A Step-By-Step Look into A Million Dollar Expansion

Even with delays and waiting on lawyers to work together, it’s still all worth it says Kenny McNutt.

A co-founder of Cincinnati’s MadTree Brewing, McNutt and his team just turned three years old, yet is working through the paperwork of an $18M expansion — which they are calling MadTree 2.0.

It will be 50,000 square feet and include a 10,000-square-foot outdoor patio and beer garden.

Right now, MadTree 1.0, located just outside of Cincinnati’s city limits, is a total of 29,000 square feet between two buildings. MadTree put pen to paper to purchase the land of a former paper plant in the Oakley area of Cincinnati 13 hours before the end of 2015 with hopes to be up and running by 2017. This is the year of waiting, McNutt admitted.

“It’s a holding year,” he said, “We’re making things rock solid and growing the employment base.”

McNutt has hopes of MadTree 2.0 being an anchor of sorts to the other end of the main drag that has began to blossom in the Oakley area, which is an up-and-coming neighborhood in Cincinnati.

Putting a multi-million dollar expansion though, has taken some time. Especially for such a young brewery, which opened in early 2013.

“Some big guys may look at us and think 18 million is not much, an easy deal,” McNutt said. “We still don’t have a third year of tax returns yet other than in-house, so I couldn’t share that with creditors. Only two years of tax returns can make it a complicated deal because we are still working on it.”

McNutt said the state of Ohio, through its JobsOhio organization is helping with a grant and a loan; the city of Cincinnati is creating a significant tax base; MadTree can still use an SBA loan because of its youth; the brewery is sinking all of its available money and future earnings into the project as well along with a loan from the bank.

That’s four parts in play along with the brewery, which means a lot of lawyers and a lot of paperwork, said McNutt, who got his MBA from Xavier University in Cincinnati.

“This is what I call my capstone, it’s the real deal,” he said. “It’s not for a grade, it’s 45 people that work for me relying on me.

“We plan to turn that into 100 employees by 2020, so the stakes are higher.”

So how did MadTree get from a business plan of 9,500 barrels by its fifth year to a new facility and the opportunity to hit 23,000 bbls before its fourth year?

“Cincinnati is damn thirsty,” McNutt deadpanned with a smirk as the brewery hit 11,000 bbls at the end of 2014 and 18,500 for 2015.

McNutt recalled the initial business plan and said, “Well, that plan was beat to shit, what’s next?

“We knew the trajectory was way above our current five-year plan, but we had to sit down and catch ourselves by hiring and start figuring out what to build out and and how to focus on MadTree 2.0.”

That phase took nearly two years before MadTree began with purchasing the 90,000 square foot building and property it bought at the end of 2015 for $3.55M. More than half of the building will be demolished and remodeled over 2016 to prepare for adding equipment — including a new 100-bbl brewhouse — and eventually staff.

Picking what they wanted to do with MadTree 2.0 and then having to pull back on some aspects to rein in a budget, and then stick to that budget was part of the planning.

“We could have always gone more,” McNutt said. “You can dream big and want everything to make things more automated or fun.

“But we put a line in the sand. Here’s what we have created at this date, here is our budget and we have to stick to this because this is the money we are hoping for. It’s what we pitched to banks.”

McNutt said in the proposal they had to pull back on some things they hope to have in the future, like in-line carbonation, a better yeast propagation area, and a larger tank farm. They have budgeted to add tanks, though, every three to six months and will have the space now to hit up to 180,000 bbls in capacity in the new building.

MadTree1.0-TapRoom_049

The MadTree owners also have left room to expand to a five-vessel system in the future, starting with a three-vessel system. That will be an upgrade from its 15-bbl, two-vessel system, which McNutt says they do about 33 batches a week on.

“We are leaving room to plug and play in the planning process to improve quality, consistent and efficiency,” McNutt said.

Those three components are important to McNutt, and it could be a reason MadTree has caught on so quickly in southwestern Ohio.

Quality control and lab work have been keys from the start, said McNutt.

“Without truly knowing what others do, I still can venture that we have one of the biggest labs in the city with three of 45 employees full-time in our lab,” he said. “It’s not insignificant. It’s always something we are passionate about. Without the science to back up the data to verify, it’s just sensory.”

McNutt says he also deals a lot with sensory and teaches a class once a week. The top seven employees that pass the tests move on to the sensory panel.

Part of the planning is expanding the workforce. Although some will come via the production side, much more staff will be added for the taproom, maintenance, administration and IT.

A big swell will be in sales.

“We need to be able to put some more boots on the ground,” McNutt said.

Getting into all of Ohio is the first step, followed by a solid footprint in the “tri-state” area of Ohio, Indiana and Kentucky.

“We didn’t anticipate growth this fast, but we did go into this wanting to be the most respected regional craft brewery,” McNutt said, adding that additional distribution into Michigan, Wisconsin, and Illinois could be next with a look ahead to Pennsylvania and West Virginia after that.

All of the equipment is ordered, mostly new for production along with tanks, canning, a keg filler and a keg washer, with some used pieces as well.

“The fun thing about being around three years is we have every tank manufacturer out there I think,” McNutt said with a laugh, “It’s a test bay.

“We have five or six different ones there, so we have tested all the ones we would have considered.”

The new taproom will be four times larger than the original. The one MadTree has now was a late addition because at the time of planning in 2011, taprooms in production facilities were not yet legal. Ohio changed that law in early 2012 and MadTree scrambled to squeeze in 2,000 square feet of space. It’s been quite a hit McNutt said.

“Taprooms fund growth,” he said. “Anyone that says they don’t want a taproom because they are a production facility, that is a bad idea. You want to grow that and get your margins and build the brand.”

Twice in three years McNutt said he has slowed down enough to think about how quick this has come.

“I’ll sit at the corner seat [in the taproom] and stare up and look up with a beer in front of me and start to contemplate how the hell this all happened,” he said. “Usually we are so busy looking forward we don’t have that chance to look back. Which I encourage everyone to look back and see what they have accomplished and learn from mistakes but accomplishments as well. That’s hard to do.”

5 Comments

  1. kj

    June 8, 2016 at 9:58 pm

    Nice article but I wouldn’t describe Oakley as “up and coming.” It was already quite developed and quite nice. I would just say experiencing a lot of new development.

  2. Not JK

    August 24, 2016 at 2:14 pm

    Very fluffy article, but speaking with little Napoleon, that’s to be expected. There’s a line of burned relationships, bad deals, lies, and cheating in the wake of MadTree in it’s current configuration. Wonder if someone will bring out the paperwork right before 2.0 hits. Hell, maybe I should do some digging in my own inbox.

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