Brewer Profile: Ballast Point

April 6, 2011

Brewer Profile: Ballast Point

Dear Client:

(Editor’s Note: This is the first in a series this week that will profile the SoCal beer market, featuring popular breweries, on-premise accounts, and market data. Expect us to start in the West and work our way across the nation with our regional profiles.)

People far from San Diego’s Ballast Point don’t realize their longevity and influence on the industry, possibly because they do a full 85% of volume in their own backyard. The brewery started about 19 years ago with Jack White and Yuseff Cherney, who operated a homebrew shop with a 15-barrel brewhouse in the back. Six years ago they moved production to their current digs on 10051 Old Grove Rd., where they now brew their sought-after, tropical-hoppy Sculpin IPA and help pioneer the burgeoning distilling market coming out of the craft brew movement. Their still-standing homebrew shop is something of a nexus for the local brewing community, some 40 breweries-beer pubs strong, whose members have passed through its halls. Beyond, the beer Ballast sends everywhere else seems to evaporate when it hits the market.

ON THE SOCAL BEER MARKET. SIG data ranks San Diego in the top 10 markets for beer in the supermarket channel with 540,255 cases sold last year (up almost 7% in case sales) despite its small size. But SoCal can sometimes cower in the shadow of their northern brethren (in the Bay Area), who practically started the industry. Until the last three years or so, it was hard to push kegs up to that somewhat insular market – especially with Bigeye IPA going for $190 a keg, and some Russian River at $150. Things have changed – a couple of wholesalers got on board with the mission without going soft on price, Earl says, and now they’re “crankin’.” They never went soft on price.

ON NUMBERS, NEW MARKETS AND GROWTH STRATEGIES. Head brewer and distiller Yuseff believes the brewery will get to 25,000 barrels this year; last year they finished around 18,000 after adding tanks. The in-progress expansion to add five special stainless-steel tanks with skin that reaches the floor are twice the size of their current ones and will help push them up to 50,000 in the next two years.

But Ballast guys are cautious about expanding distribution. They’ve held off on plans to pick new markets since September, as they can barely keep up with current demand; sales chief Earl Kight estimates they’re up 65% YTD in their home market. They’re currently in selects markets in Cali., Hawaii, Ariz., Penn., New York, the Carolinas, Mass., Conn., Rhode Island and a “smidgen of Florida.” They plan to enter Texas with Andrews Distributing. Why? They expand where distributors persistently court them . Philadelphia is their No. 2 market, driven by a distributor at Bella Vista who begged for their beer, then excitedly wrapped his truck with Big Eye IPA.

Interestingly, draft sales have skyrocketed the past two years: it accounts for 65% of their volume. In the off-premise, they just got their first real chain distribution in 109 Vons stores across SoCal.

ON PUSHING THE GROWING CRAFT DISTILLING SEGMENT. Ballast has had a small distilling program for two years now. Their Old Grove Gin and Three Sheets barrel-aged and white rum are currently out to market, with bourbon and whiskey soon to be released. Craft brewers across the nation are getting more attention for distilling, with more popping up or being discovered seemingly every day. Yuseff believes Ballast’s spirits will get traction with the popular mixology movement in San Diego and elsewhere. “It’s the same as the craft beer bars that started here in SD and Portland and Denver, really pushing for us all along.”

Expect this trend to grow. Yuseff himself is a microcosm of the textbook craft beer consumer, who the Brewers Association and the like tell us are notorious cross-drinkers. But he also believes that more brewers will realize that adding a still is fairly easily added production, when they already have many of the raw materials for certain spirits. Ballast uses washes from the brewhouse for distilling.

ON WHAT SEPARATES THE CRAFT DISTILLER. The craft distillery as a genre tends to act more like a brewery in terms of tradition-bucking and portfolio. To the latter point, Young’s Market told Earl to stick with one spirit. “We’re gonna have a hard time with that, because we make award-winning IPAs, stouts, porters, pale ales,” Earl told him. “These guys are gonna wanna make gin, bourbon, whiskey, absinthe, if we can figure out how to make it.”

Ballast’s spirits also push the envelope like the larger developing niche industry, taking a deconstructionist approach to spiritmaking . Ballast’s spirits sell well where they’re sprinkled in Calif., Mass. and Conn., despite that the rum, at $57 a bottle, is possibly retailer BevMo’s most expensive in that spirit category. But it was a hard sell to the buyer, who took a sip and denied it was rum. “The rum you taste smells like suntan lotion and has spices,” Earl told him. “Our rum is distillate into a brand-new American oak barrel heavily charred on the inside. Thinking that maybe 150, 200 years ago, that’s how rum was made.” The buyer took it.

Yuseff believes craft distillers also use better base products for distilling. Distillers malt, he says, is like bottom-of-the-barrel, next to feed. Brewers malt is plump, with a flavor that lacks astringency. Instead of molasses, the waste product of the sugar industry, they use an organic evaporated cane sugar for their rum. And they age their whiskey and rum in unused bourbon barrels. The spirit doesn’t demand it, but they can do it because they’re “not looking at that cost over 10 million barrels a year.”

BEER BRIEFS:

OSKAR BLUES 11,500 barrels in the first quarter, 50% over last year’s Q1 numbers, according to Boulder County Business Report. “The company is growing both by adding sales in existing markets and in its sales price per case, said Chad Melis, an Oskar Blues spokesman,” according to the story.

LOTS OF FEEBACK from BBD’s report this morning citing a few craft brewer execs who are getting increasingly frustrated with the slow progress of state franchise law reform. What do you think? hs@beernet.com

Clarification: On the Craft Brewers Alliance write-up yesterday, we should note that CBA’s existing fee structure with AB includes an incremental fee component, whereby CBA pays incremental fees to A-B based on increasing volume. As part of its sale of its Goose Island investment to A-B, the fee was modified to a flat $0.25/case fee structure.

Until tomorrow, Jenn

“Were we fully to understand the reasons for other people’s behavior, it would all make sense.
-Sigmund Freud

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Editor: Jenn Litz – jenn@beernet.com
Publisher: Harry Schuhmacher – hs@beernet.com
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