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A Craft Beer Empire

4,279 Comments By Paul March 1, 2011

How Sam Calagione Built Dogfish Head Brewery

Taken with the idea of crafting his own brand of beer, Sam Calagione left his writing program at Columbia University in New York City in 1993 to apprentice at a brewery in Maine. One year later, Calagione built his own brewery using recycled kegs in the resort town of Rehoboth Beach on the Delaware shore. Today, Dogfish Head, named after a peninsula in Maine, operates a restaurant, a distillery and a brewery that, in producing 140,000 barrels of beer and raking in a combined $52 million in revenue, has become one of the fastest-growing microbrewers in the nation. Calagione has also become a media star both as the author of three books, including Brewing Up A Business (which has been updated and rereleased in paperback), and as the host of the Discovery Channel’s, “Brew Masters.”


Here’s how Calagione describes his rise to the top of the beer world:

 

I started waiting tables at a restaurant called Nacho Mama’s Burritos on the Upper West Side of Manhattan while I was enrolled in some writing classes at Columbia University. That’s when I first tasted microbrews like Sierra Nevada Bigfoot and Chimay Red. I then got hooked on brewing my own beer in my tiny apartment. That’s when I decided to drop out of school and take an apprenticeship up in Portland, Maine at the Shipyard Brewery so I could learn how to make even tastier beer. During the day, I learned about hops and international bittering units or IBUs, which measure how bitter a beer is, while working on my business plan at night.


After about a year in Maine, my wife Mariah and I and moved back to her hometown near the Delaware shore. I fell in love with the area and decided to try and open my own brewery there. I didn’t have a lot of money, so I cobbled together some used equipment and started experimenting in my basement with lots of unique ingredients like licorice, coffee and apricots. The frustrating thing was that I could only brew about 20 gallons at a time, which was about 10 cases worth. I started by selling what I had to areas pubs and restaurants.

My beer, however, started to get a reputation for being different. I started getting requests from bars and distributors in Baltimore, D.C. and Philadelphia, so would hop in my truck and deliver them a few cases at a time. As we started to sell more, we could afford to expand our production, so I bought an old Dannon yogurt factory and converted its equipment into brewing kettles.


In 1997, the craft-brewing industry really exploded. Brands like Sam Adams and Pete’s Wicked Ale became household names and that put a lot of pressure on the 1,600 smaller breweries like ours to keep up. But I wouldn’t cave on keeping our beer unique and distinctive since 80 percent of the beer sold in the U.S. is a derivative of a similar lager recipe sold by Budweiser, Coors, and Miller. Even though craft beers make up less than 5 percent of the market, I wanted to sell to people who wanted some excitement in their beer. I knew not everyone would drink our beer. We were seen more as heretics than pioneers. That’s why I adopted the mission of making off-centered ales for off-centered people.


We had separated the production brewery from our restaurant, Dogfish Head Brewing & Eats, in 1997, but our wholesale operation didn’t turn the corner until 2001. We were using the profits from the restaurant to keep the brewery afloat. But when many other breweries started going out of business, I was able to buy the assets of the Ortlieb’s brewery in Philadelphia for pennies on the dollar. I got $1 million worth of equipment for $200,000, which meant that I finally had equipment designed to make beer. The consistency and quality of our beer really took off from there. That was a real turning point.


When we started, we were the smallest craft brewery in the U.S. We were able to grow 40 percent to 50 percent every year until recently when we decided that we were growing too fast. We want to build a family-run business, not sell out or go public. Now our goal is to grow something like 20 percent a year. That’s frustrating for some of our distributors who want to sell more of our beer.  While I’m proud to say that we were the fastest growing brewery over the past five years, we’re more interested in building a brand that stands for something, which means growing methodically and organically even if it means we’re leaving money on the table.


The beers we make today are more exotic than when we opened in 1995. It’s exciting for us to focus on ancient cultures and to revive ancient recipes. We flex our creative muscles every chance we get. We now have 34 different styles that use ingredients such as maple syrup, juniper berries, cumin, coriander, and tea. Once someone learns that beer was made in Turkey 3,000 years ago using saffron, tasting one that uses maple syrup doesn’t seem so crazy.


While we are still best known for our beer, we have expanded the Dogfish Head line to include everything from gin, rum, and vodka that we distill ourselves to a line of beer soap and shampoo. While I shy away from using the term lifestyle brand, it really comes down to saying, Hey, if you like delicious and flavorful beers, you might want to check out these other things, too.


We continued to grow throughout the recession despite the fact that our beers are among the most expensive. Yes, craft beers are a luxury. But we’re reminding people that they can treat themselves to a word-class beer rather than splurge on a giant SUV. It comes down to identifying the truly important things in life.


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