Sierra Nevada Brewing Company

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Sierra Nevada Brewing Company

1075 East 20th Street
Chico, California 95928 U.S.A.
Telephone: (530) 893-3520
Web site: http://www.sierranevada.com

Private Company
Incorporated: 1980
Employees: 365
Sales: $100 million (2005 est.)
NAIC: 312120 Breweries; 722110 Full-Service Restaurants

Sierra Nevada Brewing Company is one of the top ten beer makers in the United States and the country's largest privately owned "craft brewery." The firm's beers include its best seller, the distinctively hop-flavored Pale Ale, as well as Porter, Stout, and Wheat varieties. In addition to these year-round brews, Sierra Nevada produces the seasonally available Summerfest, Celebration, and Bigfoot, as well as others which are available on tap at select locations, including the company's own restaurant and pub, located next to its brewery in Chico, California. The firm is owned and run by founder Ken Grossman.

Beginnings

The Sierra Nevada Brewing Company was founded in 1979 by Ken Grossman and Paul Camusi in the town of Chico, California, some 175 miles northeast of San Francisco in the Sacramento Valley. Both men had enjoyed brewing their own beers at home, and three years earlier one-time chemistry student Grossman had opened a store that sold home-brewing and winemaking supplies.

At the time they decided to go into business, there were only a handful of small breweries in the United States, notably Anchor Steam in San Francisco and New Albion in Sonoma, California, that produced the kind of flavorful, hand-crafted beers which the pair wanted to make. The bland lager-style offerings of industry leaders Anheuser-Busch, Miller, Pabst, Stroh, and Coors had come to closely resemble each other, and the availability of American-brewed traditional varieties like ale, porter, and stout had almost become a thing of the past.

Grossman and Camusi were motivated to start their new company by the simple desire to brew good beer and expected to sell no more than 3,000 barrels a year, not even a drop in the bucket in an industry whose leaders brewed millions, in some cases tens of millions, of 31-gallon barrels each year. In 1979, the pair started construction of their brewery on a gravel road outside of Chico, using equipment scavenged from a dairy, a soft-drink bottler, and closed breweries. The new company was named after backpacker Grossman's favorite hiking spot, the nearby Sierra Nevada mountain range, and financed with $100,000 borrowed from the partner's parents.

On November 15, 1980, the first batch of Sierra Nevada Pale Ale was brewed. However, Grossman and Camusi were not satisfied with the result, and they threw out the first nine batches (at a cost of $1,000 each) before commencing production in 1981. In addition to pale ale, they brewed several other varieties, including a darker porter and stout. In its first year, the company sold just 500 barrels.

Unlike the industry's leaders, and even most home brewers, Grossman and Camusi used whole hops instead of hop pellets or extracts, as well as top-fermenting yeast, which resulted in a rich, highly distinctive flavor. The beer was also "bottle conditioned," which meant that a small amount of yeast was added to the unpasteurized beer as it was bottled, resulting in a secondary fermentation and natural carbonation. Few brewers of any size used this process because it was difficult to get consistent results, and the vast majority simply pumped carbonation into their pasteurized beers before bottling. Beer aficionados prized the firm's methods, which yielded a fresher, richer flavor and also caused Sierra Nevada's beer to age better than mass-produced brews, giving it a longer shelf life in the process.

With production underway, Sierra Nevada's first employee, Steve Harrison, was put in charge of marketing and sales, and he went out to local stores and beverage distributors to try to get them to carry the firm's brews. He had a hard time persuading them to take on the new, unfamiliar beer, however, and those who did sometimes saw it gather dust on the shelf.

Sales Take off in Mid-1980s

Gradually sales began to grow in Chico, where the large population of students at California State University had a healthy thirst for beer. Distribution was later extended to San Francisco, where the beer was discovered by Grateful Dead guitarist Jerry Garcia. When word got out that Garcia loved the firm's porter, many of the band's loyal fans began to seek out Sierra Nevada's beers. A May, 1984 profile of the brewery in the San Francisco Chronicle 's Sunday Magazine gave the firm another boost, as did an article in New York's Village Voice, which helped create demand for the beer on the East Coast.

With the company's beers beginning to attract attention in the media, Sierra Nevada Pale Ale, Porter, and Stout started to appear more frequently alongside imports like Heineken and Lowenbrau in specialty beer stores and even in some supermarkets such as Safeway, whose head beverage buyer had been introduced to the beer when visiting his daughter at college. The company had gotten its start at a time when there were few competitors and when growing numbers of Americans were seeking out the richer flavors of imported beer. In 1984, there were just 15 microbrewers (under 10,000 barrels) and 25 regional brewers (under 500,000 barrels) in the United States.

By 1987, Sierra Nevada was distributing its beers to seven states, and production had increased to 12,000 barrels per year. To handle this growth, a larger brewery was needed, and in 1988 the firm completed one which featured a 100-barrel brewhouse, four open-barrel fermenters, and 11 68-barrel secondary fermenters. The year after the new brewery was operational, the company also added a restaurant and pub to serve its beers, including some special brews not available elsewhere.

The firm was now reaching a wider customer base than the largely male college students and beer aficionados it had begun with, one that included more women and mainstream beer drinkers who were willing to give the company's beers a try. By 1989, production had jumped to 30,500 barrels, and expansion of the new brewery had already begun. This growth was especially remarkable given the fact that the firm eschewed the use of advertising, relying solely on word of mouth and occasional media coverage. Sierra Nevada also did not research consumer desires and trends in an attempt to reach a larger market but instead focused strictly on brewing quality beers.

The 1990s saw expansion continue at a rapid rate, with production hitting six figures in 1993, when 104,325 barrels were brewed. By now, the microbrewery segment had begun to explode, with more than 300 small brewers operating in the United States, including more than 70 in California alone. Part of this count included brewpubs, which made beer for consumption on the premises only.

In 1995, with the company's production continuing to mushroom, Grossman decided it was time to install a new bottling line. The firm had been using one built in 1962 for the makers of Rolling Rock beer in Pennsylvania, which was now outmoded. After much research, he selected a new system that removed almost all of the air from a bottle before filling, virtually eliminating the oxygen that could degrade a beer's flavor. The company installed it in February 1996 after arranging the brewing schedule so that production was disrupted for only two days. The line's $2 million cost was funded by a Bank of America loan. During the year, the firm, which now employed 80, produced 265,000 barrels of beer.

New Brewery Added in 1998

The company needed more than just a new bottling line to keep up with demand, however, and in 1997 Sierra Nevada began construction on a second plant based on the design of the existing one but on a larger scale. The new brewery had a capacity of 600,000 barrels of beer per year, with the capability for future expansion built in. Because making the firm's beers involved using the more complicated method of bottle-conditioning, it maintained a state-of-the-art testing laboratory with a staff of ten to assure quality. A case of beer from each batch was stored and tested after six months. Then it was tested again a year later. The environmentally conscious firm also added a wastewater treatment plant to the new facility.

Company Perspectives:

"Back in 1980, I founded the Sierra Nevada Brewing Company with one simple goal in mind—to produce the finest ales and lagers possible. To achieve this goal we have always used the highest quality and most natural brewing ingredients while utilizing the very best brewing practices. This allows us to create ales and lagers with superior flavor, aroma, balance and character. You can personally measure our success in this endeavor by enjoying our fine beers!" (Ken Grossman—Master Brewer, Owner, Founder, and President of Sierra Nevada Brewing Company)

By this time, the craft beer segment of the marketplace had reached a period of reevaluation that some were calling a shakeout. Distributors were being pressured by the largest beer makers to focus more on their own products, while the proliferation of small breweries had led to a flood of similar beers vying for the consumer's attention, forcing stores to drop slower-moving brands. Makers of imported beer, once the trend-setters in the premium beer market, had also launched aggressive new marketing campaigns, while liquor distillers were beginning to successfully divert younger drinkers away from beer and wine. The craft industry itself had also been hurt by the inconsistent output of some brewers, occasional deterioration of products due to lack of proper rotation in stores, and the loss of "fair-weather" microbrew drinkers, who briefly tried the more expensive brews, which typically cost one and one-half to two times as much as mainstream beer, before returning to their old familiar lager or lite beer. Additionally, several specialty beers had been launched by the major brewing companies that were less expensive than a true craft beer but were packaged to look as though they came from a small brewery. These included Anheuser Busch's Pacific Ridge Pale Ale, which had been clearly patterned after Sierra Nevada. All of these factors made succeeding in the business difficult, and a number of small brewers folded while others cancelled expansion plans.

Despite such challenges, Sierra Nevada's position as the leading independently owned maker of specialty beers in the United States insulated it from many of the industry's woes, and the company's sales continued to surge. Output in 1997 had been 302,734 barrels, and this jumped to 382,050 in 1998 and 420,000 in 1999. By this time, Ken Grossman had bought out Paul Camusi to become sole owner of the firm.

"The Big Room" Opens in 2000

In 2000, the company opened a no-expense-spared 350-seat auditorium called The Big Room at its brewery, which soon began hosting concerts by local and nationally known folk, blues, and world-music performers. A full kitchen and bar were attached, and the space was made available to rent for banquets and other events.

Tours of Sierra Nevada's brewery had long been a popular tourist attraction in Chico, and many fans of the company's beers went out of their way to visit the area for this purpose. To accommodate their requests for souvenirs, the company had opened a store that sold a variety of Sierra Nevada logo merchandise. Its offerings included a line of beer-based mustards which the firm had also begun to market around the country.

Though Sierra Nevada beer had been distributed nationally for some time, sales were still strongest on the West Coast. In 2000, 57 percent of the firm's beer was sold in California, with 43 percent purchased in the northern half of the state. New York was far behind in second place, with 3.4 percent, followed by Nevada with 2.7 percent and Colorado with 2.6 percent.

In 2001, Ken Grossman bought the shuttered Fun World amusement park adjacent to the company's plant. The defunct amusement park was then torn down in anticipation of Sierra Nevada's future expansion. During the year, production topped 541,000 barrels, up from just under 500,000 the year before.

In 2003, Sierra Nevada began limited distribution to England. The firm had previously resisted exporting its beers, in part because the rapid growth in the U.S. market had consumed all of its output. The following year, Sierra Nevada Pale Ale won the "Champion Beer" award and the gold medal in the International Keg Ales category at the Brewing Industry International Awards in England, considered the "Oscars" of brewing. The year 2004 also saw the debut of a series of televised concerts taped at the firm's Big Room. Sierra Center Stage, as the program was known, was shown on a number of public television stations.

In 2005, the company began preparations to install four Direct Fuel Cell (DFC) generators to supply electrical power to its plant. The generators used natural gas, but the company was also exploring the possibility of using anaerobic digester gas from its brewery. The expensive DFC units were more efficient than standard combustion-based generators, and their purchase was part of the company's ongoing commitment to being good stewards of the environment.

In 25 years, Sierra Nevada Brewing Company had risen from humble origins to a leading position in the American beer industry. The firm had benefited from its position as one of the first modern craft breweries, but its success was also the result of astute management and a deep commitment to quality. With export sales just beginning, further growth seemed assured.

Principal Competitors

Boston Beer Co.; New Belgium Brewing Co.; Redhook Ale Brewery; Widmer Brothers Brewing Co.; Deschutes Brewing Co.; Pyramid Brewing Co.; Pete's Brewing Co.

Key Dates:

1979:: Ken Grossman and Paul Camusi start building a brewery in Chico, California.
1981:: Output totals 500 barrels in the company's first year in business.
1988:: The rapidly expanding company opens a new brewery.
1989:: The company opens a restaurant and pub.
1993:: Production tops 100,000 barrels per year.
1996:: A $2 million bottling line is installed.
1998:: A new brewery comes on line with a capacity of 600,000 barrels per year.
2000:: "The Big Room" concert hall opens.
2004:: Sierra Center Stage televised concert series debuts.