Opportunity brews for bakery supply
Small beer is big business for San Antonio distributor
“We didn’t realize the industry is not a delivered service industry. From a distribution standpoint, it never has been. All brewers have always gotten supplies by common carriers. And it is very, very, very expensive.”
—Kevin Johnson, CEO of San Antonio-based Johnson Brothers Bakery
SAN ANTONIO—As the days shorten and the summer heat subsides, bakers turn their attention to the tastes of the season: pumpkin and apple for Halloween treats and Thanksgiving pies; chocolate, pecans and peppermint for winter festivities.
The San Antonio Express-News reports so, too, do the nation’s thriving subculture of craft breweries, which vie for customers with frosted mugs of nutty Oktoberfest-time lagers, pumpkin-infused autumn ales and spicy gingerbread stouts for chilly holiday nights.
That’s why when Kevin Johnson, CEO of San Antonio-based Johnson Brothers Bakery, saw the city sprout more and more brewpubs and taprooms—largely a result of state legislation passed in 2013 allowing small brewpubs to sell both on-site and to retailers—he decided it was time to expand his one-stop-shopping bakery supply model.
The idea for Johnson Brothers’ Brewery Direct division was an idea that had been, well, brewing, since the 1980s.
“I had a competitor in Waco, Texas—it was a bakery distributor that ultimately got bought out by a big company—and he sold brewery supplies,” Johnson said. “It was very small at the time, but it always stuck in my mind that he did this, he found a niche.”
Johnson joined forces with Jesse Reyes, who is now vice president and chief malt officer, and in 2015 launched the Johnson Brothers division known as Brewery Direct.
According to the Federal Reserve Bank of Dallas, the number of craft breweries in the Lone Star State has soared from 96 in 2013 to 251 in 2017, with gallons produced nearly doubling to about 1.7 million. As of June, there were 6,665 small independent breweries across the nation and more than 800 in Canada, the majority in Ontario.
Brewery Direct’s unique offer is free shipping freight, 36-hour fulfillment and custom ordering in an industry that’s as much about beach and mountain tourist towns as it is hip urban neighborhoods.
“Free freight is what we’ve done since the day we opened,” Johnson said. “We didn’t realize the industry is not a delivered service industry. From a distribution standpoint, it never has been. All brewers have always gotten supplies by common carriers. And it is very, very, very expensive.”
Truck drivers also are hard to come by, thanks to the West Texas oil boom. Johnson Brothers has had drivers drop off trucks because a competitor gave them an extra $500 for a load.
Reyes began wooing San Antonio clients, in part, by pointing out how much square footage they’d save by having the same kind of custom, just-in-time delivery as Johnson Brothers’ bakery customers.
Southerleigh Fine Food & Brewery, their first customer, was able to back down on plans to buy a parking lot storage container.
Keith Kilker of Guadalupe Brewing Co., another early customer, could replace a malt storage area with a fermentation tank.
“He said, ‘There’s no way I could ever have done that. If I had to put my malt in that spot where that fermenter was, all the revenue I got from that fermenter would have been gone,’” Reyes said.
After two years using warehouses in San Antonio and Dallas to build business along the Interstate 35 corridor and out to Oklahoma and Arkansas, they started aggressively courting brewers who would be served by Johnson Brothers’ distribution center in Houston. They’ve also added warehouses to the west in Albuquerque, N.M., and to the east in Lake Charles, La.
In August, Brewery Direct announced a national expansion into the New York tri-state area, Upper Midwest and Ontario. Partners in the expansion include A. Oliveri & Sons of North Bergen, N.J., (serving New Jersey, New York, Connecticut and eastern Pennsylvania), Valley Bakers Supply Co-op of Greenville, Wis. (serving Wisconsin, northern Illinois, southern Minnesota and Michigan’s Upper Peninsula), and Traynor’s Bakery Wholesale Ltd. of Hamilton, Ontario.
They’ve since added SBS Foods Inc., a partner in Spokane, Wash., that will serve Idaho, Montana, Washington, Oregon and Alaska.
Bakery Direct’s role will be as a marketer and consultant whose knowledge and experience will help those established distributors break into the craft beer scene.
It’s an expertise that took time to develop. Johnson, who started the new venture with a beer palate that was “more Shiner than anything else,” knew he’d go nowhere without the right partner.
Reyes, a grant writer who’d begun dabbling in homebrewing, had just moved from Washington, D.C., and started doing public relations for breweries. He met Johnson via the charity event circuit. Johnson and his wife, Melissa, in 2011 founded Project Angel Fares, which provides special needs children and their families all-expense paid weekend trips to San Antonio’s ultra-accessible Morgan’s Wonderland amusement park. He was looking to host a fundraiser for the project.
“I did a couple of 5Ks, some events, and that’s how I met Kevin Johnson,” Reyes recalled. “And then kind of he gave me a try. He pretty much told me that I had to put a 5K together in less than four weeks.”
Johnson in turn “found somebody that loved beer.”
“And I liked his character,” Johnson said. “If you know me, you know it doesn’t take me very long to implement things. So shortly after the run I called him and I’m like, ‘We need to talk.’”
Reyes had to “really hit the science part of” craft brewing.
He found he enjoyed the chemistry behind brewing: the temperatures, the weights, the manipulation of malts, hops and yeast.
Johnson invested in his brewery education by going to industry meetings and conferences.
“And this is all, mind you, for our customers,” Reyes said. “We want to make sure that our customers, if they ever have an issues, they need some troubleshooting that there’s someone there to help them.”
Reyes now leads seminars on beer making for sales reps who are used to dealing with bakers. The base grain is like the all-purpose flour. The crystals are the sugars. The roasted malts are the dyes.
While Johnson already stocked all the fun fringe flavorings a brewmaster could dream of—flash-frozen rhubarb, caramels, tapioca and dark rye for complexity—he now needed to supply malts.
Johnson Brothers now has staging areas with 2,000-pound pallets of Ireks malts imported from Germany and Proximity, an American malt brand out of Milwaukee. In a temperature-controlled backroom are more malts from England, Belgium and Canada. Minnesota-based Cargill is another big supplier.
As with flour for baking, supplies are contingent upon growing conditions. Several years ago, brewers were rocked by a drought-caused shortage of hops. This year, a record-breaking European heat wave has Germany predicting its barley crop will be down 40 percent. German suppliers are holding back what they’d normally export.
Johnson sees it as an opportunity to expose brewers to North American brands he views as equal in quality while only half the price.
Hops will be next, something that initially didn’t make sense to buyers who had longterm contracts and weren’t ready to place their bets on a new supplier.
“So that’s probably been the biggest challenge, building on that confidence that we’re going to be here for the long time, we’re going to be a part of your team, we’ll be there as long as you’re around,” Reyes said.