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Proximity Malt

by Eric Peterson on December 4, 2018, 02:55 pm MST

www.proximitymalt.com

Milwaukee / Monte Vista, Colorado / Laurel, Delaware

Founded: 2014

Privately owned

Employees: about 50 (22 in Colorado)

Industry: Supply Chain

Products: Brewers malt

CEO Dale West is rethinking the malt supply with a regional play that dovetails nicely into brewing trends.

In a long career in the malting industry, West saw an inherent inefficiency with the status quo that worsened with the advent of craft brewing. As the market morphed from "a few multinational companies to a plethora of craft breweries," he struck out on his own to launch Proximity Malt.

Headquartered in Milwaukee, the company has two malthouses in Monte Vista, Colorado, and Laurel, Delaware. The business model is actually a throwback. "There used to be regional malthouses around the country," says West.

As brewing consolidated, so did malting, dwindling to four major suppliers nationally by the 1990s. But as the number of breweries soared, going back to a regional model made good business sense to West.

The industry norm of importing malted barley from Europe or Canada, with touch points at ports, switchyards, and trucking depots en route to craft breweries represented a thorny logistical tangle.

"There's got to be a better mousetrap," says West. "The traditional supply chain has so much tied up in logistics costs. There's got to be a way we can bring a secondary supply chain closer to the breweries."

He calls Proximity "a different kind of malt company. We're regional. We call ourselves a regional player, versus a national or multinational or hyper-local craft."

The target regions had a concentration of craft breweries and good conditions for barley and wheat. "We looked at two things: Where's the raw material? Where's the highest concentration of breweries?" says West. "Colorado was pretty evident. What was less evident was the Mid-Atlantic."

He found that winter varieties were a great fit for farms in Delaware, Maryland, and Virginia that don't suffer as much moisture stress as traditional varieties. "We avoid the summer heat by harvesting in June," adds West, noting that barley is also a great rotational crop for the region.

"There just weren't malting varieties being grown out there," he continues. "Our thought was if we could get out there with enough demand . . . that gives the agriculture community enough scale to where it makes sense to switch over and do something new and the economic incentive to do so."

From 2014 to 2017, Proximity was in site selection and construction mode. He credits his experienced team with bringing the idea to fruition. "We found brownfield sites in both locations," says West. Delaware's location is a former feed mill and Colorado's is an old potato starch facility. "All of the malting is greenfield." West is hesitant to name budget numbers, calling the buildouts "a significant capital expenditure."

In 2018, the Monte Vista malthouse scaled up its operations after launching the year before. "Colorado grows beautiful barley," says West. "The [San Luis] Valley is just a garden for growing grain."

Proximity's target market spans the entire craft brewing community. "It doesn't matter what size you are," says West.  "We're working with New Belgium, we're working with Oskar Blues, we're working with Odell . . . all the way down to the two-barrel systems."

The Monte Vista malthouse is also supplying such Colorado breweries as Pikes Peak, Square Peg, Ska, and Denver Beer Co., as well as other customers in Texas, Arizona, and Missouri. Laurel is working with Dogfish Head, Tröegs, DuClaw, and Stone.

The adoption rate is accelerating, says West, noting, "We're picking up in the range of 10 to 20 breweries per month."

He touts Proximity's "personal touch": "It doesn't matter what size you are, you know who's producing your malt," he says. "That was one of my main desires of setting this up: to bring the malthouse to the brewer."

And a cutting-edge malthouse at that. "The plants we built, the facilities are highly automated, with state-of-the-art process control capabilities," says West. "We do have roasting capabilities at both locations. We have a full line of products from the base malts all the way to black."

Like the process controls, the roasting system is novel. "Our roaster is unique," says West, describing a two-story machine. "It's not a traditional drum roaster. It's an electric coil roaster. It's very gentle on the grain. It keeps the hull intact."

The end result? "The consistency for the sophisticated craft brewer is second to none. That's something breweries aren't getting right now," says West. "Usually, it's a small batch. Each batch is going to be different."

On the macro-malting side of things, there's a similar issue. "If you've got 250,000 tons of malt, you've got to be able to source 300,000 tons of barley to feed that plant." Within that vast sea of grain, there will be a range of growing conditions and qualities. "You've got variability from ear to ear," says West. "We're a bit isolated from that in the valley."

Proximity also operates a semi-works to malt small batches in Milwaukee. "It's not a pilot, because we're doing 200-pound batches."

The plants took longer than expected to come online, but that hurdle is now cleared, says West. "From there, it's getting our product out, getting it trialed, and getting brewers to know who we are," he notes. "We're really excited to be in the business development stage and out of the plant development stage. We're doing what we love doing: manufacturing great malt and talking to brewers."

Favorite beers: "For me, it'd be, 'What's my favorite malt?'" says West. "We have worked very hard on our pilsen malt." He hopes that Proximity can convert some brewers from European grain: "One of the advantages we have in the valley is malt with consistently low protein."

Challenges: Growing both supply and demand. "Getting the word out," says West. "It's not self-evident when people hear about Proximity Malt."

That's largely because the company is a first mover in regional malting. "There really isn't anybody in the space right now," he explains. "We're not a craft maltster . . . and we're not a national or international company. We're a very regional company working with local raw materials for a very efficient supply chain."

Opportunities: West says he hopes both malthouses will be operating at full capacity -- 22,000 to 25,000 tons -- in 2019. "Our objective is to focus on the plants we have," he says, noting that breweries producing 2,000 to 3,000 barrels a year are a strategic target. "We have the scale to grow with them. From a sustainability point of view, that's important."

After the Colorado and Delaware malthouses are close to capacity, West plans to open additional regional facilities. "The whole concept is scalable," he says. "Obviously, we need to focus on the two plants we have today and get them up and running before we look at expanding. . . . Beyond that, anywhere you have a high density of breweries and the opportunity to work with raw material, this business model works."

Needs: "I've got a lot of needs," says West. At the top of the list is "an open mind from brewers. To me, that's the biggest need we have, and it's not easy. They all have suppliers today they're comfortable with."

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