NEW ORLEANS -- The joke around the Dixie beer brewery is that bankers call owner Neal Kaye Jr. every morning just to make sure he's still in business.
'I'm going to rename the brewery 'Argentina,' ' Kaye said recently. 'There's so much debt, they can't let us fall.'
Kaye bought the quaint little brewery from technical bankruptcy last year with a vow to be in the black by the end of this year. That won't happen. Dixie owes $5 million and has negative cash flow, he said.
'Don't be surprised if you open up the paper one morning and see I've crashed and burned, belly flopped into a pool without water,' Kaye said. 'But I don't anticipate that happening.'
So far Kaye, 35, has kept the company running with a new brew, tighter organization, his family's years of experience in the beer business and perhaps sheer force of will.
If Dixie beer dies, a part of old New Orleans will die with it. The 75-year-old brewery is the South's sole survivor of Prohibition and decades of competition.
Dixie has watched Falstaff, Jax and four other city breweries fall by the wayside since the days when beer was delivered to New Orleans homes in horse-drawn wagons.
It has also watched national giants Anheuser-Busch and Miller take an 80 percent share of the market, with the rest divided among the little guys.
'There are only two places you want to be in the brewing industry,' Kaye said. 'You either want to be the Anheuser-Busch or so small you fall between the cracks. You can't compete directly.'
Dixie ranks No. 21 among the nation's 25 breweries. It brews about 75,000 barrels a year, which a major brewery could turn out in two days, Kaye said.
'You can stand on top of the brewery and look to the horizon and that's our distribution area,' he said.
When Kaye took over, he believed most of Dixie's customers were loyal New Orleanians who held their noses to drink the beer. He began to brew with spring water instead of the city's treated Mississippi River water and changed the formula to give Dixie a softer flavor.
The new beer is 'elegant and refined and has the tradition of New Orleans -- not the South, but New Orleans,' he said.
'It's something a New Orleanian can be proud to put on his table' - a considerable boast in a city of self-styled gourmets and enthusiastic imbibers.
Kaye had an upscale label designed and raised theprice -- higher than Michelob -- to cover production costs. So far, his market share is about the same.
Dixie still has a built-in image problem: The majority of New Orleans residents are black with no warm sentiment for the antebellum South.
'You're just not going to sell 'Dixie' beer to the black public,' Kaye said.
But his other labels, such as Private Reserve and Coy beer, are popular in black neighborhoods, he said.
Dixie is handmade beer. The original brick brewery on Tulane Avenue, a flag flying from its domed tower, still houses the entire operation with its original copper vat and yards of copper tubing.
Deep in the maze of winding, crumbling staircases and vault-like doors is the chilled room where Dixie beer is aged in oak and cypress casks. Other beers are aged these days in stainless steel tanks, Kaye said.
Kaye, who runs an up-to-the-minute distributorship in suburban Harahan, notes proudly the New Orleans brewery operates without a single computer.
The Dixie brewery is more modern than when Kaye began, however.
'I attacked the brewery,' Kaye said. 'Not just the production facilities, but I got consultants to evaluate my managerial group ... I replaced people who had accepted a negative outcome with people able to picture a positive outcome.'
He held on to 75 or so skilled union workers who had staffed New Orleans' breweries for decades and gave them a pay raise.
Meanwhile, the beer-selling environment changed. Stroh bought Schlitz, giving Stroh access to national distribution, and introduced its new Schaefer beer with a vow to sell it at the lowest price in any market. The move started a price war that is still under way, Kaye said.
Dixie's only alternative was to 'quickly grow small,' cutting production and tightening expenses.
'You can't store Dixie Beer in cypress casks for six weeks and expect to sell it for a low price,' he said.
Kaye has taken up some of the slack with his lower-priced labels, brewed under contract by companies with excess capacity. He also makes beer for about 10 grocery and generic labels.
Sooner or later, Kaye said, one of the five big breweries - Anheuser-Busch, Miller, Stroh, G. Heilman and Coors -- will 'decide this is stupid' and raise their prices.
But Dixie's survival will remain precarious.
Some creditor impervious to the New Orleans tradition of slurping raw oysters with Dixie longnecks could file suit on a past-due bill and force the brewery out of business overnight.
'I've never filed for bankruptcy,' Kaye said. 'I think it's a dishonorable thing to do.'
Kaye said he pays whatever he can to his creditors, who know they are better off as long as Dixie stays open.
'They know I am creating a company that can survive and prosper,' he said. 'I didn't buy the company to supervise an orderly liquidation of the assets.'
Kaye bought the company, in fact, to boost the distributorship his father acquired in 1969 after 20 years with Schlitz.
'I was sitting there with weak or underdeveloped brands and competing with other people for the remaining 20 percent share of the market,' he said.
Kaye was also contracting to produce Private Reserve and Coy (the name Kaye is pronounced Coy), which were cutting into Dixie's share of the market. Dixie's owners finally offered to sell for $3.2 million.
A complicated merger agreement ended up costing Kaye far less cash and preserved Dixie's tax-loss credits.
Kaye's first move was to cut $1.2 million out of Dixie's expenses by closing the Dixie distributorship and using his own, Coy International Corp. Then he launched the turnaround.
The tax exemption -- virtually no state taxes on the first $750,000, courtesy of the Legislature -- will expire in three years. By then, Kaye said Dixie should be self-sufficient.
'You're standing across the plate from a guy in the little leagues who wants very much to be in the big leagues,' he said.
'I want to go up against Augie Busch. I want to show him how to sell beer. I want to show him how it's done.'
