A Couple of Quick Updates Regarding our New Brewery

As you've no doubt noticed, we've not updated this site much recently. We'll soon get back to the narrative we started in earlier posts, but in the meantime, here are a couple of quick video updates, which will give you a glimpse of the status of our new brewery project at Towle Farm in Hampton.

First, here's a project update from company president, Peter Egelston:




And here's a time-lapse film, taken from mid-November, 2011, through January, 2012, which shows the moving of the farmhouse as well as the dismantling of the "el" buildings that connected the house to the barn.

Smuttynose Builds its Dream House - Part 5 - Newmarket Mills (b)

Good afternoon.  As you can see, it has been a long, long time - way too long -  since the last time I posted on this site. Before I look back to 2005, when our plans for building a new Smuttynose brewery in Newmarket finally came to an end, I'd like to provide a brief update on where things stand at present.

As of this writing, Monday, August 1, 2011, our plan to build our new brewery in Hampton is very much alive and moving forward, though not as quickly as we had hoped or originally planned. We own the property at Towle Farm and have sought and received Site Plan Approval from the town. The project is fully designed and engineered.  It is, as they say, shovel-ready.

As some of you have heard me say, if I bought a winning Powerball ticket on my way home from work today, we would begin construction next week.  In reality, we are putting the final touches on a very complex and multi-faceted financing package which will consist of a sizable amount of owner equity, bank loan(s), SBA financing, and a variety of smaller loans acquired through various public agencies. If all the pieces fall into place as we expect, we will apply for a building permit before the end of this month and start building in the fall. If we stick to that schedule, we will move into our new brewery at the end of 2012 or beginning of 2013.

Now, back to Newmarket...
On October, 27, 2005, I sent a letter to the Newmarket Community Development Corporation and Town Council. It was addressed as an Open Letter, so it was no surprise that it quickly passed through a lot of hands, including those of our local newspaper.  Here is what my letter said:

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AN OPEN LETTER TO THE NEWMARKET TOWN COUNCIL AND THE NEWMARKET COMMUNITY DEVELOPMENT CORPORATION

I had written a different version of this letter last week and was preparing to send it out when an acquaintance brought to my attention an article that appeared in Foster's Daily Democrat on Tuesday, October 18. Whether intentionally or not, the article grossly misrepresented my position with respect to the redevelopment of the mills in Newmarket. In light of this, I have rewritten my letter in order to clarify that position and to explain why I have finally thrown up my hands in frustration and walked away from what looked like such a promising venture.


In simplest of terms, the Newmarket Community Development Corporation was not able to successfully conclude its negotiation with me because of its naive and excessive demands on one hand, and its failure to mitigate the risks in a project of this magnitude by properly addressing the uncertainties surrounding downtown Newmarket on the other. In fairness to the NCDC, the latter point comes as the result of poor overall planning in Newmarket, which in turn is the direct result of the town's weak, fragmented leadership.


As you know, well over two years ago I began negotiations with the NCDC with the goal of creating a new home for my company in Newmarket's riverfront mills. I had envisioned that these buildings and the land surrounding them would evolve from their present state of shabby, urban blight to a vibrant centerpiece of community life in Newmarket, and I was proud to have the opportunity to play a key role in that. That vision included the relocation to Newmarket of our award-winning artisanal brewery, a visitors' center, pub and restaurant, as well as other uses, including arts-related activities, offices, and even some residential occupancy. I had hoped to have the opportunity to develop the land surrounding the mill buildings, especially the central millyard, in a way that would enable it to become a "village common," a place of public gathering and activity. What made my plan different from most developers is that I was intending to set down roots, to tie my company's future to Newmarket's, and I was very optimistic about that, so optimistic that I devoted two years of hard work, hundreds of hours of my time, and well over a hundred thousand dollars in pursuit of that goal.


This past August, I suspended my negotiations with the NCDC, and I have since decided to drop them altogether and pursue opportunities elsewhere. There are two basic reasons why this occurred. First, it became clear to me that the risks associated with this project far outweighed the potential benefits. And while risk assessment is something that anyone in business routinely does, what makes this situation so frustrating is that the risks that finally drove me away from Newmarket had little to do with business considerations at all, but instead were the direct result of uncertainties arising from the fragmented, dysfunctional process of decision making and planning that I encountered there. Furthermore, it was evident that the NCDC was attempting to saddle this project with well-meaning but wildly unrealistic restrictions and stipulations that made the project a non-starter from a financial standpoint.


When I first began negotiations with the NCDC I was told that I could only purchase the riverfront mills and the land on which they sat - nothing more. The fate of the property surrounding these buildings was uncertain, because the future development of the Main Street mills and the Riverwalk was yet to be determined. That, unfortunately, was simply the first on a long list of yet-to-be-determined items. Parking? Uncertain. Pedestrian and automobile access to my businesses? Uncertain. My hopes to create public space in the millyard? Contingent on unknown factors. Riverwalk? Uncertain. Main Street development? Up in the air. TIF funds? Someone else's department. Water & sewer? Unclear. In effect, I was being asked to take a huge leap of faith, investing between eight and ten million dollars into what would be a tiny island of clarity surrounded by a sea of uncertainty. One thing I did find certain is that the major stakeholders and decision makers do not communicate effectively and often are completely unaware of what the others are doing. Resources that the town possesses or has access to - like its very capable and talented Town Planner - are largely underutilized, important decisions are made in a vacuum, often in a veil of secrecy, while the town administrator's office is largely ineffective. Meanwhile, the town's architectural and cultural centerpiece, the heart and soul of Newmarket - its mills - steadily, quietly deteriorate.


Newmarket is a community with an abundance of good ideas and laudable ambitions. However, good ideas and ambition are no substitute for sound planning. In the time I spent working on this project, I encountered many bright, energetic, creative people with high hopes and aspirations for their community. I was witness to much discussion, and lots of different visions, but little in the way of leadership helping to bring it all together into a unifying vision, and certainly no attempt to craft a real plan which all the stakeholders have a part in shaping, and which guides future growth and development.


The Foster's article made it appear as if I did not want to be the developer for this project, as if I suddenly came to my senses and realized I was in over my head. Nothing could be further from the truth. I was ready, willing and able to tackle the development of the mills, to work with the Town of Newmarket bringing my vision to fruition. What I am not prepared to do is risk everything I have built over nearly twenty years in such a problematic environment.


Your town has a great amount of potential and human capital. This is a time of tremendous opportunity for your community, but I believe that opportunity will never be fully realized without a change in the fragmented, piecemeal decision making process and lack of leadership that I have encountered there. And although I believe the Town and the NCDC are taking a small step forward in putting out a request for proposals for all of the mills packaged together, this is not sufficient. Why is Main Street Phase II even moving forward without a commitment to develop the mills? And why are either being discussed without a comprehensive plan for parking? And who is leading this process? Before another step is taken (and someone else's time and money are wasted), Newmarket must take a step back and look at its big picture. It needs to bring in outside expertise that can assist in bringing stakeholders together, facilitate the process of translating all those good ideas floating around into a plan, building a consensus to support that plan, and advocating on behalf of the community as that plan is put into action. If Newmarket tries to do this on its own or on the cheap, the results will be disappointing at best, disastrous at worst. That is my parting piece of advice.


As you can probably tell, I am very disappointed in the way things have turned out. According to our original timeline, we would have been wrapping up the planing and permitting process by this time, with the goal of breaking ground in early 2006 and being open for business by the end of the year. I am not the only one that is disappointed. We still get emails almost every day from people telling us how much they look forward to the day we open our doors in Newmarket.


Sincerely,
Peter R. Egelston
President, Smuttynose Brewing Company

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Rereading this letter today, I am not especially proud of its angry, self-righteous tone. However, I still believe that my description of the situation was accurate, so I won't elaborate further here - the letter speaks for itself.  Since then, I believe that the climate in Newmarket improved considerably with the departure of the Town Administrator who was present at that time, and I was happy to see a recent report that Newmarket's mills will finally be brought back to life, as described in this Portsmouth Herald article.

Once the decision to walk away from Newmarket was made, we were back at Square One, as far as building a new facility was concerned.  That fall, as soon as the news became public that we were done in Newmarket, we heard from people in Dover, Exeter, Newfields, Stratham and Epping, suggesting that we consider locating our brewery in one of their communities.  But the one place I wanted to take a fresh look at over all others was our home town of Portsmouth.

One of the reasons we did not seriously consider Portsmouth in the first place was its strict use-based zoning. Our plans always included a brewery with a visitors' center and restaurant. In Portsmouth, a light manufacturing use such as a craft brewery is not permitted in a commercial zone, where a restaurant would be permitted; a restaurant would not be permitted in the industrial zone. However, the city had just adopted a new Master Plan, which encouraged the concept of mixed uses and even suggested zoning changes to encourage mixed-use development. I felt that this might be a good opportunity, so shortly after I cut my ties with Newmarket, I reached out to Nancy Carmer and John Bohenko, Portsmouth's Economic Development Program Manager and City Manager, to discuss the possibility of Smuttynose building a new brewery close to home.

While this was going on, sales at Smuttynose continued to increase, and our need to build a new brewery became more urgent. We got a temporary reprieve in early 2006, when our neighboring tenant moved out, giving us the opportunity to take over the entire building and increase our floor space from 12.5 to 25 thousand square feet.  In April, 2006, we installed our first 200-barrel fermenter. Since our building has 15 feet of clearance from floor to rafters, and tanks that size are 23 feet  high, we set the tank outside and constructed an addition on to the building to accommodate it. (This was the first of five such tanks we'd add over the following four years, with four more still to be added at the end of this year.)

Around the same time, our attention was drawn to a vacant 10-acre parcel of land on LaFayette Road (US Route One) in Portsmouth, about a mile from our current location.  In many ways it was an ideal site for our new brewery.  The property was zoned Office-Research, a hybrid zone identified as problematic by the City's master plan, and city officials assured me that since this site was targeted to be rezoned, my timing was very good. I purchased an option on the property and then embarked on a long, strange trip and expensive civics lesson.

Next time: how a plucky little band of neighbors united to slay an menacing, evil dragon (us) - or the existentially angry denizens of Elwyn Park versus Smuttynose Brewing Company.

Smuttynose Builds its Dream House - Part 4 - Newmarket Mills (a)

In July, 2003, my partner Joanne and I took a drive to Newmarket, where our friends Peter Hamelin and John Pasquale were developing their plan to purchase and reopen the famous Stone Church music club. Located about twenty minutes from Portsmouth, Newmarket is an old mill town situated on the Lamprey River, a tributary of the Great Bay. Compared to other thoroughly gentrified communities up and down the Seacoast, Newmarket has always been refreshingly, even defiantly, down-to-earth, populated with a diverse mix of people: folks with roots that go back generations, along with recent immigrants; working-class people, professionals, college students, artists and random bohemian types. It is both well-grounded and artsy in an appealingly unpretentious way.

Although Joanne and I were in Newmarket that day to hear about Peter & John's plans for the venerable Stone Church, the conversation eventually drifted to our own vague ideas for a new facility for Smuttynose. John, who lives in Newmarket and was involved in local politics, asked if we would consider looking at the mill buildings that dominate the center of town. He told me that they were vacant and that the town was actively looking for someone to come in and develop them. In August, 2003, we took our first tour through the old, abandoned mills and we were astonished by what we saw.

Newmarket's mills are a relic of New England's early, water-driven industrial revolution. Built from quarried split granite between the 1820's and the early 1900's, these massive structures were originally used to mill cotton. Later uses included shoe manufacture (Timberland got its start in the mills next door), hydro-electric generation, distilling, and most recently, the manufacture of sheet mica and electrical insulating material, but regardless of the use, they have always been the economic heart of the region, employing thousands at their peak. By 2003, the mills on Main Street housed a single small manufacturer; the mills across the Lamprey River had been converted into residential condominiums; but the bulk of the space - over 70,000 square feet in buildings in a picturesque setting alongside the river - had been vacant for more than a decade.

It is easy to see how seductive the idea was of breathing life back into these beautiful structures, especially with a traditional manufacturing use such as artisanal brewing. Walking through their vast, empty spaces, you can imagine when these buildings were filled with workers operating clanking machinery and pulsed with energy. And although these buildings did not perfectly meet the criteria outlined in the previous post, the notion of transforming these historic mills had an irresistable appeal. John introduced me to the Newmarket Community Development Corporation (NCDC), which owns the mill property on behalf of the town, and we embarked on what would turn out to be a two year-long journey that ultimately did not bear fruit.

Our plans generated a considerable amount of excitement in the community and the region, with a fair amount of positive press. Here's an example from the Exeter Newsletter in June, 2004, shortly after we signed an option to purchase the property. Here's another from the Portsmouth Herald on the same topic. It's obvious that everyone was swept up in the possibilities at this point. We had over sixty thousand square feet of buildable space to work with, even after removing large portions of floor to make room for our two-story high brewing vessels. And because of the location, in the heart of Newmarket, our

plans evolved to encompass more public uses than we have originally envisioned, including not only a new brewing facility and a pub, but other uses that these buildings and their location seemed to call out for - a cafe, office and studio space, and even a small boutique hotel. Conceptually, it all made sense, with all the parts fitting together to form a whole.

But the hard work or making all those pieces fit into the larger scheme of things was just beginning. We had hired an architecture firm in Boston to help us do a feasibility study, and we commissioned some early engineering studies of the site. Over a two year span, I attended countless meetings with various parties who had an interest in our project, and was met with a consistently high level of enthusiasm. Yet, in retrospect, there were clear signs from the very outset that our plans to redevelop the Newmarket Mills were doomed, if only I had been able to recognize them.

Next post - things fall apart...

Smuttynose Brewing Builds its Dream House - Part 3 - Our Criteria

At the end of the last post, I said that I’d next write about our exploration of the mills in Newmarket. I lied.

It has occurred to me that now would be a good time to lay out the criteria that a new Smuttynose facility must meet. They are straightforward and relatively simple, but once you spell them out, you can see how some locations easily meet most of these requirements, but how few locations truly meet all of them.

In simple terms, a new Smuttynose brewery must meet five basic criteria:

1.) Space - we’ve been running out of room here on Heritage Avenue for a long time. The first post in this blog described the reasons for this. Starting with 12,500 square feet in 1994, we doubled our space when we took over our entire building in 2006. We’ve also constructed several additions to the outside of our building to house new tanks, and this summer we're raising the roof to accommodate still more tanks. Before the year is out, we’ll be forced to lease off-site warehouse space as well. You get the picture: the simple fact is we need a bigger facility.

2.) Energy efficiency - the building we currently occupy is appallingly inefficient, from an energy standpoint. But more than that, the way our brewery is engineered is also quite wasteful. Here’s a simple example: during the winter, even during the coldest weather, our fermentation tanks are cooled using a big, industrial chiller which throws off a considerable amount waste heat into the atmosphere, while at the same time we’re running space heaters indoors to warm up the building! We can design amazing efficiency into a new facility by taking advantage of simple synergies between the different parts of our process and the structure itself. “Waste” heat is no longer a waste product, but a way of preheating our brewing water. Interior spaces that need to be cooled can be done naturally in the wintertime. Daylight can be brought into interior spaces, reducing the need for electric lighting. Simple stuff, but difficult to implement in an existing facility, especially one where the landlord has no incentive or desire to participate.

Much ink has been spilled about our efforts to build a “green” facility and seek LEED certification. Frankly, the direction we’re taking is one we embarked on some time ago. Most of the choices we’re making are driven by common sense and a desire to be part of the solution, not part of the problem. Plus, in addition to reducing our footprint, we stand to save a good deal money operating our new brewery, which will help us become more competitive.

3.) Logistical efficiency - In our existing brewery, the inflow of raw materials & packaging and the outflow of finished products & waste material is not nearly as efficient as it should be. This really didn't matter much as long as we were producing a small amount of beer in a relatively small space, but what used to be mildly inconvenient has the potential to cripple us as we grow. A purpose-built facility designed with process flow in mind will improve our productivity in significant ways both large and small.

4.) Public Access - We want to build a brewery that is a visitor-friendly destination, a place where we can offer tours and share the craft of artisanal brewing with people who enjoy our beers. As longtime brewpub operator through our sister company, the Portsmouth Brewery, we have always wanted to operate an onsite restaurant & pub, as well. Put another way, the site has to have sex appeal. Some places have it; some don’t. And usually you know before you’ve even set foot out of your car. Unfortunately, the places with the most romance tend to fall short in other areas.

5.) Favorable Zoning - As we've learned though sad experience, few things get people’s undies knotted up like a good old-fashioned zoning dispute. Because of our project’s particular needs, we must choose a site that is zoned to permit both light manufacturing and commercial uses. And that, my friends, is easier said than done, as you will see when we talk about our experience trying to build a new brewery in our home town of Portsmouth. But that comes later.

In conclusion... Using these five criteria, it is easy to grade each of the locations we’ve considered over the years. Some had the potential for space and efficiency, with absolutely no charm. On the other hand, some sites were dripping with romance but failed on every other count. The old Frank Jones brewery buildings were a good example of this. Existing structures, especially old mills, do not lend themselves well to logistical efficiency and good process flow. And any city officials or politicians who say they can “fix” problematic zoning restrictions to fit your plans is blowing smoke up your skirt. It’s never that easy - run the other way!

Next time, we’ll travel back to Newmarket in 2003.

Smuttynose Brewing Builds its Dream House - Part 2 - Early Explorations

One afternoon is the summer of 1995 or '96, my ex-partner Paul Murphy and I drove across town from Heritage Avenue to Islington street and, armed with flashlights and screwdrivers, let ourselves into a vacant mill building with a key that had been lent to us by the building's owner, Joe Sawtelle. We had been warned to beware of rotten floorboards in the upper floors, so we trod very carefully through what appeared to be a 35,000 square foot pigeon coop. (And yes, there are baby pigeons - we saw lots of them that day.)

Although Smuttynose Brewing was still in its infancy - our production was just a few thousand barrels a year- and we did not distribute outside of New Hampshire - the microbrewery segment of the beer industry had experienced explosive growth from the mid-eighties through the mid-nineties, and we were already wondering if we'd need to seek out new digs before long. How Mr. Sawtelle knew that, I have no idea, but he contacted us and encouraged us to look over his building at 1001 Islington, which he said he'd sell for $500,000. But although it was fun to fantasize about building a new facility in an old mill located a stone's throw from downtown Portsmouth, common sense told us that the time was not right and we did not pursue the idea any further than a few self-guided tours through the musty old hulk of a building. Eric Chinburg purchased the building shortly thereafter and converted it into a very nice apartment complex.

Around the same time, we were contacted by the owner of the old Frank Jones brewery buildings, which were located a bit further down Islington Street. This complex of late 19th-century buildings had housed until recently Schultz's hot dog factory. The Schultzes where looking for potential new users for some or all of these buildings and thought we might fit into their plans to revitalize what they called Schultz's Brew Yard. Though the romance of relocating our brewery into the remnants of the historic Frank Jones Brewery was appealing, we did not give it serious consideration, given the magnitude of such a project. Ten years later, in 2005, we would take another look at the same buildings, which had recently been sold on auction and still remained vacant (and still are). But in the interim we had turned our focus to surviving the brutal shakeout that hit the craft beer business in the late nineties. In the meantime, finding a new home for Smuttynose Brewing would have to wait.

In the next post, I'll write about our exploration of the mills in Newmarket. As always, your comments and questions are welcome.

Smuttynose Brewing Builds its Dream House - Part 1 - Introduction

A couple of weeks ago, I received an email from a fellow who has been following the news of our proposed new brewery for quite some time. A resident of Hampton, our future home town, he was writing to ask about the status of the project and pointed out that we were doing ourselves and our fans a disservice by maintaining a sphinx-like silence on the topic. "I was hoping to see construction begin this spring but it looks like there is nothing going on at the site," he wrote. "Rumours are spreading in town that the project has been scrapped due to the economy. If it is hasn't been scrapped you need to get out ahead of things on a PR basis and let your fans know what is going on. The lack of any discussion of the project on your website only fuels the rumours further."

Yes, the writer is correct - a lot of people have been wondering what's going on with Smuttynose and our future home at Towle Farm in Hampton, and here, at last, is our response. The purpose of this blog, with apologies to Mr. Blandings , is to provide not only ongoing updates on our progress, but also some background and history of our brewery and its plans for expansion. The short answer is Yes, we are moving ahead with our plans to build a new facility at Towle Farm in Hampton. We plan to start construction in the first half of 2010 and will be moving in about a year later, in 2011. But getting to that part of the story is actually a rather long and involved tale, so I'll start by asking for your patience and indulgence in advance. I'll post here from time to time in hopes of presenting this in bite-sized pieces. Let's begin with a quick thumbnail sketch of our growth and expansion up till now.

In 1994, the year we opened for business, Smuttynose Brewing owned only the six 40-barrel tanks that we purchased with the assets of the bankrupt Frank Jones brewery. Although none

of these tanks was rated to hold pressure, a previous owner with little money and even less common sense had jury-rigged two of them to serve as pressured conditioning tanks. The brewery, with its small, twenty-barrel brewhouse, had a capacity of about 2,500 barrels a year. Within less than a year, we added four 50-barrel fermenters, purchased from Harpoon, which had outgrown them, two horizontal 100-barrel dairy tanks to be used for conditioning, and two vertical 180-barrel conditioning tanks that we acquired from a brewery in Buffalo which had closed its doors. This tripled our capacity, giving us the potential output of about 7,500 barrels a year. We grew into this capacity within four years.

By 2005, our tank inventory consisted of the original six 40-barrel, nine 50-barrel & one 20-barrel fermenter, plus four horizontal and two vertical conditioning tanks. In 2006, we outgrew microbrewery status when our annual output exceeded 15,000 barrels. That year we purchased our first 200-barrel fermenter, whose 23-foot height required us to build an addition attached to the existing building. We have since purchased two more 200-barrel fermenters, building a new outside addition each time. In early 2006, we leased the other half of our building, adding about 11,000 square feet of warehouse space to our existing 12,500 square feet. We filled that space in a matter of weeks with packaging, raw materials and finished product.

In 2001, we replaced our old 20-barrel brewhouse with a 50-barrel brewhouse purchased from a brewery in Miami that had gone out of business and have since upgraded that brewhouse substantially, adding a whirlpool as well as a new mill and grain handling system. We've replaced & expanded our refrigeration system, and replaced & upgraded virtually all of our bottling and kegging lines.

This year, 2009, we expect to produce about 23,000 barrels, or about 310,000 cases’ worth of beer. To accommodate this growth, we will add two more 200-barrel tanks, a fermenter and a new conditioning tank, early this summer. Since we no longer have room outside the building for more additions, we now must find space inside the building, raising the roof by ten feet and reinforcing the floor to carry the weight of the new tanks (50,000 pounds apiece, including beer). The only spot inside the building with enough space for these tanks is where our hospitality room is currently located, so visitors to Smuttynose this summer will be greeted with a much smaller place to gather for tours. This space will accommodate only one additional tank, another 200-barrel fermenter, which we expect to add next spring. After that, expanding this facility will require a whole lot of creativity.

In my next post, I'll write about some of the early sites we considered for a new facility. As always, your comments & questions are welcome.