F.X. Matt Brewing Co. celebrates 125 years in business
Craft brewer overcomes Prohibition, recessions, and a fire in its more than a century in business
Back in the late ‘50s and ‘60s, talking beer stein characters Schultz and Dooley promoted the mellow taste and naturalness of Utica Club lager in TV commercials. At the time, the brand was a strong regional competitor produced in Utica, N.Y., by West End Brewing Co., which is known today as F.X. Matt Brewing Co.
If those mugs could talk today, they’d have 125 years’ worth of new stories to tell as well as a new flagship brand to tout: Saranac. Although the family-owned brewery still sells Utica Club, albeit with very limited distribution, the Saranac brand family now makes up more than half of its sales throughout its distribution territories on the East Coast.
Last year, the brand paid homage to one of the brewery’s original beer recipes by launching Saranac Legacy IPA in celebration of the company’s 125th anniversary. F.X. Matt, grandfather of the company’s current Chairman and Chief Executive Officer Nick Matt and great-grandfather to its current President and Chief Operating Officer Fred Matt, originally founded the company on March 28, 1888.
“[Saranac Legacy IPA] comes off of my grandfather’s recipe from 1914 when he made an IPA,” Nick says. However, the brewers slightly adjusted the formula to keep up with the times.
“We did adjust the hops a little bit, so it’s a little bit hoppier because today’s IPAs tend to want to be a little hoppier in taste, but the malts we left the way they were,” he explains. “We used the traditional kinds of malts that he was using, so you end up with a lighter product in terms of color and also taste, and so that IPA is remarkably drinkable.”
The beer initially appeared last year on draft and in four-packs of 16-ounce cans as well as in a Brewer’s Dozen variety pack of 13 beers. Due to high demand, the brewery currently is rolling out Saranac Legacy IPA in six- and 12-packs of 12-ounce bottles.
During its 125-year history, the company has faced Prohibition, two recessions, and a fire that wiped out its entire bottling operation. F.X. Matt Brewing Co. has literally “risen from the ashes” to become one of the top brewers in the United States. In fact, it ranked No. 8 on the Brewers Association’s list of the Top 50 U.S. craft brewing companies and No. 15 of overall U.S. brewers, based on 2012 beer sales volume. It attributes this success to its dedication to quality.
“I fundamentally believe that a company doesn’t stay in business as long as we have unless you’re making a product that the consumer wants, and the only way you do that is by making a really … high-quality product,” Nick says. “Our focus has always been on that. If I go back to my grandfather, that was clearly his focus. He believed he would be more successful because he believed he knew how to make a better beer than other people, and at the end of the day, that makes all the difference.”
The company has been growing between 3 and 5 percent annually, Fred says. Although this growth is positive, it is lagging behind what the trend should be, he says.
“We think it should be minimally 15 [percent], so we are really focused on changing that trajectory,” Fred explains.
To do so, the company is putting an increased emphasis on innovation. To help enable this innovation, F.X. Matt Brewing added a pilot brewery to its facility approximately a year ago that enables it to experiment with beers in smaller batches. The company’s spring seasonal, Saranac Prism White Ale, available from January through March, is one such result of the pilot brewery. The beer is fermented with fruit, which results in an unusual, fruity product, Nick says. Additionally, the brewery plans to release a beer aged in whiskey barrels under its High Peaks brand of complex, more flavorful beers this summer.
Furthermore, the company plans to use the pilot brewery to experiment with hard ciders, Nick says.
“We’ve got some unusual ideas for ciders, and we think we can do some experimentation in the pilot brewery,” he explains. “Frankly, again, it’s an opportunity for us, and the beauty is that we end up with a few kegs that we can bring up [to our bar] and let people try. We can let some retailers try them and see whether they think they’re really interesting. It’s an opportunity.”
To continue to boost innovation, F.X. Matt Brewing developed an innovation team consisting of Nick, Fred, Nick’s son Nick R., and three of its brewers. Plus, just as beer stein characters Schultz and Dooley got the company’s story in front of consumers more than 50 years ago, F.X. Matt Brewing is aiming to strengthen its presence in the current market. Coinciding with the company’s 125th anniversary, Nick R. joined the company last year to better market and publicize its brands.
“With Nick [R.] coming back, it’s been a great opportunity to get someone 100 percent focused on how you drive sales with our consumer,” Fred says. “That doesn’t mean he’s not going to focus on the distributor or the retailer, but to have more of a consumer-driven emphasis will help us a lot.”
In anticipation of implementing these new plans, the brewery has high hopes for its future. This year, it expects to increase its beer production nearly 10 percent from 350,000 barrels to approx-imately 380,000 barrels, the executives say.
But to accommodate that increase, it will need room to grow. F.X. Matt Brewing’s existing facility offers 400,000 square feet of office, production and warehouse space. Recently, the brewer purchased property across the street from its current location and plans to build a new facility for additional fermenting and aging of its beers. This addition would increase the company’s capacity by 50 percent, Nick notes.
In addition to doubling its own business, F.X. Matt Brewing is keeping its eyes open for craft brewers that it could acquire. Currently, the company has a relationship with Lake Placid Pub & Brewery, located in Lake Placid, N.Y., and it acquired the Flying Bison Brewing Co. out of Buffalo, N.Y., in 2010.
“We’d like to have more of those partnerships and increase our local presence in a lot more markets,” Fred says. “I think that we’re well positioned to do it because we’re financially very strong, and I think that there will be brands out there that are really good brands that just have gotten ahead of themselves and need some financial help.
“We think craft’s going to continue and craft’s going to be here for a long time, but as you’ve got so many people entering, there will be some type of shakeout,” he continues. “…We have been fiscally conservative over the years and, as a result, we’ve weathered the storms, and we intend to be a buyer if the storms come.”
In particular, the first and most challenging “storm” in F.X. Matt Brewing’s history was Prohibition. Not only did it keep the brewer from making beer, but it also altered the entire industry once alcohol became legal again.
“Palates changed coming out of Prohibition,” Fred notes. “People wanted lighter lagers, and that’s really where the market went. What’s really driving the company today is craft beer, and that’s really a return to the roots that my great-grandfather established originally.”
The first beer that F.X. Matt brewed was a West End-branded lager, reflecting the founder’s German heritage, Nick says. However, the company also made a variety of ales and other craft beers. After Prohibition, its Utica Club lager became its flagship offering. To some degree, the brand name itself was a result of Prohibition. After alcohol was banned, F.X. Matt Brewing quit making beer, as ordered, and began crafting carbonated soft drinks (CSDs) instead. The brand name Utica Club was initially used for this non-alcohol portfolio.
“People wanted lighter lagers, and that’s really where the market went. What’s really driving the company today is craft beer, and that’s really a return to the roots that my great-grandfather established originally.”
“After Prohibition, my grandfather felt it was such a good trademark that he took it over to the beer,” Nick says.
During Prohibition, however, the Utica Club non-alcohol portfolio consisted of CSDs like root beer, ginger beer and cream sodas, as well as a non-alcohol beer, malt tonic and malt syrup, which featured a special note for consumers.
“It said, ‘Do not add yeast, or you will create alcohol,’” Fred says. “So it effectively told you how to do it, which I think is cool because, on one hand, we were going to be legal and not get into that fray, and on the other hand, we were winking at people.”
After the first year of Prohibition, sales had dropped 70-80 percent, but founder F.X. Matt was determined to keep the business going, Nick says.
“I think if Prohibition had gone on another year or two, [the business] would not have made it,” he says. “It was right at the edge. My grandfather had done pretty well and had a fair amount of personal money, and I think he basically kept this place alive at that time, but he was running out of money. If it had gone on, I don’t think he would have made it.”
Luckily, Prohibition was repealed, and F.X. Matt Brewing introduced its Utica Club lager at the stroke of midnight at the close of Prohibition in 1933, Nick says.
Although the company’s non-alcohol offerings enabled it to weather the storm, the demand for beer after Prohibition was so high that it completely stopped production of all of its non-alcohol drinks and focused exclusively on its beer, he notes.
But consumers hadn’t seen the last of its CSDs. When the brewery opened a tour center in 1965, it started making root beer by the keg to serve to children, Nick says. After receiving requests for years from its consumers asking them to bottle the soda, Nick and Fred finally decided to do so in the early ‘90s, they say. Today, the Saranac-branded, hand-crafted CSDs are available in Root Beer, Diet Root Beer, Ginger Beer, Orange Cream, Shirley Temple and Black Cherry Cream varieties. Saranac Root Beer remains the most popular offering. Last year, the company‘s CSD line demonstrated significant growth and currently is trending at 5 percent growth, Fred notes.
“The hardest thing I’d say for us is we’re beer guys, so you think beer most of the time, but soft drinks are a great add-on because almost every account you’re in has an interest in soft drinks or sells soft drinks,” he says.
After overcoming Prohibition and building up its Utica Club beer brand for a few decades, F.X. Matt Brewing faced a U.S. recession in the 1980s as well as the rise of mass-produced light beer.
Many breweries went out of business because of the financial crises, Nick says.
“The ‘80s was a pretty tough time for regional breweries of this type, and the reason that you can’t go around and find a lot of them is because there aren’t very many of them left,” he explains. “By sometime in the late ‘70s, early ‘80s, we were down to less than 50 breweries in this country.”
Furthermore, national marketing programs had popularized mass-produced light beers, which forced many regional brewers to compete by lowering prices, Fred says. However, as prices for regional beers decreased, consumers presumed that their quality did as well, he notes. And when national brands began supplementing their offerings with less expensive, lower-end beers, regional brands had no way to compete, Nick adds.
“Utica Club, for example, competed with advertised brands costing more, perceived to be better, and on the low end, [those brands] were selling beer cheaper than we could make it,” Nick explains. “So you had really no place to hide at that point, and it really was the death of most small breweries. They couldn’t weather the storm.”
By refusing to compromise on quality, however, F.X. Matt Brewing was able to stay in the game. Its Utica Club and Matt’s Premium (introduced in the ‘60s) brands suffered significant declines during the timeframe but still maintained a good reputation, which enabled the company to launch a new brand, Saranac, as well as get into contract manufacturing for other breweries, Nick says.
“It allowed us to launch a brand like Saranac, and the consumer would accept it on the grounds that [the company has] always made good beer,” he explains. “And it allowed us to get into contract production because people would say [that our] reputation for making good beer is really good.” Today, contract production accounts for one-third of the company’s business, Nick says.
F.X. Matt Brewing introduced its Saranac brand in 1985 but didn’t realize its potential until after the beer won an award at the Great American Beer Festival in 1991. Saranac Adirondack Lager was named the top premium lager that year. Again showcasing the company’s craft beer roots, the full-flavored lager is made with caramel malt, two-row malt and hops, Nick says.
In an attempt to get the brewery through tough financial times and boost sales, it shifted gears and put its focus on the Saranac brand, promoting the award it won through point-of-sale materials and other means. As a result, the brand went from making up less than 1 percent of the company’s sales to more than half, Nick says. In effect, it saved the company, he notes.
After adjusting its strategy to make Saranac its new flagship brand, F.X. Matt Brewing developed another vehicle to help drive sales. In 1996, it began packaging variety packs to enable trial of its beers.
“We invented the mix pack, and the reason was because on Saranac, we didn’t have very good on-premise distribution for bars and restaurants, and therefore we didn’t have the normal trial vehicle where a consumer goes in and buys a bottle, and then they can have it and see if they like it,” Nick explains. “Therefore, one of the people who worked here said, ‘I wonder how it would be if we put three of them in the same six-pack.’”
Although the logistics of creating such a package were challenging at the time, the company decided to try it out and see how consumers reacted to it. Named Adirondack Trail Mix, the variety pack included Saranac Adirondack Amber, Saranac Golden and Saranac Black & Tan. It became extremely successful, Nick says. As a result, the company understood the value that craft beer drinkers place on variety.
“Once we came to understand that, we’ve continued to make mix packs,” he says. Currently, F.X. Matt Brewing offers a year-round Adirondack Trail Mix variety pack that features its Saranac Pale Ale, White IPA, Adirondack Lager and Black Forest beers. It also offers variety packs for each of the seasons. Saranac Pale Ale is the company’s best seller, followed by its seasonal beers, Fred notes.
Building on its innovation with variety packs, the company also plans to introduce a “Can-Do” 12-pack of cans including its Saranac Legacy IPA, Pale Ale and Wild Hop Pils.
“We’re excited about that even though it has to be done by hand,” Nick says. “We think that’s going to be a mix that craft beer drinkers will love because it really plays right to the taste that they look for.”
After realigning its business and getting innovation rolling, F.X. Matt Brewing hit yet another hurdle in 2008. Just after the Great Recession hit, its facility suffered a fire, which put it out of business for about a month, Nick says.
“It started on the second floor of bottling where we had our canning operation, and it actually started because a plastic conveyor caught on fire,” he explains. “They were doing a welding job to fix something that had not been right that day. This plastic conveyor caught on fire and, unbeknownst to us and I suppose unbeknownst to a lot of people, a plastic conveyor burns invisibly. Therefore, it went down the line … and caught some packaging material on fire about 25-30 feet away. And unfortunately, that packaging material was right below what had been an old elevator, so [the fire] went right up to the next floor and caught that on fire. There were packaging materials all stored up there, and that all caught on fire, so it really destroyed the whole bottling operation.”
As a result, the company pulled all of its ads, reduced its beer production, and cut its innovation for the Saranac brand, Fred says.
Despite the incident, F.X. Matt Brewing made the best of a bad situation. It reinvested in the facility and developed a better bottling operation than it had before, Nick says.
“We replaced a lot of equipment and have done some very good things over there,” he says.
However, while the company was handling overcoming the fire, it didn’t realize how much it was being held back.
“Going into the fire, we were really creative,” Fred says. “We were growing our trends and in a lot of cases surpassing them, and the fire shifted our focus into rebuild mode, and [we] really focused on getting back in business and making sure [we didn’t] lose anything. As a result, we were very focused on what we had but not very focused on innovation and creating news and excitement around the brand, and that hurt us. It probably hurt us more than we thought.
“We kept growing, but we slowed down in growth,” he continues.
Nevertheless, the company began ramping up its innovation last year and expects that to positively influence the business moving forward, Fred notes. With a new pilot brewery, innovation team and capacity expansion on the way, it appears consumers will have plenty to talk about over a cold beer in the future.