Case Study: Anchorage Brewing

While some breweries play the local card, Anchorage Brewing’s location in a sparsely populated state—along with its focus on niche beer styles—has inspired creative ways to stoke demand and reach drinkers in lower latitudes.

Jamie Bogner Feb 22, 2020 - 23 min read

Case Study: Anchorage Brewing Primary Image

Anchorage Brewing founder Gabe Fletcher stands in a booth built from a decommissioned foeder.

Making the type of beer you want to make, at the scale you want to make it, in the place where you want to live—this is one of the most challenging things to accomplish in the craft-beer business. But after 13 years in the trenches working for another local brewery, Gabe Fletcher got the itch and was determined to make it work, one way or another.

The concept behind Anchorage Brewing was novel at the time—inspired by Jolly Pumpkin and Cantillon, he’d focus on 100 percent Brettanomyces beers. These sour, barrel-aged, mixed-fermentation, and farmhouse beers were still novel in American breweries in 2010, but Fletcher’s heart was there, and he could see a potentially larger market for these relatively unknown styles.

“All I was going to do was make sour beer and barrel-aged beer, and do the things that I love to do, instead of pumping out amber ale and blonde ale and all this other crap, and only putting out a specialty beer once a quarter,” says Fletcher. “I wanted to do those things because I just got bored making production beer all the time.”

Short on startup capital, Fletcher took what was then another unique approach—foregoing the purchase of a brewhouse and co-locating with an existing brewery.

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“I didn’t have a brewhouse, and I had the idea to rent the brewhouse from another brewery here. We created one of the first alternating proprietorships in the United States. We brewed wort on their system then pumped it downstairs into foeders.”

Funding the Nascent Brewery

To help fund the launch, Fletcher brought on one partner but was careful and up front about the relationship. He had watched other businesses buckle under the stress of dysfunctional partnerships and wanted to make sure that, at some point, he would call all the shots.

“I had it set up so that I could buy him out after five years because I really didn’t want any partners in the business,” says Fletcher. “Ninety percent of the time, it becomes a problem, somewhere. Someone has a disagreement, or someone’s not getting paid enough, or … I just didn’t want any question there at the end of the day. I wanted total control over what I was doing. I had opportunities for other people to invest in the company, and they were tempting, but I just couldn’t lose that control.”

The buyout clause was built around a fixed return on the initial investment, which avoided sticky issues around valuation—not that there would have been much asset value to the business at that five-year point anyway.

“At the time, it was hard to do a valuation on the brewery because we didn’t really have that much when I did buy him out.”

One other benefit of having a partner with financial means was the ability for the business to take out private loans, and with cash flow a constant constraint in the early days of any business, having that flexibility to make calculated capital investments proved very beneficial.

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“When we started, there was a company called Applied Bottling—and you can put their name in the story because they suck,” says Fletcher. “The only $30,000 I had to invest in the brewery I gave to this guy in Canada to build me a bottling line. He took forever, took my money, then he went out of business. We had beer brewed, and I didn’t have a bottling line to bottle it. The timeline to get this equipment is really long, so it put us in a bad position, and I lost the only little bit of money I had. Steve [Marshall, the partner] actually loaned us the money to buy a GAI bottling line, and that was one of the best investments we ever made.”

Strategic investment in automated equipment is something Fletcher believes in deeply. Labor is expensive in Alaska, between the small population and bigger money to be made in competing industries, such as oil and gas, or fishing. He knew he would have to invest more up front than other bootstrapped breweries. But he has paid for that equipment with labor savings alone.

“Even to this day, I have only two guys in the brewery with me, I just hired a books guy this year, and I have two women in the tasting room, and that’s it,” says Fletcher.

Anchorage was set to brew about 2,000 barrels in 2019. “We’re still a pretty small brewery, but with the equipment that we purchased, we’re able to pump out a decent amount of beer. You see some breweries buy a little hand-bottler, and there are like seven guys bottling this batch of beer. Or you see breweries that buy a three-barrel system because they think they’re saving money, but they’re brewing three times a day, seven days a week just to keep up. Man, you’re really spinning your wheels there.”

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The brewhouse and foeder cellar are arranged along the length of the building (the taproom is tucked in front to the right of the tallest foeders).

High Quality, Low Headcount

Due to the competitive labor market in Alaska, Fletcher has always had to offer aggressive compensation—close to double the industry average, depending on the employee. As a result, turnover has been incredibly low, and his right-hand man in the brewhouse has been with the brewery for nearly five years now.

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“Bart [Chelmo] came on, and he ended up being the best employee ever. He’s my main guy in the brewery. He gets everything done and really cares.”

Last year, he added a third person the brewhouse staff, but all three of them rotate duties depending on what needs to be done. Unlike production environments where brewhouse, cellar, and packaging are clearly defined, the staff at Anchorage all share duties. As a result, everyone is cross-trained on other processes, and tasks aren’t reduced to dull repetition.

Build It Like You Own It

Five years into the business, after buying out his partner, Fletcher embarked on the next phase for the brewery—building a new location, moving out of the basement space in the alternating proprietorship, purchasing a new brewhouse, and operating a taproom. He waited patiently until he could afford it, then funded the building with bank debt and the capital equipment with cash.

“I was able to start the brewery on a shoestring budget and build it up for five years, until I got to the point where I could afford to buy a brewhouse, and buy the one I wanted, and build a building from scratch the way I wanted it.”

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Clockwise from left: Temperature controls on the foeders allow for greater precision; The 20-barrel brewhouse allows the small team more efficiency; Fletcher has invested in technology that allows for lower staffing.

Beer to the People

Making niche beers for niche audiences is hard enough in large metropolitan markets, much less in a city of 290,000 people with several already-established breweries. Add that to the logistical challenge of getting beer around a sparsely populated state—Fairbanks and Juneau, the two sizeable cities nearest to Anchorage, are 360 and 850 miles away, respectively, and each only has about 30,000 people—and you have a tough equation.

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To solve it, Fletcher signed on with importer Shelton Brothers, to get his beer to the pockets of fanatics who would better understand and appreciate it.

Starting out, he did what seemed logical at the time, bottling in corked and caged 750ml Belgian-style bottles. The lineup was primarily Belgian-inspired, with occasional barrel-aged stouts or barleywines. For the first five years, the brewery did not have a taproom and was wholesale only.

“I was trying to streamline things to make day-to-day operations easier with just one or two employees,” says Fletcher, “so having that Shelton Brothers network set up to where we would package 18 pallets of one beer, and they’d show up with a Conex box and give me a check and they’d leave, was easy. Those were the easy days.”

Nothing lasts forever, though, and about the time they moved into the new brewery, they started to notice a shift in the industry. Shelton’s orders slowed; bottles sat on shelves longer and longer. A combination of additional competition in those beer styles and changing consumer purchasing behaviors—buying more beer directly from breweries—meant that fewer consumers were buying his kind of beer from retailers. Embracing the notion of creative destruction, Fletcher set out to rethink both what his product mix looked like and how they sold it.

“We’d been wanting to can for quite a while, and it’s been two years since we finally pulled the trigger on it. Canning has been pretty huge for us. Then having the tasting room has been big, too, since we can do these small releases right here at the brewery—even though we don’t have a huge number of people here in Anchorage.”

At the same time those importer sales cooled off, a new option arrived in the form of digital sales channel Tavour. This direct-to-consumer app has focused on selling smaller quantities of harder-to-find beer to a growing audience—those willing to pay a premium for beers not distributed in their state.

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“We started to see a decline with the number of bottle sales Shelton Brothers was able to do, then this company Tavour started chatting with me,” says Fletcher. “Now we’re their number-one brewery. They pick up from us every week, and we’ve done really well with them.”

Tavour tends to pay brewers more than importers or distributors do for the same product, and makes up the difference with typically higher prices for customers. But more important for Fletcher, the company’s focus on maintaining quality through the logistics chain is the real selling point. “Tavour has worked out well for us because the beer is not ever sitting on a shelf. It’s going from us to them to the consumer. It’s the perfect situation.”

Also, Tavour is adamant about cold storage for the beer throughout the process. Hazy, hoppy beers account for about 60 percent of the brewery’s production, currently, and that volume is only possible because of the way Tavour stores the beer.

“We’ll package on a Friday and ship out the same day to Tavour—refrigerated—down to Seattle. It takes four days to get down to them, then they put it up for sale, and within a day the whole batch is sold out. We do that every Friday. We could never have sold that beer down south without Tavour. I would never sell it to a distributor. The beer would just go on a shelf somewhere. A good chunk of it would sell quickly, but there would be those lonely cans that just sit forever until they go bad. And then someone goes and buys it, and they’re like ‘Oh, this is what Anchorage tastes like? Gross.’”

Selling Direct

The taproom opened opportunities for Anchorage they had not had previously. Over the past five years, Anchorage has, for the most part, ceased local distribution in an effort to drive most local customers directly to the taproom.

“We don’t send out any of our cans, except for a couple restaurants that we like,” says Fletcher. “None of our cans go to liquor stores. There might be a one-off release for a festival we’re having, or something like that, but we’re really protective of how the cans are treated.”

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The taproom also means new ways for them to experiment with limited releases. The experience has been mixed, however. Their first stab at a big public release was the 2017 vintage of their A Deal with the Devil barleywine—a six-bottle set packaged in a bespoke laser-engraved wooden box in a run of 430, which the brewery sold for $300.

“That’s when things got pretty crazy and a little out of control,” says Fletcher. “It was October and 10 degrees out. Our parking lot looked like a homeless camp. People were staying the night and setting up tents and burn pits. It was cool. I was down for it.

“I had a talk with everyone before I left for the evening because I was kind of nervous about it. ‘Everyone respect everyone and be safe.’ A lot of people had a good time, and I showed up in the morning, and there was this crazy line down the street. My wife and I handed out every box set and case of beer to every person who came, but there were some guys from the south that were hiring people off the street and Craigslist to stand in line and proxy. It put a sour taste in my mouth. Some of these guys went home with 20 boxes of A Deal with the Devil box sets.”

Normally, a customer spending $6,000 and taking it upon themselves to transport that beer back to the lower 48 would be seen as a win, but the cynical social-media beer culture seemed to hold the brewery responsible for a perceived lack of fairness in the sale. In addition, these profiteers were making as much profit, if not more, than the brewery itself.

“People in line, literally the minute they bought it, were putting it up for sale on the Internet,” says Fletcher. “It would have been nice if we got some of that money.”

Even today, two years later, you can find boxes for sale on certain beer resale websites for $900 or more.

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For the 2018 release of A Deal with the Devil, Anchorage decided to cut into the profits of those resellers a bit. They had only one cask’s worth of the beer to release—a very special version that had been de-barreled and re-barreled in fresh spirits casks every year for three years.

“The beer was outstanding,” says Fletcher, “and we only had a few bottles of it. We thought, ‘We’re going to sell it for $100 a bottle because I know everyone who buys it is going to put it on the Internet for a thousand bucks.’ But everyone just freaked out.”

One hundred dollars for a bottle of wine would not have raised eyebrows, and $100 for a bottle of whiskey is also not news. But within the insular beer world, pricing a beer that high—despite the exceedingly high secondary prices of past bottles—was seen as taking advantage of the faithful. Fletcher is an emotional guy, and the negative reaction shook him.

“I cancelled the event,” he says. “I was like, ‘Screw it, I’m not dealing with it if you guys are going to cry and complain about it.’”

Instead, he sold the release to distributors in China, Australia, and Nebraska.

“The people complaining would probably show up at the brewery to get the beer, so I just didn’t want that energy at our brewery. It was just so negative.”

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Lost in the digital handwringing was the bigger question of whether beer is capable of making such a value leap. There seems to be a cultural bias in beer against such pricing—or that may be just the perception, due to a loud and vocal minority. Fletcher says he feels justified in asking that price; the beer’s current secondary-market value of about $450 per bottle would appear to support not just a $100 price point, but higher.

“Some people regard [A Deal with the Devil] as one of the best barleywines in the world,” says Fletcher. “How many beverages that are considered the best anything in the world are $100? The best wines, the best bourbons? How much do those cost? They’re way more than $100. I didn’t think it was unreasonable. If I had a whole shit-ton of it, I wouldn’t sell it for that much. But it was a single cask of something unique and special. Why is $100 too much? I don’t know how to change that.”

Still, Fletcher understands that it’s better to have such demand than none at all. These are “first world” problems that others would love to have.

“We’re thankful that people like our beer that much. Having a beer like A Deal with the Devil that has become an iconic beer—it’s definitely shed a lot of light on the other products we’re doing. Of course, now we’re packaging hazy IPAs every week, and that’s the big thing, at least for now. So [the success of A Deal with the Devil] has made it easier to sell those beers.”

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Selling Afar

Bypassing the fickle U.S. market has been another key to Anchorage’s recent success. Thanks to the buzz around the brand generated by high-profile limited releases, the brewery has developed relationships with distributors around the Pacific Rim.

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“We’ve been focusing on not selling beer in the United States,” says Fletcher. “We’re selling more direct to consumer and more internationally. We’ve been working with China quite a bit in the past year and a half, and they really wanted our beer, but we’ve made it hard for them to get it. Still, they’re taking it all. They’re air-freighting our cans directly to China, overnight. I still don’t know how they’re doing it, but they’re doing it. Three pallets at a time, but they’re doing it often.”

Bottles to Chinese and Australian distributors ship by ocean freight, but the Brett-focused beers in those shipments can easily withstand the range of conditions they encounter.

“That was the whole thing with Shelton and the kinds of beers we were selling there, too,” says Fletcher. “I didn’t have to worry about where the beer went because I knew it was pretty bombproof and stable. Now we’re starting to sell these really delicate beers, so we’re being really picky on where they go and how they’re handled.”

Keeping Up with the Joneses

One of the most challenging aspects of today’s brewing business world is keeping up with the demand from consumers for new products. It’s not the brewing—Anchorage can handle that—it’s putting together new labels with artwork, working with graphic designers and printers.

“That’s actually more challenging than making beer for me,” says Fletcher.

As a result, he’s begun batching his creative process, developing recipes and names for a number of beers at a time, so the design and printing process can be tackled in discrete chunks.

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“Right now, we’re just building this huge portfolio of different beers, but then that allows us to go back and pick and say, ‘We really liked this one,’ or ‘This one sold really well, so we’ll brew this one again.’ We keep circling back. It is true that everyone wants something new right now. You can’t say, ‘No, I’m not going to do that.’ Otherwise you’re going to have problems selling your beer.”

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Growing Cautiously

Keeping the team small and the margins high has been a key feature for Anchorage. Future growth will continue to keep headcount in check as Fletcher looks to efficient production and sales strategies to maximize revenue from the beer the brewery makes. They’ve been disciplined financially, and taken on modest debt for assets such as land and buildings, while funding brewhouse upgrades primarily through cash flow.

“This year, we’ve been able to pay for all of our expansions with cash,” says Fletcher. “The only debt we’re carrying is our building, and the next building, and the canning line, which pays for itself.”

The temptation to grow is always there, but quality of life is as important for Fletcher as profit. Maybe more so.

“I love the size we are, and I think it’s the perfect size for us. I’m still connected to the beer, and I’m right there every day. I don’t want to be the guy who owns a brewery but has no idea what’s going on in it.”

One day, Fletcher’s dream for Anchorage is a business just a little bit smaller, but not by much.

“Success is we pay off our two buildings, don’t have any debt, can scale back operations some, and I go fishing. I’m dead serious.”

Photos: André Horton

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