Sierra Nevada Brewing Company, the third largest U.S. craft brewery, has been importing its beer to the UK for 11 years. Its Torpedo IPA and the classic Pale Ale are commonplace in Britain—in bars, restaurants and on supermarket shelves. Which is to say the California brewery has come full circle—as homebrewers, its staff was inspired by British ales in the late ‘70s, and Sierra Nevada Pale Ale would eventually help kickstart an evolution in British craft beer.
Unlike a lot of British breweries of a similar age, Sierra Nevada has not stood still. They’ve moved with market trends and worked hard to constantly improve the way they make beer. And they’ve innovated by producing new styles as the market demands them, such as the Otra Vez Gose. With the Beer Camp Across America project, they’re connecting with consumers and industry folks like few other breweries of their size.
In 2014, after almost a decade with existing supplier Vertical Drinks of Leeds, Yorkshire, a new UK partnership was formed with the legendary British brewer Fuller’s. It didn’t mean the end of Sierra’s relationship with Vertical, but it did rapidly expand their distribution network throughout the UK. This, along with their new facility in Mills River, N.C., means they can get fresh beer into the UK market faster than ever before.
Export Development is managed by sole owner Ken Grossman’s brother, Steve, who works as a brand ambassador, traveling all over the world to educate both the trade and consumers about his family’s brand, while working closely with distributors to ensure his family’s beer is getting into peoples hands.
What brings you to the UK?
Well, I come to the UK a couple of times per year. It's going to become more often this year now that we have our relationship with Fuller's, who've been our importer for about a year. I think it's really important to come out and work alongside them, help develop the brand a little bit and just get to know the market in a way that visiting more than two times a year will allow me.
Why did you decide to partner with Fuller's?
They're a great partner and certainly one of the most respected brewers in the UK and the rest of the world. They have a great distribution network. We had been with our previous UK importer [Vertical Drinks] for 10 years and they'd done a great job but they didn't think they could handle the additional business that they saw was available for us. So we had discussions with Fuller's on the recommendation of our previous importer and the relationship has worked really well so far. We're really excited to be involved with such a great brewery.
Over those last seven or eight years [you’ve been visiting], have you noticed any changes in British beer culture?
Oh there's been an incredible shift in the culture and an incredible shift in the number of breweries here. Just in London alone when we started selling beer here in 2005 there were, like, 10 breweries. Now there's upwards of 80, and it's climbing toward 100. The awareness of craft beer has certainly grown incredibly and the number of specialist pubs selling great beer has significantly multiplied. So there's a huge difference in the scene.
Do you think U.S beer culture has been a big influence in this rise?
Yes, I definitely do. It's interesting, because we sort of copied the British style when we started making our Pale Ale in 1980, and now the British have copied the American style of ales. I think America's influenced Britain and the rest of the world actually. I see it pretty much everywhere I visit.
What are the parallels between what's happening here in the UK and what’s happening back home?
I think [in the U.S.] we're a few years ahead of what's happening in the UK. But I think industry growth is maybe happening even faster here. With social media, the beer drinker knows what's going on in the rest of the world, and I think growth worldwide is happening faster now than ever before because of this. I also see the parallels in the purchases of smaller breweries by larger breweries. That's something that's started to happen here that's paralleling the U.S.
Yeah, I live a couple of miles away from Camden Town Brewery [who sold to AB-InBev in December 2015], and I thought they would eventually sell, but not as soon as they did. A lot of the breweries in the U.S. that are getting bought are quite established. I mean, look at Ballast Point, who started out in '94. For Camden to build a brand worth almost $125 million in just five years, that's incredible.
It is incredible, but this is also happening in the U.S. There are breweries that are three or four years old being purchased. It's very interesting to see what's happening with both established and newer breweries.
Craft beer in the U.S. is currently about 11% of the market, and aiming for 20% by 2020?
Correct, and that seemed almost unattainable five years ago when the predictions were first made. But I think it's probably realistic now. Certain markets like Portland, Oregon, I think, are 60%+ craft. So I think it's attainable.
If some of the bigger breweries are selling, is that going to make hitting that target more difficult?
No. That's an interesting question because the bigger breweries are still probably going to be in that category depending on who you're talking to—maybe not the Brewers Association. However, some of the data services are including the bigger breweries that have now been purchased by the very large breweries in the same data. I think that hitting 20% by 2020 is going to be attainable.
Are you seeing a shift in the way that bigger craft breweries do business?
I'm not sure if I see a shift, maybe just an evolution. I think now, with the increased competition, it's important that larger craft breweries have enough representation in the field and in the marketplace through their people. This wasn't so important 10 years ago when we didn't have almost 5000 breweries competing against each other. I think larger breweries now need to pay more attention to maintaining their market share by having strong representation in the field and constantly being in the eye of the both the public and the retailer.
Larger craft breweries such as yourselves have grown exponentially over the last few years. Do you think the way that larger craft breweries are dominating the market could cause problems for smaller breweries and startups?
I don't think the larger craft breweries will cause problems. I have a feeling that the breweries that are now owned by the mega-breweries might cause a few problems, because they now control a lot of shelf space. Now that they have more inroads to that arena I think they'll be able to have more input as to what's on those shelves. I also think they might have more input in controlling what brands are on draft, maybe through pricing. So I don't think it's the larger craft breweries that will have an effect, I think it's the very large breweries that will have an effect.
Coming back to smaller breweries and the problems they might face, how do you think that the limited resources of hops, grain, etc. might be put under strain? Especially in the light of the larger craft brewers using so much of these resources?
I think there's going to be a real strain on resources for two or three years until the industry reacts. Or at least until the growers react and there's more hops going in the ground. But there's always a delayed reaction, so I think for the time being that there's going to be a huge strain on resources and I don't see that slowing down. If we're going to get to 20% market share in the U.S. then that's a lot more hops that are going be used and will need to be grown.
Do you think that larger brewers like yourselves have a bit of sway with farmers? How would you encourage them to spare more acreage for hops and grain, especially if they're potentially making less money from these crops?
I actually think they'd make more money growing grain for brewing. I think that two-row barley, which most brewers use, is going to make them more money than if they grow barley to be turned into animal feed. At Sierra Nevada, we're encouraging growers by paying more to grow organically, and I think that gives them impetus to plant more crops for brewing. Their’s is a pretty steady market, and farmers can see that, unlike maybe with food crops, that beer is actually pretty steady and reliable and hopefully the price will stay fair for everyone.
You see a lot of U.S. beer brands here in the UK now. And what we're seeing is a lot of U.S. brands launching and then stalling a few months later as consumers lose interest. But you guys have been here a long time. What’s the secret?
We've been here for a little over 11 years, but I think we were unofficially here before that via the gray market. I think it's paralleling our growth in the United States, with our focus on quality. I think the consumer knows that when they pick up a Sierra Nevada they're going to get a great tasting beer. It's going to be consistent, it's going to taste the same today as it did 10 years ago, and it's going to taste the same 10 years from now. I think the consumer realizes that, but there's a lot of excitement when trying new brands. However, I think the consumer still comes back to what they know is going to be consistent, reliable product.
What do you think the struggling breweries are doing wrong?
I think if the breweries sending over beer are sending it refrigerated and they're making sure that the beer is maintained properly once it gets here in terms of storage conditions, then I don't know if they're doing anything wrong. If they're not making sure the beer is looked after properly, rotated, and fresh, then I don't know if it's something wrong. I think it's the marketplace that makes these decisions.
Have you seen mistakes made by U.S. brewers that the younger UK brewers can avoid making?
Sure! Make sure you produce the best quality beer you can. Don't release beer that has issues. This is your reputation on the line. You only have one chance with the consumer to try your product and to be impressed or otherwise. So put out the best product that you possibly can and do not cut any corners when brewing your beer.
How critical is the export business going to be for Sierra Nevada’s longterm health?
The majority of our business will always be domestic, and currently our export sales comprise only about 2% of our overall total. That being said, as I stated previously, with social media being so powerful in the beer world, the consumer is aware of what is available in other markets and would like to have access to products that they read about—and will go to great lengths to acquire them where they’re not readily available. As a result, this has created a secondary market of many primarily-small importers sourcing beers without the brewery’s permission and selling in myriad countries around the world.
Since our focus has traditionally been on domestic sales, and we’re only exporting to a few countries, this grey market importation, as we’ve been discovering, is quite prevalent for our beers. This is very concerning to us, as we know that in the vast majority of instances, our strict quality standards of refrigerated shipping and warehousing and shelf life management are not being adhered to, and the consumer is often not getting the best representation of our beers under these conditions. This has prompted us to re-examine our export strategy, and we’re considering appointing more official import partners to oversee and maintain the quality of our beer in the worldwide marketplace.
What can a brewer like Sierra Nevada do to keep things in line further along the value chain?
We price our beer as fairly as possible and actually make quite a bit less margin on our export beer than domestic. Although we ship our beer refrigerated to every market we’re in, we’re aware that our export partners have added expense in shipping overseas in refrigerated containers, and we try to price accordingly so we’re competitive in the marketplace. We encourage our import partners to price with the same philosophy, and are pleased to report that the majority of them work on very competitive margins. Of course, we can’t control fluctuations in currency, but we’re willing to examine a temporary price reduction should a major devaluation occur.
As a small brewer in the USA, our goal is to see an even playing field for all brewers.
How do you feel about potentially benefiting, even if you don't want to, from those kinds of business practices, though?
We do not want to receive benefit from those types of business practices.
What's next for Sierra Nevada?
We're always looking at new innovations, ways to make our beer taste better and stay fresher longer. We're coming out with new products all the time. We have a new Gose [Otra Vez] that just hit the market, and we're working on some other really exciting beers. We're always looking at new styles.
Looking further forward, what's happening is that the next generation of my brother’s family is being groomed to take over the reins at some point, so that's really exciting for us. I think looking towards the next generation and our continued legacy is the next big step, which will be happening over the course of several years. It's something for us to look forward to and my brother knows that the brewery is going to be in great hands when he finally decides to step back a bit.
We've also got our new brewery in Mills River, North Carolina, which is doing great. That's enabled us to expand our exports because shipping time to the UK and the rest of Europe is significantly reduced, so the beer is going to be fresher by the time it arrives.
When it comes to our innovations, we're also looking at ways in which we can lessen our impact on the environment. We're adding new technology to our breweries all the time. In fact, we just added some micro turbines in both Chico and Mills River, which will produce our own electricity for both breweries. We're just always looking to improve on what we've been doing now for 36 years.
Do you see Sierra Nevada staying in the family for many generations?
That's the plan. My brother has a succession plan in place, so we already have the second generation on board, and that second generation now has families and kids of their own. I'm sure they're going to instill that succession plan in their own families and hopefully these kids will grow up and want to be involved in the brewery and help build a family legacy. We maybe don't have control past this second generation, but my brother's done everything he can to put the wheels in place and get them rolling. Hopefully we'll stay on the tracks.
What challenges have Sierra Nevada experienced in transitioning leadership to the next generation? How do you instill the same sense of entrepreneurialism for someone who didn't have to scrape it all together themselves?
Good question concerning the sense of entrepreneurialism. Ken has gone to great lengths to make sure the transition goes as smoothly as possible. However, I think it can be a challenge for someone stepping into a highly successful business that the previous generation has built from the ground up. The next generation does not have the experience of the incredible time and emotional investment that the founder put in, and as a result, will have a different perspective. We’re fortunate, however, that Ken’s kids basically grew up at the brewery. They were able to see Ken’s commitment firsthand, the dedication and long hours he devoted to the brewery, and learned what it took and still takes to build and maintain a successful business. Additionally, they’re aware that the brewery is an integral part of their family and its future. The kids realize the importance of this and are dedicated to putting in their hours, commitment, and emotional investment in their own unique ways to continue and build upon what their dad started some 36 years ago.