The Beer Pipeline

Distribution is the gateway to success for local brewers.
Too bad dispersing beer is so difficult.

November 11, 2016

Baja BrewsIssue 21: November/December 2016

Let’s say you produce a product. Let’s say your product is a delicious beverage that has been loved for thousands of years and is imbibed in great quantities around the world—a liquid that incites camaraderie, contemplation, bloviation, eructation, and occasionally brawls. Let’s say you want to exchange that beverage—let’s call it beer—for money. Even with today’s heavily greased, capitalistic mechanisms in place, it’s not as easy as you might expect. You can’t just put a table and a pitcher in your front lawn and sell stout like a kid sells lemonade. I mean, you could—but you’d get smacked pretty quickly with a fat stack of fines.

Dragoon Brewing’s semi-automated canning line by Palmer Canning Systems is a rotary design, which allows for greater consistency and stability.

Dragoon Brewing’s semi-automated canning line by Palmer Canning Systems is a rotary design, which allows for greater consistency and stability.

After the repeal of Prohibition in the 1930s, most states established some form of a three-tier system to regulate alcohol sales, in which a firewall was built between producers (brewers), wholesalers (distributors), and retailers (barkeeps). The logic behind the three-tier system was based on two presumptions. One, states thought that they could tax alcohol production and consumption at every possible stage, and they do. (Arizona annually rakes in around $22 million a year in beer tax.) Two, states thought that the biggest beer producers would monopolize beer distribution, forcing drinking holes to pour nothing but their own beer—what is known in the industry as a tied-house. Unfortunately, this was effectively what happened: walk into most bars in the second half of the 20th century and you got to choose among three or four varieties of mass-produced, low-alcohol, sparkly-yellow lager, some of which advertised coldness as their most distinguishing characteristic. The three-tier system’s legacy is that today it’s wholesalers who largely get to decide what beer gets sold where—which is only one of the gauntlets beer producers have to slip through to get their beer from brew kettle to pint glass.

“Beer is heavy,” Tristan White, of Dragoon Brewing Company, told me. It’s an aphorism that bears its truth on multiple levels—full kegs of beer weigh about as much as a grown man, though it’s not such a cinch to get them into bars. And distribution in the beer industry, White said, “is the gateway to success.”

Dragoon’s original canning line was capable of filling 8 cans per minute. The new one, seen in the background, can do 40.

Dragoon’s original canning line was capable of filling 8 cans per minute. The new one, seen in the background, can do 40.

White is Dragoon’s young and bearded jack-of-all trades general manager. Besides running sales and marketing and acting as press officer, he also runs the forklift, installs new brew equipment, and handles accounting, delivery, packaging, and HR as well as throwing in a hand with lab work, bartending, dishwashing, and cleanup. When I first met him he was on his knees in the brew house, tinkering with an orange accordion gate. I was going to ask what he was working on, but was distracted by a double-decker stack of Dragoon IPA cans—thirstily waiting to be hosed full of 16 ounces of IPA during their ride down Dragoon’s new Palmer canning line (which White was helping to install).

With Dragoon’s taproom bopping and Big Bad Wolf’s food truck dishing sandwiches out front, White and I sat down for a few beers. (He went with a tall tulip glass of Unihopper and I tasted through the Black IPA, the Monsooner, a barrel-aged beer called The Cuatro, and the Stronghold Session IPA).

A lot of the “weight” of beer comes from another legal relic: franchise laws. These laws, which lock a brewer to a single distributor (‘til death or bankruptcy does them part), were put in place to protect beer distributors—the mom-and-pop companies carting or trucking your beer from brewery to bar—from big domestic brewers like Bud, Miller, or Coors. These laws were also imagined post-Prohibition, when there were only 40 or 50 brewers in the country, on which the many small distributors completely depended. Today, the relationship between distributor and brewers (at least small- to medium-sized craft brewers) has been reversed. Distributors have merged or bought each other up, while the craft beer boom has done the opposite, atomizing beer production into the now thousands of breweries across the country. Which means that it’s the brewers who depend on the wholesalers—if they don’t have room in their trucks, or don’t want to carry a brewery’s beer, the brewer is left awash in a sea of unsold suds.

Tristan White is Dragoon’s jack-of-all trades general manager.

Tristan White is Dragoon’s jack-of-all trades general manager.

And with so many craft brew options in town (this autumn Tucson welcomes three new breweries—Dillinger, Green Feet, and Crooked Tooth—into its ranks), a lot of bars and tap rooms want to have rotating handles—the physical handle that the barkeep pulls to pour you a beer—which, for a single brewer, means that instead of having four or five clients who keep the beer flowing at a constant rate, you need to have 20 or so clients who put on your handle every other week. Drinkers’ love of options has led to “Rotator Nation,” as White described it to me—great for the drinker, but hard on the brewer. And distributors don’t have clear incentive to keep one craft brewer’s beers on tap at any single bar: for them, as long as their trucks are full, the profits don’t waver. In effect, craft beer is a distributor’s market.

You’ll have to go to Sentinel Peak’s brewpub to drink their Peanut Butter Cup Porter: 10 pounds of Reese’s Peanut Butter Cups soaked in Sentinel’s Porter, which might sound like a saccharine gimmick, but—happily—it’s not oversweet, with the peanut and chocolate notes coming out and complementing the porter more than the candy. To drink other Sentinel beers, however, you can go to just about any neighborhood in town. Their red and white handles are pulled at bars and restaurants across Tucson.

Sentinel Peak has been open for less than three years, and they’ve already gone through a number of expansions, and will likely keep up their rapid growth, according to founder (and full-time firefighter) Jeremy Hildebrand. Like most breweries, folks at Sentinel Peak started distributing themselves, selling every drop they produced. After reaching out to, and getting snubbed by, some bigger distributors, they were approached by Young’s Market, a California-based wholesaler (which also distributes for Bisbee’s Beast).

Sentinel Peak brewer Cory Hines begins a brew that will be served in more than 80 restaurants and bars across Arizona.

Sentinel Peak brewer Cory Hines begins a brew that will be served in more than 80 restaurants and bars across Arizona.

The slow-growth trajectory that many brewers I’ve talked to have described as their business model might seem to be contradicted by the local boom in craft breweries. But rate of growth is relative, and I get the sense that Baja Arizona brewers are more careful than slow: the backyard-bucket-to-brewhouse model seems to be the standard model. “We’re growing fast, but we also like to play it cautious,” Hildebrand told me, capturing Tucson’s malty zeitgeist.

Sentinel Peak first started shipping their beers about a quarter mile away, to Roadhouse Cinemas, right across Grant. But now that Young’s Market is stumping for them—acting as the agent between bar owners and Hildebrand—their beer is being poured in nearly 80 restaurants and bars across the state. A lot of local bars, Hildebrand told me, are as interested in the story and ethos of their brewery as they are about the product. Young’s Market set up Tucson International Airport’s Arizona Sports Grill and Sentinel Peak on something like a blind date: Hildebrand beered-and-dined the bar owners at the brew pub, chatting about their origin story, giving them a brew-tour, and eventually securing a handle at their bar—happy the thirsty jetsetter. And Sentinel Peak’s story does sell: founded by three firefighters, with beers inspired by Hildebrand’s time spent in Germany, where he was stationed while serving in the Army as a Russian interpreter in the last years of the Cold War. Sentinel Peak’s Dewpoint Dunkel, which is traditionally a black lager, though Sentinel Peak brews it with Kolsch ale yeast, replicates the smoothness of a lager, but with extra body. Hildebrand told me that he spent six months—test brewing in his backyard with a turkey fryer—just getting the color down: a clean, dark, acorn brown, which shines a lovely maple when held to the light.

Sentinel Peak’s most surprising beer is probably their Overhaul Chili, which is brewed with five varieties of peppers, including roasted jalapeño, serrano, habanero, poblano, and ghost pepper. If it weren’t so delicious, it might be undrinkable—nearly stinging on its way down your throat. This is one of the joys of drinking craft beer: large domestic and regional breweries don’t dapple with capsaicin-heavy peppers, but smaller craft operators have the room, and the imagination, to experiment.

Sentinel Peak’s Jeremy Hildebrand says that they’ve had to manage their rapid growth “cautiously.”

Sentinel Peak’s Jeremy Hildebrand says that they’ve had to manage their rapid growth “cautiously.”

Rob Fullmer of the Arizona Craft Brewers Guild explained some of the challenges of starting and running a craft brewery in Arizona. Currently there are 78 state-licensed breweries, with an overwhelming 80 percent of all craft beer sales occurring in Maricopa County. (Pima!—drink up.) Fullmer has been executive director for only three years, and has already seen the number of state breweries double. The Arizona Craft Brewers Guild’s mission is to “promote and protect Arizona breweries,” which may sound a little like the objective of a militia, but, as Fullmer explained, liquor laws are inherently prohibitory in nature, and the guild spends its time “playing a lot of defense” to make laws more brewer- and consumer-friendly. One basic example is allowing restaurants to sell beer to-go in growlers, which was prohibited until the guild lobbied to include new permissions in the state’s 2016 Liquor Omnibus Bill. A more significant victory for the guild was raising the cap of barrel production in 2015 from 40,000 to 200,000 barrels, allowing for midsize breweries to maintain the label

of craft, which permits them to pour their beer the same place they make it.

“The best bet,” Fullmer told me, “is to self-distribute for as long as possible … to own your neighborhood,” and establish organic relationships with bars and individual consumers. For small brewers, Fullmer said, “distribution is also a marketing tool”—establishing brand recognition at local bars. Brewers also “get the biggest return per ounce of liquid if they sell their beer at their own bar.”

Like most new breweries, Dragoon started by self-distributing, and did so until June of 2015, after finally succumbing to the persistent courting of Finley Distributing (who also distributes Thunder Canyon and Borderlands). But even after signing with the wholesaler, Dragoon’s sales rep keeps close ties to both the restaurants and the bars that pour their beers. Beer-making, White told me, is a “relationship business.” Despite their surge in growth, White explained how important it was “to have somebody on the street in all of their markets. Otherwise people aren’t going to really care about their product.” In the end, craft beer is small nuts in Finley’s large portfolio, with Dragoon making up what White estimated was less than 1 percent of their sales. And yet, Dragoon’s handle is near ubiquitous in downtown area bars. And you’d be remiss if you haven’t started picking up four-packs of their flagship IPA. (With a hoppy slightly citric slap in the mouth, by my judgment it’s the best IPA in town.)

The ultimate goal for both Dragoon and Sentinel Peak is to achieve statewide distribution. To do so they would need to get on board with major supermarkets, like Fry’s and Kroger, which is where most beer in Arizona is purchased.

Another option, though it might seem far-fetched, is to follow the example of Belgian Brewery De Halve Maan (Half Moon), and build a beer pipeline. De Halve Maan brewery pipes its beer underground to a bottling plant a few miles outside the historic downtown of Bruges. It was important to De Halve Maan owners to keep producing (and keep jobs) inside the city. Instead of moving to an industrial suburb, or continuing to use loud and polluting trucks to transport their beer, they decided on the more efficient, underground option. It might be something for a few of Tucson’s downtown breweries to consider.

In fact, let this stand as an open call to City Council members and Mayor Jonathan Rothschild: if they want a bipartisan, electoral-friendly, public works project without the controversy of widening Broadway or the wheel-spinning history of Rio Nuevo, why not install a beer pipeline in Tucson?

Imagine, say, how easy it would be for Borderlands to pipe their beer directly to a handle at Tap and Bottle. Or Thunder Canyon to pump to Hotel Congress. Or Pueblo Vida to Playground. Or—I’m just saying—a direct line from Dragoon to the tap in my kitchen …

John Washington is a writer and translator. Visit jblackburnwashington.com or find him on Twitter at @EndDeportations.







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