Brewdemption: Sudwerk Brewery

 Back Story:

Our earlier review of Sudwerks on this blog created quite a response.... from the Brewery itself. They invited the Blog back for a tour, a discussion of what they were trying to achieve, and of course, a bit of beer tasting. Along the way we learned a lot about the challenges and rewards of brewing and where the industry might be headed. Enjoy.

Sudwerk v1.0: The Rising

Sudwerk, founded in 1989, was a visionary attempt to bring German brewing and beer culture to the U.S. Founded by two Davis, California natives who had lived and worked in Bavaria, they struck upon the idea that good, local beer, served fresh (ubiquitous in Germany), would also be successful back home. It seems like common sense now, but it was a rather bold gamble then.

It must be remembered that in the 1980's microbrewing as we now know it really didn't exist. A few pioneers like Sierra Nevada and Boston Brewing Company were out there, but otherwise it was Bud or Coors, or Henry Weinhard's if you were lucky.

The labeler

From its founding in 1989 through 1995 Sudwerk was the largest brewpub in the country, right there in the hamlet of Davis. As brewing world started to diversify in the 1990's, Sudwerk followed suit and increased their capacity and started opening new locations. The goal was to compete head-on with the Pyramids and Gordon Bierschs - solid beers, slightly refined pub food, consistently served throughout the suburbs of America.

The Davis facility was intended to be the brewing center which would supply a large and growing chain of restaurants. For a number of years Sudwerk's output was prodigious, 6000-8000 barrels a year.

In 2003 the momentum started to wane. The Sacramento restaurant location soon closed and the chain idea went with it.

2003 saw a consolidation of the business and a renewed focus on distribution throughout Northern California. The goal was to capture shelf space and sell to quality bars and restaurants. The problem was that by 2003 the craft beer market had greatly matured. Competition for tap space and cooler shelves was fiercer than ever. The early reputation advantages that Sudwerk had were not enough to push through in this challenging environment. Sudwerk was in a slow downward spin.

The Dock Store

Another important event was the sale and bifurcation of the restaurant and brewery. As of today the Sudwerk restaurant is owned separately from the brewery. The brewery actually has its own tasting room, called the Dock Store. What a low-key place to find great beer.

Sudwerk faces many of the difficult challenges that plague the brewing industry - the "Three Tier" distribution system which makes entry into the market quite difficult to nearly impossible for smaller brewers. Basically those that make the beer, those who distribute the beer and those that sell the beer to customers, must each be separate entities. This is a vestigial law left over from Prohibition. If you want to know more about this system, and its tremendous impact upon the US alcohol market, read this.

The entrance to the brewery

When distributors charge 28% and when your profit on a keg is as low as $9, you had better be growing and maximizing profits. The German motto of “brew it and they will come" is difficult to apply in the US. Having lived in Germany I can absolutely understand this mildly arrogant attitude. Germans do not, until recently, believe strongly in marketing and advertising, to them it makes sense that a superior and unique product would inevitably outperform its competition.

Well, the US is a heavily-regulated, dynamic market, and the times are challenging. By 2009 the owners were thinking of closing down Sudwerk.

Sudwerk v2.0: Keeping the Faith
We spoke with Aaron, one of the new managing partners, a 26 year-old, self-described "former TOGO's sandwich maker". In mid-2009, a grandchild of one of the original owners contacted Aaron, a mutual friend, about keeping the Sudwerk vision alive.

They felt passionately about the beer and its mission and knew they could contribute if at the very least, some “sweat equity”.

To quote Aaron, "If you don't push it, they won't drink it" and "Being good is not enough." Humble and wise words. Aaron said he one of the reasons he bought the brewery was so that he didn't have to go to law school. Well, it turns out running a brewery is also pretty challenging.

The material used to filter the beer.

Sudwerk has a vision to be “California’s Lager”, a vision that comes with a lot of hard work and investment. This starts with continuing to invest in their talented brewing staff. InBev, SABMiller and even Sam Adams are scouring the country for talented brewmasters and offering higher pay then what most local brewers can afford. The people behind the beer are as important as the brands themselves.

The filter

Creating the vision also means continuing to invest in high quality brewing equipment. The Sudwerk facility is impressive in this regard. The brewing capacity is robust, the facility is clean and the focus on quality is evident. From the use of White Labs Yeast, some of the best on the market, to consistent use of Pilsner malts (to keep a uniform flavor palate), to the expensive water filtration system (which assures that Davis water is pure enough to produce good beer), this is a mature operation.

I loved standing in the largest lagering room I have ever seen (kept cool to account for the lower fermentation temperature required for lagers). Seeing as how I believe we need more lagers, this is where I expect them to come from. Maintaining this equipment isn’t cheap and this results in slim profit margins.

Good Beer loves a Good Barkeep

If you want to try the freshest beer possible visit the Dock Store at the brewery itself. You can get beer that is a few days old at most.

Another challenge for Sudwerk and any small brewer is the need to focus on the final delivery to customers.

As our earlier review of the Sudwerk restaurant made clear, it doesn't matter if a beer is well brewed if it served badly at the table. Sudwerk will have to focus their vendors, making sure that their beers don’t go stale on the shelf or in the keg. Good beer vendors are hard to come by.

He singled out Pangaea Two Brews and The Shack as "good people, great beer" spots. Places where they are willing to evangelize the good new beers that brewers are producing. Places that know how to take care of a craft brewer’s beer. "Everyone else is focused on profit, not beer".

As a result small brewers want to limit their sales to merchants who let the product get stale on the shelf, such as low turnover liquor stores, and bars and restaurants where beer does not turnover fast enough.

A discussion of the future with Aaron was also very insightful. Yes, the brewing landscape is more crowded and competitive than ever, but so are the clientele. They believe that good beers, intelligently managed, will continue to be rewarded, and I tend to agree.

The brewing kettle

When asked about government regulation, beyond the Three Tier distribution, Aaron suggested that the tax structure was burdensome. Duplicative taxes on the production side (as opposed to the consumption side, but we can likely expect more of these too), combined with heavy distributor costs really made margins tight. He suggested a tax holiday or tax shift from production to sales could help small brewers compete and spur innovation.

When asked whether an attempt to reboot Sudwerk would benefit from a name change or even brewing a line under a new label, the answer was a clear no. Sudwerk had earned its name through hard work and vision, and Aaron said "I believe too much in the brand".

The bottling room

More interesting was the discussion of other craft breweries. Some were singled out for producing complex beers but skimping in the process. Once you make claims to a certain beer heritage line, brewing it in a cost-cutting manner actually hurts all brewers. If I buy a cost-cut Saison that is lacking in flavor, I may just never order another Saison again. All brewers lose on that one.

Also interesting was the challenges that vagabond brewers (breweries without a permanent physical brewing operation) placed on established brewers. Much as the food truck v. restaurant debate plays out, so does this one (innovation and creativity vs. cheating by escaping fixed costs and benefiting from other's hard work creating a ready customer base).

Keep it Fresh, Keep it Tasty and the future is bright...

As a lover of German beer I think they have their priorities correct: stay true to their German roots, stay Reinheitsgebot compliant, work hard, make beer that is sessionable (one you can enjoy over and over in a single sitting), stay within a flavor range they know and don't chase all the fad flavors. Their focus on freshness is commendable (all beers have a born-on date) and assures that the beer tastes its very best. After all beer is a "living substance that changes every day".

Sudwerk wants to become "California's Lager", and I don't see any reason they can't. Who knows, I'm sure the state would license the name for the right price to plug the budget deficit.

In all this was a wonderful firsthand look at the successes and challenges of a pioneering California brewery. I really must commend Aaron for inviting us back to re-taste the beers and tour the brewery. That was classy move, and moved us from critics to fans.

A good brewer must be passionate about his beers, must protect his reputation and must be unashamed to say, no, try it again, it is a good product, you will taste the quality. (This got me thinking about one of my favorite childhood insults "that is your opinion, and your opinion is wrong!") On this occasion I surely did. After enjoying samples of their beers (with a few quick notes below) I have to say they have a good thing going. We look forward to their continued success and seeing what quality brews come from our friends in Davis.

 

Beers Reviewed

• California Helles: very fresh, slightly more body than many Helles, hoppier than the standard
• Iggy's Pop: a German ingredients IPA, decent but not world beating
• Choco Taco: a chocolate stout with Jalapeno notes, unique and good
• Oatmeal Stout: nice taste, light for a stout, a solid beer
• Dopplebock from 2010: my favorite, malty front notes with rich body, starts smooth and finishes rich,
• Festbier/Marzen: rich, balanced deep flavor, better than nearly all other Marzens I have tried

Overall, we were impressed. Some of us went in thinking there's no way they will win us over. Our first experience back, after years away, was not good. However, the beers we tasted from the Dock Store were good to great.

I suggest you check out the Sudwerk Dock Store and sample California's Lager.