The Pipeline

Beer’s Long and Winding Road From Brewery to Glass

November 1, 2011 By Greg Kitsock

You pop open a bottle of Sierra Nevada Pale Ale, an old reliable that you’ve been drinking since the 1980s.

You tear the pull-tab off a tallboy can of Oasis, a double IPA from a microbrewery halfway across the continent that showed up without fanfare a local retail outlet.

You have the bartender draw you a pint of The Public, a hoppy pale ale from the first packaging brewery in Washington, DC, since the Eisenhower Administration.

Did you ever think about the long and winding road that your beer took from the brewery to your lips?

It’s a Big Beer World

There are over 13,000 brands of beer registered in this country, according to the National Association of Beer Wholesalers. Some accounts, like the Westover Market in Falls Church, VA, will take whatever you’ve got. The grocery store lines it shelves with over 1,000 brands for takeout and operates a small bar and beer garden. “It’s chaos!” laughs Zachary Duarte as he shows me their cold room, which contains an Everest of kegs and cardboard cartons, alongside boxfuls of dormant tap handles.

Most businesses need to be more selective. Recently, I was allowed to sit in on a meeting between Dogfish Head Craft Brewery’s Sam Calagione, a partner in Manhattan’s recently-opened Birreria brewpub, and the managerial staff as they plotted beer orders. The group poured over a printout listing units sold over the past month for 35 brands: house-brewed and guest beers, bottled and draft. Written next to each were comments like “sold three 50-liter kegs in five days,” “spikes depending on crowd,” “failed to sell well.” Calagione says he’s a proponent of “craft beer Darwinism”: “If a beer is doing well, award the brewery with another tap to see how it goes.”

Birreria, perched on the fifteenth story of a high-rise cater-corner from Manhattan’s famous Flatiron Building, attracts a young, adventurous, well-heeled crowd who are willing to pay $10 a pint for house beers like the chestnut mild and thyme pale ale, and as much as $38 a bottle for some of the specialty imports from Calagione’s Italian partners in the venture. “People want a back story here. They want to have fun,” remarks general manager Allen Arthur.

Selling in the Shadows

If you can’t offer the connoisseur every beer in existence, give him or her something that nobody else is pouring. That’s the idea behind the “tap takeovers” that have become an increasingly important promotional tool for craft breweries.

At Rustico, a multi-tap in Arlington, VA, Peter Egleston, president of Smuttynose Brewing Co. in Portsmouth, NH, is chatting up the clientele. Mike Harbin and Chuck Matthews of Specialty Beverage, Smuttynose’s Virginia distributor, set up the meet-and-greet and supplied Rustico with a half-dozen strong, scarce, limited-edition beers from the New Hampshire brewery. They include Homunculus, a Belgian-style strong golden ale, and a 2009 vintage of Gravitation, a quadrupel brewed with 200 pounds of pureed raisins.

“Fifteen years ago, this was a business where you sold a large volume of product at small margins,” reflects Egleston. The distributor dropped off kegs and cases of Bud, Miller, Heineken and their ilk and the beers leapt off the shelves and out the taps, aided by the millions that the large brewers invested in advertising.

Increasingly, though, the industry is about hand-selling. He adds, “For an account like this, it’s a feather in their cap to offer a bunch of beers that nobody else has. It gives them bragging rights.” Whereas brewers used to cultivate brand loyalty, today they practically reward brand disloyalty by releasing a steady stream of new and innovative brands.

Later this year, Specialty Beverage’s Harbin says he’ll travel to St. Louis to visit another of his clients, Schlafly Brewing Co. There he plans to help formulate and brew a beer that will only be available in the Virginia market.

“We do a big part of the work for them,” says Harbin of the breweries he works with. “We’re the fingers of their hand.”

Keep on Truckin’

Homunculus and the other Smuttynose specialty beers took a roundabout route to get here. They were shipped from the brewery in New England down south to Specialty Beverage’s central warehouse in Richmond, VA, then were trucked back northward another 100 miles to this Washington, DC, suburb.

Welcome to the three-tier system.

Brewpubs aside, most beer in this country passes through the hands of three parties before it reaches your mug, with the wholesaler or distributor acting as middleman between the manufacturer and the retailer. This system has been in effect since Repeal. Garrett Peck, author of The Prohibition Hangover, credits this setup to John D. Rockefeller, the richest man in America of that era, who was an ardent supporter of Prohibition until rampant crime and flouting of the law left him disillusioned.

“Before Prohibition, the brewers owned the bars; there was a great deal of fear we would return to this system,” notes Peck. Rockefeller proposed revamping the beer business to make it more like the soft-drink industry. “One of the key goals was to break apart the vertical integration of the brewing industries,” he explains. The distributor was a kind of buffer zone that prevented alcohol manufacturers from directly owning chains of bars. What’s more, each time the alcohol changed hands, you’d get a further markup on the product (Peck estimates 30-35 percent en route to market). “That meant no cheap booze again.”

The three-tier system might add a few pennies to your beer purchase but it definitely has its advantages. The National Beer Wholesalers Association, one of the country’s most influential PACs, credits it with creating “an orderly marketplace” instead of a free-for-all where producers flood the market with cut-rate alcohol. And the NBWA isn’t off base when it lauds the system for promoting diversity in the marketplace. If America had a “tied-house” system where the large breweries operated most of the bars, the big guys could have strangled the baby in the cradle by preventing nascent craft breweries from ever getting to market. Conversely, if big-box chain stores like Walmart and Costco could buy directly from large brewers at a discount, they could force mom-and-pop retailers (the most receptive venues for smaller craft brands) out of business.

“Without the three-tier system, guys like me never get to market,” Hugh Sisson, founder of Heavy Seas Beer in Baltimore, once confided. Indeed, the Brewers Association, the Boulder, CO-based organization that represents America’s small, independent beermakers, strongly supports an independent middle tier.

The distributor is often the unsung hero of the pipeline that spits out fresh beer in unlimited quantities and guises. The mere act of delivering the liquid is an unglamorous but necessary task. The Brooklyn Brewery in New York used to operate its own distributorship, the Craft Brewers Guild. In one year, they ran up $60,000 worth of parking tickets navigating the streets of the Big Apple.

A Good Partnership is Crucial

Jonathan Frye of Hop & Wine, a craft distributor in Vienna, VA, lists “narrow back alleys” and “winding staircases” as two of his least favorite aspects of the job. To haul product to the Birreria brewpub in center-city Manhattan (possibly the highest brewpub in the nation in terms of distance above the surrounding terrain), deliverymen need to take one elevator up 14 stories, then use a second elevator (specially built for this purpose) up an additional flight. Customers need to use these same elevators, so deliveries are scheduled early in the day, preferably before the 11:30 a.m. opening hour.

But a good distributor is more than a trucking company. It’s a partner who helps the client brewery move beer by setting up displays, organizing special events like beer dinners and tap takeovers, removing cobwebby, past-its-peak beer from store shelves, and educating retailers on what makes a beer worth buying.

When New Belgium Brewing Co. in Fort Collins, CO, decided to move into the Mid-Atlantic region, it interviewed 40 different distributors before cobbling together a network of 17 wholesalers to serve its new Maryland, Virginia and Washington, DC, markets. Montgomery County in Maryland presented a major roadblock to complete coverage. This is probably the only locality in the nation where the county government is the sole licensed wholesaler of alcoholic beverages. With a monopoly comes an attendant lack of service. Montgomery offered to warehouse and deliver beer, but wouldn’t agree to any other services, and wouldn’t even promise to keep packaged beer refrigerated at all times. According to New Belgium’s Mid-Atlantic regional director Neil Reeve, the brewery struck a deal with a neighboring distributor (Premium in Frederick, MD) to store extra beer at the proper temperature and truck it to the Montgomery County warehouses on an as-needed basis. Premium also agreed to keep an eye on the beer once it reached the marketplace. Adding another tier, in effect, to the existing three will make it more expensive to deliver beer, but New Belgium refuses to compromise on freshness issues.

A distributor also works with a brewery’s sales reps to allocate liquid. How do you allot limited seasonals and one-off beers? “A lot of arm-wrestling goes on,” says Joe Whitney, Sierra Nevada’s director of sales and marketing. “All the sales managers make an argument as to why their market deserves the lion’s share.” As a rule of thumb, if Sierra Nevada sells 10 percent of its year-around brands in a certain area, that area will get 10 percent of a special release like Hoptimum (an imperial IPA spiced with experimental hop varieties) or the brewery’s Ovila series of abbey-style beers. Sierra Nevada will occasionally make exceptions. For instance, San Francisco got a disproportionate share of Fritz and Ken’s Ale, an imperial stout that former Anchor Brewing owner Fritz Maytag collaborated on.

Occasionally, a distributor will place beer in a venue that a brewery rep might have overlooked. Brad Phillips, Mid-Atlantic rep for Sierra Nevada, recalls getting flak from some retailers who felt shortchanged when beers like Hoptimum started popping up in a 7-11 in Arlington, VA. But that 7-11 is situated in an affluent, rapidly growing area and is able to move higher-end brands.

Staying Fresh

DC Brau makes it easy on its distributor, Hop & Wine. This Washington, DC, microbrewery sells its entire output of about 60 barrels a week to around 100 accounts in the District of Columbia, none more than a few miles from the brewery. “We’re a pretty simple account for them. They come once or twice a week and sell it all in three days,” says co-founder Brandon Skall. He further asserts, “Anything you drink in a restaurant was kegged within the last week.”

Being local is a virtue, but also a necessity for such a tiny operation. Not only are The Public, Penn Quarter Porter and other DC Brau brands available only within DC, but only at bars and restaurants—establishments that sell beer for strictly on-premise consumption. Skall believes this market strategy is better for brand-building. You can deliver a parcel of beer to a supermarket or liquor store and a single customer or two can buy out the entire stock. But in a bar or restaurant, patrons will generally limit themselves to a pint or two, allowing more people to sample the beer. DC Brau, however, will sell you six-packs of cans or growlers at their tasting room on Saturdays.

Tallgrass Brewing Co., a four-year-old microbrewery in Manhattan, KS, with an output of about 10,000 barrels a year, employs a different marketing strategy. Tallgrass distributes its Oasis Ale, Buffalo Sweat (a cream stout) and other beers in 14 states, as far north as the Great Lakes, as far south as Mississippi, and as far east as Virginia and Pennsylvania.

Regarding Virginia, Tallgrass founder Jeff Gill said he was approached at the 2010 Great American Beer Festival by Jacob Brunow, a representative of Brown Distributing in Richmond, Va. “He said he was impressed with the quality of the beer, and the fact our beer was in cans.” (Not just your garden-variety twelve-ounce can, but sixteen ouncers, an unusual size for craft beer.)

“We weren’t really seeking that market out,” admits Gill, “but we knew it was growing and that intrigued us.” Besides, “you have to sell beer where the people are. There are only 2.5 million people in Kansas and Guiffre (a northern Virginia wholesaler) might have that many people in its distribution area.”

Selling beer so far afield does create certain problems. It’s hard to keep an eye on your Virginia market when you’re 1,100 miles away on the prairie, so Gill employs a part-time salesperson who works on commission—his “feet in the street”—to conduct samplings and make sure local stocks are replenished on a timely basis. A skillful beer rep, he says, “knows the beer bars and the players and how to market your beer to make it feel like it’s been sold there for 20 years.”

Transportation is also an issue. Tallgrass generally ships its beers in refrigerated trucks, although Gill admits that in the winter he might settle for an ordinary box truck. Actually, for December and January deliveries to Minnesota, insulation (to keep the beer from freezing) is more important than refrigeration. “If the trucker stops for the night, it can get pretty brutal!”

Gill says he’s thinking of sharing a truck eastward with other breweries to cut down on expenses. “A lot of Colorado breweries are shipping east, and we’re down I-76, eight hours from Denver.”

Riding the Rails

Transportation is an even bigger issue for Sierra Nevada Brewing Co. in Chico, CA, the nation’s second largest craft brewer with 780,000 barrels sold last year. Sierra Nevada ships to all 50 states. Before it’s loaded onto the truck, the brewery’s flagship pale ale is prepped for a journey that can take as long as a week to go cross-country to an East Coast distributor, then another 3-4 weeks before it winds up at the retailer. It sits for six days in a brewery warehouse while the yeast naturally carbonates the beer. Then it’s hoisted unto refrigerated trucks that maintain the temperature between 42 and 49 degrees.

Unpasteurized and only roughly filtered, Sierra Nevada Pale Ale contains more malt and hops per cubic unit than mass-market beers, which means more ingredients that can break down at improper temperatures, Whitney explains. Refrigeration, he maintains, is “more essential” for craft beers than for pasteurized mass-market lagers from Anheuser-Busch and MillerCoors, which in recent years have relaxed their requirements that their beers be kept refrigerated every step of the way from brewery to point of sale. (These beers are kept instead in “temperature-controlled” areas where the mercury can rise up to sixty degrees.)

About half of all Sierra Nevada shipped to the East Coast rides the rails. Sending beer by train “is a little more sustainable,” notes Whitney. “It doesn’t use as much fossil fuel.” The drawback is that trains “don’t go everywhere—only to the major hubs.” The beer then has to be transferred to a truck for the final leg of the journey, which can add a week to ten days to the travel time if the beer, for instance, is bound for Birmingham rather than Boston.

Sierra Nevada Pale Ale has a shelf life of 150 days, so a journey of about a month from brewery loading dock to your refrigerator does cut significantly into the beer’s window of salability. (It’s little wonder that many imports, facing a trans-oceanic voyage, are freshness-dated a full year from bottling.)

Given the length and breadth of this country, it’s amazing that drinkers on the East and West Coasts (and let’s not forget the Heartland) can enjoy one another’s beers at near-peak freshness. It’s worth raising a toast to the pipeline that delivers so effectively.