Brew Trends: Cooperative Craft (Part 3)

For the third article in our cooperative craft brewing series, we explore how one Wisconsin-based business is building a strong following and growth strategy using a hybrid cooperative model.

By Jeremy Martin




By Jeremy Martin, February 25. 2016

Crowdfunded Cooperatives

Beyond Flying Bike Cooperative, other collectives take a more communal approach to beer creation.

mobcraftOne example of an entirely different (and unique) business model is MobCraft of Madison, Wisconsin.

Henry Schwartz, CEO, explains: “How it works...is we take ideas from the crowd for beers they want to brew. Some are fully realized home brew recipes some are just general ideas on flavors and styles of beer. We put those beers up to a vote and people from the across the U.S. cast their votes by pre-ordering four packs of that beer.”

Group handsVoting takes place online as MobCraft doesn't have a tasting room or even their own brewery for that matter. The three man team leases space from another Madison brewery.

Winning beers are bottled in 22oz bottles and sold at the brewery, at local beer stores and are distributed to 'voters' via independent liquor stores that are licensed for interstate commerce. “People don't buy beer from us per se, they buy it from an online store. We're the brain power behind it but the actual sales all go through normal distribution channels,” Schwartz says.

So far MobCraft has brewed about 220 recipes with an average of over 300 people voting per month.

Durian“The weirdest beer we had come through was a durian beer; its the world's stinkiest fruit, it smells like rotting flesh. No brewery has ever put it in a beer.

Our head brewer is a micro biologist so he knew that the stink was a sulfur compound which has a really low boiling point. He brought that fruit up to 180 degrees and well, the whole brewery smelled horrible! But underneath that you have this really nice mango-like custard taste of the fruit. It paired really well with a pilsner style of beer,” says Schwartz.

Unlike other member driven or cooperative brewing operations, MobCraft financially operates more like a traditional brewery. It began with a $33,000 investment from its founders then, just like the beer recipes, the rest of the needed capital was found online.

wisconsinIn lieu of recruiting members or owners to the company, Mobcraft chose to sell shares of the operation to Wisconsin residents under the recently established in-state crowdfunding exemption. That allows companies to sell online business shares to in-state residents who are not state accredited investors.

The change in the law results from the 2012 Jump Start Our Business Startups (or JOBS) Act, which provides leeway for businesses to seek new forms of private investment such as crowdfunding.

According the Securities and Exchange Commission; “crowdfunding regulations cap an amount an issuer can raise to $1 million in any twelve-month period, as well as caps the amount a person can invest over a 12-month period to 10% of annual income or net worth for incomes of $100,000 or more, or for household incomes of less than $100,000, the greater of $2,000 or 5% of annual income or net worth.”Investors

In short, the SEC now allows small businesses to take on small online investors without either entity needing special permitting or licensing.

Due to this exemption, MobCraft was able to raise $65,000 in the past year, facilitating a planned move from Madison to Milwaukee where they will open a new 14,000 sq ft facility and plan to up their barrel count from 800 to nearly 3,200 per year.

In our upcoming article, the final in this series, we look at the role of committees in Flying Bike and High Five Co-op Brewery. Can member committees help grow a brewing business? Find out tomorrow...

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Jeremy Martin Profile


Jeremy Martin is a Seattle based writer who primarily works on stories about craft beer and coffee; often writing one while drinking the other.

A graduate of Western Michigan University, his work has appeared in a several national and international publications. He now shares his expertise as a regular contributor to the Kinnek Community.

 

 


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