Hard Cider Demand Creates Need For Expansion

06/14/12 12:50PM By Nina Keck, Ric Cengeri
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VPR/Nina Keck
Vermont Hard Cider Company President, Bret Williams
Back in the 18th and early 19th centuries, hard cider was the drink of choice for working Americans. 

But when German immigrants brought their beer making skills to America in the 1850s, cider fell out of fashion.  Prohibition didn't help much either. 

But hard cider is making a comeback. U.S. sales last year grew by more than 20%. And while it still makes up a tiny fraction of the alcoholic beverage industry, many analysts say it's got big potential.  

That's good news for the Vermont Hard Cider Company, which controls 60% of the U.S. market.

Company President Bret Williams dons safety glasses and walks through the noisy bottling plant where brown bottles of Woodchuck cider rush past on conveyor belts. "Nearly 600 are sterilized. filled, capped and labeled per minute," he says. 

Based in Middlebury, The Vermont Hard Cider Company makes Woodchuck and two other brands of hard cider and it bottles and distributes a fourth.

"The cider category," says Williams," is really starting to take off. In the last year and a half, we've run out of space for our people, our product and our juice. " 

He's not kidding. Williams and most of his staff are working out of temporary trailers out back.  But he says by the end of next summer, construction should be finished on a new 100,000 square foot headquarters just down the street.    

"It'll have a visitors center," says Williams, "a post and beam barn where people can come and tour the facility. We're laying out all the equipment so that it's super viewer friendly.  Today, " he says, "we're really just a production facility."

It's a $24 million investment that Williams says will allow the company to more than double its production and add 35 new employees.

"In this economy, to be talking about any growth at all is pretty amazing," says Williams. "The fact that we're growing by over 30% annually and we needed an entirely new building is phenomenal and I pinch myself every day." Williams says that's been going on for the last 5 years.  I used to lay awake at night sweating about payroll," he says shaking his head, "now I'm worried about whether we can keep up with demand and make enough product."

Williams likes to joke that it's been a 21-year overnight success story. "When I started with the company," says Williams, "all we heard was, ‘No.' People didn't know what hard cider was."

Joseph Cerniglia made the first batch of Woodchuck Cider at his winery in Proctorsville in 1991.  Five years later he hired Brett Williams as the company's first salesman. 

Not long after, H.P. Bulmers, which at the time was England's largest cider maker, bought Woodchuck.  But Williams says that was a disaster. "The European owners came in," says Williams, "and I think what they failed to realize is you can't build a brand or a category by flipping a switch and spending a lot of money and pushing it in places it doesn't belong."

By 2003, Woodchuck Cider was floundering and Bulmers wanted out. That's when Williams decided to buy the company.

"I did everything that people tell you not to do," he says smiling. "I used my 401k, the mortgage on my house, every nickel I could come up with. I pulled change out of the ashtray in my car.   I threw it all on the table. And I'm not much of a gambler but I pushed it and said, ‘I'm all in,' and took a shot."

Williams' gamble paid off. The Vermont company has more than tripled in size and now controls 60% of the U.S. hard cider market, distributing Woodchuck, Strongbow, Wyders and Woodpecker brand ciders.  According to financial research firm Symphony IRI, the Vermont Hard Cider Company racked up $32 million in sales over the last year.

But while production is humming, there have been some bumps along the way. Last year, the company had to take legal action against a former employee for breach of contract -alleging he stole company secrets to start up a competing cider business.  "We have a hundred plus employees that have put decades into the brand," says Williams, "and there was a strong sense of betrayal there that we had to handle." 

The company also faces increasing competition. In the past five years, the number of small craft cider producers has exploded. And just last month, Anheuser-Busch launched its new Michelob Ultra Light Cider while Miller Coors recently purchased the Crispin Cider Company in Minnesota.

Eric Shepard, editor of Beer Marketer's Insights, a trade journal, says there's a tremendous amount of buzz around cider. "I think the real question is how big is the category going to get?" says Shepard. "And will it be able to accommodate all the new players that are coming in?"  

Hard cider will likely get a lot more shelf space in grocery stores and even begin showing up in some convenience stores. But Shepard says he's doubtful that bars will have more than one cider tap, which will make competition for those establishments fierce. 

Considering all that, he says it's unlikely that Woodchuck will be able to maintain such a dominant market share. "But it may not even be that important," he says.  If the cider category explodes, says Shepard, so what if Woodchuck doesn't have the shares it used to have?  It's really about growing their business. When you have such a small category as cider," he says, "the share number is not all that important. The question is what their volume is going to be and what their sales and revenues are going to be."  

Back in Middlebury, Brett Williams grabs a box to show how they assemble a variety pack. 

"To stay ahead of the competition," he says, "it's all about innovation."  New flavors, he says, new lines of high-end cider, cider in cans and their popular variety packs.  If Williams is worried about Miller Coors and Anheisuer-Busch getting into the game - he doesn't show it. Among cider drinkers, he says, being a small Vermont-based company is a plus. But he admits, they'll have to keep up.

Williams says their new production facility will go a long way towards meeting increasing demand, and he says they're already making plans to add on to that facility in three to four years. 

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