The story below was part of a larger Maryland craft brewery project I worked on while at Capital News Service at the University of Maryland. You can see the entire project here, including three videos I shot and edited and another piece on Flying Dog Brewery and Evolution Craft Brewing Company.
For the Love of the Beer: Small Craft Breweries Discover Unique Business Challenges
By Anna Weaver
ST. MICHAELS – In 2006, Adrian and Lori Moritz found themselves without jobs and with a newborn daughter. They decided the only thing to do was to start a brewery.
The young couple sold almost everything they owned and moved from upstate New York into Adrian’s parents’ home in St. Michaels. With their home renovations skills and a bank loan, the Moritz family built out an old mill building to house their new company, Eastern Shore Brewing.
“Our safety blanket was yanked out beneath us,” said Adrian Moritz. “All the reasons we didn’t want to do it were taken away.”
The Moritz family is just one of many craft beer businesses that have started up in Maryland in recent years. But while the businesses may be small, the amount of work and struggle that go into running them is not.
Since the mid-1970s, when the national Brewers Association started tracking craft breweries, through the end of 2011, 1,247 craft breweries have opened and 421 of them have closed, a 34 percent failure rate. For brewpubs over that same period, the failure rate has been 48 percent.
Craft beer is built on a grassroots movement, according to J.T. Smith, the executive director of the Brewer’s Association of Maryland. “We’re all small, independently owned businesses,” he said. “We don’t have a tremendous amount of money like some of the larger transnational brewing companies have.”
The recession didn’t help those small business breweries either, said Paul Gatza of the national Brewers Association. “Beer is not recession proof. And the recession did impact craft breweries, but not as much as the larger brewers,” he said.
“After things calmed down, we really saw craft beer sales grow from low single digits up to double digits,” Gatza said.
“I would say that I traded wearing a suit for wearing flip flops,” Adrian Moritz said. “I also traded having Saturdays and Sundays off for working 120 days straight. It is a commitment that is rivaled only by parenting. It is all day, all night, every day.”
He and wife Lori Moritz opened the doors to Eastern Shore Brewing in St. Michaels in August 2008, during the height of the financial crisis.
They had been living in upstate New York and homebrewing for several years while dreaming of starting a brewery “some day” but not wanting to leave the security of either of their jobs. Then they had a daughter, and Lori Moritz decided to take a buyout from her executive position at Xerox.
Six weeks later, Adrian Moritz was laid off. With no back-up plan, the couple started searching for an East Coast brewery location. They settled on St. Michaels on the Eastern Shore. Adrian Moritz’s parents had retired there, and they thought the small town environment would be a good place to raise daughter Joycelyn.
“We sold every single thing that we owned to have collateral for a loan,” Adrian Moritz said, including two homes they had renovated and sold.
The bank loan allowed them to rent and completely renovate part of a former mill on St. Michaels’ main street. They’ve self-financed three brewery expansions since then by putting all brewery profits back into the business, living with Adrian Moritz’s parents and having a steady paycheck from Lori Moritz’s job as a contract administrator with Sotera Defense in Easton.
“It was a lot harder than we thought,” Lori Moritz said. “Every time we turned around we were spending more money, spending more money.”
The Moritz family said they could see the recession’s effect on St. Michaels when less visitors came to town and local stores started to close. But they said the visitors that do come are buying more beer.
Keeping expenses down, using social media and a focus on customer service to market themselves and a successful tasting room have kept them in the black. They’ve also found a support network with other St. Michaels businesses.
Eastern Shore Brewing bottled its beer for three years before the Moritzes realized they were making more money from tastings and distributing draft beer. They now produce about 400 barrels a year with distribution up and down the Eastern Shore. They recently expanded to Delaware and hope to be in Anne Arundel County soon.
They’ll keep the tasting room open late if there is even one customer in the store. The Moritzes, their brewmaster Randy Marquis, their bartender, and friends that know the beer do all the events and promotions themselves.
“In this economy, any opportunity to make a dime that you don’t take on, somebody else will,” Adrian Moritz said.
Another example of success? “We’re married, we have a daughter, we live with our parents and own a business together and we haven’t killed each other yet,” he said.
Jon Zerivitz and Kevin Blodger dove into uncertainty when they left their jobs as a freelance designer for T. Rowe Price and as head brewer at Gordon Biersch Rockville respectively to open Union Craft Brewing in the Hampden-Woodberry neighborhood of Baltimore in June.
“To up and leave for something with no clear future yet was definitely scary and still is scary,” Blodger said. “But I think we’re succeeding. I think we’re doing a good job and we’re trying to look forward to the future smartly.”
“A little uncertainty in your life can be a good thing and motivate you to do bigger things,” Zerivitz said.
Both Baltimoreans have young children, but had the support of their wives and a desire to get more into the creative side of brewing by branching out into their own business.
Like Eastern Shore, the Union brewery start-up cost a lot more than expected. Most of the funds they’d raised from investors were gone by the time they’d completely renovated a sign factory on Union Avenue.
But business has been good so far, with strong word of mouth promoting the brewery within Baltimore. They’ve got almost 2,000 followers on Facebook and great foot traffic.
“I think that people were just really excited there was a brewery [here]. And people love good beer,” Blodger said.
A couple of awards in their first year can’t hurt either. Union’s Balt Altbier won a gold medal in German-style altbier at the American Beer Festival in Denver in October and they took home several awards at this year’s Brewer’s Association of Maryland Governor’s Cup.
Union is brewing 100-150 barrels a month right now and wants to be up to their 12,000 barrel capacity in five to 10 years. Their ultimate goal is to be a strong Mid-Atlantic brewery that’s part of the fabric of Baltimore.
As Zerivitz put it, “I’m building something for the city and for my future and for my own family’s future.”
Like the Union guys, Paul Rinehart of Baying Hound Aleworks in Rockville had his wife’s support in starting a nanobrewery.
“My wife also wanted her basement back and told me to go and get a warehouse,” Rinehart joked. “So that’s what I did.”
Rinehart has beer in his blood. His maternal great-grandfather was on Carlsberg’s board of directors, his paternal great-grandfather was a bootlegger in the 1920s and Rinehart himself started home brewing when he was 14.
He tried a career as a chef before swearing he’d never step in a kitchen again. In 2010, he used about $30,000 to start up Baying Hound. “I wanted to start small and scalable,” he said.
Rinehart says that dealing with the paperwork and bureaucracy of having a brewery is challenging but he loves that he and his brewing partner are brewing beer “the way we want to do it.”
He says Baying Hound is breaking even right now but doesn’t make enough beer yet to turn a profit. Rinehart hopes to expand soon to a new location with a 15-barrel system and start distributing kegs. A good distributor also helped Baying Hound expand its draft and bottling reach from about eight to around 50 locations in Maryland, Washington and Virginia.
As for the recession, Rinehart doesn’t think it affects beer, repeating a common adage in the craft brewery world: “When things are good, people drink beer. When things are bad, people drink even more beer.”
Two people who have drunk a lot of beer in their day are Bob and Ellie Tupper, who together own Tuppers’ Beers Co.
The pair started keeping tasting notes on their beer tasting trips in 1979 and have since recorded about 22,500 beer tastings. After thousands of tastings, they took a look at their tasting notes and saw some commonalities in what made a great beer.
“We sat down and realized nobody had put these together,” said Bob Tupper, who has taught history at Holton Arms Academy in Bethesda for 43 years.
So they created Tuppers’ Hop Pocket Ale in 1995, brewed by their friend Jerry Bailey, the then owner of Old Dominion Brewing Company. The beer amassed a cult following in the Washington area until Old Dominion was sold and the new ownership didn’t have space to continue brewing Hop Pocket.
After a few years break in production, the Tuppers found a new brewer for Hop Pocket along with sister beer Tuppers’ Keller Pils at St. George Brewing Company, a small brewery in Hampton, Va. Hop Pocket beer returned to stores in 2010. But now because of production costs, a four pack goes for $11. Despite that high price, the beer continues to have a low profit margin for the Tuppers.
“Never open a small business of any kind unless you are prepared to not make a dollar for the first year,” Bob Tupper said. He also says a brewery needs to have enough money for a full year of operation before diving into the brew kettle.
Asked why they never set up their own brewery, Bob Tupper said that both he and Ellie Tupper, who is a senior production editor for the American Society for Microbiology, like their jobs and neither wanted to run a brewery full-time.
“It is a ton of work,” he said. “I work hard as a school teacher but I don’t work as hard as someone who works at a brewery.”
Tuppers’ Beers Co. may not be growing quickly, Bob Tupper said. “But we are really committed to making good beer.”