From nuts to beer: Company builds revenue as craft brews grow
Brian Polowniak sliced and diced business plans and spreadsheets from 2011-13 for the $100 million investment arm of 5-Hour Energy entrepreneur Manoj Bhargava, deciding which early-stage companies were worthy of investments.
Today, Polowniak is still slicing and dicing, but it’s chestnuts he’s working with, not spreadsheets, as president and CEO of Jackson-based Treeborn Inc., a spinoff from Michigan State University that has started to provide chestnut chips to the fast-growing craft beer industry as an ingredient in specialty beers.
Chestnuts have long been used in European beers but are something of a novelty here.
Treeborn was incorporated last year. Polowniak said the company has several customers already, including Dexter-based Jolly Pumpkin Artisan Ales, which uses the chips in its Fuego del Otono beer; Roak Brewing Co., a brewer in Royal Oak that launched in June; Grand River Brewery in Jackson; Short’s Brewing Co. in Bellaire; and Perrin Brewing Co. in Comstock.
Polowniak said 39 breweries in 15 states are in various stages of testing his chestnut chips in its beers.
John Leone is president of Roak Brewing. He said he decided a year ago that he wanted to make a winter beer using chestnuts, Michigan maple syrup and porter ale.
“I’m an Italian kid, and I’d grown up eating chestnuts around the holidays. And I knew chestnuts were a growing industry in the state,” he said. “But we couldn’t get it to taste right. Then one of my guys came across Treeborn on the Internet, and we called them and got some of their chips. We created some sample beers, and it worked.”
Roak said he then bought 388 pounds of sliced nuts from Treeborn and is making a batch of beer called Chestnut Head that will be out about Dec. 1.
“I just tasted it. It’s not quite there yet, but it’s delicious,” he said.
Leone said this batch is 90 barrels, which will make about 1,000 cases and 150 kegs.
Minnesota Town Hall, which has been making craft beers in Minnesota for 18 years, is another customer. Brewmaster Mike Hoops said he has been experimenting with Treeborn chips and plans to launch a new brew for the Christmas holidays that blends the chips with a popular coconut milk stout.
“We’ll sell it at one or two of our restaurants and see how people like it. I think it’s going to be quite good. It should add quite a depth of flavor,” said Hoops.
He said Treeborn reached out to him earlier this year and asked him if he was interested in testing its chips.
“I said sure. We deal with lots of ingredients that are interesting, but I’d never used chestnut chips,” Hoops said. “When we got some, we spent the first few days munching them. They were very tasty.”
Investing to operating
So how did Polowniak go from funding startups to running one?
After leaving Bhargava’s Farmington Hills-based Stage 2 Innovations LLC at the end of 2013, he was recruited by Spartan Innovations, a nonprofit founded by the Michigan State University Foundation to commercialize university research, to be one of its CEOs in residence, vetting technologies to see which lent themselves to commercialization.
Before joining Stage 2, Polowniak had been president and CEO of his own Brighton-based consulting company, Solution Strategies Inc., a practice he still has. He previously was a sales executive at Procter & Gamble and Johnson & Johnson.
One technology he vetted for Spartan Innovations involved processed chestnuts and whether there was a snack market to go after.
Polowniak said that after he determined it would be too expensive to market sliced chestnuts as a snack food, he thought that the craft beer industry, with all its claims of nut brown ales, would be interested.
And it was, he says.
The company was founded with a convertible note of $107,000 last year from Spartan Innovations, with Polowniak; Dennis Fulbright, a professor emeritus at MSU; and Roger Blackwell, president of Chestnut Growers Inc., a cooperative, as co-founders.
Fulbright is vice president of product development, and Blackwell is vice president of business development.
Polowniak said the company employs five, all of whom receive equity in lieu of salary as they ramp up production.
He said revenue this year will be about $50,000, “but if any of the large craft breweries that are making samples now come on line as real customers, we can go to $500,000 in revenue overnight.”
Treeborn is based at the Rogers Reserve, a farm donated by Ernie and Mabel Rogers to MSU in 1990 so Fulbright could plant and grow chestnut trees.
In 2002, at the bequest of the Rogers, an endowment was created to improve buildings and equipment on the farm, including a chestnut peeling line. The peeling line was purchased from Italy by the Midwest Nut Producers Council, a nonprofit affiliated with MSU.
According to the 2012 U.S. Census of Agriculture, Michigan has more chestnut farms, 115, than any other state. It also has the largest annual harvest, estimated at 150,000 pounds.
Polowniak said most of that supplies grocery stores such as Whole Foods with whole nuts. He buys the secondary crop of smaller chestnuts the grocery stores don’t want.
He said the smaller nuts are just as tasty as large ones and fine for making beer. Treeborn slices them and bakes them light, medium or dark, depending on how mild or strong the brewmaster wants.
“We think we can fund our growth out of sales, but if all of a sudden we had some very large breweries say, ‘We’re going to feature you,’ and need 20,000 pounds of chips, we’ll have to go out and get funding,” Polowniak said.
Tom Henderson: (313) 446-0337. Twitter: @TomHenderson2
About the Michigan State University Foundation
Established in 1973 as an independent non-profit, the Michigan State University Foundation is committed to the commercialization of cutting-edge technologies invented by MSU faculty, staff, and students. The MSU Foundation’s overarching goal is to support research, innovation, and entrepreneurship at the University. Additionally, the MSU Foundation operates Spartan Innovations, Red Cedar Ventures, Michigan Rise, and the University Corporate Research Park. More information on the organization’s notable achievements, services, leadership, and history are available at www.msufoundation.org.