Interview with Ken Grossman

Modern Brewery Age, May 10, 1999

Ken Grossman co-founded the Sierra Nevada Brewing Co. in 1981. The company has built its business gradually, adding new capacity as demand has warranted and exercising care in market expansion. Despite their circumspect approach, the company has been growing like a weed, boosting its business 26% last year off a respectable base. Sierra Nevada is now the 11th largest US brewer, producing 382,050 barrels last year. Sierra Nevada's growth has continued in the face of a micro slowdown that has seen many large crafters stagnating. Certainly the primary driver for the Chico, CA brewer's success has been the company's flagship Sierra Nevada Pale Ale. The noted British beer writer Michael Jackson ranks this beer a four-star "world classic" in the pantheon of beers and says "This American classic has a teasing balance between the floral Cascade hops and the fruitiness of the top-fermenting yeast." The brand is notable for its consistency and long shelf life, two attributes that are not a given for American microbeers. Interestingly, the brand is bottle-conditioned, meaning that live yeast is added to the bottle, triggering a secondary fermentation in the package. This contributes to product stability, but it's a technically demanding exercise, and quite uncommon in the brewing world. The success of Sierra Nevada Pale Ale has not gone unnoticed in brewery suites around the country. In a back-handed tribute, the largest brewer in the world produced a brand called Pacific Ridge Pale Ale some time ago. This product was astonishingly close to Sierra Nevada Pale Ale in flavor profile, and with a green-labeled bottle to boot. And, when Ken Grossman's co-founder decided to leave the business some time back, there were rumors that big brewers were sniffing around, hoping to land a bargain. As it happened, Ken Grossman managed to buy out his partner and take full control of the company, so Sierra Nevada remains a strong, independent craft brewer.

In the interview that follows, we talk with Ken Grossman about the progress of his business and the changes in the competitive landscape.

MBA: I gather that your new brewery is pretty much complete...

KG: We're commissioning a couple of more bright beer tanks, but overall the project is complete. We started brewing a year ago, and we're working on finishing touches.

We've got a retail store, and public area that we'll open up for events in about a year or two. We've designed a place that can seat 400 people, with full kitchen, music hall. But that's a ways down the road.

Getting the new brewhouse up and running was the priority. We've put all our energies into that. It's a Huppmann 200-barrel, capable of doing in excess of 10 brews per day. We also have new cellars, new refrigeration, all new water filtration and handling, a new boiler room. So essentially we duplicated everything we had in our East Side brewhouse. We were at the limits of the infrastructure over there, so when we built the new brewhouse, we had to do everything else along with it.

What is the capacity of the new plant?

We're doing 200 barrel brews, 10 brews a day. We can do in excess of 600,000 barrels a year. We don't have cellar space for that yet. Between the East side brewery and the new facility we have 500,000 barrels of fermentation capacity.

Will you run both breweries concurrently?

Yes. I think so. the older brewhouse is a 100-barrel size, and for some of our products that works out better. It gives us some additional flexibility.

Are flavor profiles for product from the new brewery in line with expectations?

We designed the new brewhouse just like the old brewhouse, just twice as big. We're still using whole hops, and designed the new facility around our process and procedures.

What decided you on this size brewhouse?

It made sense for us. We had 200-bbl fermenters and 400-bbl fermenters, so having a brewhouse twice as big as our original worked well as far as fermentation capacity and handling.

It seems based on your performance in 1998 that demand is growing apace...

Yes.

And how long do you project this facility will be adequate?

We designed some fairly easy expansions into the new facility. Piping is already in place for another 200,000 barrel cellar. We're in the process of pouring concrete on that facility, though I'm not sure when I'll purchase tanks. We could go to 800,000-900,000 annual capacity.

What is your philosophy on expansion...We've seen a lot of breweries overexpand. How do you gauge that?

Historically we've always been behind the curve. So we've been under a bit of pressure before we've committed to another expansion. We're still going along with that philosophy. The marketplace has certainly changed, and growth isn't guaranteed anymore. So we're just sitting back. Hopefully we'll add some more fermentation capacity, but at this point we won't do it until we're sure there is some demand there.

Why do you think the marketplace has changed?

There are a lot of players, for one thing. In some markets, there is a fair degree of saturation in distribution channels and at retail. Our style of beers can only command a certain percentage of the US beer market. It's not an unlimited percent at this point. We make fairly robust, distinctive beers, and we certainly realize that we won't win over a majority of American beer drinkers.