MiBiz is now Crain’s Grand Rapids Business. Visit our new site at crainsgrandrapids.com

Published in Small Business
City Built Brewing Co. CEO Ed Collazo. City Built Brewing Co. CEO Ed Collazo. PHOTO BY STEPH HARDING

Craft brewers retool to maintain profitability

BY Sunday, April 11, 2021 05:45pm

Looking back on a 2020 plagued by the COVID-19 pandemic, Ed Collazo didn’t sound like a business owner who just saw his company’s revenue plummet by half a million dollars for the year.

“2020 was a blessing, dude,” said Collazo, CEO of Grand Rapids-based microbrewery City Built Brewing Co.

There is certainly no disputing that top line revenue for virtually every craft brewery took a hit in 2020, a year when brewpubs and taprooms were either shut down completely or operating on strict capacity limitations. Still, some breweries did see the hardship as an opportunity to fine-tune their businesses.

While the pandemic forced the hands of Collazo and his peers to make drastic changes to operations, Collazo focused on growing the most profitable aspects of his business while leveraging available state and federal relief grants.

[RELATED: Craft beverage producers adapt marketing approaches, deal with supply chain headaches as pandemic drags on]

“We were more profitable in 2020 than we were the year before on $500,000 less in sales,” Collazo said.

Labor adjustments

Some of the changes Collazo implemented at City Built were similar to those made in other West Michigan breweries. The pandemic highlighted to Collazo that his company carried too much labor. 

The pandemic gave him an opportunity to re-calibrate this area of his business as, when statewide shutdowns went into effect, the brewery went from around 50 employees to just three overnight.

“It just became a thing where: How do we wisely add people that match our new sales?” Collazo said. “And, what we’re finding is that our sales are almost back to what they were before the pandemic only without all the labor.

“We have half the kitchen people on any given day but our numbers are looking pretty close to what they were prior to COVID.”

City Built made a few adjustments to accommodate a leaner crew, such as opening at 3 p.m. instead of from 11 a.m. to 11p.m. each day. City Built also stopped serving customers at their tables and, instead, started counter service.

[RELATED: Craft beverage suppliers see highs and lows during the pandemic]

“I don’t see that changing (back) — I think it’s awesome that the public is allowing us to make that change (because) they continue to show up. … I think the changes we made to our food menu and to our beer menu all help to accommodate the counter service and quick food.”

Collazo also found dollars in the types of beers City Built brews and how they were distributed.

Before the pandemic, City Built distributed 50 percent of its beer offsite, a figure that changed to just 5 percent currently. The brewery is canning, but only to make it more convenient for patrons to grab-and-go or drink onsite within a designated social zone.

Because of this inconvenience, the average number of beers sold went from less than one per person to almost three per person, according to Collazo.

As for selection, City Built focused on hot-selling styles like hazy IPAs, fruit-loaded sours and pastry stouts. Early in 2020, City Built brewed a batch of pastry stout that used 250 pounds of coconut. It sold in a matter of weeks for $30 per four-pack.

Collazo also has embarked on collaborations with multiple breweries across the state to raise City Built’s profile.

“These are breweries that had big followings and were brewing beer that we wanted to make,” he said.

Those collaborations were done with names like Ascension Brewing Co. in Novi, Drafting Table Brewing Co. in Wixom, and with hip-hop group Run The Jewels, which routinely collaborates with breweries around the world to create a portfolio of craft beer.

“We didn’t have a banner year (as a business) but our brand had a banner year,” Collazo said. “We were down half a million dollars. We found a way, with less, to be more profitable. … As things open up, we have lots of momentum and are positioned very well to take advantage of the fact that now people are willing to get out and people are getting vaccinated. Our concern is that we can’t make enough beer (to meet demand).”

Universal struggles

David Ringler, founder of Cedar Springs Brewing Co., went through a similar exercise as Collazo and his fellow brewery owner brethren.

“When we were in regular operations, we probably carried a little more fat than we had to. Things like this force you to focus on the things that are absolutely necessary rather than things that might not be necessary,” said Ringler. “For that reason, when this all happened, we all tried to be able to operate as thinly as we can and get by with lesser revenues. The fact of the matter is that revenues are significantly less and your overhead is still based on revenues.”

While some breweries may have weathered the storm better than others, Ringler said that “profitability” can be a deceiving word in this case, especially with revenues taking such a dramatic hit and many breweries surviving on relief grant money.

“The (Economic Injury Disaster Loan), (Paycheck Protection Program) and other programs have injected cash into the system and allowed people to get by with other income,” Ringler said. “I don’t think that’s profit — because it’s not — but it is positive cash flow. And cash flow is king when you get down to it.”

Read 3684 times Last modified on Sunday, 11 April 2021 23:35