CBB // We have just seen some pretty major breweries sell for what amounts to pennies on the dollar. In this kind of environment, it seems noteworthy that you are choosing to grow and to invest in more capacity for the future. What do you see that is driving that kind of confidence in the future for beer and in the future for Alvarado Street?
JCH // Every situation and every business is different. For us, this was a decision that I started thinking about in 2023, as we saw the writing on the wall—our capacity was going to be coming to an end. We had to decide in 2026 whether to sign another five-year lease, and that would have made it 15 years in this location. With aging equipment and no ability to grow, rising operating costs, rising rent, raw material costs… it just seemed like I was at a crossroads. I could take the one path, and we could just stay in our current place, not grow, operate the business accordingly, and then maybe after this next five-year [lease]—in the early 2030s—we could decide what we wanted to do, maybe wrap that side of the business up in the next five-year plan. Or we could go a different direction, and we could take Alvarado further, see what else we can do, invest in new equipment that would give us more capacity, search for a place that we could own rather than pay rent every month, and really build equity into the land and take things further.
Going to Germany was the deciding factor for me because it was a totally eye-opening experience to see how efficiently breweries were laid out there, how thoughtfully designed they were. In American craft beer, the owner and operator is very passionate. A lot of us are homebrewers—we’re just psyched on beer. That’s what makes it so amazing. But at the same time, we put passion ahead of logical or rational business-making decisions, and I’m totally guilty of that. So, this current facility was never built with expansion in mind. … A lot of us don’t design our brewery to accommodate future growth, and that’s what I wanted to capture with this new plan. I wanted to design it from the ground up. I wanted a 20-year plan. I wanted to have enough capacity to grow enough every year to offset inflation and rising costs and basically have a brewery I can hand down to my kids one day—a long time out, if that’s something they’re interested in. Keep it in the family and keep it fun.
I love what I do. I love brewing. I love process. I love the engineering behind it. I love recipes. I love the science, the chemistry, everything. I just turned 41. I’m not trying to go anywhere. I want this company to be around for the long term. That was just a critical decision that I had to arrive at, and I think that travel to Germany really put that into perspective to me. When I came home, I was fired up—that was late summer of 2024. I started looking, and here we are now, and we’re a couple of months away from finishing our building, which is kind of cool.
CBB // That’s incredible. I have seen exactly what you are describing. That typical European mindset toward brewery investment and operation is generally a multigenerational one, versus an American idea of building a business to sell. Those have very different impacts on the way that you invest in the future and think about that kind of growth. So, even culturally speaking, it sounds like that German experience didn’t just impact how you brew. It’s even impacting how you think about the business itself.
JCH // Yeah, almost more so. I mean, obviously the technical side of things, that was just the cherry on top because that’s just so much fun to soak myself in the knowledge. But like you said, multigenerational—they’ve been around for hundreds of years. Our American craft story is still fairly new compared to the history that you see in Europe and in the U.K.
CBB // That kind of longer-term thinking also suggests that you see the current environment and some of the challenging sales in the United States—and around the world, for that matter—as not a permanent condition and not a structural decline, but a scenario that will change within a timeframe that will be reasonable for the future of Alvarado Street.
JCH // I think that the health trends toward sobriety and drinking less are all trends that we can get behind as an industry, and us as a brand, Alvarado. I think that just creates more opportunity for us. I mean, not to hammer the Europe thing too hard, but one common theme throughout at least 30 breweries that I went to there: Every brewery has their own line of juices or sodas or nonalcoholic beer. They all have been building these alcohol-free beverage portfolios for a long time because they’ve seen alcohol per-capita decline for a long time, as well. So, they’re taking steps already to embrace those health trends. And I think we’re doing it as an industry now, and it’s a really good time to do that. There’s a lot of opportunity to innovate as brewers, to create new products that go along with health trends—especially with beer.
Beer is still the beverage of moderation that’s been around for thousands of years. I think it would be foolish to look at the last couple of years’ trends and assume that those are going to be permanent. People are going to continue to drink beer for the long term. Right now, our company’s 99 percent beer and probably 1 percent non. We have hop water, and that’s it. But over the next 20-year plan, I’d like to have at least 15 to 20 percent of our entire volume be in either nonalcoholic beer or … hop water, sodas, alcohol-free beverages. I think that’s a huge opportunity for us.
CBB // Tell me about this expansion. From what I understand, you are building a new building and own that property. You’ve also purchased a brew system at auction. You are building a blend of new and used to keep the overall expense in some manageable place. Talk to me about how you thought about capacity for the future and this blended strategy, to take advantage of current economics and opportunities in the market, but also to put yourself in a situation where the capital investment is manageable and reasonable for this next 10- or 20-year plan.
JCH // First of all, knowing that our rent was going to be increased where we currently are, I basically took that number and said, “Okay, we can probably take that much in debt, just right off the bat.” In terms of planning for the land acquisition, the building, the equipment acquisition—putting it all together—that was the start of my budget. … I’ve been trying to keep that perspective of trading rent for debt. We’ve never taken on debt, as a company. Before this started, we were completely debt-free, which I’ve always been proud of. To do a project like this, you have to have debt. But if it’s something that doesn’t exceed what our current monthly rent is, then it’s something manageable, and we can still operate the way we want to operate and not have to make rash decisions. … We want to be able to do this on our own terms.
But the used-equipment market, there’s tremendous opportunity—of course, you don’t know what you’re going to get. I’m in the throes of that right now. I’m discovering lots of little things that maybe weren’t apparent when I bought some of this equipment. … Yes, you can get things for pennies on the dollar. But at the same time, there’s quite a bit of cost putting everything back together, fixing things, replacing pumps, doing all the welding. It’s not free, by any means.
CBB // Have there been any lessons about specific things that you’ve learned in that process?
JCH // I’m not quite there yet since we haven’t installed any of the equipment. We did have an engineer-mechanic from BrauKon come out a couple of weeks ago, and he looked at the 50-barrel, four-vessel BrauKon system that we bought at auction. And yeah, he basically just described how many pipe welders and pipe fitters we’re going to need to have for X number of weeks, to get the project done. And that came as a bit of a shock, but at the same time, it’s necessary. It’s what needs to happen to build it all to spec.
CBB // Right. Save 80 percent off the price of new but then spend another 30 to 40 percent of that to put it all back together again.
JCH // We’ll see at the end of the project. I bet it’ll come down to maybe half the cost, which is still pretty significant. ... We’ll see where it ends up. But there’s just a lot of opportunities, especially with bigger systems. For 10-barrel and down, I feel like those systems, there’s probably a lot more demand. But when you get into those bigger systems, there’s not a lot of people doing what we’re doing. So, the timing in that regard has been pretty good for us.
CBB // Alvarado Street is very focused on the general region that you’re in—from Monterey, now Castroville, Salinas. You have taken a very rooted-in-place approach. But even with products like Monterey Beer, you have worked to—as people say in the industry—own your backyard, and to be the most important brand that you can for all the people around you. Talk to me about that, how important that piece of the strategy is. Certainly, you could have found a production facility, probably turnkey. And instead of doing that, you’ve decided to build in Monterey County. How much did that locality drive some of the decision-making? JCH // I probably could have saved a lot of money by doing that. But like you say, we really try to own our own backyard, as the cliche goes. We sell so much beer just in our little three-county area [where] we self-distribute. We sell almost three or four times as much in those three counties. Monterey County is less than half a million people. We have a wholesaler in the Bay Area, and we generally outsell them three or four to one—and they have a huge area. So, continuing to own the backyard is huge.
And building at Castroville, that’s a northern part of the county that we don’t have a lot of presence in, and it’s this cool little community ... and people just zoom right by it, millions of people a year. Strategically, it makes a lot of sense. Monterey County has just been really important to us. That said, I do think there’s growth opportunity for us in the Bay Area using the existing relationships that we have, direct with retailers and with our wholesaler there. But also, we’re not done building other locations. We have three restaurants, two of which are brewpubs, and that’s it. … We haven’t actually done any satellite tasting rooms yet.
We kind of live in two worlds. We have the world where we work with wholesalers, and we do distribute flagships to try to reach a greater number of people, try to get a wider audience to know who Alvarado is. And then we also heavily exist in the bleeding edge of craft, highly engaged with the hazy IPA fans, with the West Coast IPA fans, with people who love heavily fruited sours, with lager nerds. That’s where Alvarado shines, but we kind of live in these two worlds, and a lot of that happens to be in Monterey County. That’s a big part of our growth strategy. I don’t think we would be willing to partner with a big statewide wholesale plan and go big flagships. We’ll keep putting out Mai Tai, Monterey Beer, but now we have all this extra capacity to do more one-offs, more creative stuff, and live in that creative rotational sphere.
CBB // You bring up an interesting point here, and that is just how diverse your beer lineup is. The one differentiating factor there is that every one of those styles that you make, you have earned a reputation for being one of the best at making that style. So, it isn’t dabbling in a bunch of different things. It’s focusing deeply on making everything the absolute best that it can be. For many breweries, it’s incredibly difficult to hold a brand together that has all of those facets. How do you make sure that Alvarado Street stays focused on that kind of quality in each of these segments—in many cases, in segments that other brewers would view as mutually exclusive?
JCH // No, for sure. And I love seeing all these breweries focus on specific styles. I think that’s amazing. I just think we’ve had such [an] attention-deficit approach to brewing since we started. We are just huge, passionate beer nerds at the end of the day. I’m into all of those styles you mentioned. Every beer that we release, it has to elicit this visceral reaction. It has to have this, “Whoa, wow, what is that? This is amazing.” But not just in the liquid, but also in the artwork, in the copy, in the way it’s projected via media—it all has to pass that test. So, every single release, we all have to collectively be psyched about it.
Every single style, for me personally and a lot of our brewing team, we’re always tinkering [with] things. Every single batch, we’re [adjusting] one or two variables, just trying to make it better. That’s consistent with every [brewer] you talk to, and that would ring true with us. I will say with our lager program, we’ve been infusion brewers for the last 12 years—and there’s nothing wrong with infusion lagers. Some of your highest- rated beers that have scored in the magazine and competitively have been infusion lagers. This is going to be our first foray into decoction mashing and using an adjunct cereal-cooker vessel, to take our lager to the next level. So, I don’t feel like we’ve even really taken our lager to the next level yet.
We have such talent among our brewing staff—with each, a specific expertise in those styles—and collectively, when we all get together, we can just make sure that it ticks the box for us. That’s basically more or less our approach.
CBB // Even from the start [in 2014], including a restaurant—and then restaurants—in the business plan was unusual, given the time. You could have certainly launched just a brewery with a taproom. But it feels like that hospitality piece now underpins this whole idea of Alvarado Street.
JCH // The food is essential. Honestly, I’m so grateful that we’re in the restaurant business. We’ve always been in the restaurant business, so it’s not new to us now. Without food, you’re not going to be able to keep people as long. They’re not going to drink as much, and you’re not going to draw as much of a crowd. Now the whole community can come in and have a meal, have a beer together. It’s a part of our identity, the restaurant piece. And I will say any tasting room satellites that we may want to do in the future, we’re definitely going to have food [and] a kitchen. That’s definitely a part of our DNA.
CBB // For you as a business operator, what has been the biggest learning opportunity over the past five years? Where many people have gone down this passion road, as you mentioned—where homebrewers love beer [but are] may not be experienced and savvy business operators and have had to get up to speed quickly. You were no exception to that, but the way that you have gotten up to speed is commendable. What have been the biggest things that you’ve had to learn over the post-pandemic era, and how have those impacted how you plan now for the future?
JCH // Managing people is a really challenging component of any business. And I think we’ve tried to take an approach where we take care of our people really, really well. We’ve invested in our benefits, we’ve invested in our compensation, we’ve invested in our training, and it has cost a lot more money from a labor standpoint than I think a typical operator would see. But for us, we’re really striving to have people happy at work. It’s as simple as that. So, I would say getting to that point, to a decade-plus, we’re still trying to add to our benefits and trying to add perks and more PTO and everything we can—that’s been a nonstop work in progress, but it’s something we’ve been committed to. And we’ve reduced our turnover drastically. I have a lot of people who have been with us since the beginning, a lot of 12-year employees. Every year we get a new batch of 10-year employees, and that’s just so incredible.
That’s really what has driven a lot of our success—just getting really good people, good decision-makers, and good managers of people.