Deep Ellum Brewing Enters Oklahoma, Opens Fort Worth Outpost

Deep Ellum Brewing Company was busy last week.

The Dallas-based craft brewery — which was acquired last June by the Fireman Capital-backed Canarchy Craft Brewery Collective — launched in Oklahoma, its first market outside of Texas; opened a research-and-development brewery and restaurant in Fort Worth; and commissioned a new 60-barrel brewhouse at its main production facility.

Deep Ellum founder John Reardon told Brewbound that those expansion projects have him bullish on 2019 and “gunning for 60,000 [barrels].”

“That’s with a very minimal rollout plan,” he added.

The plan started late last week as Deep Ellum began shipping beer to Oklahoma, which Reardon called “an extension of North Texas.” A full rollout is slated for mid-March through Capital Distributing Company in Oklahoma City, LDF Sales & Distributing in Tulsa and Pope Distributing Co. in Enid/Stillwater, he added.

According to Reardon, Oklahoma is just the start of Deep Ellum’s plans to expand distribution beyond Texas, and the company could add up to five new states before the end of the year. Arizona, Georgia and Florida are among the potential targets, although Reardon wouldn’t rule out the home markets of other Canarchy breweries, such as Colorado (Oskar Blues) and California (Three Weavers).

“We’re going to start filling out our little regional footprint down here in the south,” he said, adding that the company isn’t interested in entering lower volume states in the short-term. “At some point, with the entire collective portfolio, it’s going to make sense to bring all brands wherever they can travel. And we’re very aware that not all brands are going to travel to all places, but we’ve got one that resonates.”

Reardon is hoping the Deep Ellum brand will also resonate in Fort Worth, where the company officially opened a 5-barrel research-and-development brewery and restaurant called the “Funkytown Fermatorium.” He estimates the facility — which cost about $3 million — will pump out about 2,500 barrels annually.

The 6,000 sq. ft., space took two years to open, recently running into city opposition after a mural painted on an outside wall of the building was deemed an “advertisement.” The company was also delayed by the government shutdown, as the Alcohol and Tobacco Tax and Trade Bureau (TTB) was not operating and couldn’t approve its federal brewer’s permit application. Deep Ellum received approval from the TTB last week, but due to Texas Alcoholic Beverage Commission regulations was unable to sell beer not made onsite. So, as a workaround, Deep Ellum gave away two pints per person.

“Because we didn’t have our TTB license, we couldn’t produce any beer onsite,” Reardon explained. “So we were in a bit of a holding pattern, but as soon as we got that notice, we brewed straight for three days.”

Starting Friday, March 8, Reardon anticipates Deep Ellum will finally be able to sell batches of beer brewed at its Fort Worth facility. He added that a proposed law change that would allow manufacturing breweries to sell up to two cases of beer per consumer daily — within an existing 5,000 cap on direct-to-consumer sales — could also open up additional opportunities for the brand.

“Very quickly we could have another outpost for beer to-go,” he said.

Meanwhile, Deep Ellum’s main production facility in Dallas began brewing beer on a new 60-barrel, fully-automated system, which was installed in mid-February and replaced an existing 30-barrel system.

According to Reardon, Deep Ellum was “capacity constrained” in 2018 and finished the year just under 46,000 barrels, up about 3,000 barrels from 2017. Although the company began supplementing production at Oskar Blues’ satellite brewery in Austin around November, Reardon said the company was unable to ship enough beer to the market “to really make a dent.” That’s expected to change this year.

Nevertheless, Deep Ellum sold about 85 percent of its beer within a 30-mile radius of its Dallas brewery last year. The company’s two top brands — Dallas Blonde and Deep Ellum IPA — account for about 40 percent and 28 percent of Deep Ellum’s volume, respectively, Reardon said, adding that he expects those brands to continue to accelerate as the company expands distribution.

Also new in 2019 are new packaging formats, including 19.2 oz. single-serve cans of Dallas Blonde and Neato Bandito Mexican lager — which are being sold in convenience stores, concert halls and sporting venues — as well as 24-packs of Dallas Blonde, which Reardon hopes to begin selling in Texas Costco stores by the third quarter.

“We’re not going to go and compete with the [Key] ‘Stone Light, but we’ll be a premium offering in that section of the cold box,” Reardon said.

Innovation will also be a focus in 2019. Reardon said the company’s “rapid growth” over the last five years hasn’t allowed it to focus on creating new products. Deep Ellum plans to launch a lemon-flavored hard seltzer brand — called Blind Lemon — on draft within the next 60 days, with cans to follow. Reardon said the product has been in the pipeline for awhile, and comes at a time when other Canarchy-owned companies have launched their own hard seltzer brands, including Oskar Blues (Wild Basin), Perrin (Clear Coast) and Squatters (Grandeur Peak).

Other innovations in the pipeline include a line extensions of Neato Bandito, including one aged in tequila barrels, a sea-salt-and-lime margarita variant and a michelada-style.

In addition to the beer business, Reardon continues to run a side venture, Deep Ellum Distillery, which remains a separate entity from Canarchy. Currently, Deep Ellum Distillery’s all-purpose vodka is sold in Texas, while its infused-vodkas (dill pickle and apple spice) are available at its Dallas tasting room.

“We did about 1,500 cases last year, but projecting to grow much more quickly over the next two years,” he said.

Reardon added that the company is planning to roll out an Irish-style whiskey.

“We are hoping to have some single barrel bottles available by end of year, with more coming next spring,” he said. “The barrels will tell us when they’re ready.”

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