Sprecher Brewery Aims To Be National Soft Drink Leader

There is a photograph in the visitor center of Sprecher Brewing Co. depicting three men hoisting beers and smiling broadly. It was taken in February, 2020, and features Randal Sprecher flanked by Sharad Chadha and Andy Nunemaker as they celebrated the sale of the business Sprecher founded in 1985 as Wisconsin’s first new Post-Prohibition era brewery.

Mere weeks later, as COVID-19 ravaged the planet, shuttering taverns and restaurants and obliging millions to live in isolation, only Sprecher remained smiling. He sold out just in time. For CEO Chadha, the largest shareholder and Nunemaker, his principal investor, a large portion of their business model went down the drain, along with kegs of unsold beer.

Chadha, 51, came to Milwaukee from his native India at the suggestion of Dr. Dilip Kohli, Professor and Chair of the Mechanical engineering department at UW-Milwaukee, a cousin of Chadha’s schoolteacher mother.

Chadha, with his UWM MBA, had been an executive at GE and Samsung before the entrepreneurial bug bit him. He had invested all of his assets in the purchase of the brewery, even mortgaging his home. The partners had also taken on bank debt. Shareholders would have to wait for any dividends or capital gains. Banks, on the other hand, are not so patient.

In an August, 2022 interview with Medium Magazine, Chadha recounted the challenges:

The COVID-19 pandemic hit only two months after we closed the deal to take over running Sprecher, with our tours, taproom and restaurants all shutting down. I went from riding the high of starting a new entrepreneurial venture to the fear of figuring out how to keep the business afloat. I invested everything our family had into the brewery purchase, and it was all suddenly at risk along with the future of our employees!

The good news is this helped us pivot as a company even more from the crowded craft beer market to expanding Sprecher’s craft soda line that people all enjoyed at home. Our sales from retail stores and online actually increased, and we were able to keep our business not only afloat but growing!

In a gesture of community goodwill, Chadha organized an eight-hour, drive-through, root beer-float event at the brewery, 701 W. Glendale Ave., where his team served 16,000 of the sweet treats for free.

Beer is Flat While Soda Pops

The craft beer industry has changed since Sprecher was the only one in the state, and large producers held over 99 percent of the market. Now, nearly 40 years later, and after a couple decades of frenzied growth, there are 249 craft breweries in Wisconsin. Most industry observers expect that number to shrink due to intense competition, a stagnant market and the power of the brewers like MillerCoors and AB InBev that still control about 86 per cent of the volume of beer sold nationally.

During a tour of the brewery earlier this month, Chadha mentioned the rapid implosion in 2022 of Madison’s Ale Asylum, and the local Milwaukee Brewing Company, each of which was larger than Sprecher at the time of the 2020 sale. He suggests that others might be on the way to facing the same fate. Indeed, Sprecher’s production of beer is about the same as during the pre-pandemic era, while the company’s soft drink sales are up 35% year over year. Although Sprecher Root Beer had been a consistent award winner since its 1987 introduction and was named the nation’s best in a 2008 New York Times blind tasting, its distribution was mostly limited to the Midwest. By last year, Sprecher was to be found in 40 states. This year, it is up to 49 states, where it is sold in over 23,000 stores. Soft drinks now provide 90 per cent of the company’s revenue.

Many Advantages in Soft Drinks

There are a number of advantages soft drinks offer a producer. For example, breweries may only sell to a licensed distributor, who then marks up the product before selling it to licensed retailers like taverns or liquor stores, and the end customers must be of legal drinking age. Each state has its own distributors, rules, regulations, taxes, and fees, and abundant paperwork for any brewer, large or small.

Soft drinks, on the other hand, have a shelf life measured in years rather than weeks as with beer, can be purchased by all ages, and may be sold directly by the manufacturer to wholesale and retail customers without the legal requirement of a distributor. Also, unlike beer which lost most of its small, local producers during the Noble Experiment of 1920-1933, there remain quite a number of regional soft drink brands that Chadha feels are still ripe for growth — and for Sprecher to add to its portfolio.

On October 4th, Sprecher announced the purchase of Ooh La Lemin, as the first in its “All-Natural Beverage” category. Since Chadha acquired Sprecher, the company has purchased other regional craft soda manufacturers including Green River, WBC, Olde Brooklyn, Caruso’s Italian Style Craft Soda, Oak Creek Barrel-Aged Root Beer, Claire Baie and Black Bear, established in Milwaukee in 1920.

In October, 2021, Chadha told Rich Rovito of Milwaukee Magazine:

When Randy Sprecher started the business, it was the first craft brewery in Wisconsin since Prohibition. … Now there are hundreds and then there are thousands nationally. The competition is fierce, and everybody’s got an idea and wants to make beer. It’s become very intense competition with relatively lower margins. With craft soda, on the other hand, there are hundreds of competitors, but not thousands. … It’s a much bigger market, … the growth opportunity is more. The competition is not as crazy.

Since his group purchased the brewery, it now runs two 10-hour shifts daily, and has doubled employment to 120, with more growth on the way.

Tons of Honey in a Hive of Activity

The Sprecher plant at 701 W. Glendale Ave. in the City of Glendale, is located in a one-story building constructed as an elevator cab factory. The brewery owns a total of about nine wedge-shaped acres in the city, bounded to the east by I-43, on the north by a residential neighborhood, and on the west by Evergreen Cemetery. On 22 acres to the south, the new 300,000-square-foot Opportunity Center sports and wellness facility is under construction in Milwaukee, and enhancements are being made to the bike trail near the properties.

Many craft breweries occupy repurposed factory space, but few also have nicer offices than those of Sprecher, having always served in that purpose, rather than being cobbled together. Just steps away, the factory space unfolds. Tons of honey in plastic cubes encased in steel cages will be used to produce its award-winning Root Beer Soda. Chadha explains that most soft drink manufacturers simply use extracts, concentrates, carbonated water and lots of high fructose corn syrup to make their products — and make them cheaply. Sprecher, however “does things differently,” he says, and brews its beverage in much the same way that its beers are made from natural ingredients. A small test brewery is located in the space, where his staff can experiment with new recipes. Rows of fermentation tanks that have seen much use are enclosed in a chilled room. Although the company no longer bottles its beer, having switched to cans after a 7-digit investment in 2021, most of the soda is still packaged in glass and is sold in 4-packs of 16-ounce bottles.

For large orders of beer, Chadha buys pre-printed can blanks. For smaller runs, the crew can affix labels to the filled cans. Further down the line, cans are robotically transferred to the filling line, while forklifts haul the finished product to the loading docks. The warehouse is filled to the rafters. Chadha says that with the growth in business, he must expand, and points out how the plant could be further reconfigured for maximum efficiency.  Meanwhile, on October 17th, Sprecher announced it had purchased Excent, LLC of Richfield. The beverage packaging firm occupies a 128,000 square foot facility, offering an opportunity to make “variety packs” of his various soda flavors. Added Chadha, “another benefit of the acquisition is that it allowed us to get more warehouse space, as our headquarters’ warehouse space is at capacity.”

Chadha pauses as he watches two workers load the product. He says it gives him great satisfaction to provide steady employment for his workers, many of whom live nearby. He has offered them assistance with the purchase of vehicles and homes. The company attorney is available to help them with paperwork.

He tells me:

It is my goal as a leader and an entrepreneur to provide those opportunities to our employees and do good by all our stakeholders. Not just shareholders, our customers, employees, community members and more. Be a good corporate citizen. Give people a chance.

Just steps away, the scene changes dramatically as we enter the taproom and gift shop. Merchandise of all sorts lines the shelves of the salesroom, while a dozen beers and soft drinks are available on tap. Customers sit at communal tables in the room which Randy Sprecher decorated with a Teutonic flair.

Chadha clearly enjoys the experience. I asked him what it was like, as an executive, to have a lively sideshow just steps from his office?

He responded, “It is the fun part of the job, go get a beer or soda with colleagues, friends, neighbors, community members. We are like the local watering hole. A community builder.”

A group of women, all wearing sashes, enters the beer hall. The one seated at the head of the table is about to be married; the others are her wedding party. Chadha, clearly pleased by their enjoyment of the brewery, says they can have a drink on him. They all choose beer.