Brew ha-ha

 In 2014-12

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By Edward Martin

Out back where summer visitors in lawn chairs listened to live music with brews in hand, fall fades the last of the color from the mountains of east Asheville. Inside, where stainless-steel tanks dwarf workers, conveyor lines shuttle brown cartons marked Gaelic Ale and shrink-wrapped pallets of beer await shipping, the office phones at Highland Brewing Co. start ringing this time of year. “When will the Cold Mountain Winter Ale be released?” the eager ask. That makes Oscar Wong proud. At 74, he’s a man of dry wit who laughs easily and often. Favorite saying? “In wine there is wisdom, in beer there is strength. In water there is bacteria.” But beer is serious business here.

In a cubicle the size of a closet, a staffer sips, take notes, then passes a brew through a portal to a counterpart on the other side. This is a blind testing. “Is it the right color, the right aroma? Some should be very pale, some amber, some brown, some black,” Eric Jorgenson, quality assurance manager, says. “The whole idea is consistency.” In a lab down a hallway, a device Wong describes as “about the size of two 12-packs stacked on each other” samples bottles pulled at random from production for carbon dioxide and oxygen content, alcohol level and other factors. “That one was a shocker,” he says of the machine. “It cost us about $65,000.” Amid a mad-scientist setting of tanks and other apparatuses, brewmaster John Lyda stirs a steaming kettle fired by a gas burner, experimenting with a new recipe. “We call this the skunk works,” Wong says. “Twenty beers for 20 years,” Lyda announces, referring to the varieties they’ve introduced.

Since December 1994, Wong and crew have built Highland into North Carolina’s largest homegrown brewer and the third-largest craft brewery in the Southeast. By year-end, its 44 full-time and 22 part-time employees — he added a dozen in the last year — will have made 40,000 barrels of beer for distribution in nine states. Revenue should top $10 million. But Highland has done more than wet a lot of whistles, which is why it’s Business North Carolina’s Small Business of the Year. “Oscar Wong started a whole new industry in western North Carolina,” says N.C. Secretary of Commerce Sharon Decker, one of the judges in the annual competition sponsored by Winston-Salem-based BB&T Corp. The other judges were Dr. Roy Archambault, CEO of Wilmington-based Dry Corp LLC, last year’s winner, and BNC Publisher Ben Kinney.

Asheville has been voted Beer City USA four times since 2009 in online polling by a national craft-beer organization. Cable network CNN named it one of the nation’s eight best cities for beer last year. “A lot of people give credit to Oscar and Highland as the real trailblazers,” says Margo Metzger, executive director of the North Carolina Craft Brewers Guild, a Raleigh-based trade association. “Since 2006, we’ve gone from 27 to about 120 craft breweries statewide, and I know of more than 40 others in the planning stages.”

Forty-seven are in AdvantageWest Economic Development Group’s mountainous region, 23 counties stretching from South Carolina to the Virginia state line. Twenty are in Asheville. Highland’s success has spawned local competitors such as Wicked Weed Brewing LLC, which is undergoing a $5 million expansion with capacity to produce 50,000 barrels a year, more than Highland’s present output. It’s also a magnet for the Walmarts of craft beer. Chico, Calif.-based Sierra Nevada Brewing Co., the nation’s second-largest craft brewer, recently finished a $125 million, 300,000-barrel-a-year brewery in Mills River, south of Asheville. The third largest, Fort Collins, Colo.-based New Belgium Brewing Co., is spending $175 million to build a 400,000-barrel plant in west Asheville and a distribution center in Enka. Longmont, Colo.-based Oskar Blues Brewing Co. opened a brewery in Brevard in 2012 that shipped nearly 50,000 barrels its first year.

Highland is making its own $5 million-plus expansion, more quickly than Wong expected. “I figured we’d eventually become about 50% bigger than we are today, then kind of level off. Growth takes cash. I would have been comfortable if we’d gotten to 60,000, maybe 80,000 barrels a year, but we can’t be viable and stay at that level. … We’re like the dairy farmer who says, ‘If I only had another 50 cows.’ Then he finds he has to buy more machinery, more land, more feed. We’re kind of in that mode at the moment because of the new breweries coming to town.”

Business North Carolina has told his tale before (cover story, June 2010) — how he was born in Jamaica to Chinese immigrants, dabbled in home brewing while earning undergraduate and graduate degrees in civil and structural engineering from Notre Dame University and started a Charlotte-based company to design, build and operate nuclear-waste processing units for utilities. He later refocused on systems for low-level radioactive waste before selling the business in 1986. Footloose at 46, Wong dabbled in possible second careers before settling on opening a microbrewery. He picked Asheville mostly for its pure water, good transportation and clean environment.

Wong set up shop in the basement of a downtown bar. “We had a total of about a quarter of a million dollars at startup. We put in about $120,000, and then we borrowed about $120,000.” It was about four years before Highland turned a profit. “It was too important for us to maintain quality and pay the bills. Of course, we depleted a fair amount of my retirement and [daughter] Leah’s inheritance — not to mention a lot of credibility with my wife.” He laughs. “I’m a conservative businessman. Of course, she thinks I’m wildly extravagant.”

In 1998, he was forced to farm out some of his brewing to a Maryland company. “I viewed that as a necessary evil. We were locked in a downtown location, and I was told by distributors if we didn’t ramp up production, they’d have to stop promoting our brand.” He settled on Highland’s current site, first leasing, then buying it. “The most dangerous point for a small business can be in making that first move, not when you start. When you have a move that’s imposed on you like we did, it can’t be incremental. It has to be big enough to justify making the investment, and it’s difficult to improve and grow your revenue fast enough.” Relocating cost about $2.2 million, he estimates. “I was asking for about $2 million for our transfer from downtown to the new location. My banking contact brought his supervisor over from Charlotte, who said, ‘That’s well and good, but when do you think you’ll be using $5 million or $6 million?’ The message was, we were on the really, really low end of their radar and I’d better find someone a little more in my weight class.” He switched to BB&T.

The move was completed in fall 2006. Other changes helped, too. When Highland opened, “we had letters to the editor about us doing the devil’s work,” Wong recalls. Since then, Asheville has grown into a city with an oh-so-hip cachet, catching the attention of The Rise of the Creative Class author Richard Florida and attracting the kind of people willing to pay a third more for a six-pack of craft brew than for Bud or Miller. The state also relaxed its 6% limit on the alcohol level of beer, which had strangled introducing stronger types such as imperial stout, intended for savoring rather than chugging.

In 2010, amid the craft-beer boom, Highland opened its tasting room and, a year later, began offering food, live music and samples from its skunk works. Asheville was becoming the craft-brewing center of the Southeast, the Napa Valley of beer. Highland was the first, but it has had plenty of company. Maybe too much. “Now we’ve got more craft breweries per capita than any city in the U.S.,” says Dodie Stephens, spokeswoman for Buncombe County Tourism Development Authority.

Fewer than 20 miles south, Sierra Nevada’s brewery looms, as Leah Wong Ashburn describes it, “like Disneyland.” It’s massive, copper-hued — an unabashed come-on to beer fans. This is not the craft brewing Oscar Wong had in mind when Highland hopped its first batch under Barley’s Taproom. In a segment of the beer business that traditionally valued size — small, that is — Highland now has to grow to thrive. Directing that growth will be his daughter and anointed successor. “I think we’ll need to at least cross the 100,000-barrel level to be in the game,” he says. “The breweries that are smaller than we are are nipping at our heels, and the ones larger are sitting on our heads. Leah can take it to the next level.”

“I’ve been here officially about three years, unofficially about 20 years,” Ashburn, 44, says. A journalism graduate of UNC Chapel Hill, she worked in education and sales, including a stint at a Charlotte publisher of school yearbooks, before joining the business. Her experience with beer, she admits, “was mainly on the drinking side.” But as her father prepares to step aside when she becomes president in January — he’ll remain chairman — she has something that might be more valuable than brewing skills. That’s a taste for marketing. “The entrance of the national breweries has upped our game,” she says. “Dad thought we might be able to relax for a while, but we can’t.”

In a breezy portion of its brick building, recently stripped to its structural-steel bones, crews smooth freshly poured concrete floors. Daylight shows through roof beams. “We’ll reinforce them, but they’re already strong enough to carry the rooftop bar,” Wong says. The expansion calls for additional tanks, packaging equipment and other necessities. It’s being carried out by Ashburn Builders Inc., the construction company his son-in-law owns. “We have under ownership about 180,000 square feet of building,” Wong says. “We plan to be using just over half that by the end of this year and leasing out the rest.” Highland owns the land, too, about 40 acres. In late October, the county tourism authority awarded the company an $850,000 grant, which will go toward building the rooftop bar, production and entertainment space and outdoor bathrooms. “Dad likes to say it’s better to improve a hundred things 1% than one thing 100%,” Ashburn says.

Highland’s seven-year plan is to boost production 15% annually, topping out at about 100,000 barrels, nowhere near Sierra Nevada’s or New Belgium’s output. But it has an asset they don’t. Its roots are here, and they run deep. “They’ve got fervent followers,” Stephens says. And even though competition is growing, so is the market. Craft-beer sales nationwide this year were up about 20% through early fall, the Boulder, Colo.-based Brewers Association says. Highland’s sales have increased that much annually over the past five years. Last year, craft beer accounted for $14.3 billion of the $100 billion of beer sales in the U.S. “Craft beer seems hot right now, but it’s still only 8% of the [barrels sold] in the country,” Metzger says. “You’ll see 20% by 2020, and it could go to 25%.”

Family is important to Wong, and so is the fact his will continue to run the business. “My father and mother raised a family of five kids in a grocery store about twice the size of this room,” he says, sitting in a small office. Later that day, walking down a dim corridor, he stops short. “I was hoping and hoping Leah would come on board,” he says quietly. “We’d talked about it for quite a while. If I didn’t think she would do a great job, we’d do something else, because it wouldn’t be fair to the company or our employees. But I have absolutely no doubt. Now, that’s the American dream.” This time, he doesn’t laugh.

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