Bulletin E-Edition:
Deschutes Brewery delays plans to expand operations
By Jeff McDonald / The Bulletin
Published: July 03. 2009 4:00AM PSTGary Fish
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Slower beer sales in Oregon and better utilization of existing equipment have led Deschutes Brewery to delay plans for expanding its beer-making capacity, the head of the Bend-based craft brewer said this week.
The company had said in January it would need to craft a plan this year to expand its existing facility near the roundabout of Colorado and Simpson avenues, or open a new facility east of the Mississippi, where the company would like to expand within the next three to 10 years.
Deschutes Brewery’s overall beer sales, while flat this year when factoring in all of the brewery’s markets nationally, are down 10 percent in Oregon, where the company does a majority of its business, due to the sluggish economy, said Gary Fish, company president.
“It is a tough, competitive marketplace we are in,” Fish said. “We expect to make beer in Bend forever, but we will continue to explore opportunities (for expansion) in markets closer to where our beer is sold. It is the economic way to do it.”
The brewery has found a way to expand production capabilities at the Bend facility from 200,000 barrels annually to 240,000 barrels, Fish said. That extra capacity should give the brewery about two additional years of growth at the Bend facility, Fish said.
“We don’t need to expand this year in Bend,” he said. “Only seeing moderate growth allows us to delay expansion for a while.”
Fish had announced plans in January to add 10 new 45-foot-tall fermentation tanks outside the existing facility that would add to the company’s existing 35 to 40 tanks. Those tanks, which produced about 180,000 barrels of beer in 2008, were expected to reach full capacity based on the company’s growth patterns.
“Those (expansion plans in Bend or out of state) are currently on hold,” Fish said. “We have been able to eke out more capacity from existing equipment. Sales growth has softened with the economy, so we are sitting tight for the moment.”
Keeping production in Bend could help with marketing the beer as a Central Oregon creation, but as the company grows in the Southeast and Midwest, it might make more economic sense to open a facility east of the Mississippi, Fish said.
“Beer doesn’t travel well,” he said. “It’s costly and leaves a large carbon footprint.”
The company would still like to expand its Bend plant, regardless of new markets in the East, because it has available land here for growth, Fish said. But it is somewhat restricted in that growth until either the brewery or the city can create more wastewater capacity.
“The city has issues with their infrastructure and is trying to get that fixed,” Fish said. “The city has not given any indication that they would give us a barrier to our expansion plans.”
Fish also cited increased costs, including taxes passed by the state Legislature and sewer and water fee increases from the city of Bend as additional reasons for delaying any expansion plans locally.
Deschutes Brewery currently sells its craft brews in 14 states, including Oregon, Washington, Arizona, Alaska and California. The brewery recently began shipping beer to Utah, Texas and British Columbia, and is evaluating new markets in the Midwest and South, Fish said.
Ultimately, the company plans to sell beer in all 50 states, he said.
The company’s expansion plans could lead it to open a new facility east of the Mississippi, Fish said. Deschutes Brewery has no plans to move its Bend headquarters, but it could open another facility in Oregon or Washington state if the brewery cannot expand locally, he said. The company employs about 280 workers, including 150 in Bend, Fish said.
Deschutes, which began brewing in Bend in 1988, ranked sixth among U.S. craft brewers last year in terms of total volume of beer sold, according to the Boulder, Colo.-based Brewers Association, the industry’s nonprofit trade association.
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