Interview with Bakunin brewery. Part II: “We will build our production in Estonia”

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The second part of the interview with Vladimir Naumkin and Yuri Mitin from the Bakunin contract brewery. This time we talked about the Baltic craft culture, Russian business features and about where, when and why Bakunin will build its own production. The first part can be read here.

“Living standards set the limit for the development of craft brewery in the country”

In Russia, people start collaboration with contract brewers to load the capacities. Is it the same in Latvia?

Naumkin: Firstly, there is seasonality.

Mitin: Seasonality is everywhere, but in Russia breweries collaborate with contract brewers, because if they do not load their capacities, they will close. Because breweries are on rented premises, in rented buildings. In Latvia and Europe, the approach is slightly different, there are slightly different prices and the cost of land. They have everything in their property, and they have no restrictions, like those that if there are ten tanks and only three of them are used, you will have to close two months later because of this. Moreover, they build breweries with a margin for further development. The Latvian brewery had its own sales, but when we came to them, they delivered us five CTCs within four months.

Naumkin: there are several Russian breweries, too, which have expanded. It’s difficult to say that thanks to us, but they have expanded also due to the fact that we brewed some part of their beer.

If you look at the market and the industry, what is the difference between Russia and the Baltic countries?

Mitin: Baltic countries are also very different. If Estonia is considered to be a Baltic country, then it is difficult to withdraw an average. Estonia now is more Scandinavia than the Baltics, including the mentality.

In Latvia, there is a craft beer market in Riga, the Labietis is very authentic. It is even difficult to call them craft brewery in Russian sense, because they do not brew dozens of IPAs and imperial stouts. On the contrary, they make very individual varieties, with different herbs, berries and spices. Very folkloric things. There are 15-20 breweries out there that brew non-classical beer, but not always it can be called craft beer, just something interesting. There are several craft brewing locations. The Labietis has its own bar, there is Alus Celle. But I can’t say that there are too many visitors.In Latvia, the state of the craft beer market is still in its infancy, but we are opening Rockets & Bishops in Old Riga, in the Old City, and we will try to shake it. And in Estonia it is a completely different level. They started much earlier; the guys very active promote and develop everything there. The guys from the Põhjala brewery have set the wheels in motion in the last three years working with Tallinn Craft Beer Weekend.

Naumkin: But perhaps the most notable location in the Baltics, was ALEHouse that the first appeared in Riga.

Mitin: But it did not found its consumer. I actually got acquainted with craft beer there, then I returned to Russia and started to look for where to buy, where to cook.

Naumkin: 2012-2013 it was only beginning of the craft brewing in Estonia. But Tallinn overtook everyone; this is the Baltic capital of the craft brewing. They have overtaken the Finns, though Finns have started earlier. In 2011-2012 we went to Finland for a craft festival. Then there were still many interesting things for us, the IPA have just started to appear, in Russia it was not like that yet. But very quickly Tallinn as well as Russia have overtaken it, and now it is not interesting to go to Helsinki for craft beer.

And why were the Estonian so quick?

Naumkin: The living standards are probably one of the main reasons.

How much are the craft brewers annoyed by the fact that the Russian living standards are falling?

Naumkin: To some extent, this limits the development. The percentage of craft beer consumption from the total beer consumption depends also on the living standard. So in developed countries it can be higher. The ceiling in the USA is about 15%, and it is almost reached, then either stagnation or search for alternative development models begins. For example, the standardization of varieties, now there are many large breweries, which were creating craft brewing 20-30 years ago, and which begin to brew more standard things. Or they are bought by large corporations, which make them more standardized because of the optimization, costs and price reduction in order to expand the market.

A regular contract brewer will not afford the move to Latvia

It seemed to me that contract breweries try not to name the production sites on which they brew. But in your case everything is quite open. Everyone knows, where to find you in Latvia. At Latgales Alus.

Naumkin: Yes, it was so; a few years ago, everybody was trying to hide such information, because they were afraid that others contract breweries will come.

Mitin: We don’t worry about that. As for Latvia — we know what we have to go through, to build beer production there, and import and distribution procedures here.

And what did I have to go through?

Mitin: Firstly, it is, in fact, control over the importing company. The question of the EGAIS (USAIS) rises again. We’ve done it directly “on a joint”, the first brew in Latvia has been held in December, 2015. Since January, 2016 everybody should pass to EGAIS (USAIS). We did not have an importer company for that, it appeared only in February. Then I had to learn some intricacies. Previously, there was no support from the EGAIS, no one knew anything. In the RAR, it was the same: people were running with crazy eyes. Then all of these FRAPs, the establishment of nomenclatures, the receipt of EGAIS codes, then there was a large EGAIS, it is a separate program for importers and producers. In general, much work has been done. Logistics, customs, document executions.

If you compare the usual contractor for whom the brewery has brewed and bought everything, while ha was only taking pictures near the cooking kettle, I doubt very much that he will manage the move to Latvia. Without additional labor input, without people and without the existing structure, it is impossible to organize. It requires a lot of resources.

At how many breweries do you brew?

Mitin: At five, including Latvia.

And is there the same approach and the same control points for all breweries?

Naumkin: Each brewery is different, unfortunately. In Russia everything is more complicated, interaction with breweries is harder.

Can you roughly describe the control scheme over the brewery, where your variety is brewed? How many control points does it have, at what stages of production do you exhibit them?

Naumkin: We provide breweries with the recipes. If this is a new variety, then I’m present at the cooking and give some training on technological issues. Often everything is described in the technological cards in details, but it is necessary to discuss. Every day we control the temperature and density of beer. On the next step I say what to do – to gain pressure, to cool, etc. Dry hopping is done by us.

Mitin: In principle, we try not to advertise at least hop varieties, which we use, to the last, because we can do these steps ourselves. You come, you take out the plastic bags and write, when and what kind of bag you should add- if you are not present at the brew.

Naumkin: Of course, we give a detailed formulation of how much malt and which yeast to add — this can’t be avoided, because after all their employees all do this manipulations.

Mitin: As a result, it is impossible to hide anything, and still most of the recipes are known. Well, let’s say, instead of Cascade you add Summit, there will be just a bit another aroma and flavor, but the concept will be similar.

With such a control, how many percent of brews were failed?

Mitin: For all the time probably about five brews were failed. That’s the maximum. Five is “with a reserve”, immediately I can recall two or three.

Hasn’t it happened that the result was different from your expectations but it still wasn’t bad. So that you said: “This is not what we wanted, but it turned out quite well?” Or are the failures always connected with negative?

Mitin: No, there were no such failures. It is clear that the IPA can be slightly more or less fragrant, but this is not the reason to reject the brew. Another thing when you try the beer, but in a fresh tank it already has a strange taste or aroma. That’s a problem. We’ve been brewing gose recently, and there ...

Naumkin: Yes, the mash started to gelatinize. The first time this happened, most likely due to the fault of the equipment — the sensors did not work or were broken.

Mitin: Sometimes the technical problems happen during the fermentation, for example, cooling down. The sensor did not work when it was necessary, everything was chilled during the fermentation, and the yeast stopped the fermentation. We’ve tried to reanimate it, added new ones, turned off the cooling, but it did not help.

The possible beer licensing in Russia is the first reason why we consider the European project

When will you build your brewery and are you going to build it at all?

Mitin: In fact, we’ve started this project for quite a long time already, but we are too demanding to ourselves and to the project. We still want to build something immediately with a reserve for the further development, and with production capacities, and we want it to be good, solid and correct. It must be something that can be used for several decades without problems.

In particular, there is an option that we will build a brewery in Estonia. For various reasons, and for reasons of civilized business, and because of the EU market, there is still a very large demand for Bakunin, and we can’t devote enough time to the EU markets, we are in short supply there. We are slowly moving to these markets, very carefully, but here we also want to do everything right. Not just travel, but represent the brewery, communicate with people, in particular, at European craft festivals, we often take part in Europe. A lot of people come to the festival, who already know something about us and they ask where to buy our beer.

For example, recently we’ve been to Italy, at the birthday of Birrificio del Ducato, and many people approached, said that they liked our beer, and asked where it could be bought for their bars. At this festival we got acquainted with the distributor in Italy. In the near future, from the nearest brews that will be in Latvia, we will send the beer there for acquaintance.

Therefore, the main option is Estonia; there is a technology park near the border. In Estonia, of course, it is easier with the selection, delivery and installation of equipment from European manufacturers. Europe, and, in particular, Estonia, is quite supportive of companies that want to create jobs and to pay taxes. Plus, we still want to make not just a production site, but a cultural object, with a tap-room, with a beautiful brewery that can be visited, which will be the cultural point of the region in which we will be built.

By the time frame, we have started this project a long time ago, it’s quite expensive, so we, again, are very meticulous about the development and do not want to get into the project ahead of time.

I understand that you have domestic investments, or is there any external financing?

Mitin: Certainly, it requires external investment because the project is large; we want to start with a minimum capacity of 150 tons.

Naumkin: There are some difficulties with building and construction works .Firstly, the level of the project is very high. Secondly, the capacities are large, since we have an increase in production, and we can’t build a brewery for twenty tons, it does not make sense.

Mitin: The aim is to make a brewing line with a large margin for production growth, and then just put new capacity as needed. Therefore — yes, the project exists, and the most optimistic timing is by the summer of 2018. There is nothing more to say about it now.

From the point of view of legal work, documentation, have already started to prepare anything?

Mitin: Certainly, we have. Over the last year we’ve been communicating and collaborating with various government organizations and authorities there, studying the tax base and taxation. Many things there are much easier to do.

Any shipment there is carried out only with one document, an invoice. There is no EGAIS, there are no shipping documents, as we have references to the CMR or a declaration of conformity. There is a system of alcohol control, a system of excise warehouses. If in EGAIS-system the sale is reflected, the fact of change of the owner of alcohol, then there only the fact of movement of alcohol from point to point is fixed.

Naumkin: Again, the idea of production licensing in Russia is constantly in the air, probably, is one of the crucial moments in favor of the European project, because with EGAIS everything is more or less clear, it is possible to work with it, you can adjust. But with the licensing everything is much more complicated. I have been in the alcohol industry for a long time. I remember how wineries stopped for a few months because of licensing, some of them just shut down.

Will there be anything interesting in the project from the technological point of view? Concrete fermentation tanks or any big coolships?

Mitin: We definitely plan a Barrel house, even a house, or a room, depending on the scope of the project, collships we also may place there. From the point of view of innovation — it is possible there will be ecological sources of energy. For example, a windmill, because the area is quite close to the coast of the Gulf of Finland.

Naumkin: There is an idea of waste recycling mostly grains, and of usingof alternative energy sources. These things are well welcomed in Europe.

Mitin: The state is rather actively sponsoring all such activities in different volumes, regularly distributed grants for the agricultural sector. Our company will be located in the countryside. Estonia is a country that is mainly fed with IT technology, and from the point of view of agriculture the country is absolutely unremarkable, and people do not offer any new ideas or innovations. And the EU issues grants twice a year to this sector, where they remain unclaimed, and we can partially use them.

Would you like to organize your own festival?

Mitin: We haven’t had enough time just physically. We began to explore actively this topic, to prepare, but at some point we realized that the team was not ready, we will not do it at the right level. We are demanding about everything that we do, and if we understand that we are not going to pull it now, it’s easier for us to postpone the idea for the next season, because we do not want to do anything below the level. The idea was, it wasn’t lost anywhere, and we’ll do it.

Breaking between five breweries is physically impossible, so the technical part is already being done by our brewery employees

Vladimir, an indiscreet question. You were allergic to the hop-pollen, how did you cope with this problem?

Naumkin: I ‘m still allergic to it, when I start to weigh the hops, I start sneezing.

How do you try to fight with it? Masks, Citrine?

Naumkin: No, the doctors said that it’s not necessary to take any anti-allergy medicaments I should just use a respirator. In fact, I also have helpers.

Mitin: Well, yes, burst into between five breweries is physically impossible, plus Vova is responsible for the procurement planning of raw materials. Tour brewers are working on the technical part. Vova often goes to Latvia now. We travel with him to develop the collaboration in Europe. Now met with the Norwegians. They invited us to their festival, which was held at the end of May, on the same days that the Big Craft Day, so there were no two of us on the Big Craft Day, but the brewery was represented. We went to Oslo for the festival, it took place the brewery, and we brewed a collaboration beer with them right during the festival. So now we have assistant brewers.