Wednesday, January 27, 2010

Brewery on the Brink

Over the last 30 years the microwbrewing industry has grown exponentially. In 1990, there were less than 100 breweries operating in the United States. By 2009, that number increased to well over 1,500 breweries. Much of this growth is due to the renaissance of the local brewing company (craft brewing). In 2008 the craft brewing industry crew by nearly 6 percent by volume while producing some 8.6 million barrels of beer. In the first half 2009, the craft brewing industry continued its boom with growth of 5 percent by volume and 9 percent by sales. At the same time overall sales of beer were actually down 1.3 percent.

In 2000, a couple of hometown heroes in Buffalo, NY, Tim Herzog (pictured) and Patrick Mullins, started the Flying Bison Brewing Company. The first commercial brewery in Buffalo since 1972,* FBBC offered a unique flight line of brews from a couple of guys who got their start brewing at home. (Larry "Red" Mrozek was Mr. Herzog's original partner but he passed away before the brewery opened.)

Despite a slow start, FBBC started making headway in Western New York. Exported from Buffalo's Black Rock Neighborhood, the flight line can now be found in more than 100 stores and pubs across the region. Aviator Red is the standout of FBBC's 4 flagship brews. The company boasts an additional 6 seasonal brews and they recently unveiled Rusty Chain Beer; a collaboration with Green Options Buffalo, Buffalo Rising, and Buffalo MicroParks. Rusty Chain is a community effort promoting the positive impacts of bicycle riding.

We've had our share of FBBC brews, particularly focusing on Aviator Red and were disheartened recently to find the company in dire financial straits. The growth of the craft industry was not enough for FBBC to offset the difficult economy of Western New York (Buffalo is the 3rd poorest city in the US) and the skyrocketing costs of brewing ingredients. A craft brewer in the nation's poorest of cities can't simply raise prices on the consumer when the costs of raw materials go up.

According to reports in The Buffalo News, FBBC sales had been rising. According one report, 2008 sales increased by $25,000. It's just not enough to stay in the black and keep the lenders at bay, particularly when material costs increased by $35,000. Said one FBBC shareholder, "A couple of years ago, Tim was right on the edge of turning the corner and really making it."

Is there a silver lining to this dark cloud? Sort of. If you're the romantic entrepreneur type waiting for a Tommy Boy-like story you will be disappointed. If there's good news to report it's that Mr. Herzog offers a compelling product. So compelling that F.X. Matt Brewing Company in Utica, NY has already placed an offer to purchase the company and keep brewing operations in Buffalo for the immediate future. FX has the capacity to purchase raw materials for less and efficiencies can also be had in the bottling operations. “Utica is very efficient at doing long runs, Buffalo is very good at doing short runs,” said Steve Jackson, a shareholder and member of Flying Bison’s board of directors. “The two facilities would complement each other.

According to reports, FX will brew Flying Bison in Utica with specialty runs of Saranac and FBBC to be brewed in the Buffalo brewery. FX CEO Nick Matt said "[w]e like Flying Bison as a Buffalo-based brand, and we think there is more opportunity for a Buffalo-branded product. Frankly, we think it can be a lot bigger than it is today."

The story is not quite over as the shareholders of FBBC must approve the sale to FX (the vote will occur on February 11, 2010). If approved, Mr. Herzog will be offered an employment contract. If the sale is not approved by shareholders, Sear Capital, an Austin-based investment firm with Buffalo roots, may submit an offer.

*Iroquois Brewing 1830-1972

Sources: The Buffalo News (January 20th and January 24th 2010), ArtVoice, Flying Bison Brewing Company. Statistics from the Brewers Association Craft Brewing Facts.


buffbeer said...

wow, an interesting spin on what really happend. What about Phil Internicola, the founding partner who actually is a shareholder, the second largest. Pat Mullins? wow guess this is a great way to spin how the trademark for a label not owned by Pat or Tim can be spun to force a deal....Tim Herzog is obfuscating everything to cut a sweet deal for himself, and screw every other shareholder

saint386 said...

In all stories there are three sides...yours, theirs and the truth somewhere in between.

PMullins21 said...

Usually fact checking is a big part of journalism on every front, including blogs. Unfortunately for this "article" it seems that wasn't a huge priority.

For the individual who continues to post on these sorts of blogs under his pseudonym of whatever he wants to hide behind, also doesn't seem to understand that either, or the definition of "obfuscation" for that matter. (You don't know what it means, it's a "big word" stop trying to use it. I, by following up your posts with my real name am not trying to deceive or obfuscate anyone, like you.)

To the author of this nonsense, I am not or have ever been an owner of Flying Bison Brewing Company in any sense. Not even at the level of formal shareholder. Phil Internicola was, after Red passed. I know that there has been friction to say the least after the decision for him and the company to their go separate ways, but I would never disparage Phil for what he did to get FBBC off the ground. Regardless of what his feelings are about me, I have a tremendous amount of respect for him.

I also do not, and never have claimed that I own the rights to any trademark, URL, logo, shirt graphic, photo image, or any intellectual property owned by FBBC, outside of artwork that I directly created for FBBC such as the branding for Aviator Red, Blackbird Stout, Barnstormer etc.

The trademark for Buffalo Lager is owned by FBBC. Blizzard Bock is a trademark that is not owned by anyone. It is intellectual property of KMT Mngmnt, I would assume.

If any of you would have simply asked I would have told you all of this directly, at any time but you continue to obfuscate the public in this public forum, and some of you were actually involved in the process all along. You should be embarrassed. Do your homework.

jerome said...

We are happy to follow up this posting with the other 2 sides of the story if some are offering additional information for the class.

buffbeer said...

Obfuscate: to muddy, make unclear to hide the truth. The truth on Buffalo Lager is simple: It is owned by Gejel/KMT Management. They have a letter that was prepared for Tim Herzog to sign to: not make or use the label except under a licence to FBBC, and that any changes adjustments or modifications to said agreement need to be approved by them, the true owners. John Townsell: 716-839-1072. Mr Herzog is using this forum to "spin" his side.