Taproom Nation: Small Craft Breweries Expand Their Footprints

Growth. It’s a business imperative for a profit-seeking company. To meet demand and increase production capacity, some of the largest craft breweries in the US—Sierra Nevada, New Belgium, Deschutes, Stone—have opened sizeable second locations thousands of miles from their base of operations. But for smaller craft brewers, a barrage of reasons make this step unattainable, or, for many, unattractive, as they wouldn’t dream of leaving the very cities that have sustained their livelihood and supported their passion. Instead, breweries in places like Asheville, N.C., Grand Rapids, Mich., and San Diego are forging a new path while growing their presence by opening multiple locations closer to home.

It’s an approach that’s proven to be both necessary and a recipe for greater success for breweries from California (Bear Republic) to Virginia (Strangeways). Extra taprooms might help build customer loyalty and can potentially remove some of the pressure of distribution. But every change comes with challenges. How do smaller beer companies balance the demands of multiple facilities and more employees while answering to area bars and bottle shops, some of which might view additional taprooms as competition?

San Diego, California
Mike Hess, owner of Mike Hess Brewing in San Diego, says one of the main factors contributing to this growing multiple-location reality is that “distributed beer for a small brewer is a really tough game, financially and logistically. Margins are thin, and competition is fierce for shelf and tap space. Opening up a second, third, or fourth facility really allows breweries to build their brand in a new location, reach different customers, and gives the brewery a small, but often necessary financial boost.” For Hess, opening a second location was almost inevitable since the original brewery started as an 800-square-foot garage outfitted with a hand-built, three-vessel, system. From opening day in July 2010, the company couldn’t keep up with demand—it actually had to close for two weeks to make more beer—so the search began in 2011 for a larger production facility. When Hess got a tip from a friend about a former J.C. Penney location in the resurging North Park neighborhood, he jumped at the opportunity. “It was surrounded by other interesting and eclectic businesses, foodie spots, and, of course, people—all of whom were excited that North Park was cleaning up and becoming amazing. We were early on in that revolution, too, anchoring our block​ and helping to spread good businesses and opportunities in the area.”

Today, MHB operates three tasting rooms in the San Diego area, with a fourth spot set to open in Imperial Beach in early 2018. This one appealed to Hess because it meant they could actually obtain a permit to have a beachside beer garden. “We love our San Diego weather, but there are few places that you can drink beer outside because the city ordinances make outdoor patios difficult to permit,” he says. The outdoor space is 75 feet from the sand and will feature surfboard and bike racks as well as a taco shop and shipping containers with more seating.

All production now happens at the company’s 30-barrel North Park facility, which also has an on-site tasting room. According to Hess, his business continues to expand because “we’ve found tasting rooms to be relatively inexpensive and they have a fairly quick ROI, but, more importantly, they allow us to grow the brand and be part of another community.” One of the communities Hess knew early on he wanted his business to become part of was Ocean Beach. He frequently visited with his kids and wife, who serves as the brewery’s COO. Today, the team at the dog-friendly Ocean Beach tasting room leads quarterly beach cleanups that end with participants kicking back beers.

For Coronado Brewing Company, opening a second location in San Diego eventually arose out of pure necessity. Its first brewpub housed a 10-barrel system on the small island of Coronado, a resort and naval air station across San Diego Bay from the city center. So in January 2013, the then 17-year-old company added a 30-barrel location in Bay Park, followed by a third in Imperial Beach a year later that acts as a quick-service, 16-tap restaurant steps from the sand where customers can also fill growlers or pick up beer to go. Coronado was the first to put down roots in Imperial Beach, and business has exceeded expectations so much that it’s opening a fourth location, also in Imperial Beach. “Having more locations allows us to engage with more customers,” explains Melody Crisp, Coronado’s marketing director. “It’s a great way for a brewery to market in a new neighborhood, build demand, and hopefully grow sales at retail,” she adds. The new location, situated inland about 2 miles away on 13th Street, is slated to open in late 2018 and will be a full-service restaurant with an on-site brewery. “It made sense for us to expand down south, where we know there’s demand, and where we have ties to the local community,” Crisp says.

While Hess and Coronado grew into multiple locations organically, the business plan for Rip Current Brewing in San Marcos, Calif., included multiple locations from the start. “In our opinion, the customer gets the best value and experience buying directly from the brewery since we have [complete] control over the beer condition, temperature, carbonation, etc., all the way to the customer’s glass or growler,” explains co-founder Paul Sangster, who is also currently vice president of the San Diego Brewers Guild. “The brewery-direct pricing also tends to benefit the customer,” he argues. “It’s a win for both brewery employees and our customers.”

However, in spite of the value to consumers, this direct pricing can cause tension with beer stores. “One challenge is the backlash that local purveyors may have toward satellite tasting rooms as they often look at them as competition, rather than what we are trying to do [which] is build the brand,” Hess says.

According to Best Damn Beer Shop owner Sid Mikhail, Hess’ assessment is spot-on. “Not only are satellite tasting rooms becoming direct competition to mom-and-pop bottle shops, they are slowly killing them,” he says. “The pricing of these satellite tasting rooms is undercutting the prices of bottle shops. Awesome for the customer, bad news for bottle shops that work on a small margin as it is.” Another issue? More and more, breweries are only sending him their core lineup, while keeping limited releases for on-premise sales. In order to compete, Mikhail has “cut down dramatically on many SKUs from the big breweries and now focuses on independent craft breweries with a small-batch format.”

Grand Rapids, Michigan
For Craft Beer Cellar owner Brian Beaucher, smaller breweries opening multiple locations in the same city isn’t what concerns him. “What I don’t want to see is large scale brewery ‘chains’ dominating the market and putting independent brewpubs out of business. If we all continue to support our local and small regional breweries, we’ll be good,” he says.

In a city of 196,000 residents, Harmony Brewing Company has enjoyed plenty of support from the beginning as demand quickly outgrew the supply its original location could produce. “The brew system itself was scrapped together using old dairy processing tanks. The fermentors were old yogurt tanks that were accessed by threading a hose through the basement window into a hall on the first floor,” explains co-founder Barry VanDyke. “When we finally got the whole place functioning [in 2012], we were expecting to cater to a niche market of neighborhood beer aficionados. We had no idea that the industry was about to take off in Grand Rapids the way it did.”

Since Harmony was completely surrounded by commercial and residential buildings in Eastown, opening a second location 3 miles away in a former sausage factory became the solution. In September, the company celebrated the second anniversary of its satellite brewery on Stocking Avenue. Today, Harmony utilizes its original location to make small-batch, high-ABV specialty beers like Space Dragon Double Red IPA and Birthday Barleywine. Meanwhile, the newer Harmony Hall, west of the Grand River, features German-inspired cuisine instead of wood-fired pizza, 25 taps compared to 10 at the original brewpub, and live music on occasion.

Like Harmony, Elk Brewing east of downtown Grand Rapids was also limited in its ability to expand on site, which led ownership to build a new production facility and taproom in Comstock Park, 8 miles to the north. Positioned across from Fifth Third Ballpark, home to the minor league Whitecaps, the newer facility includes a bottling line and a full kitchen. Explaining their rationale, owner Eric Karns echoes Hess’ distribution concerns and advises breweries to “focus on the pub side of things rather than distributing. This may be an area that is becoming saturated for new and upcoming breweries.” Yet, owning multiple locations obviously comes with its own worries.

According to Elk’s general manager Jacqueline Silwinski, challenges include “trying to keep communications among the two locations open and updated mainly with the staff.” It’s an issue that several other brewers raised, too, saying that they work hard to make employees feel like part of one brewing family instead of splintered teams.

Asheville, North Carolina
Although Asheville’s population of just 89,000 people is dwarfed by San Diego and Grand Rapids, five local breweries have already opened second locations in the city, with a sixth, One World Brewing, joining the movement before the end of the year. Asheville Brewing Company was the trendsetter, opening a second space in 2006 and a third in 2012. Although its first location in North Asheville opened in 1998, head brewer Pete Langheinrich says that ambition soon had the company thinking beyond Merrimon Avenue. “We had our eyes on cans early on, following the lead of Oskar Blues, and knew we needed a bigger boat.” The allure of doing things a bit differently also appealed to ABC. “A lot of times you might not have had the opportunity to do some of the things you wanted the first time around,” Langheinrich adds.

Green Man Brewery certainly took advantage of doing things differently when designing its new Greenmansion location. Although this sleek, three-story packaging hall, retail shop, and tasting room sits next door to its circa 1997 “Dirty Jack’s” tasting room, they are worlds apart. The original location enjoys support from regulars, while the Greenmansion is often packed with tourists, especially during clear days when the Blue Ridge Mountains can be seen in the distance from the rooftop bar.

And doing things differently was also a motivator for Wedge Brewing Company, which cut the ribbon on a second, much larger facility less than a mile from its first in late February 2017. “Now we have two talented brewers making great beer which is different from and complements our standard beers,” explains owner Tim Schaller. The new location sits on 14 acres that includes dozens of graffiti-covered buildings that will eventually become dozens of new businesses and artist studios. Popular local barbecue restaurant 12 Bones already shares space with the Wedge taproom. Besides the ability to increase capacity, Schaller attributes the two-location trend to the type of people drawn to this industry. “The craft beer world has a lot of non-traditional entrepreneurs,” Schaller says. “Some of us find it hard to sit still.”

For Hi-Wire Brewing and Burial Beer Company, putting down new roots in completely different neighborhoods elsewhere in Asheville has helped each meet growing demand and restore old buildings, too. It also provided the opportunity for both breweries to turn primary locations into specialty brewhouses. Hi-Wire selected a 27,000-square-foot building in Biltmore Village to “reach a totally different demographic” and “grow sales by 60 percent every year,” says co-founder Chris Frosaker. At its Biltmore Village facility, Hi-Wire sees a lot of locals and families, while tourists scoping out Asheville’s beer scene frequent its downtown South Slope location. Frosaker also noted that part of the motivation for opening a second location resulted from an increasingly competitive beer distribution landscape. “By bypassing this route to market and selling directly to the consumer, it removes a lot of uncertainty on the sales end of a brewery,” he says. Currently, 7 percent of the volume Hi-Wire produces is sold through its taprooms, with the rest entering distribution.

Like Rip Current’s Sangster, Burial Beer’s owners knew they would eventually need to open another location to hit their production goals, but it couldn’t just be anywhere. Co-owner Doug Reiser explains that he and his partners wanted to keep to their brand mantra of “breathing life back into the dead, whether it’s buildings that have decayed, or wonderful beer styles left for dead.” So, they purchased a 2-acre property (also in Biltmore Village) that was once home to men building the Blue Ridge Parkway as part of the Civilian Conservation Corps during the Great Depression. “The property’s soul and history drew us to purchasing it,” reveals Doug’s wife and co-founder Jess Reiser. But the fact that it gave Burial the ability to add a 20-barrel system to complement its 10-barrel brewhouse on Collier Avenue probably didn’t hurt. ■