Edinburgh brewer Vault City ramps up investment as demand for sour beer soars

Such has been the sharp rise in demand for Vault City beers that Mr Smith-Hay is investing heavily to ramp up production capacity to keep up with demand.

Investment totalling more than £1 million is being made to expand the brewery’s fermentation capacity and introduce a new canning line and decanter centrifuge, a piece of equipment which will reduce the amount of ingredients that are wasted in the production process.

This comes shortly after Vault City raised more than £40,000 from around 300 investors in a crowdfunding campaign to finance the opening of a second pub, The Porty Vault, close to its brewery in Portobello.

The new outlet, a sister pub to The Wee Vault in Haymarket, will allow it to move into serving food for the first time, with a menu spearheaded by leading chef Darren Lim. It opened on Friday July 8.

READ MORE: Edinburgh's Vault City Brewing opens bar in Portobello

All of this activity has played out against a backdrop of profound economic upheaval and steeply rising costs, which recently precipitated a decision by Vault City to shift its packaging out of bottles and into cans.

Mr Smith-Hay, who moved into brewing after a career in IT, said building the business during the pandemic has been “eye-opening and terrifying in equal measure".

“But the last couple of months, as we have come out of Covid in earnest, have been brilliant,” he told The Herald.

“We have been absolutely flying with the launch of our new core range. We have been preparing for entry into supermarket number two, so Morrisons will be taking our beers in a month’s time. Just in general, things have been going really well.”

In addition to the beers sold in the on-trade and supermarkets, Vault City maintains a regular schedule of limited edition releases. Those are sold in its own bars and on its website.

While Mr Smith-Hay said the on-trade is “really the bread and butter” of the business, he insisted: “Supermarkets are great to have.”

READ MORE: Edinburgh brewer secures 200 listings for debut range

“A lot of the thought process of around moving to listings in supermarkets were firstly to provide an introduction to craft sour beer, but secondly to give us a level of protection,” he added.

"Covid really opened my eyes to the weaknesses of the business. Having a listing with the likes of Tesco or Morrisons means that we have always got something that we can bank on. We are immensely proud of the beers that are in Tesco and are going into Morrisons. It’s allowing us to then push forward with other projects as well.”

Mr Smith-Hay set up Vault City after successfully dabbling in home brewing. His experiments ultimately saw his home converted into a commercial brewery, complete with fermentation space in the cellar and a customs and excise operation in a bedroom.

Asked why he moved into the sour beer market, Mr Smith-Hay said it was the style of beer he had been making for friends and family at home. But there was commercial logic behind the decision too, with the brewer having come to the conclusion that there was an “over-saturation in the market of traditional craft [beers]”.

“I felt that IPAs and pale ales and stouts had been done,” Mr Smith-Hay said. “And they had been done really well.

“The quality of beer in the UK is outstanding, second only maybe to the US. But sours hadn’t had the focus they deserved. We see sour beer as really accessible and almost an entry level into craft beer.”

READ MORE: Edinburgh brewer launches crowdfunding drive for Portobello pub

Mr Smith-Hay also observed that some of the bigger players like BrewDog and Beavertown were investing in sour beer. “They usually have a good idea as to where the market is going, so I thought that was a reasonable gamble, although I don’t think anyone else agreed with me,” he added.

Vault City’s limited editions often sell out on a pre-order basis.

“I really can’t complain with that,” Mr Smith-Hay said. “It’s a fairly intricate process that we have for coming up with ideas – we all sit around once a quarter and get p***** and write on post-it notes. There’s a board and the release schedule goes up.

"We tend to release a session beer, something around 4% [ABV], a mid-range beer around 7%, and a high-octane beer around 9% or 10%.”

Asked if the sour beer term was in any way a challenge to marketing the product, he said: “Funnily enough, yes. Calling it sour beer is almost doing a disservice to how accessible, approachable and frankly delicious the beer is.

"The reality is that it is beer. We do sometimes get the traditionalists saying: 'this doesn’t taste like beer therefore it must not be beer'.

READ MORE: Edinburgh brewer Vault City opts for four day week after pilot success

“But it is a malt-based beverage, it is fermented using barley and wheat from a farm five miles down the road; we use oats from Perthshire 20 miles up the road. So it is a beer base. But the real magic happens when we add all the secondary ingredients into the fermenter: using 30, 40, 50, 90 per cent fruit in the beer is what gives it its flavour. Whatever we produce will really be a great representation of those ingredients.”

Vault City, in common with many manufacturing businesses, is dealing with an ever-increasing cost base,with the price of everything from base malt and kegs, wheat and sugar rising sharply in recent months. Longer lead times have also had to be factored in when ordering fruit because of supply chain disruption.

But despite the challenges, the company continues to grow. It turned over £2.2m in its recently-completed financial year, and Mr Smith-Hay said he would be “disappointed I we did less than £4m” this time.

“The growth has been spectacular,” he added.

Noting that the company now sells its beers in more than 30 countries, with Denmark its biggest market, Vault City recently sent its first pallet to the US and is about to secure an export deal with Canada.

“Export could be enormous for us,” Mr Smith-Hay said. “Having just launched our core range means that we have now created an accessible price point for people to start drinking our modern sour beer more than regularly.”

Six Questions

What countries have you most enjoyed travelling to, for business or leisure, and why?

We were recently in Norway serving Vault City at the Oslo Craft Beer Festival, and I absolutely loved it. The place is stunning, and the people are incredibly welcoming. It also has a growing craft beer scene so there were plenty of opportunities to sample local beers and meads or try something from further afield. I’ve already booked my next trip back to see the Fjords and go fishing!

When you were a child, what was your ideal job? Why did it appeal?

When I was younger I went to university to study business and economics, and for most of my adult life I had a fairly corporate career. Truthfully, I never knew what I wanted to do until I got into home brewing. Once I started Vault City I knew immediately that this was my ideal job.

What was your biggest break in business?

Our biggest break in business must be when the UK craft beer festival scene started inviting Vault City to their key events. Reaching such a wide audience of craft beer enthusiasts at such an early stage of our brewery helped put Vault City on the map and allowed us to really connect with the community there.

What was your worst moment in business?

At the time the first lockdown was announced I’d not long quit my full-time career as an IT consultant. With no safety net, I’d gone all in with Vault City and overnight every bar in the country was forced to close their doors. We had to act quickly to survive, so we launched our web store and started selling direct. It took a lot of late nights and hard work, but thankfully it paid off!

Who do you most admire and why?

I’m a big fan of Elon Musk. He’s had some incredibly innovative and successful companies that have moulded new and existing industries to challenge the status quo. I also have a lot of admiration for Henok Fentie of Omnipollo, a Swedish microbrewery who make some of my favourite beers.

What book are you reading and what music are you listening to?

I’m currently reading The Young Team by Graeme Armstrong. It’s an amazing read, but as a new dad, finding time can be a little tricky! When it comes to music, I’m always revisiting favourites from my youth; early Biffy Clyro albums are always in my top-played artists.