Happy Birthday Ninkasi

Ninkasi turns 5 years old today. Happy birthday to one of my very favorite breweries - a hop-head's delight. Also today marks the release of the superb Maiden the Shade. Rejoice!

A Tale of Four Businesses. Part 1: Ninkasi

I have been swamped lately and have not had time to get back to writing about my trip (with the Beerax) down the valley to visit four very different breweries.  Jeff has done a good job describing them and their different objectives, but I want to focus on their very different businesses.  I will do it in four parts (because I am still pretty busy).  I will start big and go ever smaller: Ninkasi, Oakshire, Block 15 and Brewer's Union Local 180.

So today I'll talk about arguably the easiest one - Ninkasi. Ninkasi is a packaging brewery that is the big success story of Oregon brewing over the last few years.  Personally, I heard about this new brewery and their great beers about four short years ago.  Now, there is hardly a store in Oregon that doesn't feature their beer, they have tap handles everywhere and they are rapidly expanding into Washington and California.  In fact Ninkasi is, along with Deschutes, probably the most likely craft beer to encounter in any situation in Oregon.  There is a very good reason for this success: the beer is fantastic and nails the Northwest palate sweet-spot - extremely aggressive hop bombs that maintain balance and produce wonderful flavor and aroma.  Jamie Floyd brewer and founder (with Nikos Ridge) told us when we were there that Ninkasi was a 30,000 barrel a-year brewery that buys an amount of hops suitable for the average 200,000 barrel a-year brewery.

Jamie and Jeff talking hops

Ninkasi decided to go for aggressive big beers and to big fast.  The economics of brewing are clear: there are significant economies of scale that don't go away until well into macro territory, so growing fast makes all kinds of sense.  But going big was a significant risk.  There is a significant and growing craft beer enthusiast consumer base in the NW but would there be enough out there to sustain the amazing growth that Ninkasi has enjoyed?  I wouldn't have thought so, but I would have been wrong.  The appetite for Ninkasi's big beers has amazed me.

Ninkasi is the master of the hop-bomb and hop bombs sell.

Biggering, and biggering and biggering...

Jamie Floyd had a decade of experience in the craft beer industry before he started Ninkasi and he and Nikos came into it with a clear sense of what they wanted and how the business would grow, and grow and grow. I have no special knowledge of Ninkasi's finances, but I suspect that most of the profits have been thus far devoted to expansion.  To achieve this growth, Ninkasi has been disciplined to a price point that is competitive and this is a bit of a bet on that, in so doing, they would be able to sell in quantities that would turn a profit and drive expansion that would bring down per-unit costs.  So far so good.

New Kronos Krones bottling line.  Six-packs are coming...

Though Ninkasi is all about scale and growth, the beer industry is still very much a personality driven business, no matter how big and how fast.  And much of Ninkasi's success can clearly be traced to Jamie Floyd who is an engaging and tireless front-man for the company. Building relationships and creating brand identity is not an easy job, it requires lots of face time and glad handing and Jamie clearly has devoted himself to building the company.  You have to if you want the growth Ninkasi has enjoyed.  No distributor can be the face of the company for you and no beer sells itself.

I suppose the danger in all of this is that some other newest-latest brewery will steal their thunder and the rapid expansion will slow abruptly, leaving them with too much capacity and problems will ensue.  But, if I were a betting man, I'd bet on Ninkasi

Foyston on Ninkasi

Benjamin Brink/The Oregonian

Just a note to guide you to John Foyston's piece in today's Oregonian on Ninkasi.  Some highlights:

Last year, Ninkasi brewed 18,000 barrels of beer (558,000 gallons) and graduated from microbrewery -- making up to 15,000 barrels a year, as defined by the Brewers Association, a national trade group -- to regional brewery, joining the likes of Rogue Ales, Full Sail, Widmer, BridgePort and Deschutes.

...

This year, Floyd said, Ninkasi is on track to nearly double last year's total and brew as much as 32,000 barrels -- nearly a million gallons of beer.

That kind of growth can spell trouble, said Paul Gatza of the Colorado-based Brewers Association; he's seen it happen before.

"They really seem to be doing something right," he said, "but plant capacity becomes a real holdback to that kind of growth rate -- it's very unusual for a brewery to be able to sustain a growth of more than about 10,000 barrels a year."

But, thanks to the left-brain/right-brain partnership between Floyd -- the creative, charismatic brewery frontman -- and Ridge -- the financial and planning wizard who spent his college summers interning on the floor of the New York Stock Exchange -- Ninkasi is ready.

...

Butenschoen said that Floyd also saw a wide-open market in Eugene for a production brewery and that the outcome would've been very different had they started a brewpub.

"If you're a brewpub, you're often seen as competition by other pubs and restaurants, and they're not likely to put your beers on tap."

A few thoughts: First, I was fascinated by Ninkasi's business model from the start. The standard modus operandi of new Oregon craft brewers these days is to start a brewpub. The state makes it easy with a special license from OLCC and the food side helps on the revenue front.  But restaurants are hellishly difficult beasts to do well and concentrating so much on the restaurant can inhibit your ability to get the beer out of the door.  Ninkasi started by doing its own distribution of its kegs to restaurants and bars and thus was able to capture all of the revenue themselves to start (and maybe offer it more cheaply?) - and were able to get an astonishing number of taps quickly (fantastic beer helps a lot too...).  Anyway, it is interesting what they say about the perceived competition of brewpubs versus breweries.

Second, Ninkasi from the start mastered the art of the new social media: Facebook pages, Twitter feeds, etc.  These days, among the youngsters at least, this is a low cost and very effective way to get yourself known.  Ninkasi has been more active on this front than any other brewery I am aware of.

Third, they are apparently ready to start packaging in 12oz six-packs.  For this I say hooray.  Big beers in big bottles are difficult for a wee economist whose wife is not really a beer drinker.