Location Location Location: How Craft Breweries Are Shifting the Definition of Local

Feature by | Jul 2012 | Issue #66

Photo by A. Jordan

The Dixie Brewing Company boasts its New Orleans heritage on its labels, and its logo can be seen on hand-painted signs and murals all over the city.  But since Hurricane Katrina flooded the building with 10 feet of water seven years ago, and scrappers made off with wiring in the walls and the copper vat inside, the brewery on Tulane Avenue has sat fallow. Though its bottles claim a commitment to return and “re-beer New Orleans,” the brewery hasn’t been able to find a local company with the space to contract-brew enough beer to meet demand. In 2007, Dixie ended up partnering with Joseph Huber Brewing Company, 1,000 miles north, in Wisconsin.

“It is kind of curious that we’re so far away. We are on the other end of the Mississippi River,” says Gary Olson, president of brewery operations at Minhas Craft Brewery, which owns Huber. “Good Dixie beer is made in Monroe, Wisconsin, and so is the best Canadian beer.”

The definition of “craft brewer” is ever evolving, but according to the Brewers Association, three adjectives are at the heart of it: small, independent and traditional. A pervasive undertone in that definition involves individualism and customer engagement derived from a sense of place.

But as craft beer grows in popularity and serves a wider market, regional identities are becoming more fluid. Sierra Nevada is named after the Pacific mountain range that serves as its water source, yet the brewery is finding a second location in Mills River, N.C. Bayou Teche Brewing’s LA-31 Bière Pâle has the image of Louisiana and the state’s pelican seal on every bottle, but it’s being contract-brewed by Lazy Magnolia Brewing Company in Mississippi. As craft breweries grow in popularity and demand, will regional roots play less of a role in craft beer’s identity? And do consumers care?

Dixie hasn’t fared very well since its forced move, according to David Britt, brand manager for Paulaner HP USA, which manages Dixie’s distribution in 34 states. “I get emails all the time looking for Dixie. There’s still interest in the brand and the beer, it’s just a matter of us playing catch-up,” Britt says. “We have taken a hit, but a lot of the pushback we get is from the distribution end, not consumer. It’s kind of a stigmatized brand. Some of the distributors are concerned that it’s no longer brewed in the South, and they don’t believe they can sell the beer.”

Kevin Stolzenthaler, a construction project manager in New Orleans, who was drinking with friends one Sunday at The Bulldog, an uptown bar, says he’s noticed that you can’t get Dixie on draft anymore. “Dixie kind of fell off the map a little,” says Stolzenthaler. “If the brewery was still on Tulane Avenue, I think you’d see it around more.”

Britt says that Dixie has recently started looking into contract-brewing at a different location, one below the Mason-Dixon Line, and would like to start up its own small-scale brewing operation in Louisiana. “We want to be brewed in the South again,” he says.

For many breweries, a regional, cultural identity fosters the brand’s wider appeal. Paradoxically, that popularity might dilute the brand by requiring a large-scale production model that precludes ties to its regional roots—something breweries keep in mind as they choose which locations to expand into.

The Knott family gathers on their tasting porch at Bayou Teche Brewery on Saturday, June 2, 2012 in Arnaudville, Louisiana. | Photo by Michael Conti

The Knott family gathers on their tasting porch at Bayou Teche Brewery on Saturday, June 2, 2012 in Arnaudville, Louisiana. | Photo by Michael Conti

Bayou Teche Brewing started out as a small operation on the Knott family farm deep in the Cajun country of in Arnaudville, La. Karlos Knott had begun to experiment with beer styles that would compliment local Cajun cooking—beans and rice, spicy jambalayas and smoked boudin sausages. And after a few years of homebrewing, Knott and his family decided to start up a 1-barrel farmhouse brewery in an old railroad car.

They thought distribution would be limited to Acadiana, a remote Cajun-French region, but when the company started producing commercially in 2010, it took off immediately. The Knotts had not anticipated such a high demand. “We were told that Louisiana is not a craft beer market. Our theory was no one’s really been introduced to craft beer. These beers were designed to go with food native to our state,” Knott says. “We started as a nanobrewery, thinking that Lafayette was going to be our market. We opened up and within a week, New Orleans and the North Shore were knocking at our door. We were making 2 barrels a day.”

They contracted out their recipes to Lazy Magnolia Brewing Co. in Kiln, Miss. Knott says he chose Lazy Magnolia because they understood Bayou Teche’s Southern philosophy. “We talked to other breweries in the state, and they were at capacity and couldn’t help us out,” he says. “But [Lazy Magnolia’s] still Southern, like we are, and that’s a different vibe. You don’t really look at a clock so much as you worry about crawfish season and pecan season. I think it also reflects in your beers as well—they revolve around the growing season.”

Last year, Lazy Magnolia brewed 4,000 barrels for Bayou Teche, which were distributed all over Louisiana, Alabama and Florida. “That was kind of like our 10-year plan,” says Knott.

The Knotts are working on building a new brewery on their property in Arnaudville. They hope to get it online by July. “We’ve been working overtime to get it corrected,” Knott says of adorning their bottles with the Louisiana branding when the beer is brewed one state over. “I know some people have a problem with it.”

But the fact that LA-31 is brewed out of state hasn’t hurt the beer’s popularity. Stanton McNeely, a New Orleans native who was enjoying a beer and reading the paper at The Avenue Pub on St. Charles Street on a recent Sunday afternoon, says that for Southerners, the definition of “local” might be looser than elsewhere in the country. “From a customer’s perspective, there’s still that local connection. For us, anything on the Gulf Coast is local,” says McNeely. “I think, here, there’s part of a post-Katrina culture of supporting the local economy.”

Craft beer is at a crossroads. Small batches and cultural ties are at the heart of its definition, yet as the popularity of craft grows across the country, many breweries are expanding to meet demand. So the examples of Dixie and Bayou Teche might prove instructional for the second wave of craft breweries set to hit North Carolina in the coming years. Three Western companies—Oskar Blues of Lyons, Colo.; Sierra Nevada of Chico, Calif.; and New Belgium of Fort Collins, Colo.—have recently committed to building new locations, all within an hour of Asheville, N.C. All three companies have cited demand as the main reason for their expansion.

Byron Knott takes the family pirogue out at Bayou Teche Bewery on Saturday, June 2, 2012 in Arnaudville, Louisiana. | Photo by Michael Conti

Byron Knott takes the family pirogue out at Bayou Teche Bewery on Saturday, June 2, 2012 in Arnaudville, Louisiana. | Photo by Michael Conti

New Belgium, for one, has been growing by an average of 15 percent per year, according to the company’s spokesman, Bryan Simpson. “We’re bumping up against the roof here as far as how much we’re able to produce,” he says. “We’re not meeting demand in any of our markets. There are still 22 states where we don’t distribute, and we’re not adding any new states.”

The new Asheville facility will have a 400,000-barrel capacity, increasing New Belgium’s capacity by nearly 50 percent. Simpson says New Belgium, which is often associated with its Western origins, sees the expansion as an opportunity to let its identity evolve.

“We’ll export the cultural pieces that work here, and also let the new location inform our company. If anything, it’s going to imbue our culture with new ideas, so there’s not a lot of concern about the brand,” he says, adding that the second location could also allow for more of the experimentation that epitomizes craft brewing. “Certainly with the small-batch stuff, there will be a lot of opportunities to make beers that are unique to one location,” he says.

Chad Melis, of Oskar Blues, echoes that notion, saying that another location in a different part of the country seemed like the best way to meet customer demand, but remain a small operation connected with the community. “[Founder] Dale [Katechis’] background is in the restaurant industry. As we continue to grow, losing that intimate feel between employees and community in general was something that scared him,” Melis says. “Instead of growing and growing in Lyons, we were looking for a similar community with an outdoor lifestyle and brew-savvy customers.”

He also says Asheville’s culture of music, mountain biking and environmental sustainability all link it to Lyons, almost like a sister city, just as Bayou Teche felt linked to Mississippi’s Southern culture.

Seeking out a like-minded culture was also part of Sierra Nevada’s decision. “When we were looking for a second location, we wanted a place that felt as much like Chico as possible,” says spokesman Bill Manley. “Asheville is right in the mountains, it’s pretty progressive, and sustainability is pretty important to the local culture.”

Sierra Nevada’s new 300,000-barrel-per-year location was also brought about by the original brewery nearing its capacity of 1 million barrels last year, with East Coast sales on the upswing. Manley says that the company was concerned about the environmental impact of shipping beer across the country. “Chico is always going to be the home base for the beer. When Ken [Grossman] was originally getting the brewery up and running in the ’70s, a lot of inspiration came from the mountains,” he says.

Asheville already has its share of hyper-local craft breweries, and three years ago, they formed the Asheville Brewers Alliance, a confederate of 17 companies that formed to promote regionally produced beers and to foster a supportive environment among its members.  These local breweries share mixed feelings about their new neighbors—one reason they’re unhappy is that Sierra Nevada was awarded $3.75 million in Henderson County tax incentives and more than $1 million in state grant money. The city of Asheville put up $3.5 million in tax incentives and $500,000 in local infrastructure improvements to entice New Belgium, and the state also gave the company a $1 million grant.

Some local brewers, including the president of the Asheville Brewers Alliance, have said those tax breaks give larger companies an advantage that the truly local craft brewers didn’t have when they broke into a challenging craft beer market in the ’90s. “Oftentimes we feel that we need to look at the subsidies to bring in large corporations and companies, and balance that with our current locally owned businesses, which probably have a greater impact on our local economy,” says Franzi Charen, director of the Asheville Grown Business Alliance. “When a business comes in from the outside, they often take money from that community and invest it elsewhere. That is the risk any community runs when it brings in any large business.”

John Marrino, owner of The Olde Mecklenburg Brewery in Charlotte, N.C., says the state’s choice to bankroll large breweries with grants is a double blow to local craft breweries, who have been operating under a 61.7 cents-per-gallon alcohol tax. “You could argue that they increased the taxes on small local brewers and then turned around and gave that money to big, out-of-state brewing concerns. And part of the reason those out-of-state brewers have grown so big is that their states are much more brewer friendly.”

He added that if he had Colorado’s 8 cents-per-gallon tax rate, he’d hire three more employees and grow his business faster. “There are 60 breweries in North Carolina,” he says. “So if all 60 [North Carolina] microbrewers had that rate, don’t you think we’d at least create as many if not more jobs over the next seven years as New Belgium and Sierra Nevada have promised? I believe it’s no accident that states with low excise tax rates have the preponderance of top craft brewers. They are able to keep more of their revenue to reinvest in the growth of their business.”

Other locals are looking past the tax issue. John Lyda, brewmaster at Highland Brewing Company in Asheville and vice president of the Alliance, says that because there is such a rich local beer culture in Asheville, brewers have already learned to distinguish themselves, and he isn’t too concerned about the effect of the national breweries moving into town. “All three of the ones moving into this area already sell here. They’re going to focus on their East Coast distribution, so it’s not like they’re coming in here to just take over west Carolina,” he says. “I think it will actually make the region more of a destination nationally and lend some more credibility.”

Charen agrees that the larger breweries aren’t trying to eek out the local craft market. “I don’t think that could happen anyway, because they have such a strong presence and following locally,” she says.

The brewers in the Alliance are already considered local, but it will take a while for breweries like Sierra Nevada to be considered local among Asheville residents, Lyda says. And while becoming a part of the fabric of the Asheville community is important for the outliers coming in, they still associate their identity with their flagship locations.

“It is something we discussed, whether it would be weird to have Sierra Nevada in the Appalachian Mountains,” Manley says. “We’re already available in all 50 states. Inspiration is one thing, but I don’t think we’re all and of this specific location.”

While astute beer drinkers might notice the source location on their bottles, chances are they won’t be too bothered by it. “I don’t care where the beer’s from,” says John Wilkie, a music industry professional who was drinking a Brooklyn Lager with Stolzenthaler at The Bulldog. “If it’s good, I’ll drink it.”