Analysis of Kolar Kegging, Inc

In 2002, Jeff and his wife Teresa Kolar purchased Port Washington Brewing Co. and established Kolar Kegging, Inc. Port Washington Brewing Co. has a long history that can be traced back to nineteenth century.In 1847 Jacob Moritz opened the Lakeside Brewery which was located at 419 Lake Street in Port Washington, WI.

The brewery was purchased in the mid 1870's by Henry Dix, a saloon keeper, and renamed Henry Dix ; Co. The brewery produced approximately 1,500 barrels of beer per year.The brewery was sold in 1881 to Gottlieb Biedermann and John Bostwick and renamed Gottlieb Biedermann ; Co. A bottling plant was added to the operation in 1900.

And yet again, in 1905 the brewery was renamed to Port Washington Brewing Co. and brewed Old Port Beer. One of its more popular brands was called Premo. It was headed by Louis Labahn and operated until the start of Prohibition in 1920.

After the end of Prohibition in 1933, the Port Washington Brewing Co. was reopened as Old Port Brewing Co. by Edwin L. Obermann. The brewery resurrected the Premo line from the old brewery and for a short time, Premo competed with Schlitz using the slogan "The beer that made Milwaukee furious".Edwin was the son of Jacob Obermann who was the founder of the Obermann Brewing Co.

of Milwaukee. Edwin died in 1935 and Joseph C. Reilly took over as company president. At this time, M.I.

Labahn was vice president, Herbert C. Labahn was the secrectary-treasurer and manager, and Leonard Scholl was the brewmaster. In the early 1940's, Herbert C. Labahn took over operation of the brewery.While in operation, the Old Port Brewing Co. averaged 9,000 barrels per year with approximately 80% of production devoted to the bottling department.

Its three main brands were Old Port Lager, Premo, and Port Select. With G.W. Heinrich as the president, the Old Port Brewing Co. was sold to a group of Utah beer dealers in May of 1946. The group had planned to ship approximately 80% of the beer to Utah but the plan failed and the brewery closed in 1947.

The registered name and brewery was not reopened until the owners of Smith Brothers Fish Shanty purchased the rights to the name. The location of the Port Washington Brewing Co., at 100 N. Franklin Street inside the Smith Brother Fish Shanty, was built and started operation in August of 1996.

In August of 1999, under the direction of Brew Master Jeff Kolar, the brewery began distributing bottles of its three flagship brands, Pier 96 Lager, Amber Ale, and Old Port Porter. While working there, Jeff realized the potential of the business but felt there were constraints on growing the business because of ownership lack of vision and the present location's lack of space.For a couple of years business operations were conducted in Port Washington while Jeff searched for a new location to relocate the business. In early 2002 the Kolars purchased the Port Washington Brewing Company. They continued to run the business in Smith Brothers Fish Shanty until mid 2002.

In mid 2002 the Kolars found a 70,000 square foot building, capable of handling all facets of their business, in downtown Sheboygan, Wisconsin. Remodeling was started immediately and the manufacturing operations were relocated to 1327 N 14th Street, Sheboygan.Sheboygan Wisconsin was considered a good place to start the business. The city had a storied history of brewing traditions, but it currently stood as the largest city in Wisconsin without a brewery.

In fact, the last brewery in Sheboygan had closed in 1974. It is an ideal place to start a microbrewery business.Kolar Kegging, Inc. has many facets to its business. Its micro brewery wholesales beer (keg and bottles) to Wisconsin taverns and liquor stores. Through its brew pub, called Hops Haven Brew Haus, it plans on retailing their specialty beers along with food and merchandise.

Eventually, over the next 5 - 10 years, they want to expand the business to include a banquet hall, meeting rooms and office rental space.Currently Kolar Kegging has a product offering of three beers and a root beer soda. The year round offerings include the following:o Pier 96 Lager is a sweet, malty, medium-bodied lager, lightly hopped and golden in color. Aged slowly to produce a smooth, clean taste.o Amber Ale is a brilliant deep color, medium-bodied and modestly hopped. Produced from five malts and four different hops.

o Old Port Porter is a full-bodied, dark brown ale with a complex malt aroma and flavor due to chocolate, caramel and black malts. One of the best English-style ales found in the New World.o Root Beer Soda is a soda for anyone and everyone. Root beer has a hint of sassafras and vanilla just like old-fashioned root beers.Additional facts about Kolar Kegging:* All of the kegging operation is done in Sheboygan while the bottling is currently done in Black River Falls.

* Initially, Hops Haven Brew Haus (Brew Pub) will serve Beer, wine and other malt beverages. Eventually with expansion they will add hard liquors.* The brewery has the capacity to brew 2500 barrels of beer annually. Presently it is brewing and selling at 25% capacity and the ratio of beer sales to root beer sales is approximately 55-60%.

* Kolar Kegging has four established wholesale distributors which make distribution is in Sheboygan County, Ozaukee County, Calumet County, Manitowoc County, and Milwaukee County. Sells keg beer and bottle beer thru these distributors in various retail outlets and taverns (See Appendix for Retail locations.)The U.S. Industry is divided into three basic levels of brewing according to annual production: high-volume, regional, and small brewers. The market for beer in the U.

S. consists of essentially three segments: domestic beers, imports, and specialty beers.The US beer industry is characterized by flat consumption trends and dominance by three top brewers, Anheuser-Busch, Miller Brewing, and Adolph Coors. They have expanded their market shares at the expense of other national brewers.

Expanded market share, price increases and improved production efficiencies are the keys to improving operating margins for large national brewers in the US Market. National brewers are also looking to expand their presence in those international markets with increasing consumption trends.U.S.

Beer consumption rose 0.6% in 2001 to 2.8 billion cases (2.25 gallons), the slowest growth rate in fours years.

Imports climbed +8.8% while domestic dipped for the first time in four years by -0.3%. Premium products (light and imports in particular) continued to chip away at sub premium and popular brands and categories.Gains made by super premium and micro/specialty (+9.

6%) and lights (+2.9%) were not enough to offset losses by premium (-4.1%), popular (-6.3%) malt liquor (-8.7%) and ice (-4.8%) beers.

The buzz in the beer industry over the past 24 months has been "malternatives," which are flavored malt beverages led by Smirnoff ice. Malternatives, which are still small compared with other beer categories, are playing their part in creating excitement and interest within the relatively stagnant overall beer market.The only growing market segment in the domestic beer industry is the smaller micro breweries which are often brewed by regional brewers. While sales of domestic beer are expected to stagnate for the rest of the decade, the specialty beer category has been experiencing double-digit growth rates annually in the 1990's and ranges from 7 to 8 % in the last few years.

These crafted brew products generally cater towards small consumer market segments with less consumer price differentiation (i.e., price inelasticity - small price increased do not result in reduced consumption or brand switching) than the major brewery brands. Due to the high costs of entry in creating a micro brewery, many micro brewers rely on regional brewers to manufacture their products under contract.The Institute for Brewing Studies classifies a brew pub as a microbrewery if it manufactures less than 15,000 barrels and its off-site beer sales exceed 50 percent. A brew pub is defined by the industry as a restaurant-brewery that sells the majority of its beer on site.

Annual production for brewpubs rarely exceeds 5,000 barrels. Many small brewers prefer the appellation of "craft brewer" (to that of microbreweries and brewpubs) which refers to a brewer of primarily specialty, niche products. Craft beer sales topped $3.3 billion in 2001, according to figures from the Institute of Brewing Studies. However, small breweries still account for less than three percent of total U.S beer shipments in the last decade.