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WisBiz In-Depth: City Brewing of La Crosse
7/27/2004

By Gregg Hoffmann

LA CROSSE -- When Stroh's decided to get out of the beer-making business, it looked like the end for the old G. Heileman brewery in this river town, long known as the place with the giant 6-pack.

With the brewery would die a long tradition of La Crosse as a brewing town. The facility had stood on Third Street since 1858. Old Style and many other respected brands had been produced there.

But the brewery didn't die. Instead, some dedicated workers, and local investors, formed City Brewery in the same facility in 1999 and managed to make it the only former Heileman brewery to survive.

Today, after one "false start" and plenty of challenges, City Brewery, can claim to be among the leaders for third-tier breweries. President Randy Smith projects the company will move around 1.6 million barrels of product this year (with 31 gallons in each barrel), and employ more than 400 people during its peak production time.

"We've set all sorts of records so far this year," Smith says. "It has taken a lot of hard work by a lot of people. Some of the people here worked for no pay, up to six months. But we have produced more and more product every year, made more and more money and employed more and more people.

"Everybody here is proud of what they've done. It was the pride of the people here, many who worked for Heileman, that made it happen. We want to keep it going."

City Brewery didn't soar to immediate success. The original investors, led by entrepreneur Jim Strupp, lacked capital. They received about $1.5 million in public sector help, but just couldn't develop the markets rapidly enough.

Smith, who worked for Heileman for 22 years and holds a law degree, was involved in that first attempt to start up the company. When it became clear the plan would not work, he started calling up people he knew from the industry and local investors.

Chris Weiss, co-owner of TCI Construction in the La Crosse area, and Sabina and Curt Bosshard, became principal investors, with others involved and employees also getting shares of the company. Debt was restructured and capital obtained through Associated Bank. The public sector money has since been paid back.

One thing City Brewery had going for it was a skilled workforce that knew the plant. "We like to think of ourselves as free agents whose teams suddenly were disbanded," Smith said. "A lot of people knew the plant well, which helped."

Change led to success

That doesn't mean that upgrades and changes weren't made to the plant. In fact, the entire business philosophy changed.

"We had been given this battleship," Smith said of the old Heileman plant. "But it took a lot of fuel to get it to move through the water."

It became clear that City Brewery could not survive on its own products. So, it ventured into the "controlled packing business." Smith said, "There are not many breweries in the country that have excess capacity. We did, so decided to make use of it."

In essence, City Brewery is sort of like a micro-brewery within a large brewery. It brews several of its own brands. The "core beers" include: City Lager, City Light, KUL, KUL Lite, La Crosse Lager, La Crosse Light, City Slicker Malt Liquor and La Crosse NA. Seasonal beers include: City Pale Ale, City Cream Ale, City Winter Porter and City Festbier.

But City Brewery also brews and packages beer from other breweries, tea, energy drinks and other beverages. Smirnoff Ice was the first big contract. It required the plant to retool within 60 days.

"We lacked the pressure labeling needed for their product, and the liquid processing equipment," Smith said. "We went to Italy to get machinery for the labeling, and got equipment from elsewhere. In 60 days, we were ready."

Since that time, City Brewery has picked up contract work for Mike's Hard Lemonade, Arizona Tea, some Canadian breweries, energy drinks and others. It recently brewed and bottled some Pabst products, when Miller Brewing, which has the contract for former Pabst products, decided to farm out some of the work. All these products are both brewed and packaged in the La Crosse plant.

"Diversification is very important," Smith said. "The alcoholic beverage market has not grown as much as the 'new age' non-alcoholic drinks."

The City Brewery production facility could handle up to 7 million barrels per year, so there still is room for additional production. But the company has actually had to turn down some contract work this summer because of limitations in bottling and other areas.

City Brewery also is testing products in its labs for other drink manufacturers. "I believe we will do more of that and you could see some innovative products come out of here," Smith said. "Heileman invested in its labs here, so we still have them available."

Proud of tradition

Smith and his co-workers remain very proud of their own beer and the tradition of brewing. The world's largest 6-pack still stands on the east side of Third Street, like it did in the Heileman days, but La Crosse Lager now is displayed on it. The original Heileman house, once used for offices, remains just down the block. Gambrinus, the king of beer, still proudly hoists one on the west side of the street.

City Brewery products are distributed regionally in Wisconsin, northern Illinois, northeastern Iowa and southeastern Minnesota. About 40,000 barrels of company brew are produced, a rather small percentage of that projected 1.6 million barrels.

"We are very proud of our beers, but we could not survive on them alone," Smith said.

About 50 percent of the beer consumed in the country is produced by Anheuser Busch. Miller is second and Coors ranks third. Pabst often is listed as fourth, although Miller holds the rights to the brands of that former brewery.

About 11 percent of the American market is made up of imported beers. So-called "craft" or micro-brewery products make up about 3 percent.

"You just can't market your beer like Bud can," Smith said. "We like to think of our products as quality beers at a fair price, marketed more on a local basis."

According to Modern Brewery Magazine, City Brewery ranked third among third-tier breweries in the country, with 1.15 million barrels in 2003. The projected 1.6 million barrels this year could boost the brewery to No. 1 in that tier and a claim as the fourth largest brewery in the country.

City Brewery has gone out of its way to use state and local vendors for its bottles and cans, labeling and other areas. The company also has been very involved in La Crosse and surrounding communities' events. Earlier this year, it brewed Potosi Light beer, which is being used as a fundraiser to help build the National Beer Museum in Potosi, a small community in Grant County.

"We fought to keep this brewery going in the community, so we want to remain part of it," Smith said.

Continued emphasis on diversification will be a key to City Brewery's presence in La Crosse. "We rule nothing out for the future," Smith said. "Americans' beverage preferences are constantly changing. You have to change with the times and keep up with that diversity in the marketplace."


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