Ask a dozen different brewery owners about the best way to structure the business, and you’ll hear at least a dozen different answers. Depending on location, size, ambition, organization, distribution plan, and many other factors, there’s really no best way to come at it other than to say, “If it works, it works.”
But, for as varied as the craft-brewing industry is, there are a few common traits that indicate a healthy business no matter its size. Efficiency in the brewhouse and across all operations is one, as is sustained profitability, strategic growth, and simply making the best quality beer possible. Here’s a look at how two different brewers work to constantly improve these factors through two very different approaches.
Fremont Brewing: Sustainable growth through constant reinvestment
Husband and wife Matt Linecum and Sara Nelson opened Seattle-based Fremont Brewing (pictured at top) in 2009 with little more than “spit and blood,” as Linecum puts it.
It was the height of the Great Recession and Washington Mutual Bank, a cornerstone in Northwest Washington’s financial community, had just shuttered with short notice. Unemployment in the city had reached 10 percent and, for the most part, existing businesses were hunkering down. The couple opened Fremont with no outside investors, no bank loans, and no credit cards.
They did have one beer, however, a pale ale, as well as the city’s only taproom at the time.
“We started off as a scrappy craft brewery with no money at the height of the last recession, but with a really successful tasting room,” Linecum says. “That first year was basically hand-to-mouth.”
In many ways, operating on such a slim margin starting out has helped Fremont remain laser-focused on its core values and mission while pursuing what Linecum calls “real, meaningful growth” as opposed to expansion for expansion’s sake.
“We had some great demand out of the gate for what we were doing, and we’ve responded by continually reinvesting in our employees, our equipment, and our beer,” Linecum says.
“My vision for this brewery was to get to a point where we were large enough to offer a living wage with benefits for all of our employees while having the freedom to explore some of my more creative passions on the brewing side. And that starts with great equipment and a great customer base.”
Today, Fremont offers the highest wages in the region for breweries of comparable size, as well as a benefits package that includes health, life, vision, and dental insurance, Linecum says. The brewery also employs three full-time lab technicians and regularly evaluates samples from other breweries, as well as its own.
Fremont operates in the top tier of breweries nationwide for its beer-to-water usage ratio, according to the Brewers Association, and is in the same category as craft-giants Sierra Nevada and New Belgium. The brewery is in the process of converting all its facilities to LED lighting and has planted a rain garden on its roof that collects rainwater for use in landscaping. Its sales fleet is comprised of hybrid vehicles. Fremont has also partnered with Impact Bioenergy to install a compact system called HORSE (High-solids Organic-waste Recycling System with Electrical output), which takes liquid and solid waste such as spent yeast and grain and converts it into useable electricity.
“Part of what we are trying to do is to invest our money back into our facility so we can eventually have as close to zero carbon footprint as possible,” Linecum says.
Using local ingredients and supporting regional agriculture as much as possible is another priority for Fremont. The brewery is invested in an organic hops farm and successfully lobbied to change an FDA rule that allowed the sale of beer labeled as “organic” but didn’t use certified-organic hops, a change that has spurred growth in the local organic hops industry, Linecum says.
The brewery also works with agricultural extension offices in Oregon, Washington, and British Columbia, as well as directly with farmers, to foster growth around locally grown grains and regional malting facilities.
While these efforts may not always directly translate to sales, they do impact the brewery’s efficiency, quality, and sustainability, as well as help Linecum understand how these initiatives might scale.
“We’ve been very, very careful about only expanding in tight, concentric circles out from the center,” Linecum says. “It’s not the fastest way to expand, but we’ve been really happy with our growth.”
That solid foundation is key as Fremont begins a critical stress test, of sorts, as it continues to ramp up production and move into major expansion mode.
Linecum and Nelson took out their first loan several years ago to help build a new production facility with an 80-barrel brewhouse. The new 80,000-square-foot building encompasses an entire city block just down the street from Fremont’s original location.
“There’s no way we could do this on our own—it was $8 million,” Linecum says. “That’s probably the single, greatest decision that really had me thinking. We have a ton of capacity, but not everybody understands that in business, and certainly in this industry, you can’t just keep on making the same amount because your costs to cover the loan are large, so you actually have to expand a little bit ahead of where you may want to organically.”
But given Fremont’s ongoing commitment to balancing measured growth and risk with constant reinvestment in the quality of its people, procedures, and products, it’s a safe bet that the brewery’s business model will continue to serve it for far as they’d like to go.
Melvin Brewing: Organic growth fueled by passion
It all started with a 20-gallon (76 l) brew system in the back of a defunct Thai restaurant in Jackson Hole, Wyoming.
Jeremy Tofte, owner and cofounder of Melvin Brewing Co., just wanted to chase powder, brew some beer, and live the outdoor lifestyle. He’d worked at, and then run, the restaurant before selling it on eBay and moving to the other side of the world to surf. When the landlord called a few years later to let him know that the space was available again, he moved back, bought a small brewing system, and got to work.
It turns out he’s not only talented at skiing and surfing, but at making beer, as well.
Tofte upgraded to a 3-barrel system after about a year, and then things really started to take off. Cofounder and head brewer Kirk McHale took back-to-back Alpha King Challenge wins in 2012 and 2013 for their 2x4 DIPA; they won GABF gold in 2012 (and again in 2015 and 2016); World Beer Cup gold came in 2014 for 2x4 (plus bronze for Chchchch-Cherry Bomb and silver for Carlton in 2016); and they were named “Small Brewpub of the Year” at the 2015 GABF. That’s quite a few accolades for a 3-barrel system in the back of a restaurant.
“It got to the point where we had so many people asking for our beer, the state of Wyoming gave us a state grant of $3 million dollars, and that really jumpstarted the growth,” Tofte says.
He and McHale also have twenty-one outside investors, a few of whom Tofte has never met, who signed onto the project after hearing about it through friends in Jackson Hole.
In early 2016, Tofte and McHale moved Melvin Brewing into a 20,000-square foot space on a plot of land in Alpine, Wyoming, about 30 miles down the road from Jackson Hole. They installed a 30-barrel brewhouse and upgraded to a 60-barrel brewhouse this year (pictured above).
They also started with ten 60-barrel fermentors and added an additional six 120-barrel fermentors just four months later, Tofte says. They’ve recently installed six 240-barrel fermentors and have room for about fifteen more. Oskar Blues alumni Dave Chichura joined in to run the production brewery while McHale focuses on R&D on the small brewpub system.
Starting out with so much space and planning for expansion from the beginning has been critical in Melvin’s ability to respond to increasing demand without sacrificing the quality of its beer or stretching its production schedule too thin.
As one might imagine, however, all that capacity is more than enough beer to satisfy their local market, which is why Tofte and McHale also planned a strategic, if somewhat unorthodox, distribution strategy from the beginning.
“Our local distributor likes to brag that our county drinks the most Pabst per capita of anywhere in the United States, and we make only the kind of beer that we like to drink,” Tofte says. “Wyoming is such a small state population-wise, so we knew we would not be able to sell the kind of beer that we needed to here and would have to go outside the state.
“We’ve always had the intention of distributing the beer in places that we want to visit and places that we have a connection with.”
Rather than focus on saturating their local market and slowly spreading outward into surrounding states, however, the partners decided to target more far-flung markets where they thought their beer might do well.
In Tofte’s hometown of Seattle and markets throughout Washington state, for example. As well as in Portland, where Tofte went to college and “learned how to surf on the Oregon coast,” he says, and in Bend and Eugene. You can also find Melvin beer in Vancouver, British Columbia, in select cities in Idaho and Utah, and, as of last summer, in Vermont. In early 2016, Melvin expanded into Colorado, hiring a full time state rep and leading with draft at select accounts before launching cans two months later.
“We go to the best markets possible, where people know beer and understand and appreciate beer, and we slowly start to enter into those markets,” Tofte says. “We’re not in a hurry. We have time to do it right. We’re doing it nice and slow.”
Next up for Melvin is putting down more local roots, this time with a brewpub location in Bellingham, Washington, that’s scheduled to open in June. The 7- barrel brewhouse is strategically located to give the Melvin crew an excuse to ride the world-class mountain bike trails just outside of town, while becoming a part of the rapidly growing local brewing community.
Melvin remained a self-distributing brewery for as long as possible, says Tofte, who worked in his family’s distribution business as a teen. Melvin only enters into distribution relationships with partners who share the brewery’s passion for the beer and the brand.
“Another thing we did right was to put people in every market that we distribute to,” Tofte says. “Right now we have the demand to get our beer out of the warehouse and into people’s hands within a couple of weeks.”
It’s essential to put your best foot forward, especially when entering competitive new markets, which is why the quality of the beer and treating it properly from the brew kettle to the point of sale is a primary concern.
Melvin also runs a full laboratory at the brewery and employs two full-time technicians and one part-time assistant.
“We’ve seen a lot of other breweries that are so focused on dollars and entering new markets that they’re willing to take shortcuts with their beer,” Tofte says. “I think a lot of the thinking on the corporate level is, ‘we’re going to enter new markets, and [consumers] don’t know what the beer is supposed to be like, so let’s just get it there.’
“We owe it to our customers and the people who try our beer to never short-change them like that,” Tofte says. “You can make the best beer ever, but if you put out one bad batch, people don’t forget. And you only have one chance to make a first impression.”
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PHOTO AT TOP: COURTESY FREMONT BREWING