the Nostalgia Series: (from The New Brewer, Spring 2009)

Beginning in 2009, I have written one of the four primary articles in the annual “Industry Review” issue of The New Brewer, the bi-monthly magazine published by the Brewers Association. These stories summarize performances at all levels in the craft brewing world. My assignments over the years have been reporting on either microbreweries or brewpubs. This was the first of those seven (and counting, I hope) stories, looking back at 2008, written at time when all the explosive growth in the industry was still something brand new and awesome. 

MICROS: A Tale of Nine

By Jack Curtin

Their stories were spun out of the deep hill country of Texas and from a 115-year old historic former creamery in Arizona, writ thrice over in beer-loving Colorado and twice in sunny California, told in a New York hamlet famed for its celebration of the national pastime and again in the shadow of the Keystone State’s capitol building, the accomplishments measured within the geographic limits of single states and in markets spread across the nation.

What they did is merely one part of a much larger tale–the continued growth and strength of American microbreweries—but the shared achievement of a small band of U.S. micros last year marked a special moment in that chronicle of success.

2008 marked was the seventh straight year in which craft brewing maintained its growth pattern, with a total production of 8,596,971 barrels. Microbrewery production overall was up 13% and a record-breaking nine U.S. micros topped the 15,000 barrel mark and officially became regional breweries.

The nine new regionals, listed by percentage of growth, are Firehouse Brewing Co., San Diego, CA (17,500 bbl, 83.4%); Oskar Blues Brewery, Longmont, CO (29,500 bbl, 50%); Brewery Ommegang, Cooperstown, NY (16,800 bbl, 57.6%); Real Ale Brewing Co., Blanco, TX (16,629 bbl, 44.5%); Troegs Brewing Co., Harrisburg, PA (19,000 bbl, 30.1%); Bear Republic Brewing CO, Healdsburg, CA (18,204 bbl, 31,5%); Avery Brewing Co., Boulder, CO, (15,860 bbl, 21%); Left Hand Brewing Co., Longmont, CO (16,660 bbl, 12.8%), and Four Peaks Brewing Co., Tempe, AZ (16,257 bbl, 9.9%).

The Brewers Association’s Paul Gatza noted that “most of these companies been around for a while and developed almost a critical mass of awareness in their regions,” suggesting that familiarity can breed something far different from contempt. He added that strong distributor support helped many crafts take advantage of that recognition factor. “Distributors are also being more supportive of craft products and getting them into the marketplace over the last few years. They’re seeing slower growth for the major domestics and smaller margins there and imports dropping. That makes crafts very appealing from a pure business sense.”

Better distribution was indeed one of the factors most mentioned by representatives from the nine breweries in interviews with New Brewer, along with improvements in overall infrastructure, often begun earlier, which began kicking in strongly during 2008. Several also emphasized the personal bonding between craft brewers and their customers, a factor which they see as a real advantage, especially in the current economic climate.

Real Ale in Texas, which grew by 5118 barrels, has a 50 barrel brewhouse, installed in 2006 (moving up from a 15 barrel system) and owner Brad Farbstein said the accumulating effects of that upgrade and the move to the largest Anheuser-Busch wholesaler in Texas, Ben E. Keith Beverages, mid-way through last year, were the primary reasons for its growth. “We are located in the hill country between Austin and San Antonio,” he said, “and sell our beer only in Texas and most of it within 50 miles of the brewery. We were able to build our new plant with a grant from the state which created the water and sewer lines we needed in exchange for our doubling our work force by hiring moderate and low income employees. We made more beer and sold more beer.” He noted that new beers created by head brewer Tim Schwartz, who came on board six years ago after ten years at Austin’s Bitter End, has had a major impact in Real Ale’s development and growth.

Jim Scussel, one of the co-founders of Four Peaks in Tempe, also takes pride in the fact that his beers are sold only in Arizona and that the company, which was up 1406 barrels, works with a single wholesaler. “It makes it very simple and easy dealing with one distributor versus ten or twenty of them, all with different agendas,” he said. “Our philosophy is the rifle approach–going deep in our backyard–versus the shotgun approach–spreading it across the country and seeing what sticks. We save a lot of money on marketing and transportation costs this way.” They have a restaurant in the same building as the 20 barrel brewery, a refurbished creamery which was built as an ice house in 1892, plus a bar and restaurant ten miles away in North Scottsdale.  Sales at the two locations accounted for roughly 19% of 2008 sales, according to head brewer Jim Roper. “Our growth has been steady over the years,” he said, “This year we plan to begin bottling one of our draft-only beers and are installing a canning line for two of the other drafts. Packaged beer is where we should see the most growth but we also expect draft volume to continue to increase.”

Mention cans, of course, and most beer people immediately think of Oskar Blues, the guys who did it first. PR maven Marty Jones says their hefty 6,500 barrel increase (both the barrelage and 50% growth were second only to Firehouse) was due in part to the fact that “the novelty of the package is still a major factor. More people are coming around to the concept of good beer in a can and those of us who have gone this route are collectively shrinking the number of negative opinions every day through education and promotion.” He also noted the opening of their new brewery in April and the hiring of Jeff Nickel, a former Coors brewer, and John Bryant, formerly of Odell, as solidifying their efforts. “We also have the advantage of starting out as a brewpub. A brewpub offers an experience you just don’t get anyplace else. People are sticking with us because we are offering something really special and have a very personal connection to a lot of them.”

There’s no brewpub at Troegs Brewing in Harrisburg, but co-founder John Trogner, after attributing their 4,400 barrel increase to the growth of craft beer in general and an expansion into new markets (“we went into New York last year and have just entered Massachusetts and figure that with Boston, New York and Philadelphia we have a solid foothold on the East Coast”), stressed that “one other thing we’re doing is increasing our presence outside the brewery. We were more active in Philly Beer Week this March and plan to be at more beer festivals this year. One on one with customers makes even more sense in a tough economy, because they feel they know us and it solidifies the relationship. It’s not as easy to stop drinking the beer when you feel you know the people who make it personally. We’re sending the brewers and even the guys on the bottling line out to events regularly now. I particularly like `Meet the Brewer nights’ where you can talk about beer with people who want to talk about beer. It gives me a chance to release my inner beer geek.”

Brewery Ommegang went over the 15,000 mark (up 4900 barrels) with a little help from its friends (and owners) at Moorgat Duvel, where 1136 barrels were contract brewed. That was a follow-up to 1961 barrels done in Belgium in 2007. “We just couldn’t keep up with demand,” explained “Minister of Propaganda” Larry Bennett, “so we had to ask Duvel to brew some beer for us in 2007 and early last year. The last of it arrived in this country last summer. We’ve installed several new tanks to serve as fermenters and lagering units and are caught up at last.  For last five years, our average growth rate has been over 30%. Given the economy currently, we’ve projected 25% for 2008 but the first quarter has been so strange, it’s really hard to see what’s going to happen. We’re just sitting tight, looking at things more closely, and being careful. The first quarter will give us a better idea.”

The two California breweries which are on the list are, coincidentally, both run by active firefighters. San Diego’s Firehouse Brewing, which reported upping its output by an impressive 7960 barrels last year, was founded by third generation firefighters Christopher and J.T. Finch nine days after 9/11 and donates part of its proceeds to support widows and orphans of firefighters who die in the line of duty (138 in 2008). Firehouse moved its brewery into a new location last year and finally mastered its bottling line to package its flagship Pale Ale, the two components which account for the growth spurt in Chris Finch’s eyes. “We bought an oversized 30 barrel brewhouse when we started out and installed it ourselves,” he said, “and you always really learn how you want something to work after you start using it. When we moved, we were able to tinker and make some changes and now we’re doing 45 barrel brews. We were pretty much all draft with the pale ale and a light Hefeweizen until late in 2007 and having beer in bottles gave us so many more places to sell it. Our plan this year is to try and add a new beer every month and continue to grow. We’re much more efficient now and with more than 200 firefighters involved in our ownership, we always have plenty of volunteer help.”

At Bear Republic (up 4,361 barrels in 2007) in Healdsburg, which is about an hour north of San Francisco in the Russian River Valley, new bottling and kegging lines and a new 50bbl brewhouse were added over the past two years, according to brewmaster Rich Norgrove, who is also in the fire service. He says that his experience there makes him “the sort of person who always wants to be five steps ahead of the fire. My father (who handles outside sales and the restaurant) and I are both ex-military, and my wife Tami is our CFO, so we have very similar mindset throughout the company.” Norgrove noted that “2008 was probably our biggest year in terms of adding infrastructure” and says that he expects results this year to be driven by packaging, including new 12 and four-packs and some special 22oz releases. “Our distributor has been telling us we need to be in 12-packs and now we’re finally able to do it.” He added that continued success will also depend on Bear Republic’s relationship with its suppliers. “I see the biggest issue over the next year to year and a half as the willingness of our purveyors to work with us as we grow. We are looking very carefully at what our terms are with various sources and solidifying those relationships. In this economy, instead of thinking about a 25 or 30% growth model, we’re looking at about 15 to 20% and running budgets based on that. We’re digging in, in military terms, and are ready to ride it out if we have to.”

Eric Wallace president and founder of Colorado’s Left Hand Brewing, is also looking at a longer horizon after the installation of a 60 barrel brewhouse help spur an 1887 barrel increase in 2008. He says he always has. “I don’t look at the volume number that much, I look more at how we’re doing. Are we financially solvent? Are we building distributor network for the long term or are we just opening markets left and right so we can grow our volume? We make conscious decisions to insure this is a good place to work where everybody can have a life. Our approach is holistic, we have a lot of other things we want to accomplish in our lives and in the end still make the beer that we want to drink. It’s not just about more barrels. What human cost do you have to pay to achieve that? We got out of the distribution business in 2006 and it’s a lot better now with all our energies focused on the brewing side. We fully expect to continue to grow at a reasonable pace.”

The third Colorado brewery in the mix, Avery Brewing Company in Boulder, was up 1996 barrels and owner Adam Avery attributed that to significant growth close to home and additional equipment. “Overall, we saw a 50% increase in gross dollar sales,” he said. “Our higher end products and big seasonals did the job for us, along with an 80% sales jump here in Colorado. Last August, we were running at capacity and had to spend about half a million dollars to add two more 240 barrel fermenters and rip out old glycol system and put in a new one. The silver lining in this bad economy is that money is cheaper for those who are successful so we refinanced all of our equipment into one mega-loan at a super reduced rate. In the end, all that new equipment is costing us not very much more than what we were already paying.”

Avery offered the most specific details of any of the nine about how he sees the current landscape. “We definitely saw a slowing in growth for the first two months of 2009. We had a great December, the best one ever, and then January and February were just terrible. March, on the other hand, turned out to be an all-time record sales month. We’ve never sold more beer than we did in March. I think what happened is that distributors and retailers are carrying smaller inventories because of slower sales so the pipeline thinned out for a while there, but I can’t be sure. The only thing I can predict is that it’s going to be a volatile year.”

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