Brewbound 2022 Beyond Beer Company of the Year: Schilling Cider

Speaker 1 [00:06] Hi everyone. I am back here to talk about our Beyond Beer Company of the Year, which is Shilling Cider, and here to chat about it is co-founder and CEO Colin Schilling. Hi, Colin.

Speaker 2 [00:19] What's up, Zoey? Thanks so much for having us and what a huge honor.

Speaker 1 [00:22] Yeah, thank you for chatting. I know you're a familiar face to some of the Brewbound audience. We've had you on quite a couple of times. So excited to give you guys this award and chat about what you've been up to. I think the best place for us to start is just kind of on cider overall. You guys are cidery in the Pacific Northwest. What is the state of cider right now? I mean, it's kind of like a, I like to call it a sneaky segment a little bit because it doesn't make a lot of headlines, but you got cider as a segment has maintained share of beer pretty much and to do that, it's gotta be doing something good. So, so what does that segment look like right now?

Speaker 2 [00:59] Yeah, that's a good question. You know, honestly, people have been asking that question for years because cider has always kind of done well, but it's such a niche category that a lot of the big players don't seem to take notice and, you know, it's perfect for a company like ours where we can really focus on quality craft products, but, you know, not necessarily blip the radar of folks that might want to mess with our little small world over here. So it's been really good though, and you know, if If you look at the kind of national landscape, there's a lot of regional cider players that are making good quality craft cider that are doing really well. I was just looking at the top 10 list the other day, and 7 of the 10 are growing and growing well, and the 3 that are declining are kind of your bigger national brands. So it really does tell that story of regionality with cider and people that are using good quality ingredients. Um. I think also in the broader landscape of, you know, a lot of focus on Beyond beer and kind of very flavor forward beverages that are, you know, not beer, cider is really well positioned because it is a very authentic beverage that has a lot of ability to offer great flavors, regional flavors, fruit-based. Um, with a great story and a great history, but it's premiumized, right? So it's something that actually you can tie back to agriculture. Um, and so I'm really optimistic about the category, both now and long term. I think you're going to see continued big numbers for us out of this category, but hopefully not big enough that, you know, some of the big guys come in and, uh, you know,

Speaker 1 [02:19] mess with us too much. I like how you refer to the big guys, you are kind of one of the big guys now you're doing. Uh, really nice numbers. What, you've been around for more than a decade now. So what, how have you evolved over that time as a company? Um,

Speaker 2 [02:37] you know, of course, like any good startup, we, we were founded in my garage, um, and we, we quickly moved on from there. But you know, I can really break it down into kind of three phases. Um, you know, phase one is, is you're, you're hustling every day, you're just trying to stay alive. Um, it's a roller coaster. You've got some really long days. And then we got through that period, you know, we kind of made a lot of mistakes early, learned quickly, um, really, you know, figured out what the customer wanted and figured out how we could make that work with our supply chains, continue to make really quality product as we grew. Um, and, you know, from there, I, I think the next big phase for us was really scaling up and getting to that next level. So, a couple of years ago, about 4 or 5 years ago at this point, we installed a pretty big canning line and that was really kind of our phase two of the company. And that allowed us to grow and drive, you know, profitability through efficiency ultimately. And that led us to be able to build a company that didn't need outside capital to continue to grow and organically grow. And that's allowed us to make some really nice decisions, um, to grow slower, honestly, and I know you look at the numbers and laugh at me, but to be honest, you know, we have made some decisions to grow very carefully and very strategically. Um, in my mind, that does mean growing a little bit slower than some other options that are out there, but that's allowed us to really nicely pivot into kind of phase 3 of the company where we are today, where we're really focusing on, of course, all the things we've done before, efficiency, quality products. Um, you know, great, uh, marketing and sales, but we've also really focused on culture and sustainability, and that's been, um, something that's allowed us to be, to be in a really unique space of our business now, and I really enjoy that, being able to focus on being a people-driven company and figuring out ways to give back to the community and also to put more sustainable practices into our business, um, you know, that we couldn't have made those decisions early on when, when resources were a little more constrained. Um, so, you know, to be honest, I still feel like we're getting warmed up. We're really hitting our stride in a lot of areas and we're really being able to focus on more and more things, but do them better and better. Uh, so I couldn't be more excited about it and, uh, yeah, happy to, uh, to chat more, hopefully in a few years and look back and say, hey, it felt small today.

Speaker 1 [04:39] So, the reason why we're chatting today is because you guys are our Beyond Beer Company of the Year. So tell me about Chilling's 2022. What did this year look like for you?

Speaker 2 [04:49] Yeah, that's a huge honor, and I just want to say thank you guys for the recognition, and I, I really appreciate that, especially in, you know, the, the overall climate of beverage right now when there's so many Beyond Beer companies out there. There's big companies doing some really innovative things. There's a lot of other great smaller companies doing some great things. It's a huge honor, and I think it also sheds on the cider categories as you were talking about before. Um, and I think that you guys have probably seen that as well, is that with this shift towards, you know, beer alternatives, I think you're going to continue to see cider be a big focus going into the future, because it has just such a great story, um, and such a great history around it and provides that flavor people are looking for. Uh, so specifically on us in 2022, it was a wild ride for sure. I mean, it's been a great, great year. Uh, I was actually looking back, you know, since 2016 to current, we've averaged about 44% growth year over year, every year in that time period. And believe it or not, we're actually going to be right about there again this year, despite a bigger and bigger base. Um, so to do that, it's been a stretch for sure in some ways. We added 80,000 square feet of production space this year. Um, we doubled our tank capacity this year. Uh, if you go back last year, we planned for a maximum growth number and we were within 2% of that growth number. So, it was a bigger stretch last year. This year, we, we planned for even more growth and we're coming in in a more comfortable, comfortable space. Uh, but you know, we're not immune to a lot of the challenges other folks have faced. There's been huge issues with the supply chain, of course. You know, there are a lot of key ingredients for us that used to take 6 weeks to get, but that stretched to 6 months. So now you're talking about holding par values of 6 to 9 months of very expensive ingredients, which is certainly a cash flow challenge. You know, if you look at our biggest ingredient, which is fresh pressed juice, that's up 97% for us in the same time last year, which is insane. Uh, I'm sure other people have similar complaints, but, you know, just in terms of talking about inflation and, you know, price increases, you can't pass all that on to the consumer, um, nor would you want to, but we have certainly taken some price increases this year. Uh, you know, but overall, we've also made some huge strides on projects that have been on, you know, been on a focus for a while, but we've made a lot of progress with this year, especially around some really cool things we're doing in the sustainability space. Um, I think we've made a bunch of leaps in terms of putting people first and building a really strong culture. And we've also been able to build in a lot more charitable giving into our kind of everyday process, which I'm super excited about and you're going to see a lot more from that from us in the future, where, you know, instead of spending money on kind of traditional marketing and ads, we're actually redirecting that. and we're doing that with the communities that we touch and we feel really strongly about that, especially with a, you know, a younger generation of consumer that instead of wanting to see another flashy ad, they actually want transparency in the company, which is so exciting because it allows us to live our values better and not necessarily divert from from sales by doing that. So it's it's a really great synergy we're excited about. And of course, I'd be remiss not to talk about Vitamate, which is the hat I'm wearing, and our, our relatively new, brand new uh yerba mate. So it's a high caffeine, non-alcoholic play. Uh, it's the number 3 yerba mate in the Pacific Northwest already, where we're testing it out up here. And what's so exciting about this is it allows us to create and make an amazing, you know, fruit-based product that's within our wheelhouse, our core competency, but it's for a totally different need state, right? We're not competing with ourselves in terms of evening, afternoon beverages. This is 100% a morning wake you up drink, so it's really cool to be able to use our facility and our know-how to be able to now hit like two completely different window hours in the day, and that we've got some really exciting stuff coming for that next year as well.

Speaker 1 [08:20] You mentioned you're talking about growth that you guys take a different approach a little bit. We talked earlier this year about it as well that you kind of, you're not uh trying to go as a big national brand immediately. You're trying to be deeper in certain markets than kind of just being dipping your toes in every all 50 states. So, what is, why is that an important strategy for you guys and why do you find that you need to take that approach?

Speaker 2 [08:47] Yeah, great question. And you know this is something I think we kind of came to just by thinking about it a lot, but we don't want to be a 50-state company, and there's a lot of reasons for that. You know, what we'd rather do is have 3 to 4 really high performing brand families and a smaller handful of really high performing distributors that are really motivated about us as a company. And the reality of it is, as a cider company, as you pointed out, you know, before, we're a relatively small category. And, you know, as we continue to grow and, you know, say we go to a new state that's a few states over from our home markets, cider is not going to be their biggest category. It's going to be something else. And so getting that share of mind with the distributor, it doesn't necessarily make sense for them to give us a ton of share of mind because we're going to be a small piece of their portfolio. But if we come back to them with a morning drink, cider, you know, maybe some more innovation and a few other different spaces, now we've become a portfolio that is important to their business, but we can't do that fifty-state. I mean, we also know the limitations of our resources, um, and we're not trying to step on the toes of, you know, some bigger players that have a lot more resources than we do. And so that's one of the reasons. The other one is It's kind of about the business that you want to run and operate as well. You know, I'm sure you have a better number than me, but my guess is it takes about 300 distributors to cover the US these days, maybe 250 if you're using a lot of, you know, bigger distributors. That's a lot of distributors to manage and that's a lot of people to manage. So I think there's a lot of synergy to be gained by having less distributors, but more products through that pipeline. And then you come back to supply chain, carbon footprint, things like that, you know, shipping from the Northwest, Seattle, Washington across the country is not cost effective. It's not carbon footprint effective. Um, you know, and we're doing a lot of work right now around, you know, reducing our footprint on the environment and actually we're benchmarking our carbon footprint right now per ounce of liquid that we make, and we're hoping to be able to compare that across the industry for other types of beverages. And so again, if we're trying to sell a bunch of products on the eastern seaboard, again, that's really going to bring some of those numbers down and it's going to cost us a fortune to ship it out there. So, I think we can build a great sustainable, you know, long-term business with less states than 50, and that's really what we're shooting for.

Speaker 1 [10:51] The ways typically that you can grow is both distribution and then with new products and especially in the Beyond Beer space, there's kind of this constant need for new, new, new all the time. How does shilling and just cider overall kind of stand out in that space and keep up with this constantly moving innovation cycle?

Speaker 2 [11:15] Yeah, that's a great and funny question in the context of our company, because we've always thought about ourselves as super innovative, and we have been. You know, we created a lot of new categories in cider, especially early on. We were some of the first people doing fruit cider. We were the first people to do canned cider in the country. Um, you know, we moved to 6 packs when a lot of people were still on 4 packs and cider. Uh, we, of course, you know, created the Imperial canned cider category with Excelsior, now the Excelsior family, which has really been a huge piece of our portfolio in the last couple of years. It's, it's definitely driven our business forward. But like you said, you know, kind of around when White Claw came on the scene, you just saw this exponentiation of innovation overall. And we looked at it in a very funny way, because for me, I love innovation. I mean, if I could do nothing else, I'd innovate all day long, but you've got to be really careful with with over innovating, um, for a couple of reasons. One, it's expensive, it's challenging, it's risky. But also, ultimately, you're going to train your consumer to only want whatever is new. And to build a long-term sustainable business, you need to build brands that have staying power and value. You know, if you look at some of the best craft beer brands, some of the best national brands, these brands have been around for a long time and they don't change all that much, and there's a reason that they're still around. And so we're pretty careful with innovation these days and we're actually really trying to dial it back. Um, you know, we want to make sure we're building things that have, have long term value. That being said, we're absolutely going to keep innovating. That's core to our company. So Vitamate is a prime example of that, but it's really outside of the box innovation. It's not really competing with the products we're currently making. And so I would say that if you see future innovation from us, it's going to be in a similar kind of fashion. You know, we're looking at some other things in the cider category that are kind of similar to what Excelsior did, where it really revolutionized the cider category overall. There's certainly more opportunity like that, and there's also opportunity beyond cider as well that I think are pretty interesting.

Speaker 1 [13:03] We, if people haven't seen it yet, uh, you are giving a talk at Brewbound Live talking kind of about Culture in the workplace and all the stuff that you're doing at Schilling, um, it's, I'm really excited for this chat and we'll have a little Q&A afterwards as well. Um, but supporting a healthy workplace for your employees has been kind of a core pillar for Schilling Cider and we talk about it in every conversation I think that we have with you guys. What are some of those programs that you have in place and why is that such a big part of your mission?

Speaker 2 [13:37] Yeah, I'm so excited and honored again to be, uh, I found out about the talk before I found out about this award, so I'm double honored, and I really appreciate, you know, you guys giving me the stage to talk about such an important issue. You know, as you know, our industry has really struggled with culture and various other, you know, toxic issues, and we've always set out to do things differently with Schilling, and this is definitely within that vein, is how do we set a different course and also show that this can be a winning and profitable strategy. So that's really what I'm passionate about and what this talk is all about, is, you know, why did we do it and then how do we do it, and then why should you do it. Um, you know, and so specifically what we're going to look at is, um, you know, this talk could be 20 hours long if you're the one to dive deep. So of course, I had to pare it down a little bit, but the goal here is to give folks who maybe haven't done a lot of work in this space, kind of some things to think about and then a path forward.

Speaker 1 [14:28] Well, I'm really excited for that chat, which will be by the time this video comes out as well. I want to leave us with this. What can we expect from chilling in 2023? What do you guys have coming down the pipeline?

Speaker 2 [14:41] So I wasn't supposed to say this and my team's going to kill me, but I think we're going to bet the whole farm on hard soda, like 20 new flavors. No, I'm just kidding. I got nervous. No, I mean, in all seriousness, you know, I can't tell you the exact things that we're, that we're bringing out yet. Um, but we've done a ton of building this last year. You know, we've added a lot of people, we've added a ton of equipment and structures and space, production facility, new markets, and so next year we're really kind of refocusing on streamlining, stream streamlining a lot of what we've already done to be more efficient and do what we have already started better. Um, you know, it's not rocket science, you know, it's kind of get back to basics and and do the things that you, that got you here really, really well, and continue to focus on that. We do have some awesome new brands coming to market. There's some new stuff in the Vita Vitamate space that I'm really excited about, uh, and some shilling cider items as well. And, you know, if you really dig deep, we've also changed some laws here in Washington, and so there's some innovation coming in that space as well that I'm excited about, but I can't say too much for now. And I'm sure you can, uh, a drink or two at the conference and I may be able to tell you a little bit more.

Speaker 1 [15:45] Well, I think that is a perfect place for us to end. Again, congratulations on Shilling's award and we will see you in Santa Monica. Thank you

Speaker 2 [15:54] Colin. Sounds good. Have a great day. Always nice to talk to you.