, but his whole thing was he just wanted to do new, interesting stuff. And so this is, you know, Glenn's essentially created a playground for him to go create. It's process innovation, it's product innovation, it's all of these different things that he gets to kind of get his hands on. And when you spend an hour with Todd, you know, this is he's a tinker. And so this is exactly what he needs. You know, it's a great space for him to be.

[00:48:02] Zoe Licata: Anyone who is referred to as Todd the X-Man, I feel like it's a pretty fun person to collaborate with. You mentioned that you're adding more salespeople too. With now this new space in Milwaukee, do existing partners get to also expand into new markets with you? How does that work?

[00:48:23] Pilot Project: Yeah, I mean, the idea is that we should, so I'll use it again, the friction, let's go to market, is that we should be able to incubate your idea, grow it, and also bring it to market. And bringing it to market is one, selling in our tasting rooms, then also distributing it. We hold a self-distribution license in the two states that we're currently producing in. And then we have established a lot of relationships with distribution partners outside of Illinois and Wisconsin and such that a brand could very well, I mean, Luna Bay is a great example. Even on our small system, we had distributed Luna Bay to over 10 states, I think, and they're within like nine months of existing. And so the same thing reigns true here. We just now have a lot more where we were like parsing out a single pallet to send it to five different states where now we can ship a couple. Is that your biggest brand? They've been distributed the furthest. I think, I mean, again, it all comes down to what your goals are. We've had four brands launch their own facilities. We've had a couple brands syndicate outside of just Illinois and Wisconsin. And then we've had other brands that said, nah, I wanna do 10 barrel batches of crazy stuff. And that'll put my kid through college and I'm good.

[00:49:47] Zoe Licata: I mean, you're talking about doing this big production increase, but it sounds like you're still kind of, I mean, you're at pretty much your limits almost already with this big space. Going forward, what are you looking forward to? What are your plans there? How do you continue that growth?

[00:50:04] Pilot Project: Well, we've got some big shoes to fill here in Milwaukee, but I feel like both Glenn, I'm going to speak for you and then I'll see what you say. Both Glenn Allen Todd have had robust barrel programs to their credential, and we've, I think, barrelaged once in two wine barrels at the Chicago spot. So we've not ever done that, which sounds really exciting to me. and then for us it's about flexing what can we do with this facility these guys have been breaking down and we're essentially re-engineering this entire brew house so that it can be as flexible as we as we want. What do you think?

[00:50:43] Milwaukee Brewing: I think for me it's exciting is to give back to having these production tools like having a center for your We're getting the nerd out a little bit on getting our cogs down because we are a cogs-heavy business, the way we're trying to always be creative. But I think we look at it that we're trying to build a business and make a product. So it's not all about making that dollar off that product right away. We reverse-engineer the cogs because we think, let's make the best product we can. And then, hey, it's a little expensive, but what can we do to get that price down and still have that really high-quality product? So having this bigger brew house, it's better efficiencies. a centrifuge, just bigger tanks and all the tools like a pasteurizer, a better canning line to get lower DOs. It's kind of just like a fun playground to get our quality up there and get our costs down just to make things a little bit more profitable, but also keep doing the same message that we're trying to do.

[00:51:34] Zoe Licata: It sounds like a beer nerd's dream, just being able to try so much new stuff and have new equipment.

[00:51:41] Pilot Project: I mean, I feel like we think about it that way. And then we even, from a public-facing perspective, we think of it that way. Because an important piece within our business is having that first point of consumer consumption be on our grounds. And yeah, of course, everyone wants a tasting room because it's high margin. We love it for that reason too. But we also get to gather direct feedback. I love Untappd for its place in the world, but this is actual organic feedback that we gather. In this facility, there's 15,000 square feet of public facing space, whether indoor or outdoor. There's plenty of room to really see that.

[00:52:23] Zoe Licata: Do you guys have a timeline for when people will be able to start checking those things out? I know now is not the most speedy process or time to do any sort of renovations or get any fix.

[00:52:41] Pilot Project: We're close. You're getting your first trial run in tanks.

[00:52:46] Milwaukee Brewing: Hopefully, if not the end of this week, early next. We'll have a trial through the brew house and then hopefully we brew in full time within a week or two.

[00:52:54] Pilot Project: And then we're, I mean, very fortunately, the Milwaukee team and the adjacent restaurant that was attached, we took both of those over and they were beautiful spaces. So now we're not, it's not like we're tearing out walls. We're just repainting it and making it feel a little bit closer to Pilot's vibe.

[00:53:13] Zoe Licata: Well, thank you guys for taking the time out of doing all that new stuff to chat with us. We appreciate it. And we're looking forward to see what else you guys do and what else comes out of Pilot Project.

[00:53:24] Pilot Project: No, we appreciate it. This is fun. Thank you.

[00:53:30] Zoe Licata: And that's our show. Thank you to Abel and Glenn for joining us. And thanks to my colleagues, Jess and Justin, for hanging out with me. And thanks to our audio team who makes us sound listenable and enjoyable. Don't forget to rate and subscribe on your podcast platform of choice. Otherwise, we will see you next week.