Shot Beer aims for the lager market

Entrepreneur Scott Schwalbe is tapping his tech-industry experience in contract manufacturing to brew up growth for Shot Beer, a start-up Minnesota brand aimed at young adults.

Schwalbe had worked in tech companies, where contract manufacturing is a widespread practice, for more than a decade before he joined Libertas Inc., the Rochester branded marketing company behind Shot Beer.

He promptly suggested to Libertas CEO Steve Storebo that they outsource production, also not uncommon in brewing. That would avoid the time and expense of building a brewery, get them to market faster and position them to expand rapidly.

"Contract manufacturing is what most of the world does today," Schwalbe said. "Nobody really makes their own products. They outsource it. I said I would suspect that you could do the same thing in beer."

Libertas contracted with the Minhas Craft Brewery, in Monroe, Wis., to produce Shot Beer. The family-owned Minhas, operating since 1845, says it is the Midwest's oldest brewery.

Libertas' primary focus now is building demand for Shot Beer with frequent tastings in bars and liquor stores and meetings with distributors to get the beer delivered more widely.

Schwalbe is optimistic that the company's Shot Regular and Shot Lyte will appeal to beer drinkers 21 to 35 years old and help Libertas soak up a share of U.S. retail beer sales, which approached $99 billion in 2011, according to the Beer Institute. He described the Shot brews as premium lagers, the pale, crisp style that accounts for 70 percent of all beer sold.

"It's for the folks that want a good premium beer but aren't quite ready to drink one of the hoppier [craft beers] every day," said Schwalbe, referring to hops-laden craft brews that deliver more bitterness than lagers. "The folks who like those still like a mainstream beer after mowing the grass or when they're out on a boat. We're trying to be positioned as the Midwest, the Minnesota brand to replace a Bud or a Miller. Once somebody tastes it, then we usually get them."

As part of its appeal to young adults, an arresting image of an eye peers out from the label, while the Shot tagline proclaims,"This ain't your dad's beer."

Both Shot brews have been well received, Schwalbe said, with most liquor stores and bars making repeat orders. Shot Lyte is especially popular with women, he said, and the company hopes to begin offering it in kegs in the near future. That would help overcome the challenge Shot Beer faces in many bars, which have limited cooler space for storing bottles.

Schwalbe spent 20 years in the Navy before going into the tech industry and has an MBA from Cardinal Stritch University. He's also busy launching Nimbe­Link, a tech start-up that produces a remote monitoring device using cellular networks to notify users, typically small and medium-sized businesses, of changes in temperature or a power failure. NimbeLink recently was named a semifinalist in the Minnesota Cup competition for entrepreneurs and inventors.

Customers at the Buffalo Tap in Savage, where mainstream and craft brews are popular, have enjoyed Shot Beer, said Jon Fraser, the bar's owner and manager.

The expert says: Dileep Rao, president of InterFinance Corp. in Golden Valley and clinical professor of entrepreneurship at Florida International University, said outsourcing the capital-intensive production of Shot Beer beer offers advantages with few disadvantages at this stage.

"They have reduced their upfront fixed investment in production facilities and costs," Rao said. "By doing so, they should have reduced their break-even levels and, hopefully, improved cash flow. They can also focus on their strength, which seems to be in marketing, and invest their scarce resources in brand building."

Rao said building a brand takes time and money, so Schwalbe and Storebo should evaluate whether to try to domi­nate a few states with greater market share and cash flow, lowering marketing and distribution costs, or whether to spread their efforts across a wider swath.

"Highly successful companies like Great Clips were built by entrepreneurs like Ray Barton not by being first to a market but by dominating the markets they entered," Rao said. "Shot Beer needs to worry about domination."