Beer Buzz

REVIEW SUMMARY
Issue. Startup challenges
Industry. Beer brewing
Key. Owner turns a hobby into a business.

Tom Moench began brewing beer as a way to circumvent the drinking-age laws.

“I had an epiphany when I was 18,” Moench says. “I wasn't old enough to buy beer, but I was old enough to buy the ingredients to make beer.”

Moench today is one of Florida's leading craft brewers, and he is finalizing plans to build his own brewery in Orlando. His Orange Blossom Pilsner is currently available at 400 bars, restaurants and stores in Central Florida. It's also available in select locations throughout Florida, the Carolinas, Georgia and Tennessee. He plans to expand throughout the Southeast and eventually across the country.

Twenty years in the making
Moench has a hit with his unique Orange Blossom Pilsner. Sales have increased each year, and the brew, which highlights the aroma of orange blossom honey without the sweetness, won the bronze medal at the 2004 Great American Beer Festival, considered the premier craft beer event in the U.S.

But Moench's first batches were poor imitations.

“Making beer is like playing the guitar. At first you play other people's music before you try to write your own song,” says Moench, who has been selected as a judge at the Great American Beer Festival for the last seven years.

He began experimenting with different styles, and by 1985 he had created a beer using orange blossom honey. The beer earned rave reviews from his fellow beer enthusiasts. More importantly, it was popular among friends who weren't beer connoisseurs.

“I knew I wanted to take this beer to market, but I didn't know how, and I didn't have the money,” Moench says. It would be some 20 years before Orange Blossom Pilsner — or OBP as enthusiasts refer to it — was sold commercially.

Maker and inventor
Although Moench earned a living as a stagehand and mechanic in the entertainment industry, he got an opportunity to learn more about the beer business when microbrews began gaining popularity in the 1990s. He took a side job making beer at an Orlando brew pub, where he learned about oxygenation, the process of adding oxygen to wert to help the fermentation process.

“It's really the difference between home brewing and making beer,” Moench says.

He invented a small machine that allowed home brewers to begin oxygenating their own wert. He also created a “carbonator cap” that allowed home brewers to fill soda bottles with draft beer and keep them pressurized. Both were patented and sold through Moench's company, Liquid Bread.

He sold the company in 1995 for a small sum — “I've yet to make good money in the beer business,” he laughs.

Beer evangelist
Moench launched a second beer company, Unique Beers, in 2004 to distribute craft brews to bars and stores in Florida. Moench's brands included Dogfish Head and Avery, which have developed a following today, but at the time were unknown in the Sunshine State. He also distributed his own Orange Blossom Pilsner.

It was a one-man operation.

“I would sell on Monday deliver on Tuesday. Sell on Wednesday, deliver on Thursday,” says Moench.

His success came in selling to owner-operated bars. Not only was it difficult to talk with the decision makers at franchise bars, they also wanted promotional freebies.

“They want neon signs, posters, coasters and free kegs,” Moench says. “I didn't have money for that stuff.”

Orange Blossom Pilsner began to gather a following in Central Florida as more independent bars began advertising the local brew. At the same time, craft beers were becoming the fastest growing segment of the beer business, thanks in part to “beer evangelists” like Moench.

“Craft beers became the pretty girl at the dance,” Moench says.

Moench leveraged the shifting trend to boost OBP's distribution. The large beer distributors wanted access to the craft brew brands that Unique Beers sold. Moench agreed to sell the rights to his brands. In return, distributors like J.J. Taylor Distributing Florida Inc., which distributes Coors and Miller products in Tampa and Fort Myers, agreed to add Orange Blossom Pilsner to its inventory.

A team of M.B.A.s
Orange Blossom Pilsner is currently brewed at Thomas Creek Brewery in Greenville, S.C., under an arrangement known as “contract brewing” in the industry. The brewer strictly follows Moench's recipe and procedures, but it actually produces the product. It's a partnership that has worked well, with OBP's sales growing from 5,000 cases in 2005 to 35,000 cases in 2010.

But if Moench wants to grow much larger, he needs his own brewery.

“You just can't get the volume or margins that you need,” says Moench, who admits the thought of opening his own brewery initially overwhelmed him. “You need an M.B.A. to start a brewery.”

By chance, Moench stumbled across a team of M.B.A.s. Moench regularly speaks to microbiology classes at the University of Central Florida about “the fun part of microbiology - making beer.” After one of his talks, Moench told the professor he was struggling with how to start his own brewery. The professor suggested he enroll in the UCF Business Incubation Program.

The program is one of the leading incubator programs in the Southeast. Since it began in 1999, it has helped more than 160 emerging companies that have generated $800 million in annual revenues and created 1,600 jobs with an average salary of $59,000.

Moench applied for the program, but administrators initially weren't enthusiastic about bringing a beer guy on board.

“Reading the application, my expectation was this was some college kid,” says Melissa Wasserman, a site manager for one of the program's nine offices. “I wasn't sure how serious he was.”

Wasserman says Moench's presentation to the evaluation board was more sophisticated than she expected.

“His sales numbers were the first sign that he was a legitimate business,” Wasserman says. “He had a track record of sales. Many young companies we deal with are struggling because they don't know how to sell. They think their product will sell itself.”

Wasserman helped Moench hone his business skills and determined his primary need was financing. He was able to secure $1.2 million in financing for his brewery. Most of the money will come from a bank loan for capital equipment. In addition, an angel-investment group, Catapult Angels, has committed to fund some operating expenses.

Operating in the black
Orange Blossom Pilsner and its cousin, Orange Blossom Pilsner Squared, which contains 11 % alcohol, could be brewed in Orlando in early 2012. Moench has narrowed his search for a 15,000-square-foot building to Southeast Orlando. The large vats and brewing equipment will be manufactured and installed by a California firm once Moench has selected a site.

With the help of Wasserman and the team at the UCF incubator program, Moench projects the brewery will show a profit by the end of its first quarter.

“I've kept it going and built a six-year track record basically by myself, so I feel confident that we'll be in the black after the first quarter,” says Moench, whose business cards lists his title as “King Bee.”

He plans to staff the brewery with four employees to start and add staff as production grows. By the end of the first year of operation, Moench says the company will double its sales to 5,000 barrels per year, or 70,000 cases. He expects sales to double again in year two to 140,000 cases.

Craft beer sales in the U.S. back Moench's optimism. The Brewer's Association, a Colorado-based trade group, says craft beer sales grew 9% by volume and 12% by retail dollars in 2010, while overall beer sales fell 2.7%.

Serious beer drinkers
The challenge facing Moench is to add more beers to his lineup. Unlike production beers like Budweiser, whose customers are loyal to the brand, craft beer drinkers are more loyal to the genre.

“Craft beer drinkers want to try different types of beers,” Moench says. “They may have favorites, but they want to experiment.”

That's why brewers like Samuel Adams offer seasonal beers. Moench says in addition to OBP and OBP 2, he plans to offer a toasted coconut porter, and two other beer styles he won't reveal at the moment. One will be a lighter beer, while the other will be for more hardcore beer enthusiasts.

“The honey beer gets dinged by some of the serious beer drinkers sometimes because it's an easy-drinking beer that appeals to a wide range of tastes,” Moench says. “That's OK. The point was to make a beer that sells. Once we open the brewery, we'll have some beers for the serious beer drinkers.”

Moench has waited a lifetime to operate his own brewery, and he's quick to squash any suggestion that he plans to pump up sales at OBP only to dump it in a quick sale to one of the larger breweries.

“My exit strategy is six feet in the ground,” Moench says. “I'm not looking to make a pile of money. My goal is to make world-class beer.”