Bloomberg

(Bloomberg) -- Coffee-black and unctuous, Brooklyn’s Gowanus Canal would make for a dismal Coors Light commercial. There are no mountains poking the sky, just the Brooklyn-Queens Expressway. And the water doesn’t babble and bubble; it’s a mirthless, chemical soak.

Yet, the place has become almost sacred to the growing congregation of beer worshippers. In a cramped warehouse hard by the canal’s western bank, wedged between a McDonald’s and an oil depot, sits Other Half Brewing Co., which makes some of the hottest beer around.

The kegs come and go constantly, but the place really starts buzzing on Thursday morning; that’s when the beer caravans come. Two guys in a truck the size and shape of a rolling taco stand, packed with precise machinery to squirt, carbonate, seal, and label almost 20,000, 16-ounce cans in a 12-hour day.

The first beer geek typically shows up not long after the last can is sealed Friday night. They queue until 10 a.m. Saturday when each person is allowed to buy a case of every brew on offer for about $96 apiece. The stacks are gone in a couple of hours—1,000 cases a week, 24,000 cans in all. By that time, the mobile canners are long gone, en route to Finback or Aeronaut or any one of the hundreds of craft breweries that now rely on their canning services to slake cultish thirsts.

In the beer world, small is slowly and steadily beating big, thanks in large part to a few dozen nomadic canning operations. Charging by the can, this burgeoning industry helps hundreds of brewing startups connect with customers without buying expensive machinery they don’t have the money or space for. As a result, an increasing number of the 5,300 breweries in America today can thrive—or at least survive.

Norwalk, Connecticut-based Iron Heart Canning Co., the outfit that does the canning at Other Half, is arguably the biggest and busiest of the breed. Founder Tyler Wille, emboldened by years of cooking up increasingly decent beers in his closet, was intent on opening his own brewery. Working at hedge funds in nearby New York, he incessantly ran the numbers on his dream job, right through the subprime crisis: about $1 million for property and brewing equipment, and another $300,000 for a canning system—all while grappling with an ever-multiplying number of competitors. Wille decided to skip the brewing and focus on the cans. Iron Heart was born.

He bought his first canning truck in early 2013. From there, things moved quickly. “I had 10 brewery partners right out of the gate,” he recalled. “I realized I had the opportunity to actually make the market here.” Swamped by requests, Iron Heart had another two trucks rolling within a year. In 2015, Wille sold the company to a pair of private investors, stayed on as CEO, and promptly bought three similar operations, stretching the Iron Heart empire from its New England nerve center as far west as Ohio and south to Virginia.

“We’re really allowing breweries to do more volume and get a much faster market penetration than they would have otherwise.”

Today, Iron Heart has 22 trucks rushing between some 250 brewers. Working at maximum capacity, they can fill roughly 563,000 cans a day. That’s 642,000 barrels of beer a year, almost 3 percent of all U.S. craft production. To put it another way, the company has produced about one quarter of all the new craft beer rolled out over the past two years.

“For these guys, it’s a rent-versus-buy thing,” Wille explained. “We’re the rent option and it lowers the risk.”

Meanwhile, aluminum-based beer cans have slowly shed their stigma among drinkers. Not only do cans keep out suds-spoiling light, but they make for a more portable product. A brewer or distributor can push out almost twice the amount of beer using cans instead of bottles, since cans don’t have necks and are much lighter than glass.

“Unless it’s a super exclusive release with unicorn dust in it, no one wants a large-format bottle anymore,” said Michael Kelleher, a sales manager at Atlantic Beverage Distributors, which handles craft beers and spirits. “They want cans and they want them year-round.”

Iron Heart, of course, isn’t alone. There are about 30 other mobile canning rigs dotting the country, from Craft Canning + Bottling in Oregon to River City Cannery in Washington and Mobile Canning Systems, a loose affiliation of smaller mom-and-pops. Kelleher, the distributor, just bought a mobile system and launched a side project, Black Diamond Canning.

If these operations are successful, they work themselves out of a job. As clients draw a wider following and brew more beer, they’re able to buy their own canning machinery. Wille rattles off his former accounts with an air of pride: Long Trail, Night Shift, Captain Lawrence, and Trillium, to name a few.

“We’re really allowing breweries to do more volume and get a much faster market penetration than they would have otherwise,” he said. “In markets that we’re not in, you don’t see near the level of cans on the shelf or near the level of breweries.”

Roving canners have sweetened the economics for craft brewers in more subtle ways, too. They’ve seeded the market with thousands of esoteric releases that would otherwise be available only via regional taps. In doing so, those box trucks following the beer harvest have cultivated a booming secondary market, where obsessive beer hounds sell and swap the country’s most coveted batches.

The Beer Exchange, a peer-to-peer app and online platform started in 2014, has 35,000 people logging in every month to barter suds. Concerts and sporting events are another bustling market where beer deals go down, from one trunk cooler to another.

“People are always going to want that beer they can’t have,” said Beer Exchange co-founder Luke Schmuecker. “Now, you can get pretty much any beer in the country.”

The most coveted bottles and cans–beers that have been barreled and aged like wine–fetch thousands of dollars.

Other Half finds itself in an economic pickle typically reserved for those who sell Ferraris or six-figure handbags.

The happy accident of this intoxicated fan base: Small breweries cranking out precious cans no longer have to woo wholesalers or jockey for shelf space with the craft brands bought up by AB InBev and Molson Coors. The marketing departments for breweries like Hill Farmstead in Vermont, Tree House in central Massachusetts, Russian River in California’s wine country, and Cigar City in Tampa, Florida, aren’t in corporate cubicles. They aren’t even employees—they’re the bearded masses that line up every time there’s a new release.

With demand juiced, small breweries can also set prices relatively high and keep most of the margin. Other Half, like many of the hottest breweries, doesn’t bother with retail stores.

“We just make really good beer; we try to make it interesting and we get bored really easily,” said Matt Monahan, one of Other Half’s cofounders. “With the amount of beer trading going on, it’s like having national distribution anyway.”

Take the company’s coveted All Green Everything, a hop-soaked triple IPA. Last week, 39 people in the northeast said they had some available for trade on Beerexchange.com. Meanwhile, 219 people from all corners of the country were “ISO All Green Everything,” which is to say “in search of.”

In short, small beer can be a better business model. Last year, slightly more than 12 percent of beer consumed in America came from craft breweries. However, these smaller, scrappier shops collected 22 percent of beer revenue, according to the Brewers Association, a craft trade group.

“The margins for some of these places must be tremendous,” said Kelleher, of Atlantic Beverage Distributors. “If they go wholesale, they’d have to make far more beer for the same amount of profit.”

The craft-beer boom doesn’t appear to be slowing down—and neither is the canning. Wild Goose Canning Systems, a Boulder, Colorado-based company that builds most of the country’s mobile systems, is working on four new orders a week—stationary canning lines and mobile units.

Last year in the U.S., a new brewery opened every 11 hours. Incredibly, only 97 folded. Americans aren’t drinking more beer, though; they’re just drinking more small beer.

“We’ve seen a growth curve in this industry that is, in some ways, unexplainable,” said Roger Walz, an early Wild Goose employee who now goes by the title of Beer Ambassador. “But if you look at a map, there is still a lot of open space out there. Mississippi is about to have an explosion. There are only four breweries in all of the Dakotas.”

Other Half, meanwhile, finds itself in an economic pickle typically reserved for sellers of Ferraris or six-figure handbags. It can raise prices and anger some of its best customers, or it can make more beer and shed some of the scarcity that gives it such a strong following.

For now, says Other Half co-founder Monahan, they’re going to make more beer–just a little more beer. The outfit recently expanded into the warehouse next door and is adding more vats and a far larger taproom. Sometime in the next few weeks, it will start running its own, permanent canning line—a $140,000 system from Wild Goose.

By then, the canning caravans won’t be camping there anymore. Last week’s batch—a citrus and cactus-tinged IPA called City Slickers—will be one of their last. Before the Iron Heart truck pulls away, crew chief Cully Naramore takes a City Slicker label and, per tradition, slaps it on the side of the truck, like a bearded bomber pilot in some kind of boozy war.

 

To contact the author of this story: Kyle Stock in New York at kstock6@bloomberg.net.

To contact the editor responsible for this story: David Rovella at drovella@bloomberg.net.

©2017 Bloomberg L.P.

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