Scott Goss

The News Journal

Delaware farmers might soon be able to wet their beaks in the nation’s booming craft beer industry.

At least that’s the concept behind Proximity Malt.

The Milwaukee-based startup plans to open a processing plant near Laurel by mid-2017 where locally grown barley can be converted into malt specifically for use by craft brewers and other malt users in the Mid-Atlantic region.

“Our goal is to create value for both local farmers interested in growing a premium product and area brewers looking for a local source of raw materials,” spokeswoman Amy Germershausen said. “But ultimately, we want to help create the best tasting beer possible.”

Craft beer has become a $20 billion industry in the United States, thanks largely to the unique flavors and adventurous spirit that separate independent breweries from the multinational corporations that design their products to appeal to the widest audience possible.

Yet many craft breweries still use the same raw ingredients as their global competitors. And most of those commodities are grown thousands of miles away.

Proximity Malt hopes to change that paradigm by supplying craft brewers with the most local ingredients possible.

That promise holds considerable appeal for some of Delaware’s best-known breweries.

“We’ve had some conversations with them, and I hope they’re able to make it work.” said Luanne Holjef of Fordham & Dominion Brewing Co. in Dover. “We’re always encouraging people to drink local, so it would be great if we could buy our ingredients locally too.”

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Proximity Malt was launched in early 2015 by a pair of former executives from Malteurop, one of the largest malting operations in the world. Malteurop is now suing Proximity Malt, claiming its former employees started their new business on company time.

"We don't think we've done anything wrong, and we have full faith in the justice system," Germershausen said. "There is also nothing in the lawsuit that is preventing us from moving forward, and we're continuing our progress."

The fledgling business has yet to sign any contracts with Delaware farmers or breweries, but it does have the backing of venture capitalists and state officials.

Proximity Malt landed $60 million in private equity financing last fall to help cover the construction of a test lab in Wisconsin, along with malt houses in Colorado and Delaware.

The state economic development office also staked Proximity Malt with $1.73 million in taxpayer grants. A portion of those funds are earmarked for an environmental cleanup at the former Laurel Grain Co. facility off Bi-State Boulevard that the company bought last year for nearly $1 million. Once open, the new facility is expected to employ about 25 workers.

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“The state support was very helpful,” said Dale Bugajski, the company’s chief financial officer. “But what really sold us on Delaware was the availability of a facility that matched our needs and its central location in the Mid-Atlantic, which has one of the highest concentrations of barley grown in United States.”

Proximity Malt hopes to buy roughly 70 million pounds of barley by the time its Laurel plant reaches full production capacity in 2018. Delaware farmers, by comparison, grew about 84.5 million pounds of barley last year – most of which was used for animal feed.

The company is hoping to convince some of those farmers to switch to a European variety of barley that will produce a flavor profile acceptable to brewers.

"We're experimenting with strains now to find the one that will thrive on the East Coast," Germershausen said. "Less than half of the barley we buy this crop year will be locally grown so we can get some baseline parameters established that we can use to work with local farmers. Then we'll try to buy more and more locally sourced grains."

State Agriculture Secretary Ed Kee cheered the company's business model as a potential new source of demand for Delaware crops.

"Delaware agriculture is a diverse sector, and we welcome this type of investment that can provide jobs and lead to new avenues for our state's 2,500 family farmers," he said.

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Proximity Malt is hoping to introduce itself to some of the region's nearly 400 craft breweries during this week's Craft Brewers Conference in Philadelphia. The company also is planning to invite growers and brewers to a "field forward" event in Delaware next month that will include barley field tours, a stop at the future malt house near Laurel and a visit to a local brewpub.

Eric Williams, co-owner of Mispillion River Brewing in Milford, said he's intrigued by Proximity Malt. But, he added, the real test will come down to two factors: price and flavor.

"We're all about supporting our local farmers, but it can't be grossly more expensive than what we're currently buying," he said. "We also have some core recipes that are based on certain malts so I really can't say whether this will be viable for us until I've had a chance to try it out for myself."

Germanshausen said the company is just as eager to get its product into brewers' hands.

"We've had a lot of great interest from farmers and brewers," she said. "Our focus now is on getting something to them that they can taste, smell and try out."

Contact business reporter Scott Goss at (302) 324-2281, sgoss@delawareonline.com or on Twitter @ScottGossDel.