Borealis Brewery gets out of production business

Posted: Monday, July 16, 2001

ANCHORAGE (AP) -- The founder and owner of the Borealis Brewery has decided to cut costs and get out of the production business.

The last cases of India Pale Ale rolled off the production line at an Anchorage warehouse last week. Founder SJ Klein said he will sell the beer-making equipment and contract production out to Silver Gulch Brewing and Bottling of Fox, 10 miles north of Fairbanks.

The small, craft brewery, which has yet to make a profit, hopes to cut costs and offer better-quality beer by getting out of the production business. Silver Gulch has a more modern, automated system that will produce an even tastier beer, Klein said.

''I was a little sad at the beginning but now I'm looking forward to it,'' said Klein, who decided a month and a half ago to stop producing beer at the Anchorage warehouse he's worked out of since August 1997.

Since opening the brewery, Klein has logged 60- to 80-hour weeks running the production line, marketing the beer, ordering supplies, developing recipes and doing countless other tasks involved in operating a manufacturing plant.

''Overworked'' is the word he uses to describe his present frame of mind.

To be profitable, Borealis would have to produce 4,000 to 5,000 barrels of beer annually, Klein said. It now makes around 1,500. Although sales last year were up 30 percent over the prior year, it's still a numbers game and the numbers didn't add up, he said.

He contemplated filing for Chapter 11 bankruptcy reorganization but figured shifting production to Fairbanks was a better solution for both Borealis and Silver Gulch.

Borealis is not shutting down, he emphasized. It's just moving production northward.

''It'll still be our recipes,'' he said.

Liquor stores and restaurants that carry the beer will continue to, Klein said.

Customers used to filling up half-gallon jugs called growlers with IPA, pilsener, bock and nut brown ale at the Ship Creek plant will still be able to, he said. Klein and one employee will still sell beer in kegs and growlers from Monday through Friday from noon to 6 p.m. and on Saturdays from noon until 4 p.m.

''Slammers,'' which are smaller glass bottles, will also still be available. If someone ends up leasing the Ship Creek warehouse, Klein said, he will move the growler and keg sale business elsewhere in Anchorage.

It can be tough-going for small beer operations in Alaska, several commercial brewers said. There's competition from bigger Lower 49 microbreweries, and then there's the high cost of shipping of raw materials to Alaska from Outside. Microbreweries here also are prevented from selling beer on the retail market.

''It's unforgiving in the Alaska market,'' said Glenn Brady, owner of Silver Gulch Brewing and Bottling. ''If you make one mistake, you might survive. If you make two or three, you probably won't.''

Silver Gulch went into business about the same time as Borealis and it started making a profit only in the last six months, Brady said.

''The bottom line is that it's hard to make money with a microbrewery when you're wholesaling it. People go to the store and they're like, 'I'm not paying $8 for a six-pack.' Well, that's how much it costs to make it,'' said Dawnell Smith, head brewer at Sleeping Lady Brewing Co. in Anchorage and a beer columnist.

Moose's Tooth Brewing Co., considered the big kid on the block in Anchorage as far as microbreweries goes, has also yet to make a profit off of beer sales alone, said co-owner Matt Jones. The company is profitable because it and it's sister establishment, the Bear Tooth, are restaurants as well as watering holes. Brewpubs, unlike breweries, can sell their beer retail.

''It's probably one of the hardest states in the nation to run a microbrewery, aside from Hawaii,'' Jones said.

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