Highland keeps its head

 In 2010-06

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Highland keeps its head

Favoring cold logic over what’s cool, Oscar Wong became the beer baron of one of America’s hottest brewing towns.
By Tim Gray


That Oscar P. Wong isn’t cool might well be among the most salient assets he brings to Highland Brewing Co. A 69-year-old engineer, the Asheville brewery’s owner and president spent much of his life in what many of his customers might consider a humdrum industry — electric utilities. His particular expertise was about as hip as an aging Buick: analyzing the safety of power plants and disposing of low-level radioactive waste. He wears the sort of ankle-high zip-up boots last regularly seen when Elvis played Vegas. When Highland’s young workers start blasting reggae or heavy metal, drowning out conversation, he shakes his head and gives a grandfatherly shrug. This is not a guy who does air guitar.

Yet the business he chose for his second career thrives on cool. Its leading practitioners — and often their businesses — strive to show how hip they are. Sam Calagione, founder of Dogfish Head Craft Brewery in Rehoboth Beach, Del., boasts of his surfing and brews concoctions that are as much dares as drinks. He has partnered with a University of Pennsylvania archeologist to recreate an ancient Honduran chocolate-based beverage and a 9th-century Finnish beer flavored with juniper berries and black tea. Then there’s Garrett Oliver, brewmaster at Brooklyn Brewery in New York. He writes op-ed pieces for The New York Times and has appeared on such cable shows as Emeril Live and Queer Eye for the Straight Guy. Both their breweries feature pubs where pilgrims can worship at the taps. It’s routine for a craft brewery to have a home church, serving up its creations alongside cruelty-free burgers and locally grown greens. If the operation is wind-powered, like New Belgium Brewing in Fort Collins, Colo., so much the better. Sponsoring a big-time bike race brings even more cachet; the link between cycling and craft brews is nearly as sturdy as that between banking and golf. Both appeal to 20-to-40-something college-educated men. Harpoon Brewery in Boston stages a 150-mile ride to Windsor, Vt., each summer.

For 15 years, Wong did none of those things. He shuns splashy marketing, figuring a tasty, consistent product mostly sells itself. He has expanded only when confident that demand will cover the increased cost. He approaches brewing like the engineer he is, as a series of problems to be analyzed and solved. But if not cool, he has been cunning — making financially conservative calls that have enabled sales to grow to about $5 million last year. Highland is the oldest craft brewer in the state dedicated solely to production of beer. (Weeping Radish in Currituck County and Red Oak in Whitsett are older but began as brew pubs.) It’s also North Carolina’s largest, Wong says, based on total volume. In the Southeast, only Abita in Louisiana and Sweetwater in Georgia are bigger.

Craft brewing sprang up in reaction to the bland sameness of American lagers like Bud, Miller and Coors, crisp, smooth and with only a hint of hops. Craft brewers offer a variety of styles and flavors, and Highland’s include a stout, a porter, an Oktoberfest, a wheat beer and a variety of other ales. “Craft brewing” is often used synonymously with microbrewing — making beer in far-smaller quantities than global conglomerates such as Anheuser-Busch InBev and SAB Miller. But as microbrewers went mainstream and began distributing nationally, craft brewing got co-opted. Boston Beer Co., maker of Sam Adams, now brews 2 million barrels — 62 million gallons — a year. Megabrewers have horned in, too, offering faux micros such as Molson Coors’ Blue Moon and Anheuser-Busch InBev’s Shock Top Belgian White.

The quest for cool, along with lust for expansion, has consigned many North Carolina craft breweries to failure. The business can slurp up money like a drunk swilling a tallboy, leaving investors little other than a hangover. Among the casualties were Johnson Beer in Charlotte, Loggerhead in Greensboro, Cottonwood in Boone and Cross Creek in Fayetteville. A site in Raleigh — lately it’s home to Big Boss Brewing — has housed four different outfits. After another wave of startups, the state has more than 20 production breweries and 20 brew pubs. So at a time Wong should be toasting his good fortune, he’s puzzling over a new problem: more competition than ever.

Western North Carolina has become a brewing hot spot, with 10 beer makers in and around Asheville alone. Tony Kiss, beer columnist for the Asheville Citizen-Times, says the city has more breweries per capita of any place in the country. That benefits everybody, he insists, including Highland. Craft brewers aim to swipe share from Bud and Miller, he says, not each other, and by expanding the market — craft beer accounts for only about 4% of beer sales nationwide — they educate palates and create converts. Maybe that’s true, but so is this: When a customer bellies up to an Asheville bar and orders a French Broad Kölsch or a Craggie Swannanoa Sunset, he — and increasingly she — is not drinking Highland’s Cold Mountain Winter Ale or its Kashmir IPA.

Highland was, as the company likes to point out, with a wink and a nod to the mountains’ moonshining heritage, the first legal brewery in western North Carolina since Prohibition. When it rolled out its first barrel in December 1994, Heineken and Moosehead qualified as exotics. So, despite his demeanor, might the man who started it.

He was born in Jamaica to Chinese immigrants. “My father had a grocery store that was no bigger than this room,” he says, sitting in his office at Highland’s plant on the eastern outskirts of Asheville. His dad was intent that his children attend college, and Wong came to the United States for his bachelor’s and master’s, both in engineering, at Notre Dame. He then jumped from job to job and city to city, taking on larger managerial roles. By the time he was in his mid-30s, he was executive vice president and supervising engineer at a 150-person outfit specializing in nuclear-plant safety. “I wasn’t the smartest engineer,” he says. “It was a matter of understanding how to deal with people. My strengths were communicating and motivating — making sure the work was done right.” He sums up his approach in three words: quality, integrity and respect. He prefers not to micromanage. “If people follow those principles, they’ll make the right decision.” At Highland, all staffers, down to the most recent hire, have the right to stop the production line if they notice a problem.

By his late 30s, Wong had his own consultancy. After nuclear construction began to ebb — no plants were started after the Three Mile Island accident in 1979 — he transitioned the company into processing of low-level nuclear waste. He sold the business in 1986 but stayed on several years as part of a noncompete agreement. In the early ’90s, he was living in Charlotte, one of six cities where his company had offices. He was dabbling in computers, thinking that might be his next field, when a mutual friend introduced him to John McDermott, who was working at Dilworth Brewery and seeking investors to start his own brewery. Wong had home-brewed in grad school, cadging a recipe from a college custodian and, over the years, had hosted beer dinners and blind tastings for friends, pitting domestic brews against the best European offerings he could find.

A partnership seemed to make sense. McDermott knew brewing — he had won awards at Dilworth — and Wong had cash and industrial know-how. They picked Asheville because it was becoming a redoubt of affluent transplants willing to pay up for fine food and drink. They bought metal tanks from a defunct dairy for brewing vats and leased the 4,000-square-foot basement of Barleys Taproom, a downtown bar. Two years later, they expanded into a basement next door. From the beginning, they sold their beer through distributors rather than handle deliveries themselves or deal with the headache of running a brew pub. “Everybody thought we were running beer upstairs to Barleys in a dumbwaiter. But we kegged it and sent it to the distributor, and Barleys bought it from them. I didn’t want to mess with distribution. I wanted to concentrate on making good beer. I didn’t want to be saddled with calls on a Friday night saying, ‘I’m out of beer.’ I wanted us to focus on the product. If we didn’t get that right, the rest was moot.”

That led to McDermott’s departure in 1997 in a disagreement over strategic direction. A creative sort, he was determined to expand both the company and its offerings, Wong says. “He wanted to be in Atlanta within a year. And it was hard for him to concentrate on making the same beer over and over. It was hard for him to see that consistency was the key.” Wong believed they needed to master their basic brew — Gaelic Ale — before trying new ones, so he bought him out. Now a furniture designer in Asheville, McDermott declined to be interviewed.

Wong didn’t have to hire a new brewmaster. John Lyda, a local boy who had dreamed of starting a cinema-and-drafthouse, had begged for a job shortly after Highland opened. “I just kept beating on the door until they hired me.” He had started out with a home-brewing kit bought at a rummage sale and Charlie Papazian’s The Complete Joy of Home Brewing — the 1984 book that’s the bible of hobbyists — but by McDermott’s departure had formalized his training at Siebel Institute of Technology, a famous brewing school in Chicago. Dogfish founder Calagione credits Wong for having the good sense to hang on to him. “You don’t keep a great brewer like John there for 15 years unless you’re committed to making good beers.”

Highland’s early years combined perfecting the recipes with low-key evangelizing. “I spent a lot of time at night talking to bar owners,” Wong says. “We had a small keg that we kept in a [portable] cooler. I don’t know how legal that was. We’d go around and say, ‘We’ve got a beer we want you to try.’” Initially, they sold it only in kegs. Barleys’ basement had no room for an automated bottling line. Besides, the machinery would have brought risky complexities. “Some of our competitors right away jumped into bottling. We held out because the margins are lower. Much larger fixed costs. People don’t realize that the difficulty with a brewery ends up being the packaging, not the brewing. With packaging, you have thousands of moving parts. One of those parts gets a little bacteria, and you can mess up thousands of bottles of perfectly good beer.”

As folks in Asheville became fond of Highland’s beer and asked for it in bottles, Wong and Lyda compromised: They used 22-ounce “bombers,” which could be filled by hand. It wasn’t until 1998, after years of distributor demand, that Highland went to 12-ounce bottles in six-pack cartons. Ever cautious, Wong decided that they would not only sanitize their bottles, which is essential, but also pasteurize the beer after bottling — not considered cool by beer geeks, who insist the practice degrades flavor. Large-scale breweries pasteurize beer for safety and shelf life. That might not have been hip, but the engineer wasn’t taking chances. “We put the bottles in the big tank and took the temperature up and down,” Wong says. “We lost some bottles that way, but we had to be careful.”

By 2000, Gaelic was all the rage in its hometown, outselling Budweiser on draft. By then, Highland had begun distributing elsewhere in the Carolinas, though it initially faltered in Charlotte, tiptoeing in and then pulling out. “We couldn’t keep up with the demand. The distributor was complaining, saying, ‘Either ramp it up or get out of the market till you can make enough.’” Good advice, Wong decided. Then and now, Highland doesn’t want to be everywhere. Like many craft brewers, it’s the hop-head equivalent of Whole Foods, targeting affluent urban markets. A university connection helps. Overeducated types don’t just want good beer. They want a good story — organic ingredients, charismatic brewers and labels tying their beverages to Belgian monks or Bavarian castles. An erudite or clever name is a plus. A few examples: Dogfish’s Raison D’Etre; North Coast’s Brother Thelonious, a Trappist-style dubbel; and Wasatch’s Polygamy Porter (“Why have just one?”). The industry’s slogan might as well be: “Good to drink; makes you think.” Like most microbrews, a six-pack of Highland retails in the $8-$10 range, compared with about $6 for Bud.

Craft brewers make a fetish of freshness — it’s an article of faith that the fresher a beer is, the better it tastes. Highland is no different and offers generous terms to distributors to ensure this. “If a distributor gets beer from us, within 30 days we’ll take it back [with full refund] because we can sell it here in Asheville,” Wong explains. “From 31 to 60 days, we’ll give them half of the money if they send it back. After 60, it’s our call about taking it back, but there’s no refund. We want the beer to be fresh, so you order just enough beer that you’ll sell out in 30 days. We’re not going to load them up with excess inventory.”

“We’re focused in seven Southeastern states,” Lyda says. “It’s quality control — the farther away you go, the less control you have.” Beer degrades from heat during shipping and storage: “If we stay close, we can know that the kegs are kept cold. At our local distributor, all of the bottles are staying in the cooler as well.” In contrast, New Belgium, founded just a few years before Highland, sells its Fat Tire Amber Ale across most of the country. Julie Johnson, editor of All About Beer magazine in Durham, says Highland’s strategy is as viable as New Belgium’s. “In craft brewing, you can go wide — taking a funky beer and going across the country — or you can stay at home and go deep,” focusing on building market share nearby. “Oscar has gone deep.”

“We broke even after four years of funding the brewery,” Wong recalls, “and my wife was so concerned about us burning through our retirement nest egg that she was unable to sleep at night. She prevailed upon me to allow several friends to invest.” In addition to four outside partners, his daughter and Lyda have equity in Highland. Wong remains majority owner.

Bottling continued to be a bottleneck to growth, both breadth and depth. In early 2002, Highland put in a used 28-head system but needed — and didn’t have space for — a fully mechanized bottling line. With capacity maxed out at 6,500 barrels a year, the brewery would have to move, which Wong knew was risky: “I wanted to be sure that we had the market before we expanded.” So he figured out a way to hedge his risk. In early 2005, he contracted with a larger company — since sold and renamed Wild Goose Brewery — in Frederick, Md., to temporarily produce about two-thirds of Highland’s bottled beer. Lyda cringed. “Some of the beer wasn’t up to our standards,” he admits. But he concedes that the tight basement quarters left them little choice. On top of that, the warehouse was 11 miles away, requiring lots of motoring back and forth. For most of the next two years, much of Asheville’s hometown favorite was brewed closer to Baltimore than to Biltmore. “The last shipment to our brewery from Maryland was January 2007,” Wong says.

By that time, Highland had a new home, 28,800 square feet of an 180,000-square-foot building in the former Blue Ridge Motion Pictures studio. Atop a low ridge off a dead-end industrial road near Interstate 40, the studio’s guardhouse stands empty, and no sign marks the brewery’s presence. Only a Highland truck, parked on the far side of the pot-holed parking lot, gives it away. Inside, the place is utilitarian, filled with stacks of palletized brown bottles and gleaming brewing and bottling equipment. If not for the bottles and the yeasty smell, it could be mistaken for a small factory making just about anything. The brewery moved there in late 2006.

“When we walked in here, we broke even the first year,” Wong says. “Most breweries run into their biggest problems with their first move, not when they start out. If you don’t have the market share [to support a larger operation], it takes you 18 to 24 months to get there. And you’re under water the whole time.” In its new space, the brewery can produce 25,000 barrels a year. “We have since leased another 20,000 square feet and have a proposal to buy our portion of the building along with adjacent land.”

It’s a Monday morning late last year, and Wong and most of his staff of 18 are sitting in a mismatched set of chairs — rollers, folding, whatever they could grab — on the floor of the plant. The group is mainly 20- and 30-something guys, uniformed in hoodies, Carhartt or Levi’s jeans and boots. Most sport beards or several days of growth. They look like roadies for a rock band. Wong, by contrast, wears sharply creased khakis and a pressed black button-down-collar shirt with Highland’s logo stitched on the chest. Grant DaSantos is recounting the success of last week’s tasting and laying out plans for future ones. For years, Highland didn’t have an in-house pub for tastings, unlike so many of its cooler competitors. It invited its fans into the brewery, where employees drew pints for them from the taps along one wall. DaSantos would bring in local bands and food vendors. (This spring, Wong relented to the entreaties of the staff and agreed to build a proper tasting room. It should open in July).

“The tasting was a success on Friday,” DaSantos says. “We made $1,200. It was our regular crowd.” He begins to outline plans for Highland’s 15th anniversary event. “I’ve got a really good funk band booked for that day.” (Scheduled for Dec. 18, it was postponed by a winter storm to Jan. 22.) A co-worker wants to know if they can upgrade the food from the hot dogs that they have been serving: “Maybe we could get Barleys to do it.” A discussion ensues over the merits of hot dogs — the vendor is a friendly guy everyone likes — versus something more in keeping with Highland’s upscale brews. Another staffer asks if they’ll be able to serve Cold Mountain, a spiced seasonal offering that’s popular in Asheville, at future tastings. After listening a few minutes to the guys riff and debate, Wong signals with his hand that he’s taking the floor. “A lot of details need to be addressed with regard to the tastings — like cleanup,” he says. Atop a nearby table lie three ping-pong paddles and a half-drunk pint glass of beer, presumably leftovers from last Friday. He tells the group that he doesn’t foresee Cold Mountain being served at the tastings, at least not this season. There simply isn’t enough.

A short while later, after the staff meeting breaks up, one of the attendees rues Wong’s decision about Cold Mountain — out of earshot of the boss. “The tasting room is our best marketing tool. When you get people inside and you’re able to share the passion that we have, you get customers for life. Some of the smaller breweries have really established personal relationships with their customers. These days, people are looking for that kind of connection.” Asked later about the criticism, Wong makes it clear that his willingness to coddle the in-crowd only goes so far. “I’d prefer that we not sell Cold Mountain here. I don’t want to be selling the beer here when our retailers run out. It’s long-term versus short-term thinking.”

Or to put it another way: Oscar Wong versus the cool guys.

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