Success a Tall Order for World’s Highest Craft Beer Brewery
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2017-07-10 10:22:11

This article is part of a series that explores life along the Hu Line, an imaginary diagonal line across China that has vast demographic, environmental, and political significance.

SICHUAN, Southwest China — From a converted cowshed in the rolling Tibetan highlands, two entrepreneurs have started the world’s highest craft beer brewery. Yet that distinction that comes with a host of unique challenges: Perched at an altitude of 3,550 meters, the King of Yaks brewery is far removed from ingredients, industry expertise, and craft beer aficionados.

Still, Czech brewer Maxim Nesazal and his Tibetan business partner, Norbu, are confident that the combination of pure water, local ingredients, and clever marketing that emphasizes the product’s Tibetan heritage will entice customers to try their King of Yaks brand craft beer, which they plan to officially launch in mid-July. “Yak is the traditional Tibetan animal, and it is the king of [mountain] animals,” explains Nesazal, who runs a guesthouse with his Tibetan wife. “We’re the king of beers.”

The scrappy startup will need such unbridled confidence as it elbows its way to a place at the bar. The craft beer market is growing rapidly in China and is increasingly attracting attention from big international and domestic players.

Local people are very religious, and they have the idea that in Tibetan society, [alcohol] is not a good thing.

The duo’s craft brewery is located near Xinduqiao Town west of the Hu Line, an imaginary boundary separating China’s tightly packed eastern section from its sparsely populated rural west. Operating a business in the latter region is no easy feat: Besides the absence of a large consumer goods market, difficult terrain — including high altitude, in King of Yaks’ case — and poor transportation infrastructure can make supply chain management problematic. A dearth of local expertise in food and beverage management and marketing also poses challenges for recruitment of skilled labor.

On a recent sunny afternoon in a cramped stone barn that once housed livestock, 27-year-old Nesazal shares the first-ever batch of King of Yaks pale ale with guests. Among them is British tourist Jack Palfrey, 26, a former media advertising employee visiting the area. “It reminds me of some craft brews we have in Wales,” he says, offering up his glass for a refill.

Nesazal says that while tourists both foreign and domestic will constitute an important market for the brand, their main target is locals — and in this snowcapped corner of western Sichuan, that means mainly ethnic Tibetans.

Norbu (left) and Maxim Nesazal pose for a photo at their craft beer brewery near Xinduqiao Town, Sichuan province, May 9, 2017. Zhou Pinglang/Sixth Tone

Norbu (left) and Maxim Nesazal pose for a photo at their craft beer brewery near Xinduqiao Town, Sichuan province, May 9, 2017. Zhou Pinglang/Sixth Tone

This might not be such an easy sell. “Usually in Tibetan society, many people like alcohol,” says Norbu, who owns a luxury hotel nearby. “But it doesn’t mean everybody likes it.” Tibetan Buddhism typically doesn’t encourage alcohol consumption, although it is not strictly forbidden and is even part of certain regular ceremonies. “Local people are very religious, and they have the idea that in Tibetan society, [alcohol] is not a good thing,” he says.

Yet Norbu hopes to change area residents’ perceptions of alcoholic beverages. One key consideration is flavor: “It’s too bitter for locals, but foreigners would love it,” Nesazal says of the cloudy mixture that the brewery experimented with pre-launch. “My next batch will be less bitter.” The challenge of perfecting the taste is further complicated by altitude. Few breweries operate at similar heights: There is one craft brewer in Colorado, in the American Rockies, that comes close, as well as a higher-altitude brewer in Lhasa, the capital of neighboring Tibet Autonomous Region, that makes conventional beer.

Producing beer so high up requires plenty of trial and error, and making predictions based on how equipment works at lower altitudes is impossible due to the variations in boiling points. “It changes a lot of things, especially in the hop extraction,” Nesazal says. “The bitterness and other flavors permeate in a different way.”

Developing and marketing the perfect product is not the sole mission for King of Yaks, which is keen to position itself as a form of social entrepreneurship. For example, the company plans to recycle malt residue by giving it to local farmers for use as fertilizer. The brewery, Norbu says, should be “helpful for local people and the local environment.”

Nesazal and Norbu might want to note the success of Shangri-La Beer, an early Chinese entrant into the craft beer industry, based in neighboring Yunnan province. Founded in 2009 by Swiss-born Tibetan Songtsen Gyalzur, it, too, operates as a social enterprise that financially supports a local orphanage and offers employment opportunities to disadvantaged youth.

Like King of Yaks, the Yunnan brewery boasts fresh ingredients and Tibetan heritage: The brewery is situated in the hinterland of Shangri-La, a city in the Tibetan highlands that in 2001 renamed itself after the fictional utopia from the 1933 novel “Lost Horizon” to attract tourists. The company sources barley grown by local farmers and uses water from the upper reaches of Asia’s three great rivers: the Nu; the Yangtze; and the Mekong, known as the Lancang in China.

The [craft beer] market is crazy. It’s the highest-growing market in the world, and in a few years, it will be the biggest.

By making “Shangri-La in a bottle,” the brewery aims to promote Tibetan culture through craft beer in a “lighthearted way,” Karma Tachen, vice chairman of Shangri-La Beer, tells Sixth Tone.

King of Yaks, too, wants to eventually source barley locally for use in its beers, although Nesazal says that for now at least, it will rely on imported Australian malt that has been processed in China. “The only thing Tibetans grow is barley. They don’t use many chemicals, and it’s among the best in Asia,” says Nesazal. “We plan longer term to make a malting house that would use local barley.”

Finding suitably trained staff is also a challenge, and at least initially, production will depend heavily on Nesazal’s experience in the field, which was previously limited to home brewing at his guesthouse in nearby Tagong Town. Logistically, it isn’t easy to ship equipment, ingredients, and the final product to and from the brewery, a two-hour drive by winding mountain road from the nearest city, Kangding.

The brewery plans to sell kegs at around 10 yuan (about $1.45) per half liter. Under government regulations, brewers must be able to produce over 12,000 bottles an hour to qualify as a licensed brewery, but a keg license is much easier to obtain.

The pair is looking to get in on the craft beer boom that has already hit other parts of China. “The market is crazy. It’s the highest-growing market in the world, and in a few years, it will be the biggest,” Nesazal says.

China’s expanding appetite for craft beer has attracted both local and foreign brewers. While the overall Chinese beer market has been shrinking since 2014, production of craft beer in China increased by 54.5 percent in 2015 to 170 million liters — up from 110 million liters the year before, according to trade fair organizer Craft Beer China, citing data from EAC International Consulting. The consultancy expects China’s annual craft beer output to continue increasing over the next few years, reaching 650 million liters in 2020.

In addition to expat and local craft beer enthusiasts, global beer giants are also bulldozing their way into China’s nascent craft beer market. Earlier this year, multinational brewer Anheuser-Busch InBev bought Shanghai’s Boxing Cat Brewery, the city’s oldest craft brewer previously owned by two Americans and a Canadian. Goose Island Brewery, also owned by AB InBev, opened its first branch in Shanghai in April.

King of Yaks is joining an industry much rowdier than its calm, hilly homeland. The current market resembles the Warring States period, says Karma of Shangri-La Beer, referring to an ancient Chinese era in which numerous states fought for hegemony. “With more players swarming into the industry, there’ll be a big shake-up in the next few years,” he says.

Yet Nesazal remains unconcerned about the volatile market or the possibility of the craft beer fad fading, he says, citing the longevity of the beverage: “People used to drink beer. People drink beer. People will continue to drink beer.”

Additional reporting: Chen Na; editor: Kevin Schoenmakers.

Correction: A graph in a previous version of this story credited EAC International Consulting as the data source. The source is Craft Beer China. A second graph previously identified the average annual growth rate of Chinese craft beer production between 2012 and 2015 as around 50 percent. This figure represents the compound annual growth rate.

Over the coming weeks, Sixth Tone will publish stories, videos, photo galleries, and social media posts that chronicle our road trip across China along the Hu Line, as well as an interactive multimedia platform in the fall.

(Header image: A local bar in Tagong Town, Sichuan province, May 8, 2017. Zhou Pinglang/Sixth Tone)