Beer minnows are bottling success

Beer minnows are bottling success

Trail-blazing Estonian microbrewer Põhjala has completed a two-phase €475,000 investment programme, doubling its production capacity in anticipation of a major export drive in 2015. Colin Donald reports 

Founded in 2011, Põhjala (pronounced peugh-ala, meaning “northern realm”) is a collaboration between four Estonian entrepreneurs and beer enthusiasts, along with a star young Scottish master brewer. The firm opened its 12 hectolitre (12x100 litre) brewhouse in Nõmme, Tallinn, in May.

Enn Parel, co-founder told BQ Baltic: “Demand is exceeding capacity by at least two times. We’re struggling to keep up with production, which is why we are doubling capacity this summer. We hope to break into export markets starting with Finland. We have three distributors competing for who gets to distribute us there.”

“There are other markets waiting for our product – Latvia, Lithuania, Spain, the UK, Poland. There’s quite a bit of exporting ahead but first we must expand production.”
“Right now we can’t produce enough, which is a good problem to have.”

The most recent funding round of €75,000 enabled the new cooling tanks, bigger premises and a new labelling line.

Equipped with nine 24 hec US-made fermentation vats and a US-made “bright beer” tank and bottling line, Põhjala produces five beers in the new brewhouse: an IPA (Indian pale ale) called Virmalised (Estonian for Aurora Borealis), a rye ale Rukkirääk (corncrake), a wheat ale Uus Maailm (New World) and its black IPA Pesakond, which is named after a popular Estonian comic strip.

Its newest brew, released in July, is a new porter called Must Kuld (black gold).

In addition, the firm intends later this year to reintroduce a previously developed Baltic Porter Öö (night), this time as an Imperial Stout rather than a Baltic porter. It also has a sixth beer, a double IPA, in the pipeline called Põhja Konn. This latest brew is named after a mythical Estonian frog-dragon. This 8.8% alcohol, hop-rich IPA will be marketed as a “monstrous double IPA”.

Põhjala first made its name prior to the opening of the new facility through “gypsy brewing”, the process whereby they manufacture under contract in another company’s production facilities. The model was pioneered by the Danish brewer Mikkeller in the late 2000s, which unlike Põhjala and many other “gypsy” start-ups has never gone on to establish a brewhouse of its own.

The gypsy model is seen as the best way for start-up brewers to establish a brand without major capital investment.

As well as Enn Parel, the company was founded by Peeter Keek and Gren Noormets, joined soon afterwards by Tiit Paananen, the former CEO of Skype Estonia.

However, crucial to their success in establishing the popular Põhjala taste was the recruitment of international talent, in the form of Christopher Pilkington (26) who the founders met while working at BrewDog’s brewery in Aberdeenshire, Scotland. After a trial visit in 2012 the team persuaded him to move to Estonia in 2013. He has since become a partner, along with art director Marke Saaremets.

Parel said: “All our commercial brews are Chris’s recipes. Concepts are developed either together or by someone in the team who has a great idea, and Chris devises the detailed calculations. He is the microbiologist brains behind the group. Great brewing is a combination of being a mathematician and an artist.”

The company expects to produce up to 90,000 litres of beer during 2014, but following the installation of the new equipment, plans are to increase this to 220,000 litres in 2015.

With the beer wholesaling at about €4.5 per litre Põhjala projects sales next year of about €1m.

“It’s a pretty small amount but craft brewing
is about being small. More important is that we can keep a good margin on this when we keep a close eye on costs, so it’s quite profitable, something like a 15-20% profit margin”.

Põhjala beers are currently available in Estonian retail off-trade outlets Selver, Kaubamaja and  Stockmann, as well as more than 50 smaller specialised beer shops and bars.
The capacity increase following the brewery’s opening will also advance the firm’s immediate plans to expand into Finland, where, Parel says “the Finns are eagerly awaiting our beers.”

Põhala, which – due to laws on support for alcohol producers – does not receive support from Estonian government agencies, received the investment from its four founding partners, supplemented by a loan from LHV Bank. Parel said that the company was content that the firm’s business plan was entirely market-dependent, although he conceded that they would not turn down government support in the shape of regional assistance in future, in support of their longer term plans, which include building a much larger brewery outside the capital within the next three to four years.