Take a look at the recently-released Brewers Association Top Craft Brewers list and you’ll see several local names pushing the limits of beer produced locally in San Diego. Green Flash is even undertaking a new brewery location on the East Coast. Everywhere you look, there is growth and expansion. Local beer is booming, with seemingly no end in sight. Amongst this bonanza, several of the local breweries that have opened in the past few years have taken a decidedly more local and intimate focus. Since Hess Brewing and Automatic Brewing Co. first opened in 2010, an ever-growing group of brewers in San Diego have chosen to focus on extremely small-batch brewing. These nanobrewers, sometimes producing as little as 20 gallons of beer at a time, are redefining what local, artisan beer can be.
While there is no clear origin for the dividing line, most nanobrewers consider a nanobrewery to top out at about three barrels (93 gallons) of beer per batch. On the low side, some nanobrewers still use the same 10-gallon homebrew system that they worked out their original recipes on. Sam Calagione famously started Dogfish Head of Delaware on a 10-gallon system, and they have since grown to producing over 200,000 barrels of beer a year. While still not legally recognized as a distinct class, “nano” simply came into use as a descriptor for a brewery that is, well, smaller than a microbrewery. For comparison, most brewpubs have a brewhouse that makes seven-10 barrels of beer per batch, and most distributing microbreweries start in the 15-20 barrel range, with regional breweries like Stone pumping out about 120 barrels at a time from their brewhouse, typically brewing multiple times into even larger fermentation tanks.
Common industry wisdom several years ago was that if you weren’t a brewpub, you were wasting your startup cash, as well as remaining sanity, by opening with anything smaller than 15 barrels. This idea was based on the assumption that you would distribute your beer in kegs to draught accounts, and possibly also bottles to bars and stores, either by yourself or a third party wholesaler/distributor. You might have a tasting room, but it wouldn’t be very significant as far as the volume of your beer that you would move out of it. This sizing rationale is based on the analysis of fixed versus variable costs.
A batch of beer takes the same amount of time to make on a one barrel or 15 barrel system, and the amount of space needed is not significantly different between seven and 15 barrels (though one barrel can be made in a much smaller space). So your fixed costs, including the same licensing and fees for starting up, would not change much, though your variable costs, mainly ingredients, would. At under 15 barrels per batch, the idea was that your cost-per-unit would be too high for you to charge what the market would bear and still make a profit. Your fixed costs would essentially eat your profit and you would eventually be forced to upgrade to a larger-sized brewery in order to become profitable enough to survive, or you would go under.
This economic model has changed somewhat in the past several years as brewery taprooms have become more prevalent and popular. Many locales, San Diego included, allow breweries with a certain license to sell full pints of beer and growlers to go out of their tasting rooms. This turns the old thinking on its head because small breweries can now make a survivable profit on a smaller amount of beer due to the higher margins on pints and growlers versus wholesale bottles and kegs. When going this route you are essentially a brewpub without a kitchen that may or may not also distribute some of your beer. Add on regular visits from the plethora of awesome local food trucks now doing business, and you have some of the benefit of a kitchen without the risk and cost of starting a restaurant, a decidedly more risky venture these days. Most nanos are selling all or most of their beer out of their taproom, though some, like Cold Bore Brewing Company of Jamul, are packaging all of their beer for local distribution.
Amongst brewers, there is essentially a consensus that the nano step is chosen mainly because it’s simply far less expensive than a 15-20 barrel brewery. Without a sizeable trust fund, it can be very daunting to go into massive debt or give up control to investors in order to get started. Starting small allows for more personal control and less risk. At the same time, almost all of them agree that their first brewing system is only a launching pad to larger capacity and production down the road. Dave Hyndman of Wet ‘N Reckless embodies this enthusiastic outlook. He enjoys the freedom of artistic experimentation that brewing on a 45-gallon system provides, but also acknowledges the downsides. “The disadvantage is that for every keg of beer I produce there is much more time and labor that goes into it,” he says. “It’s a labor of love but it’s also a reality of the business model.” As demand for his beers grows, he plans to expand capacity in his current space.
Vista brewpub Prohibition Brewing Company brewed 350 barrels of beer last year on a three-barrel system, though they already realized the need for more brewing capacity and have just installed a 10-barrel brewhouse built by local San Marcos brewing industry equipment supplier Premier Stainless, on which they plan to brew over 1,000 barrels this year. To head brewers Matthew Adams and Jonathon Rielly, nano is less about the absolute size and more about the local distribution of beer and connection to the community. “In our minds a nano brewery is an establishment that brews beer for their friends and family in their local community,” they said, adding, “between the two of us we agree that nano signifies a connection to the community that you are brewing for. Nano is connecting with the people who drink your beer and catering your product to their tastes, even if it conflicts with style guidelines.” While many consider nano to be all about size, I do think there is something to be said for the local state of mind.
Another brewery that walks the line is Amplified Ale Works in Pacific Beach. Located inside California Kebab, they were limited by the amount of space they had to build a brewery. They were able to fit a 3.5-barrel brewhouse in a former office, and two seven-barrel fermentation / conditioning tanks behind the bar. They double-batch on brew days, producing seven barrels at a time, so owner JC Hill is reluctant to use the nano label, preferring to call Amplified a “small craft brewery.” Right now, they can brew about 150 barrels a year, a nano-amount by most measures. Hill hopes that will change. “If we can add another seven barrel fermenter and some brite tanks to carbonate in, we’ll be able to brew a lot more” he says. Even within this limited capacity, Hill and head brewer Cy Henley have already experimented with bourbon barrel aging and plan to get into more sour and wild experiments in the future. Nano or not, Amplified is exemplifying creative brewing engineered to fit the constraints of a given space.
One of San Diego’s newest breweries, Intergalactic Brewing Company, is set to host their grand opening party on May 4, but owner Alex Van Horne already understands the freedom as well as constraint that starting nano has placed on them. He’s decided to start on a 20-gallon system, and would like to be able to brew 100 barrels in the first year, with expansion allowing more after that. “I am constantly changing recipes and improving the beer,” he says of the advantages of brewing on a small scale. “So the more I brew, the more opportunities I will have to make my beer better.” At the same time, Van Horne has a keen eye for expanding capacity as the business grows. “I don’t think anyone starts nano with the thought that they are going to stay that way. There is always some other end goal.” He says, finishing with an assessment that I think sums up the essence of brewing on such a small scale:
“Nano is great for starting out, getting a name, getting credit and a following. But when you start to realize it takes about the same amount of time to do 15 gallons as it does 15 barrels or 150 barrels and you have to hire 10 employees to keep up with demand on a small system you know that nano is not sustainable. I will add one thing, San Diego is different. With the tasting room culture that is here, nano can work. Just prepare to work 80+ hours a week if you want to make it work.”
So all you aspiring homebrewers thinking of starting a nanobrewery in the future, get ready for long hours, mountains of paperwork, and pressure to grow. We brewers are generally a crazy-determined bunch though, and I know more than a few who are up to the challenge.