By Eric Peterson | May 02, 2018
With backgrounds in microbiology and yeast production, Giarratano and Peetz met as colleagues at biofuel maker Gevo before starting Inland Island. "We talked a little bit about opening a brewery, but there were so many breweries opening," says Peetz. "We decided it would be better to start a supplier."
For Denver-area breweries, a local yeast supplier makes sense. Since yeast needs to be kept cold and shipped overnight, about half of the final cost is typically shipping. "We're immediately 30 to 50 percent cheaper, and it's fresher," says Giarratano. "It makes their fermentation a lot better." Inland Island often delivers twice the yeast cells as its competitors on a milliliter-by-milliliter basis.
Having a Denver address is another big plus. "Being local, that's huge for a lot of brewers," says Giarratano. "They're paying exorbitant prices for local hops."
Noting that there are three big players in yeast in White Labs and Wyeast on the West Coast and Brewing Science Institute in Woodland Park, Colorado, Peetz says that the lack of competition made for lesser yeast. "They had no competition, so they were able to get away with it," he says.
That's changed since Inland Island launched in 2014, when the startup counted a total of six competitors. Now there are more than 20 yeast labs in the U.S. As a local craft brewing market matures, new labs emerge to sell the freshest yeast possible. "It becomes a richer and richer target the more breweries that are opening," says Peetz.
After starting by selling vials to Front Range homebrewing shops, Inland Island started marketing its yeast to brewers in Denver that can most enjoy the benefits of local yeast. Customers include Baere, Woods Boss, Mockery, and Call to Arms in Denver and Joyride in Edgewater.
Out-of-state business has steadily increased largely through word of mouth, catalyzed by brewers in Colorado moving to new markets. "Whoever goes from a brewery here and goes to a brewery in Oklahoma or Nebraska, we go with them," says Peetz.
Out-of-state breweries now account for about a third of sales. Overnight shipping in insulated packaging keeps the yeast alive and well, but it also increases the cost. Customers outside Colorado include North American Breweries (Magic Hat/Pyramid parent), Trophy Brewing in North Carolina, and Michigan's Perrin Brewing, along with numerous breweries in Nebraska and Arizona.
"Packaging customers are great customers," says Giarratano. "They're going to buy more yeast." The flip side of that, he adds, is that many larger breweries bring yeast production in-house. "Yeast is always the thing they're trying to spend the least amount of money on and replace us."
Supplying startups has also driven growth, he adds. "New breweries are good customers. You form that relationship right out of the gate."
Peetz says the feedback from brewers is great. "They're just blown away by it."
Most brewers outsource yeast production for their entire career, Giarratano adds. "With yeast, people get a little superstitious. It's the least understood part of brewing." Moving from a longtime supplier to a new entrant like Inland Island can be "a big leap to take."
Adds Peetz: "I'm surprised by how many people still use dry yeast."
But when they look at the economics of it, they get more bang for the buck buying from Inland Island. "The savvy brewer who gets six or seven generations from a pitch from us is getting it cheaper than dry yeast," says Giarratano.
Inland Island maintains a yeast library of 50 American, European, wild and Japanese strains, many more than the five varieties of dry yeast or the dozen or so offered by most competitors. "Ours is made to order, versus large batches," says Giarratano. When an order comes in, they seed a starter from frozen stocks and are able to deliver pitches in about a week.
The company's sales have quadrupled since 2015, after converting an old tortilla factory on the north side of Denver into a yeast lab in 2014. "We were looking for a food-grade facility," says Giarratano. "This building was perfect."
At first, it was only Peetz and Giarratano, but they hired their first employee in 2016 and have steadily hired yeast ranchers ever since. "We fill this cool science niche in the brewing industry," says Giarratano. For trained biologists, he laughs, "Cleaning kegs doesn't sound too good."
With the growth, says Peetz, "We've had to implement a much more rigorous quality control program. The industry as a whole is upping its game."
To this end, Inland Island was an early adopter of Invisible Sentinel DNA tests to sniff out unwanted microbes.
Yeast tainted with the wild Saccharomyces cerevisiae variant Diastaticus led to Left Hand's $6 million lawsuit against White Labs.
"It's what everybody's worried about," says Giarratano. And when breweries start packaging for wholesale distribution, shelf stability becomes a much bigger issue. "A lot of the reason for quality control going up is people distributing," he says. "There's a lot of people distributing without pasteurization."
With that dynamic at play, Inland Island can continue to grow with the industry, and scaling is not an issue. "Yeast doubles every two hours," says Peetz.
Adds Giarratano: "We've doubled our square footage [to 5,500 square feet]. "We've got plenty of room to grow."
Peetz calls the manufacturing operation "plug-and-play -- just add employees and equipment."
Challenges: Continuing to grow. "Before it was all low-hanging fruit," says Peetz. "Now we're competing with breweries who have a relationship with another supplier."
Opportunities: "More national sales and bigger breweries," says Giarratano.
New strains represent more opportunities. "We just got 16 new strains of kveik from Scandinavia," says Peetz. "They make all these bizarre flavors and are super high-temperature tolerant." Inland Island already offers a Norwegian Farmhouse strain of kveik, but could bring more to market. Qualifying new strains for the catalog, notes Giarratano "is a long process. You've got to brew beer with it."
Needs: "Just getting the word out," says Giarratano. "I've attended a lot of out-of-state conferences." Inland Island's booth at the 2018 Craft Brewers Conference in Nashville this week is a first for the company.