Wednesday, the brewer announced it would venture into a new product line: hard cider.

Fish acquired Spire Mountain Ciders from Woodinville-based Washington Wine & Beverage Co. for an undisclosed number of Fish shares.

"Cider is one of those strange things where it's technically a wine but is distributed more as a beer," said Lyle Morse, Fish chairman and chief executive officer. "It's produced like a wine, but in stores and on tap in taverns and pubs, cider is like beer. In that way, it complements what we are doing."

Privately held Washington Wine also purchased an undisclosed amount of Fish stock and is now the second-largest shareholder in the Olympia-based brewer.

Fish, which has about 230 shareholders, falls below the threshold that would require the company to release financial details of the deal publicly.

It's a significant boost, Fish co-founder Crayne Horton said.

"Spire Mountain's total revenue in 2004 was about 20 percent of ours," he said.

Fish, which carries the torch as South Sound's largest beer producer after the closure of Miller Brewing Co.'s Tumwater plant in 2003, has long served Spire Mountain cider at its downtown brew pub.

"Our interest in acquiring this brand is in large part because of the renewed interest in cider," Horton said. "Cider enjoyed a revival in the mid-1990s, then sales slowed off a little. Now you are seeing more articles about cider, new brands and sales increasing."

Spire Mountain long has been a favorite among Northwest cider drinkers.

"Spire Mountain is the largest producer and dominant player in the Northwest," Horton said. "It was started in 1985 and is the longest-lived brand operating in the country."

Acquisition of Spire Mountain allows Fish to increase its penetration into the Northwest market and opens another brew pub opportunity.

"We want direct connection to customers whenever we can," Morse said. "This will allow us to take part in a brew pub in King County as part of Culinary Village at the end of the dinner train in Woodinville."

Washington Wine's multimillion dollar village is slated to open in summer 2006, Morse said.

Fish acquired all of the Spire Mountain assets, including the bottling line.

"We're in the process of preparing to manufacture the brand here in Olympia," Horton said.

The fermenting equipment will be transported from Bothell and installed in Olympia, where Fish has leased an additional 5,000square feet in the building that is home to its brewing operation.

Fish's state and federal wine licenses should be secured in the next week.

On the production side, cider starts out as wine.

"First, we'll make an apple wine and a pear wine," Horton said. "Later the wine is watered down to the specific 5 percent alcohol level that the ciders are sold at for bottles or kegs."

Cider production, which also includes the addition of carbonation, takes about six weeks per batch versus 10 days for Fish ale brewing.

The cider line should offer a higher profit margin.

"The numbers tell us the cost of goods is lower," Horton said.

On the sales side, Fish will offer cider along with its line of Fish Tale and Leavenworth beers.

"We're going to bring the cider into all of our existing distribution channels," Horton said.

Washington Wine started as a cider maker and branched into wine, opening Silver Lake Wines and acquiring Glen Fiona Wines in Walla Walla.

"They wanted a partner in the beer business," Horton said. "They are wine salesmen and recognized that we are better suited to sell and produce cider."

Washington Wine President and Chief Executive Officer Sal Leone echoed Fish's enthusiasm.

"This if our first venture into the beer side of the beverage business," he said in a news release. "While we have had great success with Spire Mountain over the years, we think that the sales and marketing of these products is much more closely aligned with the malt beverage industry and this sale makes a great deal of sense for both companies."

Fish's distribution will clear the way for Spire Mountain cider to expand in new markets -- Idaho, Alaska, British Columbia and Oregon.

"We have nearly complete Oregon distribution, and that will be new for Spire Mountain," Horton said. "We'll also be able to significantly increase sales while we are making calls on our draft location. Their sales staff wasn't going to the pubs."

The acquisition also makes Fish a bigger player.

"We have three brands now, and that will give us a higher profile with distributors and large grocery chains," Horton said.

Fish started in 1993. It moved the brewing across the street in 1996.

In 2000, Fish rolled out its first organic ale -- Amber.

Washington Wine approached Fish with the venture, as was the case with the deal to acquire Leavenworth Brewing in 2001. The deal was scrutinized for a year before the final papers were signed, Horton said.

Fish is making major upgrades on the brewing side as well.

Fish's facilities were appropriate to support the brew pub and meet Northwest supply demands in Fish's early business model, Morse said.

But as the company's strategy evolved to compete in and take advantage of the hand-craft brewing industry, the operations side faced a capacity ceiling that hindered growth.

"At our current size, it was increasingly difficult to meet demand and we had to grow through it somehow," Morse said. "We focused on making ourselves solvent and taking care of our main suppliers."

The Leavenworth deal was a step forward.

"Purchasing an all-draft brand in Leavenworth allowed us to increase production without the expense incurred around bottling," Morse said.

Fish production increased to 7,440 barrels, or by about 4 percent, in 2004.

That growth rate is in line with the national average for craft brewers but would have been higher if capacity allowed.

"We had more demand than we could produce," Horton said.

Fish is now doubling its capacity with a larger brew house shipped in from New Orleans. It has automated features that will make it more efficient and decrease labor needs, which then will be shifted to cider production.

"That equipment is being installed during the next month," Horton said. "We're also completely rebuilding the bottling line."

Combining the best components from the Fish and Spire Mountain lines with Miller equipment purchased at auction will give the company more versatility for differently sized packages, whether 12- or 20-ounce bottles, and labeling.

The operational changes, including a new heating and cooling system, will be more efficient and require less labor.

"The increased capacity will allow us to meet that demand and add new brands. For example, Fish Tale Blonde will be bottled as a seasonal summer ale for the first time this year, and we might start bottling some of the Leavenworth beers," Horton said.

Fish also is proceeding with plans to expand its brew pub, which has been a strong source of revenue and profits.

"We've submitted the plans to the city," Horton said. "Basically it will double our seating capacity."

Construction will get under way this summer, he said.

"The pub is the least busy during the hottest time of the year," Horton said. "That corresponds well with when we'll have the cider and new brewing operations under control. We hope to have the pub expansion completed by the fall."

Chris Clough is business editor for The Olympian. He can be reached at 360-754-5403 or by e-mail at cpclough@olympia.gannett.com.