Hitting the bottle: brewing a growth plan

The Russian River Brewing Company is hitting the bottle.

The Santa Rosa company is expanding beyond its downtown brew pub and plans to start bottling nearly half of its beer production.

The locally owned outfit has opened a new production facility in south Santa Rosa with the potential to more than quadruple its beer output. The first batch was brewed last month.

"It kind of feels surreal to see this operational," said co-owner and brewmaster Vinnie Cilurzo, who started work on the new brew house in January.

Production capacity has jumped from about 3,300 barrels a year to 15,000 barrels annually. The plan is to produce about 10,000 barrels in the first year, equivalent to about 320,000 gallons, Cilurzo said.

For comparison, Lagunitas' new facility in Petaluma can crank out 55,000 barrels a year.

The big difference for the Russian River brewery will be the expansion of its bottling and distribution. The brew house on Fourth Street sells some bottled beer, but that only accounts for 2 percent of its production. With the new facility, the plan is to bottle about 40 percent of production.

"It's something completely different for us," said co-owner Natalie Cilurzo, who is married to Vinnie.

Distribution will expand significantly from a handful of places in the Bay Area and Southern California to a much larger swath of the state, including Sacramento. Beer will also be shipped to Seattle, Portland and Denver. The brewery has found distributors for each of those cities, another for Southern California and will continue to self-distribute in Northern California.

"The focus will be in and around those markets," Natalie Cilurzo said. "We decided to keep it all on the West Coast."

The Russian River brewery shouldn't have any problem finding fans, said Paul Gatza, director of the Brewers Association in Boulder, Colo., which represents micro-brewers.

"It's not like Vinnie is an unknown commodity. His reputation precedes him," Gatza said. "He is seen as an innovator in the brewing world.

Cilurzo is credited with pioneering the double India pale ale, a hoppy style of beer. It is one of the fastest growing beers in terms of popularity, and has an especially large fan base on the West Coast. Cilurzo's double IPA is called Pliny the Elder -- named after the ancient Roman historian -- and will be bottled. "It is a very well known beer," Gatza said.

The Brewers Association bestowed its highest honor on Cilurzo this year, awarding him the Russell Schehrer Award for Innovation in Brewing.

Cilurzo and his wife, Natalie, opened the brew pub in 2004. They and a group of investors bought the beer label from Korbel, where Vinnie Cilurzo had been head beer maker for six years. Korbel had decided to close its beer-making facility in the Russian River valley.

The Cilurzos initially focused on the brew pub. It is a common strategy because it gives brewers a constant stream of cash that can be used to expand production, Gatza said.

"We've seen more and more brew pubs expanding into having greater bottling production," Gatza said. "The brew pub provides the cash flow to make that transition, and you've got a reputation already built up."

Still, the cost of beer production is skyrocketing, creating tough times for beer producers. The cost of hops has increased nearly five-fold since last year.

While major manufacturers such as Coors and Budweiser use much less hops per gallon, beers such India pale ales require larger quantities to capture their trademark biting flavor. And a double IPA literally requires double the hops of an IPA.

Yet Gatza points to the double digit growth of microbrew sales during the past few years as a signal of the sector's continuing strength. Craft brewers account for about $6 billion of the $97 billion of beer sold every year in the United States.

"People are looking for special occasions and special events to really pair craft beers with," Gatza said. "Russian River is going to be hitting a niche on that higher end that is exactly where the consumer is heading right now."

Conversely, major brewers have started seeing a shift to their more budget line of beers. Natalie Cilurzo said they're won't be doing more shifting for a while.

"This expansion was a lot of work," she said. "I don't want to do this again anytime soon."

You can reach Staff Writer Nathan Halverson at 521-5494 or nathan.halverson@pressdemocrat.com.