Brewbound Awards 2025: Rising Stars - Destihl Brewery

Speaker 1 [00:00] Joining me now is our next rising star, and it's Destihl. Founder and CEO Matt Potts is joining me now. Congratulations, Matt.

Speaker 2 [00:10] Thanks, Justin. Appreciate it very much. I really appreciate the recognition.

Speaker 1 [00:14] We're excited to get to honor you this year. So, uh, Distill has really bucked the industry's trends. You, you had 53% growth, I think it was last year. This year, you've got double digit growth that you're pacing at. How have you approached this market to find those pockets of growth because you're still doing so within craft. You haven't really ventured out of that.

Speaker 2 [00:39] No, exactly, and it would be easy and tempting to do so. In the end we're we're beer guys and we've kind of determined that, you know, we're just going to stick to what we know and what we do best, which is kind of one of my points. But, you know, our approach has been really a multi-pronged approach, not putting all our eggs in one basket. I think. Starting obviously during the pandemic 2020 through 2021, we had to manage our company through that as everybody did just to survive, but we also had to manage it from a standpoint of what's going to happen on the other side of this. We have to manage this to come out maybe ideally even stronger on the other side. And so to do that, we decided that we really needed to diversify our revenue sources. And one way that we were already kind of doing before this big downturn in craft, certainly before the pandemic was kind of dabbling in contract brewing. We started doing that in 2018. Um Uh Sometime probably shortly after the pandemic to kind of proceed with this strategy to come out of it stronger, started taking on more contract brewing clients, mostly local, Illinois, mostly. But then that really started taking off in 2023, uh. As you know, we even found growth during the pandemic year of 2020, we started doing an expansion once we started reaching some capacity issues, or at least I like to stay way ahead of any capacity issues. So in 2023, 2024, we embarked on a pretty major brewery equipment expansion. So we were doing contract brewing, not Because we were trying to just fill capacity, but also again to diversify revenue sources. So if anything we actually had to expand our brewery in order to lean into that for larger opportunities on that front. So during the last couple of years we doubled our capacity at the brewery and then some really since then. And then I'd say starting in 2022, you know, before that we were kind of trying to chase every, every trend. So that's kind of when we decided to stop chasing every trend, every shiny object, whether it be hard seltzers, boots, which we did both of those for a stint, more recently, THC.

Speaker 1 [03:12] It gets exhausting chasing all those trends too, and you know, if you don't have the passion for it, then You can't really Dive in head dive fully into it. I, I feel

Speaker 2 [03:27] like. Well, plus, right, and I, yeah, and I was guilty of it as much as anybody, like, oh my gosh, we need to diversify by following trends. That was kind of the initial mindset, but it's hard to get your craft beer team, you know, your, your brewing team to get passionate about, you know, seltzers and some of these other products, you know, and I felt like, uh, you know, for a while there I was kind of Forcing those products onto our brew crew when we probably should have just not done them at all. So, to your point, and I think the other thing, other than kind of switching the chasing trends thing in 22, the other pivotal moment for that year, which really has started this higher growth rate since then, uh, you might recall in 2021, Deadhead tour bus, Hazy IPA won in the Juicy hazy IPA category. There were like 427 entries that year and we won the gold. So we kind of went from a brewery that was really only known for its wild sours, the canned wild sour series that we launched in 2014. Suddenly we've got this gold medal IPA and rather than that perhaps being perceived as a fluke, we actually got a bronze that same year for Deadhead Haze of the Dead in the Imperial juicy Hazy category, which Help legitimize. Our hazy program, our IPA program and uh and more importantly, obviously for business purposes actually gave us an opportunity that year to start leaning into IPAs and diversifying from just our wild, you know, not just, but primarily our wild sour series which up to that at that point was probably about 70% of our production volume were sour beers, which, you know, in hindsight now I'm certainly glad that we didn't keep leaning 100% or 70% into the sour beers because that That style has been down in the industry as well. So, um, and then just to kind of finish up and then we can kind of jump into some more topics, but as far as this continued multi-pronged approach to achieving growth, um, really thinking of our Our brewery operations, our retailers, our distributors, we really started focusing on skew reduction and just brand focus, not coming out with as many beers, not as many rotating beers, seasonal beers. I'm kind of actually enjoying some of this day and age when beers are going back to just year-rounds instead of rotation nation and you have to have something new every time somebody. Uh tries a beer from your brewery, so it's been really refreshing to focus more on your rounds. And of course, Um A big thing for us over the last, really mostly starting in 2024, the year of a lot of that growth was leaning into our strategic partnerships. So this is kind of a niche just on the side of our contract brewing versus our own brands. It's kind of a merger between the two. Um, and that involves like collegiate brands like for the University of Illinois, the Fighting I like ILLIPA, Husky Light. Evel Knievel is another strategic brand or co-branding partnership that we have with Kelly Knievel, who's Evel's son. We did a big collab with Sucker Punch Pickles with our pickle beers, and now we've extended that line into sucker punch or spicy pickle beer. So, uh, You know, I think we've been kind of chasing like a 30% market share, maybe, you know, over 20% at least on pickle beers. Who knew that was a, you know, segment.

Speaker 1 [07:10] My colleague Zoe knew that it was a trend, so she is all about pickle beers.

Speaker 2 [07:15] It's done really well. What we, you know, kind of viewed as gimmicky, turned into this pickle beast, you know, that has been a good thing, and the brewery definitely smells different on those days. We smell like a pickle factory versus a brewery. Well, especially when we're brewing the brine here, and then the last couple more strategic brands, uh, partnership brands. Um would be Hanson Brothers for Umhops and then Wrexham Lagers, kind of the bigger, more, you know, more recent one that we just started last year, that's owned by Ryan Reynolds and Rob McElaney, who also owned Wrexham AFC. So, um, you know, about a year ago they also bought the brewery, so we're kind of Kind of waiting to see what all they're going to do with that brand. We do know that. There's a lot of potential there with what's happening in, you know, football or soccer as we call it these days. So pretty exciting things there. So all those things together. I think has allowed us to find growth in a in a struggling craft beer market. You know, we couldn't just rely on what we had done before, um, you know, before the pandemic, before even before the, you started seeing some indications that the craft was struggling, you know, even before the pandemic, and then certainly that was the challenge of challenges and then the inflation and everything that happened after that.

Speaker 1 [08:42] How much of your volume is now coming from those partner brands?

Speaker 2 [08:46] Probably a drop in the bucket in some ways. Now Wrexham Lager is going to be the higher, higher volumes out of those and the pickle beers, of course. We kind of treat those as, you know, kind of divide up our volume between pure contract volume versus our brands and partnership brands, um, which since we're managing the sales of those, we pretty much kind of lump those in with our brands. So it's, it's about 55% us, 45% contracts. It kind of ebbs and flows a little bit, um. And an increasing amount of, you know, our brand volume is, are those strategic beers, but also with the traction that we're getting behind the Deathhead series, which has been refreshing versus sour beers, um, as you probably can imagine and know, uh, sour beers in any given market are going to be a very small market share, so that's why it still has always had such a wide distribution footprint. Because we had to go wide and not as deep, whereas if we were just making IPAs, we could, you know, could have stayed, you know, more regional back in the day. But now we kind of are able to take advantage of that wide distribution network that we created because of the Sowers now have a wide distribution network for Deadhead, which is another been another great thing for that for that brand. Well, I,

Speaker 1 [10:02] I'm curious to know how are you pacing this year in terms of barrels or cases.

Speaker 2 [10:07] I don't think we'll see the 53% growth that we saw last year. A lot of that was coming off that expansion that we did. We wanted to play it pretty cautious, having, you know, with signing on with Wrexham Lager and all that, and we, we didn't really add any more significant contract customers after the big one that we added in 23, and then since then they've moved all their production to us, so we kind of have waited for that to come through. In terms of sales like Nielsen scan data, we're up 19% in sales over the last 52 weeks and in the last 13, so you know, more current media trends, about 15.6% percentage growth, so a slight slowdown. Uh, which you're seeing obviously in craft still. So that's, you know, of course Nielsen scan data that's just in, you know, stores that report that scanned data, so that it's not draft or anything. But if we just look at the Nielsen data, so once we start peeling off these strategic brands and kind of dig into that number like where's that growth coming from, which then kind of ties back into our multi-pronged strategy discussion, um, about 8. Our own brands, our pure distilled beer brands are up about 8.6% in sales over the last 13 weeks. Our IPAs are about 19.7%, which will take that for sure. Wild sours, as you can imagine, aren't up as much, but they are up a little, about 1.4% over the last 13 weeks now. A lot of that is self-inflicted because we actually discontinued our wild pack, which is our wild sour variety pack, at the beginning of this year. So all these comparables for those sours are actually based off of us having that wild pack last year, which is, you know, significant revenue source for the wild sour series, and A volume driver for that series. If you, if you pull that wild pack out, sours are actually somehow up 21% even in a difficult sour market. But we've got to get past this one year cycle of not having the wild pack in the market to kind of really be able to track those trends for our sours. One thing we've done with With the sours in particular, uh, you know, again, going after the volume play a couple of years ago, we brought that back because our sours are extremely expensive because we're using a real fruit, fruit puree, etc. So, you know, we, we did the 12 pack variety pack, we did 6 packs instead of 4s. So we made a big change this year that also kind of drove that volume down, which was changing the Wild towers back to what it was originally, which was a 4 pack of 12 ounce cans to kind of keep the price point on the shelf more reasonable. The margins in sour beers are not so great in a six pack, so we changed that. So that's, that hasn't helped volume. It has. Been fine on sales, um, but I think again after we cycle for a year, we're good collegiate brands, so those have been out in the market. Um, since a little bit over a year, so we released those, uh, all, all three of those college brands last fall of 2024. Um, so this, you know, this last 13 weeks data that we're getting now is actually real data for us. The collegiate brands have grown over 40% over, you know, when we launched them, which is great, if you combine all of our strategic partnerships. So that would include Wrexham, all the college brands, Evel Knievel, etc. It's 45%, almost 46%. So it's really those wild sours that are kind of keeping us a little bit down this year, but we had to realign that brand to kind of bring it back to what it was originally, kind of take that band-aid off or rip it off, you know, from a harming our volume growth for this year a little bit, but I think it's going to be a lot better. The margins are going to be better, which is a critical time for that. If you look at, obviously that was all Nielsen data. If you look at depletions and VIP, so now you're talking like drafts as well, you know, distributor depletions, so this is more just pure volume of just all of our brands last 52 weeks. So this would again include on-premise. I think we're up about 10.5%. Again, double digits, we'll take it. So

Speaker 1 [14:29] yeah, absolutely, and you should. It's in this market, yeah, it makes total nothing to feel bad about.

Speaker 2 [14:40] And the contract brewing, of course, isn't in any of that. It's not in VIP depletions. It's not in Nielsen, but just based off of our own sales, that's up about a little bit over 13% year to date over last year. Sorry, I cut you off, but that was kind of the last piece of the multi-pronged approach. So, um, but yeah, it's, it is, we do feel fortunate, um. I, you know, it's going to get more and more challenging as these trends in craft continue. I would imagine, especially as shelf space keeps disappearing and there's more competition for that shelf space with other beverages, whether it's RTDs, we'll see what happens with THC beverages, etc. but we are, we are pleased that we have found a way to navigate through a very down and challenging market. And don't get me wrong, I would want much higher growth, so we're not where we want to be, but we're definitely, you know, in a decent position.

Speaker 1 [15:36] No, it's, it's always good to be hungry for more. So when you reflect on 2025, what do you consider Distill's biggest win?

Speaker 2 [15:44] So some of this is kind of coming off of 2024, so. It was really a 20 2024 win, but that got announced in 2025, I think when the brewers Association released the industry review and showed us, you know, growing at 53% and increased our ranking from 160 to 75 in one year, which is pretty awesome. I know Brewbound had that article about, um, you know, a limited number of regional breweries that were finding growth and that. I believe we were leading that growth in that article, which was great. So, so that was a highlight, you know, great, great thing in 2025. So kudos to Brewbound on that. Certainly completing a very challenging two year plus expansion of the brewery. The most challenging part was trying to, trying to upgrade a canning line while you're trying to stay in production. And so our canning. The crew bore the brunt of those challenges of equipment upgrades. That was a really difficult time. Certainly another big win this year was the 2nd gold for two of us in the hazy IPA category. So that makes 2 goals for that beer. No other brewery has won 2 medals in that category. So we're especially proud, you know, of the brewery and our and our team for executing that beer so consistently well. Obviously maintaining growth in this industry is another win, I think for this year and to close out the year, winning the Rising Star Award at Brewbound is a, you know, obviously a highlight of 2025. So, you know, and again we thank Brewbound for that. So, and now it's just how we move, move forward into next year and all the unknowns and challenges that'll that'll happen for that, for that next year, so.

Speaker 1 [17:35] Well, speaking of next year and the unknowns, uh, What do you consider is the biggest opportunity ahead for Distill?

Speaker 2 [17:44] Well, I think as you've noticed that I always have to look at things in multi-prongs. Like I can't just rely on, you know, or hang our hat on any one potential opportunity. There's certainly some that I'd like to hang our hat on if they materialize, but I have to, you know, assume usually just to be more conservative, that some things won't work out. Uh, you know, operationally, I think improving our sales execution again, increasing focus with fewer brands, which also creates efficiencies on the production side, continuing this sustained growth that we have. Um, and you know, I think next year our release calendar is even more streamlined than ever. We just have been slashing, cutting, you know, it's sad to see some, some beers go away, but you know, I think in this day and age you really have to, given the cost of maintaining so many beers and the inefficiencies. I think another opportunity for this year certainly be to continue to leverage. The success of the Deadhead IPA series with the wins that we've got. Obviously IPAs are a much higher volume than sour beer, so, as I already mentioned, so that's a huge opportunity for us. We were able to leverage the first goal for Tour ofbus, so hopefully we're able to leverage that somehow again to maintain growth. It is between that and our West Coast IPA. those are Tour ofbus and our West Coast IPA are the two highest growth brands within that series. I think a strategic. Partnership opportunity could be the World Cup for Wrexham Lager next year. It could be a huge opportunity. So I know they're very focused as a team on on those opportunities which could turn into our opportunities in terms of beer production and sales for the collegiate brands, a great opportunity will be when the University of Illinois and Illinois State University face each other off in the Final Four, you know, for basketball and March Madness. A guy can dream, right? I would take one of those, but yeah, anyway, that would obviously be a great opportunity, um personally and, you know, for the brands, but um but we'll see how that one shapes up. So

Speaker 1 [19:56] that's pretty forward thinking. Right.

Speaker 2 [19:58] I'm not a sports guy, so, um, nor do I pretend to be. So I'll stick with beer.

Speaker 1 [20:04] Yeah, well, It's working out for you. So we can be happier to celebrate you and your team at Distill. So congratulations, Matt.

Speaker 2 [20:15] Thanks Justin. Appreciate it.