Business profile Vault City’s Steve Smith-Hay on growing a successful brewery out of his own back room

Vault City Brewing

There are not many people that can say they’ve housed an HMRC registered excise warehouse in the spare bedroom of their small two-bed flat, but then nothing about the story of Vault City Brewing founder Steven Smith-Hay is exactly typical. Steven and his partner Adele, along with former brewer Jonathan Horn, founded the brewery in 2018. But for several years before that, Steven, then working as an IT consultant, had been brewing on a semi-industrial basis from his own flat, with brew kit in the cellar and beer taps in his kitchen. The domestic operation had taken off to such an extent that the flat was approved as a brewery. His spare room became an HMRC approved warehouse, storing the beer he produced, and his local BrewDog bar allowed him to launch with a very successful tap takeover, showcasing the modern sour beers that were the focus of his venture. It was clear from the start that his beers were popular enough for him to make the move into the industry full time, and Steven left the IT world and, via a short stint in rented space in Dundee, he launched Vault City in 2018, eventually moving it to its current permanent site in the Portobello area of Edinburgh. Vault City has stayed true to its roots in sour beers, with a mission to make the category more accessible to a wider range of beer drinkers. With sours still considered niche, Steve has sought to introduce fruit flavours and accents that create more sessionable beers than the category has historically offered. And with a bar on the way, and plans in progress for a ‘secret garden’ inspired 250 person taproom on the brewery site – potentially with a waterfall - Steven is keen to give consumers the new and exciting beer experiences they are increasingly seeking out. Independent Brewer’s Editor Caroline Nodder caught up with him last month as the Scottish market was beginning to re-open…

Brewery Basics

Name: Vault City Brewing

Founded: 2018

Location: Portobello, Edinburgh

Owners: Steven Smith-Hay and Adele Wilkie

Annual production: 3,000hl

Brewing team: 8 full time

Staff: 9 in total

Core beers:

Raspberry Sour (4.5% ABV) and Tropical Sour (5.2% ABV)

Production split (cask, keg & small pack):

70% small pack 30% keg (pre-Covid predominantly keg)

How did you come to launch Vault City and how has the business developed since then?

“I was an obsessed homebrewer. I actually brewed more in 2017 than I have since unfortunately. Which is quite a funny thing to say now that we're producing a lot more. We had the homebrew kit set up in my kitchen. I had a cellar underneath that I used for a huge fermentation project - long term barrel-aged stuff in the styles we are producing now but also clean beers as well. It got to the stage where I put a draught system in the house and managed to pretend to my better half and co-founder it was about renovating the kitchen, but the reality was I wanted some beer taps installed. Always having dreamt of starting a brewery it was then a case of what can we do? Can I get my flat to being a registered brewery? Yes I can. So we started to look at what equipment we could put in. I think maybe calling it basic is the wrong word, but it got the job done. We got the kit from Brew Builder - a 400l kit. And we were actually limited to 400 litres by the electrical cable that came into the house, because I was advised by an electrician that we were close to melting it! We had specialists getting the wiring done, the cellar was turned into an even bigger fermentation space and the spare room was turned into an HMRC registered excise free warehouse. We had a sign on the bedroom door saying ‘you're entering an excise warehouse’. So it was all a bit mad, but we brewed our first beer, an elderflower sour, and the whole piece was trying to do something that hadn't really been done in the UK before by being a dedicated modern sour fruit-forward brewery. There are others that we absolutely look up to and that were there before, but we saw in the market that what I was making wasn't being made on a commercial scale really. But that, of course, comes with its uncertainties, because you could have opened up an IPA brewery and you know there's a proven market there for it. So starting in the flat was a great way to start with low risk and test the market. And it was almost immediately that we realised we literally couldn't produce it fast enough. There weren’t enough fermenters, there wasn't enough space, there weren't enough brew days - I couldn't brew every other day in a small two bedroom flat in Murrayfield! We couldn’t sell direct as we didn’t have a premises licence for the house so we self-distributed around Scotland. You're only talking about maybe like two or three kegs and 30 cases of beer, so we had a lot of bottle shops who we knew through being big into drinking beer and we just dropped in a few samples and away you go. The local BrewDog bar for us was Lothian Road and that was actually one of our first customers. And before we knew it, they were inviting us in for a tap takeover. If I put myself back in my homebrewer shoes, it was crazy to think that we were taking over taps in one of my favourite bars. I think we still hold the record of the only beer to outsell Punk IPA in that bar on a given night. So it went really well. Then the opportunity came up to move into a small rented space at 71 Brewing up in Dundee. We took the opportunity to purchase a couple of 40hl fermenters from Malrex. So fairly quick expansion there, but the mantra that we've always had is that it’s like taking your kid to buy shoes that are two sizes too big so they can grow into them. Our fermenters were a few sizes too big. It worked really well, and we actually released our first beer from there in November 2019. And then quickly placed an order for two more fermenters after it looked like we needed a bit more capacity - export seemed to take off in quite a big way. Selling a lot of beer to Italy, Spain and we've done quite a bit since then so we’re in up to 30 odd export markets. It's just a real shame to see a lot of it drop off due to Brexit and Covid - predominantly Brexit.”

It got to the stage where I put a draught system in the house and managed to pretend to my better half and co-founder it was about renovating the kitchen, but the reality was I wanted some beer taps installed.

How has the last year affected your business?

“We bought the new fermenters, filled them up, so we had four fermenters of beer ready and then Covid hit. So that was a big change, we had to completely change the business model and go from sending beer out to distributors up and down the country to looking to work a lot more closely with our customers, be that trade or direct to consumer. We managed to spin up the webshop pretty quickly. And at that stage, it was just myself and the marketing manager Andy Gibson, so there were two of us and on the second weekend that we had the webshop open we had over 700 orders, which weren't even in bottle yet. We had a manual bottling machine. So it was all systems go, and I was taking the early shift at 3am till 2pm and Andy would then come in at 3pm till 2am. It was a bit crazy. But we did it. Then it looked like the business was doing alright and Tesco approached us about having a look at entering into the world of supermarkets. We approached that very cautiously, but that prompted the move to our own location and to get back to Edinburgh with the new site in Portobello. We took the keys in October last year, and we brewed our first beer here in December.”

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What would you say your ethos is at Vault City?

“Traditionally sours would be the end point of your beer journey, so to speak. So maybe you'd start with being a lager drinker and then maybe you’d see something like Punk IPA and start drinking IPAs, then you’d move on to pales, and maybe move on to stouts. And for most people, you'd only really ever get to sours if you're at the end of that beer journey and really explored absolutely everything, and sours are the final frontier. But for us, it's all about accessibility, and approachability. So the sours that we make, we use flavours that you're probably quite familiar with. Some of our most well-loved beers, like the Skies series that use Scottish fruit - we've done it with strawberries, raspberries, cherries - paired up with hibiscus and vanilla. So it creates this really creamy, almost strawberry sweetness. We are championing modern sour beer and we find that once people do try it, it’s less than one in 10 don’t go back for a second drink. Because it's something completely different. And it's really accessible. This is not sours as they have been in the past, like some of the beers I love to drink - hugely complex farmhouse ales, and Belgian gueuzes and lambics. That's not what we're about. You can either dive right into it and go through the complexities of the mixed fermentation based beer that we produce. Or you can take a drink and go ‘that tastes like strawberry lemonade, I like it!’”

How do you see consumer tastes evolving?

“I think there are so many great breweries in the UK making so many great beers, so many great traditional styles, so many great more modern styles. I think people really are looking for new experiences. Having the ability to explore even when not being able to leave your front door, I think things get stripped away from you, and you want to look at exploring different things. With the webshop launching and being such a new brewery, at the start of Covid it meant that when we did release beers, there was a bit of excitement around it.

We've heard a couple of dozen times and had some lovely comments from people saying ‘your Sour Sunday releases actually helped me get through the deepest, darkest times of the pandemic’. And you can't get a much better compliment than that. So I think people are getting more adventurous and people are trying new experiences. And we're trying to reflect that in some of the projects we've got coming up. Like the new Haymarket bar, that’s going to be one of the smallest bars in the UK, it’s just over 20sqm including the toilet! But it’s there to give people a taste of what we are all about. It is the kind of place where you’d go and sample beer in a third, or even smaller measures, and try a whole bunch of different styles. It's all about exploring, exploring the styles that we make, and the experiences that we provide - we're also putting in a 250 person capacity taproom into our Portobello brewery. It's got a downstairs bar with a tree trunk in the middle of it. And if you go upstairs, you're into this kind of beautiful forest/secret garden type thing, with swings and firepits, and possibly a waterfall - although nobody can tell me how to get a waterfall into an industrial estate!”

People are getting more adventurous and people are trying new experiences. And we're trying to reflect that in some of the projects we've got coming up. Like the new Haymarket bar, that’s going to be one of the smallest bars in the UK How is the Scottish craft beer market developing?

“So the beer scene in Edinburgh is exploding, it's incredible. A couple of people that I know have breweries that are moving to the area, still to come, and people that are already in the area - Newbarns for example - they're making exceptional beer. They're making the kind of stuff that I was making when I was home brewing in the flat, table beer, pales, IPAs, and they're just doing an absolute stand up job of it. I've got their beers almost constantly on tap in the house and don't want to admit how many kegs I go through! Then you've got the kind of the more longer term breweries, although they’re still so young - people like Bellfield and Stewart - the quality of beer coming out of Edinburgh is outstanding. Then of course, in Glasgow, you've got the likes of Overtone and Acid and loads more. It's just, they really seem to be championing super modern craft here in Scotland. I think once things have opened up a little bit more and things get a little bit more back to normal, we'll be a force to be reckoned with - up there with your Manchester's, your London's, and people will actually want to come to Edinburgh for a craft beer holiday.”

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Supporting independents has been a key plank of your strategy. Tell me a bit more about that.

“I mean, how could we not be supportive of people who've been so supportive of us? The craft beer scene in the UK is changing. We've accepted that, we've seen that we couldn't take another Covid with the kind of operating costs now that we have our own premises. We've gone from two staff members to eight plus part timers in a year. With that comes cost and with cost comes risk. So we've looked at the Tesco piece and saw that as a great way to support the day-to-day running of the business and essentially keep the lights on if there was to be another major global event. But it was the independents who are the ones that got us to where we are. So the independents in Scotland, for example, these are the ones that we delivered to every week and would champion our beer and shout about it. And they are the ones that really took us to the forefront. That really helped us make a lot of noise about what it is that we're looking to do and what it is that we're looking to achieve. And I think ultimately, at the end of the day, we're having to tread quite a careful line in a modern climate where if you go to America, then you'll go to a grocery aisle full of craft beer. If you go in the UK, you'll see a couple of shelves a year ago, and maybe a couple of bays now. So it's moving in that direction. But we wanted to make sure that we continue to support the independents. And one of the biggest things we did was to take a big chunk out of our margin on the session sour range, and we've significantly dropped the price margin to try and get them down from, you know, between £4 and £4.50 on the shelf to £3.30 to £3.50. Breweries need independents, and independent bottle shops and bars need breweries. And we're not going to turn around and leave them in the dust. It's not what we're about.”

Longer term how do you think the pandemic will affect the small brewing community in the UK overall?

“It's difficult to tell really. It has changed consumer habits. So I think what we'll see coming out of it is obviously people come back to the pub, and go out for drinks a lot more. But I think the big piece, the real question mark for everyone really is will people drink from home more? Because I've got a lot of friends and family who weren't the type to have a glass of wine in on a Friday night, or Saturday night, but they’re now buying in craft beers direct from breweries and drinking in their house. That's a tangible change. But I do think overall coming out of Covid the whole industry will see a boost. I think people appreciate that you don’t know what you've got till it's gone. People appreciate the time spent with friends and family. And for me, certainly, a lot of that is centred around the pub. I don't see people wanting to stop that. But I think consumer habits may well have changed long term in regards to getting used to ordering direct from breweries. In the last year, people went to seek out a variety of beer from one brewery to get an idea of them. I think everyone's seen a significant increase to online sales. Whether that will continue, nobody knows.”

There has been a recent outpouring of stories on social media, starting in the US, of sexism and misogyny within the beer sector. Do you think the UK brewing community is inclusive enough or can more be done to make it so?

“We did actually put a post out last week on that topic. One of our distributors was named in the stories. And we then asked them about the allegations and we didn't get a satisfactory response. So we dropped them. That was our biggest export customer that we took off. We take it very seriously. We've got a female co-founder and Adele has worked in bars and been in the industry and the stuff that I've heard from her is just appalling. It's a challenge. And it's a real thing. And I think it's that whole piece of by being silent on the matter, you're not going to help things. So we've been pretty vocal about it. And I think that there needs to be a significant amount of change, because we've got a part to play in making sure that it’s about beer at the end of the day, there shouldn’t be any ‘-isms’ attached to it.

It's a great product that's designed to give people great times. And if we can do anything to help make that as inclusive a space as possible then we'll do it. We showed all the staff the story and the allegations made, and showed the response and sat down all of us and had a chat about it. And we decided that it didn't gel with the morals and values of Vault City so that was an easy decision for us to then just walk away. Whether it's true or not, we don't know, but it was more the response to the allegations that led me to an unfortunate and difficult decision to walk away.”

There needs to be a significant amount of change, because we've got a part to play in making sure that it’s about beer at the end of the day, there shouldn’t be any ‘-isms’ attached to it. It's a great product that's designed to give people great times.

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How important is your environmental impact to the business?

“I hate waste. I hate plastic that is one way disposable. Even if it's 99% recyclable, then we're still creating a problem that's going to exist for a long time. So I think as an industry, we need to come up with a better way of getting beer around the country in kegs. Because we're all sending these daft disposable kegs up and down the country when we could in theory club together and have something a little bit more sensible. A sustainable, reusable package. I think something has to be done there. And I think it's not talked about enough. The amount of waste that we create as a relatively small brewery is staggering. You know, we recycle as much as we can, but it's still scary to see how much waste is produced. And I think, you know, we all need to take personal accountability for what we do. We've taken the accountability, but we've not made any steps to address it. So that's something that’s high on my priorities to look at. To ensure that we're not causing any harm, which is kind of what the whole Vault mantra is – to do no harm.”

You distribute to a significant number of countries outside the UK, has Brexit affected this channel?

“Well, I can tell you the numbers. We went from a peak of £100,000 a month down to £12,000. So significant. And we're lucky that that was balanced by an increase in demand in the UK, so we weathered that storm. But, you know, that's a significant chunk. It's not like we're not pushing it or anything. I think we're now exported to 30 countries, we are maybe in 12 to 15 on a regular basis, but you can never really tell if it was the pandemic or leaving the EU that was the cause. But we've had horror stories of beer taking six, seven weeks to get to France and beer being stuck in customs. And for us, that's less of a concern. If you look at a hoppy brewery if you've got cans sat in a non-coldstore for seven weeks then they're not going to show up in peak condition to whatever market it is that you're trying to get to. It's just staggering to me that we decided to push forward with statistically significant change in our economic standing during the middle of a pandemic. We are seeing a recovery to a degree but I'm not forecasting for pre-Brexit levels for the next two years. We're exploring other options, it's actually easier to get beer to the rest of the world at the moment than it is to get it into Europe.”

Opening the Portobello brewery was huge - I still sometimes walk into the brewery and go ‘this was in the kitchen two years ago’.

What is your proudest achievement so far at Vault City?

“I think opening the Portobello brewery was huge - I still sometimes walk into the brewery and go ‘this was in the kitchen two years ago’. Also having such a great team around us and having such an interesting product that didn't really exist a couple of years ago. It was also quite a proud moment walking into my local Tesco where I've done my weekly shop for the last five years and walking down the alcohol aisle there’s two beers that came out of the Portobello brewery.”

What plans do you have for the business for the rest of 2021 and beyond?

“Well I mean two weeks ago we didn't have a Haymarket bar planned – I was driving into work and saw a big ‘for sale’ or ‘to let’ sign and thought ‘what if we turn it into a bar?’ It is such a moving piece, but the taproom for us is the next big milestone. We're working with a really talented design agency Studio So and they've done a really good job for us. It is going to be a sort of a Willy Wonka's Chocolate Factory for adults. That's going to be exceptional. And then going forward from there, I think it's all about trying to champion this new style of beer that we believe shouldn't be a niche nerdy product, basically trying to be accessible. We're also moving to a four-day working week, across the year. We've got a great ethos, and we've got great staff and we're trying to keep people as happy as possible. We do actually have a £500 a year hobby fund as well, where we pay towards someone’s hobby. The reason it's a hobby fund not just a pay rise, is it has to be on something that you enjoy, not just a new couch or kitchen, because it's over and above your paycheck. We’re trying to champion real wages for everyone in the industry. And we've set a minimum living wage of 1.1, which is 10% more than what the living wage is. We don't just want our staff to live - we want them to go enjoy themselves.”