E-Malt.com News article: USA, OR: Deschutes Brewery planning expansion in Bend or another location

Deschutes Brewery, one of the nation’s biggest craft brewers, is planning the largest, most expensive expansion in its 25-year history, Bend Bulletin reported on January 23.

Along with Bend, brewery founder Gary Fish said the company is considering other locations — including the East Coast — although it will always call Bend home.

But local officials want Deschutes Brewery to expand in Bend.

“They’re the father of our beer industry here,” said Roger Lee, executive director of Economic Development for Central Oregon.

Throughout its history, Deschutes Brewery has either been under construction or planning for expansion, Fish said. The Bend-based brewery’s most pressing need is increasing its bottling and packaging capacity. But the location for that growth is still undecided, he said, along with a number of other factors.

“We have additional land below (the brewery) that we have always planned on utilizing,” Fish said. “But it’s a big project. It’s a big idea and a lot of money.”

Initial estimates put the expansion in the neighborhood of $50 million, Fish said.

“There’s a lot of places that are a lot less expensive to develop than Bend, Oregon,” he said. “As our sales continue to grow on the East Coast, at what point is it going to make sense to produce it where it’s being sold, or closer to where it’s being sold?”

The Brewers Association ranked Deschutes Brewery, founded in June 1988, as the fifth-largest craft brewer in the U.S. in 2012.

Last year, Deschutes sold nearly 4 million cases, a 13 percent increase over 2012, Fish said. It ships beer to 23 states and two Canadian provinces and plans on adding four more states by the end of the year. The brewery is also working toward international expansion.

Fish said it costs about $4 to $5 to ship a case of beer to the East Coast. The brewery currently has a company looking at possible East Coast sites for development. According to Fish, water would be a top priority when considering another brewing location. He would want to ensure beer made elsewhere would match the taste of what comes out of Bend. California-based Sierra Nevada Brewing Co. has been testing each batch of beer from its new Asheville, N.C., brewery up to 150 times to ensure its quality, according to its website.

EDCO and the city of Bend want to keep Deschutes Brewery in Bend.

It’s a huge part of the brewing and distilling industry in Central Oregon, Lee said. Many of the new breweries trace their roots back to Deschutes.

“It’s a huge leader in our state and in our region, so obviously we want to do everything we can to see them continue to grow in Bend,” he said.

Along with 10 Barrel and Epic Air, Deschutes Brewery has an application pending for an enterprise zone incentive, which provides tax deferrals in exchange for job growth, said EDCO Marketing Manager Ruth Lindley. Incentive amounts vary, based on the amount of the project, Lindley said. Deschutes’ enterprise application calls for a $45 million project that would double its capacity, she said.

Bend Business Advocate Carolyn Eagan said that to qualify for a three-year tax abatement, Deschutes would need to increase employment 10 percent during the first year. And if those additional jobs pay higher than the Deschutes County average wage, which was $36,782 in 2012, she said, the Bend City Council can grant Deschutes Brewery a five-year abatement.

Eagan agreed it may be more expensive to expand in Bend. She said some states may not charge Deschutes anything to develop and also offer the company incentives.

“Those states have programs that are using money from somewhere else to provide that kind of free development cost,” she said. “Businesses in other places pay business taxes, sales tax, road-user fees. … Cities use those fees that they collect from other businesses to pay for new businesses.”

Bend doesn’t have similar incentives, or a sales or business tax, so all businesses have a lower cost of doing businesses overall, she said.

“It’s a trade-off,” she said, adding there’s no consensus in the community about the trade-offs the city is willing to make for business expansion. “But as a community, we could do something differently. Deschutes could be the type of company that could bring that discussion about trade-offs to the forefront.”

Over the last several years, Deschutes Brewery has nearly doubled brewing capacity at its Southwest Simpson Avenue brewery. But with its rate of growth, Fish said, that capacity will be exceeded in the future.

“We added the fermentation capacity over the last couple years,” Fish said. “The next limitation to our growth is going to be in packaging. We know that our bottling line and our keg racking line can only support so much.”

Fish said the company isn’t sure how the project will be financed.

“We’re trying to understand everything we need to proceed,” he said. “These things take years to plan and execute.”

At this stage, he said it’s difficult to discuss the project in detail because everything could change.

“Nothing could happen, or it all could happen,” he said. “It could happen in a different place, at a different scale. Everything is variable at this point. We haven’t locked down anything.”


24 January, 2014