Sierra Nevada CEO Makes East Coast Beer Run

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CHICO, Calif. (MainStreet) -- Sierra Nevada used a whole lot of years and a whole lot of hops building West Coast India Pale Ale from a taproom oddity to a cornerstone of craft brewing. Now it's coming east.

Back in January, Sierra Nevada founder and Chief Executive Ken Grossman announced that his company had bought 90 acres in Henderson County, N.C. -- just beyond the cluster of breweries, bars and beer stores of craft-beer-soaked Asheville -- for a production facility, restaurant and gift shop. It's a nearly $110 million investment that will create about 95 full-time jobs and 80 part-time positions, increase Sierra Nevada's production capacity by nearly a third and expand the brand's presence in the Northeast and Southeast.
Sierra Nevada Brewing CEO Ken Grossman says Sierra Nevada's Asheville, N.C., expansion will yield better beer.

In years, mileage and scope, it's a long way from Grossman's early days of brewing porter and pale ale in a brewhouse cobbled together with dairy tanks, soda bottlers and brewery salvage parts. Grossman was selling home-brewing equipment as early as 1976, but began building his Sierra Nevada Brewery in 1979. His first batch of Sierra Nevada Pale Ale wouldn't finish brewing until November 1980.

Grossman drew his inspiration from Jack McAuliffe's pioneering craft brewing techniques at the New Albion Brewery opened in 1976 and from Fritz Maytag's revitalization of San Francisco's Anchor Brewery, which he bought in 1965. By the time Grossman got Sierra Nevada off the ground, there were fewer than 50 brewing facilities in the United States and McAuliffe's New Albion was only two years away from shutting its doors.

Today, there are more than 1,900 breweries throughout the U.S. Sierra Nevada has grown from 663,000 barrels worth of production in 2007 to more than 900,000 barrels by the end of 2011. Its flagship Pale Ale has led the charge for much of that stretch with a hoppy IPA bitterness (37 IBUs and relatively mild 5.6% alcohol by volume), but Sierra Nevada has spent the past few years expanding the lineup and cranking up the intensity.

The brewery has begun canning its pale ale and its fast-growing Torpedo IPA -- with 7.2% ABV and a hop-heavy 60 International Bitterness Units (100 is usually the ceiling, though some IPAs claim more) -- and has been dabbling with smaller batches. Its latest offering, the none-too-subtle Hoptimum, is a 10.4% ABV, 100 IBU bitter beast loaded with Magnum, Simcoe, Citra, Chinook and a proprietary Sierra Nevada hop variety.

Though Grossman and Sierra Nevada have shown little sign of letting up, the craft beer world around them has changed dramatically. Maytag left the industry in 2010 after selling Anchor, while the industry itself has experienced double-digit-percentage growth. Sierra Nevada, meanwhile, is now the third-largest craft and regional brewer behind Samuel Adams producer Boston Beer and Pennsylvania-based D.G. Yuengling & Sons. Each of those brewers also has large brewing facilities in multiple states.

When Grossman and his family open shop in Asheville in 2014, Sierra Nevada won't be the scrappy craft underdog. It'll be flirting with or surpassing 1 million barrels of capacity, which is unheard of for small brewers who aren't Boston Beer or Yuengling, and opening up North Carolina to other big craft players such as Colorado's New Belgium Brewery. That brewer is reportedly deciding between Asheville and Philadelphia as it considers an East Coast location.

We got Grossman on the phone to talk about Sierra Nevada's growth, its future in Asheville and how he intends to keep his craft brewing legacy sustainable and in the family:

We took some request from readers for the first question and almost everyone wanted to ask about Hoptimum. At 100 IBUs, this is an extraordinarily big beer. It's bigger than your Bigfoot barleywine, which was already pretty heavy and bitter at 9.6% ABV and 90 IBUs.

Grossman: We wanted to make something that was full-throttle, both hoppy and malty.

We've fooled around with a number of recipes over the last few years and we've made a number of different batches. We released a little last year as a single production run and decided this year that we'd release it in a four-pack and make it be one of our three High Altitude Series extreme beer styles.

This is the first one. We're working on a stout that we'll release after Hoptimum and then we're going to have Bigfoot rotate into a four-pack format next year. It'll be a four-month seasonal for each of those.

Can you tell us anything about the stout?

Grossman: Well, we've been making a lot of different ones. It's being modeled around the Fritz and Ken Stout and a couple of other real big imperial stouts. We're still tweaking the recipe in our pilot brewery, so it'll be in that vein.

Does Fritz still collaborate with you on beers?

Grossman: No. I approached Fritz when we were doing our 30th anniversary and asked him if he'd be willing to work with us on our anniversary series of beers. He was very gracious and said "Sure" and we actually brewed those up ourselves.

We brewed a number of different variations of that stout and sent them down to Fritz and Mark Carpenter to weigh in on, but it was pretty much our formulation and recipe with Fritz's input on the style of beer.

A little history: When I brewed my very first batch of beer in '80, it was a commercial beer. It was five barrels of stout. Fritz and I were sitting around talking about what we'd want to do as a beer that would be a signature for both of us and he remembered when he was first thinking about what beers he was going to brew when he bought Anchor. When he was rebuilding the brewery from the ground up, he would go to a little restaurant near the brewery and drink imported stouts.

He thought to himself, "If I could only make a beer like this, it would be my signature." So stout was one of his first early memories with Anchor and was our first beer, so it was a fitting beer to do together. We actually served that at the Craft Brewers Conference. Fritz and I gave a talk together in San Francisco last year or the year before last. We had enough of that beer that I was able to share it with the 2,000 people or so in that audience.

What has Fritz been up to since selling Anchor?

Grossman: He's had a bunch of other pursuits. He's got some vineyard property up in the mountains and started a winery next to the brewery. When he sold the property I know he moved all of his equipment out of there, but I don't know if he's back making wine again.

He has property in an area outside of Calistoga and was raising grapes for many, many years. He's doing that, traveling a bit and has a house in Arizona now, so I know he's spending some time in Arizona. I'm in the middle of writing a book and I did track him down recently to write a little blurb.

When speaking to folks at your brewery last year, they were mentioning that the split in Sierra Nevada's production was once more than 60% Pale Ale compared with your other varieties. It seems to be a bit more even now as you've introduced more products. Given your history, is this a fun time for you? Is this a good time to be making beer?

Grossman: It's a great time to be a craft brewer, that's for sure.

From my history, we've gone through many years of fairly significant growth and we're still growing. To keep growing and still have fun at what I'm doing is great. The awareness of craft drinkers and the receptive audiences that craft brewers are turning out in this country is great to see.

For us, we're approaching capacity in Chico, so we're starting to work diligently on our East Coast plant expansion.

What is the plan for the capacity of your Asheville, N.C., brewery and what is that going to do to your product's availability on the East Coast?

Grossman: We'll probably be able to do some more fun stuff here in Chico. We're continuing to experiment and come up with some really creative stuff, but it's really tough with as busy as it's gotten.

It's a real stress on our company right now to keep doing things like Hoptimum. We're brewing around the clock and we're just about out of brewing capacity. Once we can relieve some of that, it'll allow us some more breathing room to do some boundary-pushing out of this brewery.

That plant is going to be designed to do more than 300,000 barrels initially and ultimately double or more than double. It'll pick up some of the East Coast volume out of that plant, though we'll continue to ship some beers out of Chico.

We're going to set it up with some open fermenters and be able to do some of the unique beer styles like Kellerweiss and Bigfoot that we ferment in open fermenters. We're going to duplicate that aspect out there and take some pressure off our fermenters in Chico.

What's capacity in Chico at this point?

Grossman: This year we'll be somewhere over 900,000 barrels, maybe 950,000 even. We're off to a really strong first month and a half to two months of this year. Sales are up close to 20%, which isn't too shabby for us. We don't think it will end up being that much for the year, but we're looking at close to double-digit growth for this year.

That's significant growth considering your brewery was producing fewer than 800,000 barrels at the end of 2010. Where is that increased demand coming from?

Grossman: Torpedo has been a pretty significant success. It was up close to 60% last year and it looks like it's trending right about there this year.

We're still growing Pale Ale in most markets, and brands like Ruthless Rye have taken off pretty well as seasonals.

Is there still room to expand Sierra Nevada's U.S. footprint or is it more about expanding presence in existing markets at this point?

Grossman: We're pretty much distributed throughout the country, but we have some pockets of the country where our distribution isn't what we'd like to see.

In some cases it's just the distribution channel we've selected. They're not performing as well as we'd like to see and in some cases we may be with wine distributors or distributors who aren't as focused on outlets like beer bars and other areas that require a different service level.

We're always evaluating where we need to invest our time, energy and dollars to help build those distributors' markets and boost share in the growth of the brand.

I'd imagine it takes quite a bit of research to determine the best location to invest in a brewery that's going to increase your capacity by about 65% or so. What drew you to Asheville? Was it the business environment in North Carolina or the beer community that picks up its beer at Bruisin' Ales and helped brewers like Highland Brewing, Green Man, Pisgah and a bunch of other breweries get off the ground?

Grossman: It was a combination of a number of factors. We looked at a lot of cities and states around that area that worked well with our markets in terms of where we were growing and where we saw our future growth.

The Asheville area worked well for both the Southeast and Northeast market share we're developing. We like the community. There's a beer awareness and it's a fun and eclectic town that we thought would be a good place to land. It's got a lot of outdoor activities, and a lot of our employees like to hike, fish and kayak and do those kids of outdoor sports. Cycling's real big there, so it fit as far as a town we wanted to live in and have our families stay.

My son is planning on moving out there with his wife.

Your son Brian, Sierra Nevada's general manager, is going to run the Ashville brewery. Each of your two daughters have worked for Sierra Nevada in various capacities as well, and all of your children own a percentage. What is it like to have one of the few legacy craft breweries and how do you feel about handing the business down to the next generation?

Grossman: You just hope they don't screw it up.

My oldest daughter has been involved since she was in junior high school. My middle daughter as well. She just had her second child, but she's planning on coming back in a full-time role here shortly. My youngest, my son, has been involved since before he went to college and after and his dream is to continue on in the brewing business, so I'm going to try to help all three of them stay engaged and hopefully be successful.

Will the East Coast brewery present a bit of a logistical challenge? Will it have some autonomy or will there be an attempt to coordinate between the coasts?

Grossman: Well we're sending a handful of people back to be involved in the eastern brewery.

It's not only my son, but we're sending back the head brewer and our logistics person who's been with us for a number of years ... We've already got someone on the ground out there working on the paperwork, community stuff and the building.

We're going to try to get as much as we can of Chico out there early on and our plan is to bring people back here from Asheville for a while as well. It's something that we have thought about quite a bit, so hopefully we'll be able to make the cultures mesh and work well together.

There won't be too much autonomy. They'll have some areas where they'll do their own thing and we'll do ours, but as far as production and shipping is concerned they'll stay coordinated.

I know the Chico facility has made a big commitment to sustainability that's included putting a solar array atop your brewing facility, using hydrogen fuel cells and carbon dioxide recovery systems and converting your trucks to hybrid power and biodiesel fuel capability. Will you be exporting some of those ideals to the East Coast brewery as well?

Grossman: Most definitely. We actually are the first people in the property that we'll be building on, so we've been able to set the standard for development. It's going to be minimum LEED Silver in the area surrounding our brewery and we're planning on being exemplary in doing a lot of the things we've done in Chico on the environmental front.

Have climate change and shifting grow zones affected your ability to maintain a sustainable brewery in Chico, and is it a factor you're considering in Asheville?

Grossman: We've done what we felt was the right thing to do, so we've put into place a lot of policies, procedures and internal metrics and invested pretty heavily in things like solar, our organic garden that we provide our restaurant with, our composting and our hop fields.

Will you have a local hop source on the East Coast or will you be shipping West Coast hops out there?

Grossman: Directly across the river from our site is the horticultural college at the University of North Carolina, and they're actually raising some hops there right now. Whether or not they'll actually be a viable crop, we'll see.

We do have some areas where we might grow some hops. As far as it being a viable crop to grow in a big way, it's probably not the ideal climate or length of day. The Yakima Valley has proven to be a lot more adept and has a little bit better growing conditions.

Even though California used to be a big hop-growing region, it's really tough to get the kinds of yields and quality out of California hops. The day isn't quite long enough to get yields out of most of the varieties.

It's not just the hops that have a bit of a problem back east. Sam Calagione, the head of Dogfish Brewing in Delaware, took to the boards on beer ratings site BeerAdvocate a few months ago to defend his and other beers from beer geeks who claimed some craft beers were overrated because their palates had outgrown them. Jim Koch, founder of Boston Brewing and creator of its Samuel Adams beers, used the first post on his company's blog to address the same topic. Have you received any similar pushback from people who've been your core drinkers, but whose tastes have expanded beyond the core product? If so, have the new varieties assuaged that animosity a bit?

Grossman: I'd say yes and no. We hear quite often that a lot of drinkers come back to our Pale Ale after wandering and experimenting.

With all the boundaries that have been pushed during the last few years, it's created a lot of excitement around craft beer and has increased a lot of knowledge of beers and different styles and qualities that were unknown a few years ago. From that standpoint, I think the brewers' education has been fantastic.

Some people have insatiable desire for hoppier, stronger, more esoteric styles, and now there's been a pretty great increase in appreciating sour beers and beers that were pretty limited in the U.S. There are some great ones being brewed now.

But there's always a place for our classic Pale Ale, and we hear that a lot. After people wander, even though they still may be experimenting, they still want a beer that they can have a couple beers of and not have a full assault on their palate. We're hopefully providing what our consumers want from consistency for our Pale Ale drinkers, but also providing Torpedo or Hoptimum for people who want something more extreme. It's tough to drink those beers day in and day out as your only beer from the alcohol standpoint and high bitterness levels. They're great beers to consume occasionally, but probably not your only beer you're drinking.

Even your Pale Ale, which is your flagship beer and functionally a gateway craft beer, it's still a fairly bitter beer, yet a great example of a West Coast IPA that made your growth possible. What is it that still draws drinkers to that beer?

Grossman: I think it has the character we look for in all our beers, whether they're really hoppy or somehow distinct. They've got balance and drinkability and even when we were pushing the boundaries for Hoptimum, we wanted it to be extreme but we wanted it to be drinkable. It's hard to strike that balance, but our Pale Ale does a great job of being somewhat assertive but having a great balance.

When you're not drinking Pale Ale or one of your own beers, what beers are you drinking?

Grossman: When I'm traveling, I gravitate to the beers that people in the area are brewing, so I don't have a real favorite.

We're good friends with Vinnie Cilurzo at Russian River Brewing and my son's a huge fan of the sours, so we have those around the house pretty regularly. I've learned to appreciate a lot of the interesting flavors and nuances. My son and Vinnie just did a collaborative beer called Brux that should be out in the next few months or so. They bottled all of it within the last two weeks, but it'll be a unique twist on what we do and what Vinnie does.

-- Written by Jason Notte in Boston.

>To contact the writer of this article, click here: Jason Notte.

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