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Dogfish Head triples bottling speed

James Fisher
The News Journal

MILTON –

It's not that the ingredients in Dogfish Head Craft Brewery's beers have changed in the past year – those bottles of 60 Minute IPA, Indian Brown and Burton Baton still pack the same punch on your palate.

But the way the company bottles and ships its beer has undergone a sea change. By spending $21 million on a new building and a German-made, robot-equipped packaging line inside it, Dogfish Head has tripled the speed at which it can put 12-oz. bottles of beer out to market compared with a year ago.

The new bottling line, in operation since the middle of last year and now open to the 2,000 people a week who take tours of the brewery, is an unmistakable sign of the company's ongoing expansion. Even throughout the recession, Dogfish Head and many breweries in its class have enjoyed strong annual growth. While the overall U.S. beer market grew 1 percent in 2012, according to industry statistics, companies making craft beer increased production by 15 percent that year.

"The first bottling line we built at our brewpub in 1996, it would take two of us 10 hours to fill 100 cases in a 10-hour shift," said Sam Calagione, Dogfish Head's founder and president. "Our new bottling line does that same volume every other minute."

Purchased from the German packaging firm Krones, the line deploys 13 robots to automatically unpack pallets of empty glass bottles, scan them for stray dust and dirt, fill them with a precise volume of beer and apply labels and caps. Near the end, full bottles go into a room-sized machine called a Varioline. There, quick-moving robotic arms unfold flattened six-pack containers, fill them with bottles, put the containers in cases and send them on to another robot that arranges them on pallets as if putting together a jigsaw puzzle.

Seeing the line up and running for the first time, Calagione said, "was kind of like a Willy Wonka's Chocolate Factory golden ticket moment." When it's running smoothly, the whole rig can put out 39,000 bottles every hour, said Matt Eisenmann, the brewery's packaging manager.

Older equipment in the brewery's original Milton facility still funnels some beers, like the raspberry-laden Fort, into larger 750-milliliter bottles, and the kegs that Dogfish sends to bars also are filled in the older building for now. Beer destined for the new bottling line is pushed through an elevated pipe that runs from the old building to the new one – a pipe so long that 400 gallons of beer is in transit at any one time during bottling.

The new machinery isn't flawless. During a visit to the brewery this month, packaging workers were prodding the Varioline into fitful compliance because containers kept getting stuck. The river of red-capped 90 Minute IPA bottles coursing through the line was on pause.

"There's an added complexity involved. It wasn't out-of-the-box easier," said Al Stuart, Dogfish Head's packaging supervisor. "Being a German machine, it's very precise. It wants perfection. And if we don't give it that" – if, say, a pallet has too many splinters – "it will fault. We're working through that with the suppliers."

For years, demand for some of the company's beers, especially its strong brews like Palo Santo Marron (at 12 percent alcohol by volume, it's triple the strength of a light beer), routinely has exceeded supply. When Calagione spent a few days in Boston, he said, he heard from distributors that even Namaste, an easier-to-quaff beer, also was scarce on the shelves.

You might think, then, Dogfish would be running its new line at full tilt to meet market demand. Not so, the company says; it runs one shift a day, five days a week.

"We're taking our time and learning it," Stuart said. "So when that day comes and we have to run a second shift, we can still run it efficiently."

The luxury of bringing a major capital investment slowly up to speed is commonly enjoyed by craft breweries these days, and was so even during the recent economic recession, said Bart Watson, an economist at the Brewers Association in Boulder, Colo. Breweries above the 15,000 barrels a year line, Watson said, don't really have trouble raising capital for expanding production, in part because the craft beer market has grown healthily for years.

Dogfish Head produced 171,000 barrels in 2012. Industrywide statistics on 2013 production will be published in late April, but no one in the business is expecting a slackened rate of growth.

"It doesn't appear that the recession sharply changed the trajectories of any breweries," Watson said. "Their growth could have been more robust without the recession, but it certainly didn't cause them to go flat."

Other breweries making big investments in recent years on the same scale of Dogfish's $21 million spend, Watson said, include Abita, in Louisiana, which also bought a Varioline from Krones as part of a $12 million expansion; New Belgium and Sierra Nevada, two Western breweries that built big new brewhouses in North Carolina to better deliver to Eastern states; and Founders Brewing Co. of Michigan, which has added distribution to four new states so far in 2014, although it's not yet on shelves in Delaware.

New entrants to the industry are coming all the time. There were 366 new breweries added in the U.S. last year – more than one new-business opening a day – and some wonder if a course correction is due, or even a contraction of the market for specialty beer.

Craft beer still accounts for only about 7 percent of all beer sold in the U.S. Watson thinks not, saying in a blog post that "a changing set of consumer preferences away from light adjunct lagers and toward full-flavored beers" is unlikely to reverse itself.

Calagione said it's still not a cakewalk for a craft brewery to convince a bank it is creditworthy. "We spent the first 10 to 12 years of our 19-year existence squeezed for cash and capital," Calagione said. "We're very lucky to be in the position we are, and we worked hard for our luck."

Dogfish Head and many other breweries are lobbying Congress to pass the Small Brewer Reinvestment and Expanding Workforce Act, which would cut the federal excise tax on any small brewery's first 60,000 barrels a year from $7 to $3.50. Delaware Democratic Senators Tom Carper and Chris Coons, and Rep. John Carney, D-Del., are among the bill's co-sponsors.

"We know a rising tide floats all ships," Calagione said of the bill. "If we get that excise tax reduction, we'll use it more for adding jobs than adding new equipment."

Contact James Fisher at (302) 983-6772, on Twitter @JamesFisherTNJ or jfisher@delawareonline.com.