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From double IPAs and barrel-aged stouts to sustainable pilsners, craft beer breweries are broadening their horizons when it comes to taste and ingredients.
"It's never been a better moment to be a lover of diverse beverages because there's over 10,000 breweries in America, thousands of distilleries, ... [and] thousands of wineries," Sam Calagione, founder and brewer at Dogfish Head, told Yahoo Finance Live (video above). "Everyone's kind of letting their freak flag fly in different directions when it comes to creative recipes for alcohol beverages."
Dogfish Head, which was acquired by Sam Adams maker Boston Beer Company (SAM) in 2019, made its name on unusual craft beer concoctions. The brewery has continued to innovate through partnerships, including an unusual IPA ice cream flavor launch with Van Leeuwen.
"We were the smallest commercial brewery in the country," Calagione said. "But how we made our name and grew to a top 10 indie craft brewery was introducing unexpected culinary ingredients into the world of craft beer."
For its latest offering, Dogfish partnered with Patagonia Provisions, the food-focused offshoot of the outdoor retailer, to launch Kernza Pils.
The pilsner-style beer was developed with regenerative agriculture in mind using a grain called Kernza that was developed by the Land Institute, a nonprofit in Kansas. Kernza is a trademarked wheatgrass that promises to sequester carbon from the atmosphere into the soil and provide greater yield potential. It's also a perennial crop, which means it does not have to be replanted every season.
"In the case of our partnership with Patagonia... they brought to us this amazing grain called Kernza," Calagione said. "Kernza is inordinately strong at drawing carbon out of the atmosphere. ... But what it does from a sensory perspective is you put it in this beautiful pilsner. And it gives it a nice dry peppery undertone that we can build this nice hop, sort of green tea and pear fruit hop character on top of."
Patagonia Provisions has previously released three beers using the Kernza grain. With the Dogfish Head collaboration, the two companies aim to nudge the industry toward sustainably grown ingredients.
"Our rallying cry for this specific beer is 'drink up to draw down [carbon],'" Calagione said. "And it invites every consumer to actively engage in the climate crisis. And with every six-pack they buy, they're helping to plant more acres of Kernza, which not only tastes delicious, but it pulls carbon out of the atmosphere."
Supply chain issues 'very real'
For beer producers like Dogfish Head, there's another reason to pursue novel grain types right now: supply chain constraints.
Naval blockades imposed by the Russian military in May currently block Ukraine’s ability to export grain, a key ingredient in beer and a commodity already radically destabilized by the war. (Russia and Ukraine produce about 13% of the world's wheat supply.)
Calagione said the company also has had to absorb the rise in material costs for its aluminum cans and glass bottles.
“The supply chain challenges are very real,” he explained. “With breweries, we buy natural products — grains, hops — and we usually buy them on a three-year contract. So every year, one-third of our volume is at risk.”
The supply pressures come as breweries have been ramping up to meet exploding alcohol sales.
According to Calagione, consumers were pantry loading alcohol during the pandemic. “People were not shopping for beer — they were buying beer, meaning they were going to big-box stores, finding brands like Dogfish 60 Minute, Sam Adams Lager, recognizable brands, and buying bigger packages of 12 packs, 24 packs,” he said.
During this time, the brewery leaned into emerging trends and its roots as a craft distillery to cater to other drinkers by expanding into the "beyond beer" market. That largely meant launching canned cocktails and hard seltzers.
When indoor dining closed temporarily, "at-home cocktails and ready-to-drink cans really accelerated," Calagione said. “Now, Dogfish Head canned cocktails is growing triple digits and is actually the fastest-growing part of the Dogfish beverage portfolio."
In December, Drizly CEO Cory Rellas told Yahoo Finance that the ready-to-drink category saw "four and a half times growth" in 2021 alone. Drizly, an online alcohol delivery service, went on to rank Dogfish Head third among the top 10 growing ready-to-drink brands of that year.
Part of this growth represents a generational shift in drinking behavior, Calagione noted. "The younger drinkers today are kind of like 'cross drinkers' — they like seltzers, they like craft beers, they like spirits-based ready-to-drink cocktails in cans."
Luke is a producer for Yahoo Finance. You can follow him on Twitter @theLukeCM.