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On Brewing: Supply chain catches up to craft

Article by Eric Peterson December 3, 2018, 05:11 pm MST

This month's BreweryWeek profiles on Square Peg Brewerks, Proximity Malt, and Whiskey Sisters Supply illustrate a key tenet of the farm-to-tap and and farm-to-bottle movements.

The craft brewing and distilling industries have grown up without their own supply chains; rather, they've relied on the same macro supply chain the multinational competition uses.

It's a mismatch: Big suppliers are built for scale, not small batches.

As Proximity CEO Dale West notes, there were once numerous regional malthouses, but the supply chain contracted to four multinational suppliers as the number of breweries contracted from about 3,000 to less than 20 in the U.S. in the wake of Prohibition.

Working for a large supplier before launching Proximity, West came to the conclusion, "There's got to be a better mousetrap. There's got to be a way we can bring a secondary supply chain closer to the breweries."

A high-tech throwback, Proximity has re-established regional malt supply in Colorado and Delaware to start, with perhaps more craft-leaning markets down the road.

The dynamics have changed, but the logistics haven't. It's similar in distilling. Craft producers (and their customers) crave all things local. And that's not really in Big Beer's vocabulary. Sheer volume usually means local ingredients are secondary at best.

Not that craft producers don't figure out how to make it work, no matter their size. Lucas Hohl of one-man Sand Creek Distillery in Hugo explains that he has "probably had to shop around more than others for vendors whose terms best suited me. Of course, some of that is my rural location, not just my production capacity."

Regardless, the craft market's combined volume has grown well beyond niche territory. Suppliers can't ignore it, nor can they simply offer one size that (supposedly) fits all and not expect some bleeding.

The chart of the number of breweries in the U.S. continues to look like a hockey stick, with the tally surpassing 7,000 at last count. With this kind of market, there are local and regional plays all over the place.

Look at yeast. When Inland Island Yeast Laboratories set up shop in Denver in 2014, there were about a half-dozen yeast suppliers nationwide. Now there are 20 or more.

Yeast might be low-hanging fruit. Anyone with the right skills and a lab can make it pretty much anywhere. Hops are fickler, ultimately dependent on climate. The same goes for grain, and Colorado's San Luis Valley has just the right climate and a legacy of supplying Coors for decades.

At Square Peg in Alamosa, co-founder Derek Heersink is growing some of the brewery's grain himself, just 15 miles away from the fermentation tanks. You can't get much more farm to tap than that.

The approach isn't just smart business. It's also got a chance to reverse broader economic trends.

Stephanie Ohnmacht of Whiskey Sisters points out that supplying urban craft beverage manufacturers could spark rural communities that have largely been left behind. It's all about making connections to bridge the divide.

As Ohnmacht puts it in Gregory Daurer's profile of the company: "Surviving today as a farmer is really difficult. Our goal is to support the farmers."

Eric Peterson is editor of CompanyWeek and BreweryWeek. Reach him at rambleusa@gmail.com.

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