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A Site Selection Web Exclusive, July 2012
WEB Exclusive story

Hops City

Beer culture comes to a head in the Asheville region.

Sierra Nevada CEO Ken Grossman, North Carolina Gov. Bev Perdue and Brian Grossman, who will co-manage the new brewery, are shown during the official announcement in January.
Jenn Vervier led New Belgium’s quest for an East Coast brewery.

Asheville, N.C., knows its hops and grains. The city has been voted Beer City USA four years running in an unofficial national poll, this year tying with Grand Rapids, Mich., for first place. An annual beer festival in the city quickly sells out. The area is home to more than a dozen craft breweries and brew pubs. And beer aficionados held the city's first-ever Asheville Beer Week across 11 days in late May and early June this year because seven days apparently aren't enough to celebrate the city's culture of cold ones.

The region's beer-centricity is advancing to a whole new level this year as two of the top three heavyweights in craft brewing are opening East Coast breweries in or near Asheville. Sierra Nevada, based in Chico, Calif., announced plans in January to build a $108-million brewery in Mills River, south of Asheville. Sierra Nevada is the No. 2 U.S. craft brewer in terms of sales behind Sam Adams. It plans to have an initial capacity of 300,000 barrels and will employ 90.

In April, Fort Collins, Colo.-based New Belgium Brewing, the third leading craft brewery in the U.S., announced it would build a $115-million brewery in downtown Asheville and employ 130.

As the two fierce competitors forged their searches, they both found themselves in Western North Carolina. Some of their location criteria were similar. But in other ways they differed starkly.

Organic Organization

Sierra Nevada, known for its Sierra Nevada Pale Ale, is already constructing its brewery and hopes to produce beer by fall of 2013, with a grand opening during the first quarter of 2014. The facility, being built on about 20 acres of a nearly 200-acre (81-hectare) site, will include a restaurant, a beer garden and an amphitheater for concerts.

Ken Grossman, Sierra Nevada's founder and owner, cited the region's beer culture, water quality and quality of life when he announced Mills River as his choice. His son, Brian, will carry on the family brewing tradition as co-manager of the N.C. site.

Don Schjeldahl, a long-time site consultant with Austin Consulting, guided Sierra Nevada's location search. Several weeks after the process ended in January, Schjeldahl joined the company as site coordinator, the first Sierra Nevada employee in North Carolina. His responsibilities include working with contractors, overseeing the permitting process and working with local government officials. He is also helping transplant Sierra Nevada's corporate culture, which he describes as being based on sustainability, renewable energy, community engagement and health and wellness.

"It's been a lot of fun," Schjeldahl says. "I've had an opportunity to really get close with the community."

Scenic Asheville, N.C., is drawing national attention for its burgeoning beer culture.
Photo courtesy of the Asheville Convention & Visitors Bureau.

For three decades, Sierra Nevada grew in Chico, Calif., about 90 miles (145 km.) north of Sacramento. The company focused on refining its products and serving its markets, which were mostly west of the Rockies. Around 2000, demand for Sierra Nevada beer began a steady rise across the eastern half of the U.S.

"For a decade, Sierra Nevada served eastern markets very efficiently, using a lot of piggyback rail with refrigerated containers," Schjeldahl says. "Bottle-aged beer has to be refrigerated, and it's expensive to run across the country, but the company did it very successfully. As the market grew in the East and capacity constraints started to be reached in Chico, it became obvious that what is needed is a new brewery and it should be built in the East to address cost and service issues."

Schjeldahl describes Sierra Nevada as a "very organic" organization with every interest represented in its strategy meetings. Good ideas are rewarded and no idea is discounted when the company is preparing to make a big decision, he says. The company debated its eastward move for several years before hiring Austin Consulting and Schjeldahl in the summer of 2010.

"I have worked on around 300 projects in 30 years and we have a very well-developed methodology," Schjeldahl says. "That was what was helpful in pushing the organic structure onto a path they could follow. Ken Grossman is an entrepreneur extraordinaire. He got into craft brewing in the 1970s and started the company in 1980. He has never strayed from this idea that quality drives everything we do. We never approach anything with the idea, 'let's do it cheap.' It's always 'let's do it right.'"

The first six months were spent looking at market growth, forecasting how things could change over time in Eastern U.S. markets and what kind of products worked. Careful consideration was given to how to establish the supply chain in the most efficient and sustainable way with the smallest carbon footprint.

"Every strategy had to run through the carbon footprint filter," Schjeldahl says.

Refined Process

After initially looking at an area broadly defined as everything east of the Rockies, Sierra Nevada narrowed the search to the Northeast, the Southeast and a hybrid of the two in the Mid-Atlantic region. That brought the hunt down to seven states: North Carolina, South Carolina, Georgia, Tennessee, Virginia, Pennsylvania and Ohio. A total of 170 communities were considered.

"We found the best location in each place," Schjeldahl says. "We pursued so many angles to this project. This was the most refined process I ever went through. We developed screening criteria at four different levels."

"Every strategy had to run through the carbon footprint filter."
— Don Schjeldahl, site coordinator, Sierra Nevada

Criteria considered included access to major highways, proximity to a college or youth-oriented community, a community with a recreational culture, a strong sanitary sewer system and water sources. Sierra Nevada also wanted a site that wouldn't "butt up against" other craft brewers. In some respects, the company was looking for a town similar to Chico, which is home to California State University-Chico.

"Initially, we thought we wanted to be in a college town because Chico is a college town," Schjeldahl says. "Initially we wanted to avoid being near other craft breweries, but as the process evolved, we changed the criteria in the middle of the process."

Sierra Nevada and Schjeldahl whittled the list from 170 to 60, then 38, still in the same seven states. The screening criteria became much more detailed, including the hard-to-quantify sustainability factor.

"We started to dive more heavily into measuring sustainability as a cultural attribute," Schjeldahl says. "There really aren't any great metrics for it. There's no common way of measuring it. Sustainability is now at a point in site selection in general where companies of all types are starting to think about how they can measure how a community is sustainability-oriented and how it can partner with business."

Sustainability came into play as the list narrowed to 38. Community attitudes were assessed. Public transportation, industrial and residential recycling programs and availability of renewable energy were considered pluses.

"If someone had methane recovery from a landfill, they got some points," Schjeldahl says. "If there were solar panels on a courthouse roof, that got some points. We looked at stream restoration and bike trails. It was also about the ability of communities to tell the story. If a community doesn't have a good, professional economic development group and is clumsy at it, that tells you something. A healthy downtown was also important. If a community didn't have a healthy downtown, that would pretty much write the town off. If there is a healthy downtown, it's a good indicator that there is a good level of cooperation in the community."

Change of Plans

The list was narrowed to 18 and then to nine. A Sierra Nevada team looked at one site in Ohio, one in Pennsylvania, one in Georgia, two in Tennessee, three in Virginia and one in North Carolina. Asheville was not on that list due to the desire to not infringe on the region's thriving beer culture. The exhaustive search was going to end with Maryville, Tenn., a Knoxville suburb, as the winner. Or so it seemed.

"I thought at that point that the next word out of Ken Grossman's mouth would be we would go to Tennessee, to the Knoxville area, which is a wonderful place," Schjeldahl recalls. "Maryville's people were so accommodating. The governor was very engaged and there was great cooperation. It was a small college town and had everything we wanted."

Grossman hesitated on Maryville because he felt like there were some unresolved engineering issues and there was some uncertainty about future development around the site.

"He came to the conclusion that we didn't really need to be in a college town and that we would never recreate what we have in Chico," Schjeldahl says. "He said 'Let's open this up and drop the college connection and see if we can find a balance with local breweries.' So we looked at six more communities in North Carolina, including in the Piedmont and lower Foothills, and then in Asheville."

Sierra Nevada also considered the site that New Belgium eventually selected in downtown Asheville.

"It's got some contamination and flood plain issues, but you can overcome those with money usually," Schjeldahl says. "It's also right in the face of some of Asheville's brewers. This seemed a little insensitive, so we narrowed it to three sites: one in Marion, one in Black Mountain and this one."

Schjeldahl describes the Mills River site, near the Asheville Regional Airport and about 10 miles (16 km.) from Asheville, as the perfect compromise. The location is not urban, but it has a regional presence, he says. It has great access to I-26 and frontage on the French Broad River. Although Asheville water is available at the site, which is part of a 262-acre (106-hectare) industrial park, the company elected to drill its own well.

"The geology here is complicated. We did a lot of research on geology. These are ancient mountains which contain old mountain water that has been filtered for hundreds of years. We drilled a couple of wells and got lucky. Sierra Nevada has a very sophisticated lab with several Ph.D. chemists. We sent lots of water back and they analyzed it. We lined the well with stainless steel, which is quite expensive, but it guarantees higher quality over time."

'Magical Meeting' and Good Barley

The industrial park, created on acreage owned by the Fitzgerald family, long-time landowners in the region, is a North Carolina certified site, a fact that helped seal the deal for Sierra Nevada.

"If they had not gone through the site certification process, we probably would not be here," Schjeldahl say. "The water wasn't here, and the sewer, road and power were not here.

The site does not have rail access, so Sierra Nevada is developing a transloading site about five miles (8 km.) away. Barley and grains will be brought in by rail, transloaded onto truck and brought to the brewery to be put into storage silos.

Schjeldahl describes Grossman as highly intuitive, recalling a meeting Grossman held with the Asheville Brewers Alliance, a group representing the interests of more than a dozen craft breweries in the region.

"He was monitoring what was being said in the brewing community," says Schjeldahl. "There was this really magical meeting with local brewers and he put himself on the spot. He explained to them what he is about and his philosophy, and he even offered to supply this good barley we are bringing in. That has been wildly beneficial and won him a lot of good points. He doesn't do it to gain favor. He does it because he empathizes with these people."

Schjeldahl says New Belgium's site search, conducted nearly simultaneously, had no effect on Sierra Nevada's efforts.

"Craft brewing is a tight industry. They [management of both companies] have been to each other's breweries many times. People go back and forth between the breweries. When it comes to selling beer though, it is pretty competitive. We are here and we came here because this is the right place to be. It doesn't matter if New Belgium is here. We've chosen to be out of town and taken on stewardship of the environment. They have chosen to be in an urban setting."

In The City

New Belgium, whose signature brew is Fat Tire Amber Ale, began considering expansion on the West Coast in 2009, says Jenn Vervier, the company's director of strategic development and sustainability. The company was running out of capacity in Fort Collins, and a new brewery made sense.

"We thought we found a great location in West Oakland, but we couldn't get the real estate done," Vervier says. "We also determined the economics of making beer and shipping out of California was not good. So our engineers found a way to get a couple hundred thousand more barrels out of our Colorado brewery."

The fix provided by New Belgium's engineers allowed the company's expansion plans to be put on hold for a year. In the fall of 2010, New Belgium hired Jones Lang LaSalle's Chicago-based site selection team to conduct a national search for a new brewery site.

"We quickly realized the brewery should be on the East Coast," Vervier says.

Working with JLL, New Belgium built a matrix of more than 30 critical factors it would consider in its quest. These included work force, operational costs, a culture of progressiveness, brownfield redevelopment opportunities and proximity to a population center. Using this matrix, JLL helped the company narrow the search to a dozen cities it would visit starting in the summer of 2011.

"It was a whirlwind search," Vervier recalls. "We looked at two to five pieces of real estate in each city. Many cities had zoned all light manufacturing for industrial parks outside of town with the only access a multi-lane highway. We took those places off the list because we believe it's important to have a site where our co-workers can bike or walk to work. That was an easy way to winnow down the choices."

Asheville was one of the few finalists that met this key attribute. Vervier says the city also had the "perfect" piece of property.

"The community met our criteria around being progressive," she says. "It's collaborative with a vibrant downtown, and the city is involved with the public."

Another pivotal piece of criteria was plentiful good water. Asheville was found to have both the culture and the H2O. Vervier likened the water's makeup to the water in Fort Collins. New Belgium was also sensitive to the region's beer culture and, like Sierra Nevada, met with the Asheville Brewers Alliance to forge a spirit of cooperation.

"We suspected smaller brewers might be intimidated by us showing up, so before finalizing the deal we hosted a meeting with the Alliance." Vervier says. "We didn't want to move to a town where people representing the industry didn't want us to be there."

'Our Own Ball Game'

Throughout the process, New Belgium was aware that Sierra Nevada was also looking for a site on the East Coast.

"We heard their top choice was Knoxville, and Chattanooga was one of our top cities," Vervier says. "By the time we heard that they were even looking at North Carolina, we were kind of past the point of no return. We each had to play our own ball game. If it turned out we were near each other, then that is the way it was going to be. The sites are about 15 miles (24 km.) apart, but also very different. Ours is in a city and theirs is not. We didn't want it to happen and it wasn't our preference, but when it became inevitable, we decided to make the best of it. We have found throughout our history that competition makes you stronger, so we are okay with that."

"We believe it's important to have a site where our co-workers can bike or walk to work. That was an easy way to winnow down the choices."
— Jenn Vervier, director of strategic development and sustainability, New Belgium Brewing

Vervier says JLL and the Economic Development Coalition for Asheville and Buncombe County were tasked with finding real estate opportunities prior to New Belgium's first visit in June 2011.

"When I got there, three or four properties met our criteria. The one we ended up with is far and away the biggest challenge to develop, but it was such an amazing opportunity to find 20 acres close to town that is also zoned appropriately."

The site New Belgium selected is composed of three parcels. One is home to a mini-storage facility, one is an old auto repair shop and the third is a stockyard, which is still in operation. Vervier expects site clearing to begin this summer and then a permitting process for the site plan will begin. She expects construction to begin during the first half of 2013, with the first production of saleable beer to come during the first quarter of 2015.

"We will ramp up to open the facility at a certain volume in 2015," Vervier says. "It's a six-year ramp-up, so we will likely open with more than 50 people and eventually grow to 150 at full capacity."

While New Belgium's CEO Kim Jordan had previously visited Asheville, Vervier was a first-time visitor in the summer of 2011. She soon became enamored with the city. She was so enamored that during a dinner with the EDC and Asheville business people, she went to the restroom and texted "I (heart) Asheville" back to Fort Collins.

"I was really taken by the downtown," Vervier says. "There are so many streets of locally owned businesses, so many independent restaurants. The natural beauty is just stunning. I just got the sense of like-minded people who believe in sustainable development and investing in the community."

New Belgium's Fat Tire ale has a cruiser bike on its label. Bicycling is part of the company's culture. All employees receive a bicycle after one year of service, just one of many perks, which include a trip to Belgium after five years. So Asheville's burgeoning bike culture caught New Belgium's eye.

"Fort Collins is great, and we have a bike-to-work day there," Vervier says. "But Asheville has a bike-to-work week. They are certainly more topographically challenged than we are in Fort Collins. Asheville is doing great with its bike community and probably will only improve. One of our initiatives is to help collaborate on extension of bike lanes and greenways."

Richmond, Va., and Philadelphia, Pa., were the other finalists for the New Belgium brewery. Vervier says the property location and overall economic analysis favored Asheville.

Both New Belgium and Sierra Nevada plan restaurants and tasting rooms attached to their breweries. The tasting rooms required an adjustment in North Carolina law, which was passed last December in hopes of securing the two breweries.

Crafting An Industry

Craft breweries are a relatively small but fast-growing lot. Craft brews accounted for about 5.7 percent of overall beer sales in the U.S. in 2011, according to The Brewers Association, a Boulder, Colo., group that promotes small and independent brewers in the U.S. That share is predicted to grow to 10 percent by 2017.

"There are three million barrels of new capacity coming on line in the next year or two and there is a ton of reinvestment going on now in craft breweries," says Paul Gatza, director of The Brewers Association. "Most people in the industry are pretty bullish about how things are going to grow."

Gatza emphasizes that this growth would not be happening without the beer drinker. Consumers are enjoying more craft beer on more occasions, he says.

"There are a lot of new flavors out there, and beer drinkers are willing to try brands they haven't tried before because they trust the category, Gatza says.

Western North Carolina got a third significant player in craft brewing when Oskar Blues announced in May that it would open up an East Coast brewery in Brevard, about 35 miles (56 km.) south of Asheville in an existing 30,000-sq.-ft. (2,787-sq.-m.) facility. Oskar Blues, which is based in Longmont, Colo., and plans to open in December, is ranked 29th among craft brewers by The Brewers Association.

"Just six or seven years ago Oskar Blues was just a small brewpub in Colorado that had a canning line," Gatza says. "They've gotten good response for putting very bold beers in cans, and are leading that trend."

Sierra Nevada’s signature beer is its Pale Ale (left). New Belgium is best known for its Fat Tire Amber Ale (right).

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