The rise of Woodchuck: an interview with CEO Bret Williams.
In 2003, long-time Woodchuck employee Bret Williams bought the Vermont Hard Cider Company (Then known as Bulmer's USA). At the time, the company was losing money hand over fist, and the cidery's survival was not assured. Through careful investment, the company has stabilized and grown, and since 2005, cidersales have taken off. In fact, hard cider as a category is now growing faster than craft beer. This growth has attracted the interest of Anheuser-Busch InBev and MillerCoors, and both companies have jumped into the category in recent months. Woodchuck, however, is not standing still. The company--which currently holds 60% share of the U.S. cider category--is moving to innovate with new products and is building a new $22 million cidery. In the interview that follows, we talk with Bret Williams about Woodchuck's progress in the market and the road ahead.
Modern Brewery Age: Bret, what was your first contact with Woodchuck?
Bret Williams: Back in 1995, I was a rep for Gallo in Maryland, and Gallo had just launched Hornsby's. I had started to see Woodchuck in the market, it had a few points of distribution, and it was doing really well. It caught my attention because Woodchuck's price point was wrong, it was always on the bottom shelf, and it was still killing Hornsby's. I saw then there was something about this brand. Then I met the owner, just bumped into him. We got to talking, and since I was working that market, I knew more about Woodchuck in Maryland than he did. The next year, I was invited for an interview at the cidery.
What was your first impression of the Woodchuck cidery?
They had this lousy old bottling line, loud as hell, and the phone was ringing off the hook, and they had about six employees. There was blood on the cases in those days. The money from every case was going to pay for the case behind it. Stroh had just bought half the business.
In 1996, Stroh was about three years from going out of business themselves!
Yes, God bless them, but they got us new equipment, new tanks, and money to grow. They moved us into a new facility, and they installed a faster line. Stroh was closing down breweries, and they had a lot of good used equipment to pass on to us. That gave us the flexibility to grow. It was a good pickup for Stroh, in the sense that they didn't pay a lot. But it wasn't a great fit for them. They had taken over Heileman, but all the Stroh/Heileman beers were low-end, and the brands were not strong in the on premise where Woodchuck needed to be built. And then Stroh exited the beer business, and sold their stake to Bulmer's in 1998. Bulmer's had already purchased Cider Jack, and they brought us here to the cidery in Middlebury.
What was the Bulmer's strategy?
Short version? Bulmer's bet their money on Cider Jack, and it tanked. Around that period the malternatives came out. Cider Jack was essentially the first malternative, but the malternatives put a stranglehold on Cider Jack. Bulmer's spent millions on marketing, reformulating, repackaging, and all the while it was dying. You can see how that's not a good business model. They put all their eggs in the Cider Jack basket. They didn't do much with Woodchuck, just left it alone, which was a blessing.
The business was failing, and in 2003, there was a chance for me to buy it. I knew everything about the company, it was a chance for me to own my favorite product. It's like somebody buying something they are crazy about, a sports car or something, but for me it was Woodchuck. It was a dream come true. I bet everything on it. My 401K, took a second mortgage on my house. The financials were not pretty, we had 42 employees at the time, and the company was losing $250,000-$300,000 a month. We closed the deal on Friday the 13th, 2003. We were actually able to turn a small profit at the end of that first month, after two weeks of operation.
How did you turn it around so fast?
I knew there was a ton of fat. A lot of it was head-count. We had a lot of expensive guys over here from England. There was a fancy headquarters in Boston. And there was really excessive spending on marketing. But I wasn't using a surgeon's scalpel, it was a chainsaw. And we definitely nicked some bone. I definitely went too deep initially. But our plan in the beginning was just to try to stay open for a couple of years, if we possibly could. If we made it that far and stabilized the business, we figured we'd be O.K. That was the whole plan. I was awake a lot of nights worrying about payroll. I wasn't at all sure we would survive. Now I'm still still awake nights, but it's wondering whether we can keep up with the growth and make enough cider. We have a hundred employees now.
What was happening in the cider category when you bought the company?
In 2003, there was little to no excitement, there wasn't much going on. Just like when I started as a rep in 1996, we heard "no" a lot. People just didn't get cider. They thought it was a female drink, they didn't know what to do with it, and they would just tell us "no thanks." In 2003, retailers and wholesalers were saying "no" because at that time everyone was focused on malternatives. Everyone was looking at all the new stuff. For us to walk in and say "Hey, this is cider, it's a historical category, and someday it's going to be big" wasn't real exciting for them.
I guess people had been hearing that refrain about cider for years.
Yeah, I know [laughs]. Cider is coming, it's coming, it's coming, where is it?
But you saw nascent strength there ...
I saw how resilient Woodchuck was. Here's a brand, the first cider in the market, it weathered the malternative storm, being put on the shelf with hundreds of new products with sweet taste profiles all around it. I believed in Woodchuck. I believed that in 1996, when I joined the company. I saw that magic, and I knew it was going to come. I knew it was a once in a lifetime opportunity. When I bought the company I was 33 years old. If it went bust, I'd take the hit and start over. But I didn't want to see it close down. That was my real motivation. These were my friends, this was the place I wanted to be, I wanted to save the jobs, and save the brand. When I bought it, there were other companies looking at it. I knew they would take the brand, and shut down the cidery. I had the passion for the product, and wanted to save the jobs.
To go from totally broke eight years ago, to building a planned $22 million cidery is beyond my wildest dreams. I never thought we'd have added 60 new jobs in this time.
When you took over the company, Cider Jack was in serious decline ...
In 2000, Cider Jack was 800,000 cases, same as Woodchuck. By the time I bought the company In 2003, it was down to 500,000 cases, and in 2006, we discontinued Cider Jack completely.
Was it disturbing to see that trail off?
[Laughs] It was disturbing in that it nearly killed the company! A lot of us didn't have much attachment to Cider Jack, it was the enemy that was brought under the same roof. And it was hemorrhaging, declining 30-35% a year. Thirty percent a month adds up to a lot of cases. They were spending $4 million a year on marketing, and it was still hemorrhaging. They discounted on price, but it was a house of cards. And there on the other side of the portfolio was Woodchuck, which they ignored. It was the most premium cider, at the highest price point, never discounted, slowly built, done the right way.
In 2003, Woodchuck had just a basic product line ...
Woodchuck hadn't had a new extension since 1997. We had the Amber, Granny Smith, and 802, our dark and dry. Innovation was nonexistent in 2003. Now we have a full library of innovation, and innovation is absolutely our number one priority. We have weekly meetings with our three full-time cidermakers. They are our mad scientists, constantly coming up with new stuff. Some of it will never hit the market, some of it will be out in a couple of months. Now we have a full seasonal line, and a private reserve tier above that--pumpkin cider and bourbon barrel aged cider. The private reserve is truly small batches, the bottling line is on for half a day. And we have our new farmhouse cider, a tier above the private reserve. That's in a cork-and-cage, large-format bottle, made with all local fruit, and fermented with a Belgium ale yeast. And we have our variety packs, which sell like crazy. Amber is our flagship, and that makes up 60% of the business, 75% off premise, 25% on. We just cracked 50 share in supermarkets in the U.S. with Woodchuck. Sales are skewed, because we haven't full penetrated the West Coast, that's where Hornsby's is, and Hornsby's is a big brand in Washington, Oregon and California.
When did you see Woodchuck start to take off?
The amazing thing about Woodchuck was that it had never declined during that whole period. When we took over, it was flat to up for a couple of years. Then, in 2005, it really started to pop, up 12%. Last year, it was up 30%. So far this year, it's up 35%. It's getting bigger and growing faster. In 2005, we decided to ramp up sales efforts, and we hired a lot of skilled salespeople. It was a big investment. We made a decision that 'OK, it's time to grow, we're missing opportunities.' We had just four salespeople, and we packed on eight new salespeople in one year. This year, we're at 25. We don't spend much on advertising, an ad here or there, it's all word of mouth, and grass roots. We're big at music festivals, we try to get the brand into people's hands, in an atmosphere where they are comfortable. And we're huge at Renaissance festivals.
People have the passion gene or they don't. At Renaissance festivals, sure, you have people running around in costumes, it may seem strange. But they are passionate. They get a beverage that they like, that's independent, they'll embrace it.
How has your geography evolved?
We just got into Hawaii last June, so we are in all 50 states. You'd have to hunt for us in Montana, but we're there. We're the biggest cider in the U.S., Hornsby's is number two, and they are our main competitor. We broke two million cases with Woodchuck, so we are triple their size. Pennsylvania was our biggest state forever, though 2010. This past year, Florida, and Texas have surpassed it, but Pennsylvania and New York were number one and two for years. We went into Pennsylvania strongly back in 1998, when the law changed, we were allowed to sell to beer distributors. From 1998 to 2010, it was our number one market in US. It's a good market, there are a lot of colleges, it's a full case market, and because it was new, we were embraced by distributors, and we had a year of no competition, so we built a ton of business.
Who is your consumer?
The brand skewed female at one time, now it's 50-50. We've drawn in more male consumers, and a lot of that is based on innovation. To appeal to the male craft consumer, we offer the bourbon barrel aged cider, the pumpkin cider. We are a winery, but we go to market as a craft, and innovation has brought men into the brand. There are a lot of guys that drink it. This generation that is turning 21 doesn't allow others to define who they are, they don't care if you think it's cool or not, it's their brand. They are not as concerned about what people think, and they have really embraced Woodchuck. If we counted every consumer, we'd still have more females, but tonnage-wise, there is more volume going down the male's throats. So it evens out, roughly 50/50.
We are also reaching people who tried the brand in college, and we have this innovation going, so we are bringing people back into the brand. It's 'Wow, I haven't had that in awhile, here is something new.' Let's face it, you can't grow at 30% without bringing in new people We have a lot of new distribution, there is a lot of sampling. We are hitting the sweet spot, We are the highest price product in the category, growing the fastest, with the highest share. You can't get better than that.
Are we seeing a cider renaissance?
Absolutely, which is good for the category--as long as the new producers keep their product quality in line. We have 20 years experience, we have cross-flow filtration, and world class equipment to ensure every batch is consistent. As long as new guys can do it right, that's great. Some of them are putting out some good stuff.
It will be interested to see what these other guys do. I'm interested to see what Sam Adams does with Angry Orchard, it seems to be doing well so far. I think they will do it right. The category is so small, done the right way, there is room. And people who get into the category will eventually find the original, and try our products.
Crispin has been around for a few years, they have been throwing a lot of stuff against the wall. There are a lot of smart people at MillerCoors, they'll do it right. They will help expand the category, and we'll win too.
I can see why bigger companies are looking at cider, it's exciting and underdeveloped, with a ton of potential. We now have growth coming from every region, it's not just one region, it's everywhere. We're seeing growth on-premise, off-premise, and strong performance by our flagship and our new brands. A lot of this is pure discovery. Our wholesalers are really getting behind the brands, which has been terrific. Until about three years ago, no one would talk to us. Now, it's a new day. Who doesn't want to sell something that is growing by leaps and bounds?
With MillerCoors and ABI getting into cider, there's going to be competition for handles. Do you think we'll start to see multiple cider handles in accounts?
It's an interesting question. Is the category ready for multiple handles? Here in the U.S., there is often just one, but in the U.K., every pub has four or five ciders. I think we are moving in the direction of multiple handles, and I think we'll get our share of those handles. In cold boxes, we're getting more presence, more retailers are now developing a cider section. Our thing is to try to get it away from the malternatives. We're not a beer, we're not a malternative. We really want to be next to craft beer, that is where the cider set should sit. It shouldn't be wine coolers, malternatives, and then cider. We try to get in with craft, and that's in the retailer's best interest as well, so we're starting to get some action. We're trying to get the message across. I think the malternative consumer is making a planned purchase, they know what they want. Cider is still impulse and discovery. And if the cider consumer is the same consumer as for craft, and they are, if it's right there we'll get incremental purchase. Someone will grab a six-pack of craft, and then a six-pack of cider, they will drink it or mix it. These are interchangeable products, and that is a huge piece of what makes the category successful.
Why do you think beer and cider have been historically intertwined?
Craft and cider used to be fringe behavior, now it's a full-blown movement. Look at occasions where craft is chosen--by the campfire, friends watching a ballgame, whatever event where craft beer is consumed, cider is the only category that replaces it one for one. Sitting around with your buddies drinking craft beer, someone opens a Woodchuck, it fits right in. There is a big percentage of craft beer--this is based on Bump Williams' research--a big percentage, about 40%--of craft beer drinkers that will drink a cider. So cider is interchangeable with craft beer to a large extent. No other category can say that. Sitting around a campfire, you pull out a malternative, it doesn't fit with craft beer for that occasion. When we see how much volume craft is packing on every year, we see the universe is getting bigger. Every day we roll out of bed, that universe is getting bigger. And that means that the acceptability of cider is getting bigger every day too.
I think they fit well together because both are hand-crafted, and you also have the mixability factor. People have been blending Guinness and cider for a hundred years or more. Now people doing half and half, a Blue Moon, mix it with Woodchuck and it's a Blue Woody. That's good for us. It glamorizes what's on draft a little more. All of us are concerned about liquor taking share. This allows experimentation without leaving the tap system, it keeps it in the family.
The on-premise remains key for us, getting wait-staff to recommend cider, or a friend recommending it to another guy, getting people to try it, that's it, that's all it takes. It's so unique.
Is there a consumer perception that cider is healthy?
I think there is. It comes from apples, so people think it's good for you. One of our biggest growth areas has been people with Celiac, because of course cider is gluten free. There are also a lot of fitness buffs that are into gluten-free diets now. So cider is being served after road races and other events. We recently sponsored a Cross-FIt event in New Haven, CT, and met a bunch of people that work hard and play hard and love Woodchuck. It has been nice to see Woodchuck embraced by athletes.
In terms of sourcing, we've heard that some cideries are starting to use Chinese concentrate. Do you?
No Chinese concentrate, ever. We only get apples from U.S. companies. The fruit we get out of the Champagne Valley in Vermont is grown with cool nights and warm days. Some of the best apples in the world are grown right down the street. For our Woodchuck Amber and Granny Smith, we get a lot of juice locally, but there is not enough fruit in Vermont for us. There used to be, when we were smaller, but not anymore. Our Farmhouse Cider is 100% local fruit, and there is fresh Vermont juice in every Woodchuck, but the only one that is made exclusively with local fruit is Farmhouse.
You have major expansion plans, are you approaching capacity in your current plant?
The capacity of this cidery is four million cases. We ran two shifts through the winter, and we'll be into a third shift in spring and summer. We won't pull out of markets. We just put in three 25,000 gallon tanks, and we're debating whether to put in more. We also need a new bottling line, but that will be going into the new facility. It's rare when your current requirements dovetail perfectly with a planned expansion, so we'll take advantage of that. Even after our new cidery is open, we'll keep this one in operation. We'll be running both facilities together, for at least the next seven years.
But the capacity at the new cidery will give us another five million cases. That plant will start at 100,000 sq ft, get up to 400,000. It's nice having it so close, only a mile away, it's like a built-in disaster plan, to have a redundant facility.
Cider has waxed and waned in the market over the years, what makes you think this latest increase is long-term?
I think the move to local and small brands is a long-term proposition. I see the amount of trial that is happening in this country, and I look at the popularity of cider globally, and we're still way behind. In England, cider is 12% of total beer, and that is total beer, not craft beer. In Ireland, cider is 15% of total beer. Cider is growing in France, Belgium, Australia, and parts of Africa. In 2010, Nielsen said it was fastest growing alcoholic beverage category in the world. And in countries like Ireland and England, cider is still growing, not going backwards.
How big do you think cider can get?
I think that long-term, craft beer is going to be 15% of the beer market, and it could get even higher. I feel certain cider has the potential to hold that same share of craft. So if craft can get to 15% of market, there's no reason we can't get to 15% of craft. Right now we're at 3% of craft. Right now the cider segment is a little over five million cases, and of that, we do three million cases.
Cider is still so tiny, there is so much potential. Even at beer festivals, people always ask me, 'Is there alcohol in this?' We do really well at beer festivals. They come to our booth, try it and say, 'I've never had anything like this in my life! Where can I get it?' Their eyes light up!
I think one of the keys for us is that cider is not an acquired taste. It's apple juice. And for craft consumers, our innovation is giving people a new reason to try something they wouldn't ordinarily try. With our bourbon-barrel aged cider, we're not not going after bourbon drinkers, we're trying to enhance the experience for our fans.
Cider is all we do. Our team lives and breathes cider. This organization makes cider. We wake up thinking about cider, and we make cider all day. We don't want to be in the beer business, or the malternative business, we're apple guys. That has helped us a lot. We are totally focused on apples.
Thanks for your time, Bret.
Irish Red from Genesee
The Genesee Brewing Co. of Rochester, NY, has revived its Irish Red Lager Irish Red Lager. "Dundee Irish Red is a smooth drinking lager with a lot of character. It has full-bodied taste, but is easy to drink at 5.0 percent alcohol by volume and 30 on the IBU scale," said Jim McDermott, lead Dundee brewer. He also joked, "It's specifically brewed to be the perfect accompaniment for corned beef and cabbage. It's sweet and malty with a slight dry finish and a sweetness well-balanced by the hops."
Irish Red Lager will be followed by the return of Summer Wheat this April. The seasonal specialties will be available on draft and in sixpacks.
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|Publication:||Modern Brewery Age|
|Date:||Mar 21, 2012|
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