Industry: Brewing & Distilling
Owner and CEO Peter Zien keeps up with the craft brewing times by staying nimble and innovative while maintaining tradition.
When Zien's family business, JDZ Inc., bought the brewery in 2002, it was the culmination of a natural progression.
"I had gone as far as I could as an amateur," says Zien. He'd racked up a trophy case of 400 homebrewing awards before turning professional with AleSmith. "It seemed kind of heaven sent for me. It was just three miles down the road from my house."
"I bought it on July 16, 2002," says Zien. "I remember that because my life changed and I was working harder than I ever had in my life."
Beyond the close-to-home location, there were several other selling points: Zien had volunteered at the brewery and liked the name and the logo as well as the early beers developed by the original owners, who were friends of his from the QUAFF homebrewing club.
He hit the ground running with AleSmith. In 2003, the brewery's Barrel Aged Speedway Stout was recognized as the best beer in the world on RateBeer.com. "That was the first time a domestic beer had ever hit number one," says Zien. "We would do releases and get the word out, and people would line up around our building."
"We had some really big growth years between 2008 and 2013," says Zien. "Some of the years were as high as 100 percent growth."
He says 2008 was "a breakout year," as AleSmith saw booming growth as it took home Small Brewery of the Year honors at the Great American Beer Festival and four beer medals in all, and the company's finances moved from the red into the black.
The year before Zien acquired the brewery in 2001, AleSmith's production was around 1,000 barrels. In 2018, that number eclipsed 31,000 barrels. The operation still has plenty of room to grow: AleSmith moved from 15,000-square-foot space into its current 109,600-square-foot home in San Diego's Miramar neighborhood in 2015.
The strategy hasn't wavered. "We've focused on being a premium brand," says Zien, noting that AleSmith's barrel-aged bottle releases feature real gold leaf on the foil caps and "really elegant, sexy European glass."
It took time for the market to catch up in the U.S. "Here, it was kind of a dumbed-down beverage," says Zien. "In Europe, it's an elegant beverage. A waiter in full whites can bring you your beer in a properly emblemed glass on a silver platter."
He adds, "It doesn't have to be the commercials you watch on TV that show you opening a can of unremarkable beer and a pool party breaks out in your backyard, or frogs start talking in trees, or silly advertising. We're all about how serious and how good beer can be, and we continue that today. . . . I wanted AleSmith to be like Rolls-Royce without the pretentiousness. I don't think we need to apologize for wanting to be the best, but I also want AleSmith to be accessible and open to all. I think that's what craft beer is -- anyone can play this game."
AleSmith's appeal has gone wider in recent years, due in part to a local sports legend: Late San Diego Padres outfielder Tony Gwynn approached Zien in 2014 to develop a beer. The result, .394 San Diego Pale Ale, was a blend of AleSmith's Extra Pale Ale and IPA, based on Gwynn's personal taste. "Tony didn't like bitterness, but he loved hop flavor and aroma," says Zien. "We designed a beer that's not a hazy, but it drinks like a hazy, and it has this huge tropical hop pop on it."
Five years later, .394 Pale Ale accounts for more than half of AleSmith's production and is known as "the stickiest tap handle in Southern California," says Zien. "It's sort of taken the Southern California market by storm. . . . It's nice to have a strong horse in the race in a softer market."
Battling cancer at the time, Gwynn passed away later in 2014, but AleSmith helps keep his legend alive in more ways than one. In 2016, the brewery opened the Tony Gwynn Museum, featuring Gwynn's personal collection of mementoes, awards, and photos, in the tasting room. "People go in smiling and laughing and come out with tears in their eyes," says Zien. "You get to see this tremendous man's life in front of you."
Zien's passion for beer extends beyond brewing, as he's judged beer competitions since the mid-1990s. "I've steadily moved through the ranks," he says. "It's not science -- it can never be, there are human beings involved -- but you can nail this down. . . . It's kind of the gift that keeps giving. You're always learning more, you're always refining, and the homework's fun: You have to drink beer."
Speaking of fun homework, Zien has been making cheese since the early 2000s. "Shortly after taking over AleSmith, I realized my beloved homebrewing hobby was now going to go by the wayside," says Zien. "[Brewing] was the last thing I wanted to do on the weekend."
Zien says he "felt a void" for a hobby, and filled it with cheese in his post-AleSmith era, ultimately studying cheesemaking at Cal Poly, San Luis Obispo. More than 15 years after he "caught the bug" for cheesemaking, Zien went pro with it as well: CheeseSmith, the first and only creamery located inside a craft brewery in the U.S., opened in November 2018 and started selling cheese in summer 2019. "I'm a one-man show in there," says Zien. "I'm I'm a licensed pasteurizer."
While both the input and output are different, CheeseSmith and AleSmith are underpinned by the same philosophy. "We're truly committed to craft," he says. "You know you're going to get the best from us."
The tricky balance is keeping that ethos front and center when you have a lease on a 109,600-square-foot brewery. "It was a big jump," says Zien of the 2015 expansion. "Carefully and conservatively -- although it doesn't sound like it -- we made this move."
He continues, "I can actually do 200,000 barrels in this facility, but we add fermenters as needed. We didn't have to capitalize everything off the bat. I like to think I've given AleSmith a home it can grow comfortably into for decades."
Production has hit something of a plateau in recent years, but that's not necessarily a bad thing. "Now we're looking at it like a normal business where a healthy growth rate might be 9 percent or 7 percent," says Zien. "We're back into reality. I'm sort of appreciating it. It's challenging -- it's going to weed out the sick and the bad."
The custom 85-barrel brewing brewhouse from Steinecker is complemented by a 10-barrel system for small and experimental batches. The small system allows for AleSmith to address a major market trend: Millennials "want something new," says Zien. "They also want something bright and shiny weekly. As a manufacturer, that can be challenging."
With the twin brewhouses, he notes, "I can make a flavor of the week on the small system and have it in the tasting room only and it can have wacky ingredients in it like pineapple and chocolate. . . . But at heart, we're a classic brewery. We make Scotch ales and German lagers and styles that have been around for hundreds of years. I'm walking in both worlds here and it's exciting to me as an artist."
"The old model back in the day was you brewed whatever you wanted, you filled a cool box with it, and then you hired someone to go out and sell it. That model's not working right now. We are on a brew-to-order [model] now, where we like to actually have the P.O. in hand. . . . It's just more responsible. You don't end up with beer no one wants."
It's part of a broader move at AleSmith involving a number of productivity-oriented initiatives. "We've recently implemented some Six Sigma and Lean manufacturing practices at our brewery," says Zien. "We can always do things better, and we're always going to search those ways out."
Favorite beers: Zien says his "Midwest roots" have led to an appreciation for Firebrick Vienna-style lager from August Schell Brewing Company in Minnesota and New Glarus Brewing's "unbelievable fruit beers" from Wisconsin.
In San Diego, he's a fan of Mikkeller Brewing's Windy Hill New England-style IPA made at his former location. At AleSmith, his preferred beverage "depends on the time of year. Right now, Oktoberfest is totally hitting the spot. . . . I do go to our .394 Pale Ale a lot."
Challenges: "Staying one step ahead of a really quickly changing market is something that's required," says Zien.
Remaining an innovator as a 25-year-old brewery is another challenge. We want to be innovative -- that's important to us. We're not your father's beer."
"Yes, the market is crowded, and yes, there is competition," he adds. "I don't call my fellow brewers competitors, I call them compatriots. We're all doing the same thing: trying to get people to appreciate better beer."
Opportunities: The company has begun marketing excess capacity in the form of contract brewing services."We have done the heavy lifting here: We have this magnificent facility that can make a lot of beer. Some of the smaller breweries that are doing well are coming to us to contract brew for them. We are currently brewing for four other breweries right now, which is cool -- it doesn't touch my sales or marketing departments, and it's pre-sold beer. I'm getting my margin on it, and it makes sense for them, too: It keeps their name out there and it keeps them on their growth curve."
For AleSmith, Zien highlights an upcoming mild, low-calorie, low-alcohol beer (tentatively called "Don't Call It a Sour Sour Ale") that's aimed at the hard seltzer market. He's not planning to make a hard seltzer because he believes the category "is going to go the Zima route. If you look at the history of fortified beverages, that's what they do -- spike and drop."
AleSmith will also continue to push its new hazy IPA, Juice Stand, in 2020. "That style's been crazy popular," says Zien. I'm never going to chase a fad. I wanted to brew a hazy because I enjoy them."
"It has to be all about the beer," he adds. "It has to be beer first and then everything else follows."
Needs: "We're always looking for top-notch leadership here," says Zien. "I'm getting a little older. My wife [AleSmith Chief Culture And Cummunity Advocate Vicky Zien] is involved in the business quite a bit. We would both like to both perhaps get some executives in these higher positions. We're a mature company now, and it happened pretty fast. It was only seven years ago that I was still cleaning bathrooms and driving forklifts, and now I'm a true CEO.
"But I want to enjoy the ride, too, and I think my wife and I are still working a little bit too hard. I think at a point in a company's existence, the owners need to get out of the way."