Written by Jennifer Fitzgerald | Photos by Anthony Harden
With a major expansion currently under way to meet the steadily-growing demand for their artisan product, let’s pay another visit to Asheville’s Riverbend Malt House.
Editor’s Note: In the March 2016 issue of Capital at Play we published “Malt on a Mission,” a profile of Brent Manning and Brian Simpson, who had started Riverbend Malt House in 2010 as the only craft malt manufacturer in the Southeast—and at a time when most craft brewers were sourcing their malt from Canada, the Pacific Northwest, or Europe. Located on Pond Road near the Western Carolina Farmers Market in West Asheville, Riverbend had rapidly grown to the point that the two owners were already mulling over a significant expansion far sooner than they had anticipated. For the first in what we intend on being an ongoing series devoted to “updating the files,” so to speak, on past Capital at Play profilees, we decided to revisit our original Riverbend story, written by Jennifer Fitzgerald, and report on how things stand now, in 2018, with the successful company.*****
Brent Manning and Brian Simpson took a leap of faith when they started their business, Riverbend Malt House, in October of 2010.
Their goal had always been to produce locally farmed artisan malts for local brewers, while lessening the impact on the earth. But they had much to learn about the craft and how to connect the local farmer and brewer. “We knew that if we didn’t take a risk, because of the nature of the growing season, it was going to be 18 months before we could work with North Carolina grain,” Brent explained, speaking to Capital at Play in 2016. “As luck would have it, by the spring of 2011, we had a strong business plan and we signed a lease on 2000 square feet.”
Added Brian, “This whole malt renaissance has re-connected brewers to the agriculture side of their business. Until we came into play, brewers just made phone calls and the malt showed up at their door. They didn’t know where it came from. We are in a position now with craft beer that there are unique opportunities showing up all over the place and we just have to be one of them. Getting good grain and getting our farmers into our program has been an interesting side to the business that we didn’t know anything about.”
Brent and Brian would go straight to the farmers and negotiate a contract price prior to planting in October. They also did a lot of extra work to make sure the farmers had good seed to start with and good growing conditions, and their farmers found that the grain worked well with crop rotation in putting nutrients back into the soil.
And for their brewers, Riverbend could bring a unique flavor profile. Riverbend’s process was almost like craft brewing—they were just craft malting. They brought little nuances to the process to contribute to the flavor of their malt, similar to the brew process. Plus, with the malt locally produced and regionally sourced, it offered the brewers an opportunity to cut their own unique footprints, the high quality of the malt providing them a chance to use a nice ingredient in the beer, and also promote the locally made malt in their marketing plans to sell more beer.
This was a very artisan approach for Riverbend, and the process called for unique equipment and offered a challenge for Brian and Brent. “When we started, we didn’t know what kind of equipment we were going to have,” said Brian. “We had to build everything ourselves. We would draw it on a piece of paper and had someone fabricate it. We knew the science behind what we were trying to achieve.”
For example, Brian designed the rake used in the germination process by looking at old textbooks on malting and then adjusting the scale to the room size. The rake weighed about 40 pounds and offered the feeling of plowing through a field. In a large malt house, this process would have been done with a machine, but Brent and Brian loved, in their words, “playing off the old world/new world thing.”
As it turned out, Riverbend was profitable in three years from the launch of the business. Some of that time was driven by an educational curve, and also having to work through supply chain issues. The two men had to figure out the best and most efficient way to buy the grain, store it, and move it from point A to point B. That took time and money to figure out.
The creative culture of Asheville and the craft beer economy helped publicize what Riverbend was doing when they launched their business. As Brent and Brian both noted, if they had started in a smaller city with just one or two breweries, there would not have been enough synergy to drive things for them.
“It is important the way WNC and Asheville celebrates the entrepreneur, celebrates local focus, community involvement, and environmental sustainability,” said Brent. “We fit into all those groups and that really helped us publicize what we are doing and get off on the right foot.”
Riverbend malted 40,000 pounds of grain their first year in business. As of 2016, they had been on track to malt 470,000 pounds a year. Their biggest obstacle, in fact, was production—they didn’t have the ability in their current location to meet the demand for their product. They subsequently were looking to expand again, as they had maxed out of their current facility in a mere 16 months—they had originally anticipated it would take three years.
Brent and Brian described their journey to date as “Malt with a Mission”—developing a relationship with the farmer and the brewer, creating artisan malts, and lessening the industry’s impact on the planet. Call it a “triple bottom line” approach that guided how the pair conducted business on a daily basis.
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Well, that was then—and this is now.
The last two years have been a wild ride for Riverbend founders Manning and Simpson. They saw continued growth of their business to the point of having more demand for their product than they could meet.
Scott Hickman joined them as CEO of the company in August of 2016, and soon they brought on additional investors and raised funds that took them from a 10,000-sq.-ft. space on Pond Road to a new facility—at 75,000 square feet in size, considerably more expansive—in South Asheville on Gerber Road, located behind Gerber Village. They began 2018 in the new facility, which has state-of-the-art equipment, 85 percent of the new gear having been purchased in North America. Riverbend produced 700,000 pounds of malt last year, and they predict the company will be on track to triple that amount in 2018.
The basic steps for making malt remain the same: steep—germinate—kiln. (Even at this large scale, you can’t rush Mother Nature.) However, at the new facility, Riverbend is doing what they did before but better—developing new products; having more flexibility for research and development; forming key partnerships with breweries and even distilleries. New equipment will allow them to expand their product line with malt that includes flaked and roasted grain, as well as expanding on their 2-row and 6-row products.
With the expansion, Riverbend finds themselves as one of the five largest craft malt houses in the United States. Their “Malt with a Mission” remains the same—developing a relationship with the farmer and the brewer, creating artisan malts, and lessening the industry’s impact on the planet—and their passion for their business and product is ever constant.
Hickman was kind enough to sit down and answer a raft of detailed questions from Capital at Play regarding the expansion (including how it was planned and financed), Riverbend’s corporate structure, how the company has evolved since we originally profiled Manning and Simpson in our March 2016 issue, and what the outlook for the future is.
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C@P: At the time of the March 2016 profile, Brent characterized the division of labor between him and Brian thusly: Brent called himself the CEO, handling a lot of bookkeeping, sales, interviews, and the agricultural side; while Brian was the COO, keeping a tight eye on the product, fixing equipment, and brainstorming how to make production more efficient. Brent the “phrase turner,” and Brian the “wrench turner,” is how he put it. How has that relationship evolved or changed since then?
SCOTT HICKMAN: As Riverbend has evolved into a larger and more complex organization, we have increasingly focused on more specific roles, with greater responsibility, for our team members. An analogy we sometimes use is progressing from a second grade soccer team, with everyone simply running to the ball, to a team in which each player has a defined position.
From a practical standpoint this means that Brent is focused on product development, farmer and supplier relations, and sales, as well as providing industry leadership in his capacity as President of the Craft Maltsters Guild [based in Asheville]. This is a pretty full plate, so we are actively seeking a Director of Sales to drive our sales activities.
Brian has responsibility for production—including the monumental task of getting our new facility and equipment up and running smoothly—safety, quality, and delivery. This is again a huge role, and we recently hired a Vice President of Engineering, Adam Demchak, to support the technical and operational aspects of our rapidly growing production system.
My responsibilities include developing strategic direction in concert with our board, finance, legal, human resources, and anything that falls through the cracks. Brent and Brian like to say that I’m the “spreadsheet guy.”
Our founders, Brian and Brent, remain the heart and soul of the company—their knowledge of malt, craft beer, and distilling, and the relationships they have built with farmers and customers, are a critical asset of the company. They are also stewards of “Malt with a Mission” —ensuring that as we grow we continue to adhere to Riverbend’s founding principles which they established.
Scott, now as the CEO—was this a contingency of you becoming a primary investor? And how are duties divided now between you, Brent, and Brian?
Yes, I was only interested in a CEO role, having been one previously, and my investment was contingent upon that. And this is really the only role where I can add a lot of value to Riverbend; I’m not a great maltster like Brent and Brian, and I never will be. Additionally, our investors and bankers—many of whom are people I have known for some time—wanted to have someone with prior CEO experience in the Riverbend CEO position as a precondition for investing.
Were Brent and Brian originally the only shareholders in the company?
Riverbend has been in business since 2010, and originally they were the only two owners. At times between the startup and the recent capital raise, there were at times passive, minority investors; they are no longer involved with Riverbend.
How did the change in corporate structure happen—were you approached by investors, or did you make the decision to seek outside investment in order to expand?
Brent and Brian had developed a good first draft of an expansion budget—equipment, facilities, and people. We had a pretty good sense for how much money we would need to fund the expansion. I felt the amount we needed—about $5 million—could be raised through a combination of angel investors and bank debt. After I joined Riverbend, we put together an equity offering and were highly gratified by the interest level—we were oversubscribed within 16 days of putting the offer out.
Riverbend is listed as originally being an LLC—what is the structure now, S-corp or C-corp? How do you feel the company benefited by making the change?
Prior to January of 2017, Riverbend was a Nevada corporation for tax reasons. We felt that being “local” was such a critical part of what Riverbend was all about that it should be reflected in our corporate structure, so we made the decision to reincorporate in North Carolina. And we decided to reincorporate as a “C”-Corp versus a pass-through entity, such as an “S,” as a bit of a bet that something like the corporate tax rate changes which were just passed would occur.
Tom Oreck, who bought the portrait that we featured on the Riverbend cover, created by local artist Jason Rafferty, of our March 2016 issue, is an investor. Are Oreck and other investors now on the board of Riverbend?
Riverbend is absolutely thrilled to have Tom Oreck—yes, as in Oreck vacuum cleaners—as both an investor and a director. We have an outside heavy board consisting of four investor-directors, our two founders, and myself. We are big believers in good corporate governance and transparency and wanted to be sure that our investors’ interests were being protected. Additionally, we selected the directors based on specific skillsets that they bring to the company, not just their willingness to invest. We believe that our board gives us a significant competitive advantage.
Back to Tom Oreck for a moment: He did purchase the gorgeous portrait which was featured on the Capital at Play cover, and he did so before he was aware of Riverbend. When I first sat down with him to discuss the possibility of investing and we realized that it was he who had purchased the piece, all I could utter was, “You’ve got to be kidding.” While Karma isn’t generally considered to be a technique for raising capital, it has its place.
As of March 2016, Riverbend had three full-time employees, and now has nine, with openings for two more. At your current rate of expansion, do you expect the hiring to continue in 2018? How many employees do you anticipate several years down the road?
We have an expansion plan which shows us growing to 21 positions over the next three to four years, including incremental employees later in 2018 if we execute according to our plan. I’m a manufacturing guy, and the opportunity to create decent paying manufacturing jobs in WNC is part of the reason I joined Riverbend—it’s part of what we mean when we speak of “Malt with a Mission.”
In our 2016 story, Riverbend indicated that among the goals for the future was to “include more living wage jobs, more connectivity to local farmers, interaction with the community, and continuing to work with nonprofits in town.” Do you feel you’ve achieved those goals?
I’m not sure that we’ll ever feel that we’ve completely achieved those goals, as we can always do better. But we’ve made meaningful progress: For our employees, we have increased our minimum compensation level to $14 per hour—above living wage—and last year we implemented employee health insurance coverage. We bring in a physician’s assistant once a month to meet with employees one-to-one, in complete confidence and on company time, to discuss any health care related topic. Through this benefit we offer flu shots, blood pressure checks, blood sugar level checks, eyesight test, etc. It’s a way for us to signal to Riverbend’s employees just how important they are.
Regarding farmers, we have extended our supplier network to include farmers from North Carolina, Virginia, Kentucky, Tennessee, South Carolina, and we’re working on Georgia. (Some of our customers prefer grain that is not just local, but from their home state.) All of our grain comes from farms located no further than 500 miles from Riverbend and much of it is grown in closer proximity. For example, we are proud that the Biltmore Estate is one of our farm sources.
Every one of the farms Riverbend is currently sourcing grain from is a family-owned farm. We continue to pay premium prices for premium quality grain, which helps our farmer suppliers, and of course the more malt we are selling, the more grain we are buying. Recently, we introduced a new product line called “Southern Select,” a two-row barley malt which is spectacular. The myth was that two-row couldn’t be grown in the South, but in working with our farming partners we’ve disproven that myth and given our farming friends a whole new potential revenue stream.
We continue to be active in the community and, given our expansion plans, this will only increase.
Do you only sell regionally in the Southeast, or has your market expanded significantly beyond that? (Originally stated that your goal was to have a 400-mile radius.)
The vast majority of what we sell is within a 400-mile radius, but, in contrast with our corporate value of sourcing grain locally (i.e., within 500 miles), we do occasionally sell to customers located at greater distances—in fact, we have one craft brewing customer located in Canada. Many of our customers want to source from a local maltster. However, for some the product quality alone is sufficient to purchase Riverbend malt. We’re not going to turn down an order from a customer simply because they are located 501 miles away.
Brent and Brian also told us in 2016 that the company’s biggest obstacle was production—they didn’t have the ability at the current location to meet the demand for their product, as they had maxed out of the current facility in 16 months even though they had anticipated it taking three years. Please outline how you subsequently prepared for expansion and what action plan you implemented.
Brent was absolutely correct. Riverbend was selling everything it could make and was turning down two pounds of orders for every pound it accepted. That’s a nice problem to have—for a little while. So we knew we had to expand.
In developing our plan, we looked at a combination of factors, including (a) how large was the potential market / how much of it did we think we could get / how quickly; (b) how much capital did we think we could raise in a short period of time; (c) what revenue levels did we need to achieve to justify the investments we wanted to make; and (d) what were the logical incremental increases in capacity enabled by the equipment we intended to purchase. Once we had the answers to these questions, we raised the capital, negotiated our capital equipment purchases, and found our long-term home over a period of several months—and then moved into execution and demand creation.
What was on your checklist as you began your search for the new facility?
Our checklist included:
Important to be in Asheville or as close as practical. Lots of good things happen just by being in close proximity to the amazing Asheville craft beer scene.
Available in the time frame we needed, available for a long term lease, at a price within our budget constraints, with room to expand.
Minimize any negative commute impact on our employees, so as close as possible to the then-current facility.
Something which was not on our checklist but which has worked out quite well is that we have an excellent landlord in Bob Harrison. He’s one of the nicest guys you’ll ever meet, and, because AAC Building Materials—his business—is located in the same building as Riverbend, we have easy and regular access to him.
How did you arrange the financing for the expansion?
We looked at the opportunity from an investor perspective, developing both a macro- and bottom-up analysis, backed by independent market data. Using that, we put together some of the standard pitch tools you might expect: a pitch deck, a one pager, et al., and then developed a formal equity offering. In parallel, we engaged with a number of banks to discuss our debt options. We were fortunate to wind up with an attractive proposal from HomeTrust Bank. They were helpful and encouraging and put together an offer which was dependent upon our raising a certain amount of equity. We closed on the equity offering and, shortly thereafter, closed on the debt.
Were there multiple locations you viewed or was the 12 Gerber Road one immediately available and ideal?
We scoured the market, doing site visits to over a dozen existing buildings. We also looked at three greenfield sites, but eliminated those from consideration based upon the expected costs and construction times. We feel pretty confident that in 12 Gerber, we’ve found the best option available for us.
What are the most noteworthy aspects of 12 Gerber?
Well, perhaps the most obvious feature is that this facility was built to last—if the North Koreans nuke us, 12 Gerber is where we’re all headed for safety. The facility is in very good shape. The concrete pad is thick—eight inches or more in places—and the ceilings are high, which turned out to be a very good thing for several of the pieces of equipment we wanted. Gerber also has good access to roads—there’s even a railroad spur available.
Does 12 Gerber provide you with the space and ability to continue expansion if production demand exceeds your forecast?
Our business plan has defined three successive capacity growth phases over the next few years; what we have today is simply Phase 1. Gerber has adequate space for us to implement all three phases—and perhaps more.
What additional machinery and automation have you put in place in order to achieve your expansion efficiently? And is the raking still done manually?
Brent has developed a robust, multi-year product roadmap including multiple varieties of 2- and 6-row barley, wheat, rye, and roasted and flaked grain. And, as mentioned, we anticipate significant growth. To accommodate that, we have added the equipment necessary for roasting, flaking, and crushing malt, and we’ve added a sophisticated, high volume sorting/separating/bagging line. We, of course, continue to manually rake a portion of our malt—that’s a signature activity for Riverbend and we will likely always produce a portion of our malt by floor malting. To meet the needs of our customers, much of our production growth will come from our new, state of the art, higher-volume GKV (Germination-Kiln Vessel) system developed with our equipment supplier that takes the malting knowledge Brian and Brent have built up over the last eight years to the next level.
What have been your best decisions for Riverbend to date? Have there been any notable missteps?
Personally, the best decision I made was to go into business with two people who know malt as well as Brent and Brian do. Corporately, some good decisions we made included recruiting a very experienced board of directors and our new VP Engineering, Adam Demchak. Regarding missteps, fortunately there hasn’t been anything too concerning (yet!), but I would note that we underestimated just how difficult it would be to design and implement a never-done-before malting system. The blizzard of decisions and details was at times a bit overwhelming.
With your obvious success, have other malt houses started up in your wake—regionally or nationally—that you are aware of?
Brent Manning is the president of the Craft Maltsters Guild (CMG), an entity of which Riverbend was a founding member. Through this organization we are able to loosely track the number of craft maltsters in the United States. There are now well over 50—most fairly small—located all over the country. Craft maltsters tend to be fairly collegial and gregarious—like craft brewers—and there is a lot of information sharing that goes on. We’re very excited that the very first annual CMG meeting will be taking place in Asheville in February, and we’ll take advantage of that event to show off our beautiful new facility to our industry peers.
I don’t think we’d claim that other maltsters are following “in our wake,” but we do note with pride that, to the best of our knowledge, we were the third craft maltster in the nation and the first one east of the Mississippi.
What partnerships have you formed with local/regional businesses, such as the Biltmore Company?
An important way that we differentiate ourselves from the huge, multinational agricultural firms which sell 98% of the malt purchased by craft brewers is that we don’t simply take orders, we work individually with the brewmasters and distillers to understand what style, flavor, and color profiles they are trying to achieve and make suggestions about how our malt can help them to make that special beer or whiskey they are envisioning. We strive to be a “trusted advisor” and, in that sense, we consider every customer we have to be a partnership.
The Biltmore Estate is a unique partnership in that they are both a supplier and a customer. Biltmore grows high quality 2-row and 6-row barley on the Estate, Riverbend malts the barley, Highland Brewing brews beer based upon recipes co-developed by Biltmore, Riverbend, and Highland, and ultimately Biltmore serves its craft beers to its guests on the estate. It’s a very local story, and providing guests with exclusive beers fueled by malt made from grain actually grown on the estate is just one more way that Biltmore provides a unique experience to its guests. Riverbend is honored to be working with the Biltmore Company.
Some of the academic partnerships we’ve been fortunate enough to forge include North Carolina State University Agricultural Extension, A-B Tech, Blue Ridge Community College, and South College. Also, Riverbend regularly participates in charitable collaborations; recent ones have included Grape and Grain with Sierra Nevada and the Biltmore Company, benefitting Riverlink, and FEAST with Oskar Blues, benefitting schools.
We have several more interesting ones in the planning stage—stay tuned!
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The Craft Maltsters Guild’s “2018 Craft Malt Conference” that Hickman referenced above takes place February 3 and 4 in Asheville at A-B Tech, and will included seminars and workshops discussing the latest topics and research in the craft malt field, as well as best practices relevant to businesses in the craft malt supply chain. Among the scheduled talks: Malting Technology, Grain Handling & Storage, The Business of Brewing & Distilling, Building Branding & Marketing Strategy, Production of Malting Barley in the Eastern US, Distilling Science & Sensory, and Quality Assurance in the Malthouse. There will also be a keynote roundtable, “Building Value from the Ground Up,” that includes Riverbend’s Brent Manning among the panelists.
Registration details and full schedule: www.Craftmalting.com/2018-craft-malt-conference
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