E-Malt.com News article: 3826

USA, St. Louis: Major brewers are forecasted to see almost flat sales this year as low-carbohydrate diets and surging popularity of distilled spirits among young drinkers send fewer consumers to the tap. But the story is different for craft brewers. They are expecting to see strong growth.

Though there is no strict definition of a craft brewer, the Association of Brewers, a trade group based in Boulder, Colo., defines it as a firm using 100 % malt as the sugar source in the fermentation process for more than half of its sales volume. This includes companies as large as Boston Beer Co., the maker of Samuel Adams beer, and those as small as O'Fallon Brewery in O'Fallon, Mo., which made about 1,000 barrels last year, Beverage World commented.

Craft-beer volume should grow between 4 percent and 6 percent this year after growing 3.4 % in 2003, said Paul Gatza, director of the association. By contrast, the U.S. beer industry's shipments are expected to grow less than 1 percent this year after declining 0.3 % in 2003.

Dubbing their product as better beer, the craft brewers think young drinkers looking for variety are more willing to try a wide range of styles, from dark stouts to golden lagers. "We're at a tipping point where we could really start to gain market share," said Dan Kopman, vice president and chief operating officer at St. Louis Brewery Inc., the maker of Schlafly beer. Using the association's figures, craft brewers produced about 6.7 million barrels of beer in 2003, about 3 percent of U.S. shipments.

Craft brewing exploded in the early 1990s, but growth slowed by the end of the decade as the plethora of styles overwhelmed consumers, still accustomed to the kind of lagers made by large brewers. The rapid growth led to uneven quality, which hurt the craft industry's reputation. Also, craft brewers said imported beers took away some of their steam, drawing away consumers looking for variety.

Now, the industry has matured, leaving firms that offer high-quality beers. "It's not a hit-and-miss thing anymore, so there is confidence these products are going to be full-flavored and high quality," Gatza said. As craft beers became more accepted in the past 10 years, a new generation of beer drinkers have acquired a taste for the level of hops and malt not found in mass-produced beers, said Bob Sullivan, vice president and chief marketing officer at Boulevard Brewing Co. of Kansas City. "There always will be a huge consumer base for people who don't want the bitterness or full-body of a craft beer, but there are more and more who like that," he said.

The biggest growth is at established regional brewers, meaning those that brew at least 15,000 barrels a year, Gatza said. "We are at the point where the craft-beer players are maturing," he said. "There isn't as much of new people trying to get in and develop brands as there are existing players slowly growing."

St. Louis Brewery, more commonly known as Schlafly, hopes to ride this growing appreciation for craft beers. The brewer expects this year's production to hit 15,000 barrels, about 25 percent more than 2003. Though its core market is the St. Louis area, the brewer plans next year to widen its distribution throughout Missouri and central Illinois.

This year, Schlafly launched two new beers, the 1904 American Lager and the Lewis and Clark Expedition Reserve. The commemorative beers were supposed to be discontinued after this year. But the brewer has decided to add them to its lineup of bottled beers. "In the past year, we've recognized that consumers want variety," Kopman said.

Now, the brewer bottles eight styles of beer during the year and six styles during certain seasons. It offers an additional 26 styles that are available in draft at select locations or at its Tap Room and Schlafly Bottleworks restaurants. On the other side of the state, Boulevard Brewing is betting heavily that its line of beers continue to grow at double-digit rates.

Boulevard expects to produce about 88,000 barrels this year, up 17 percent from 2003. Next year, the brewer foresees output at 101,000, just 4,000 barrels shy of its production capacity.

Starting in March 2005, it will invest $15 million to build a new brewing and packaging facility. The facility, scheduled to open in June 2006, will have an initial production capacity of 150,000 barrels a year, but this could grow to 600,000 barrels annually.

Though the major brewers worry about the loyalty of drinkers 21 to 27 years old, these drinkers are a solid consumer base for Boulevard.

"Our largest per-capita-consumption markets are in the Big 12 schools," Sullivan said, in areas such as Columbia, Mo., and Lawrence, Kan.

Sullivan believes that these younger drinkers, overloaded by advertising, see Boulevard as more expressive of their personalities and a way to differentiate themselves from an older generation of beer drinkers. "We're pretty much just concerned about beer," Sullivan said. "It's not just about race cars or women wrestling." Gatza said Generation Y - generally people born after 1980 - are a fertile ground for craft beer as they reach the legal drinking age. Ten years ago, people were not ready for too many choices. But this generation is not brand loyal, Gatza said. "We're at the point where there could be more craft brands out there, and it wouldn't hurt the industry like it did a number of years ago."



15 December, 2004