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E-Malt.com News article: USA: Craft beer production growth flattens
Brewery news

The heady days of the craft beer industry have given way to slower growth as small and independent brewers face stiffer competition on the retail shelf, especially from the “Big Beer” sector, the Press Democrat reported on September 6.

The news at the fourth annual California Craft Beer Summit in Sacramento on September 6 wasn’t all that bad, though. The United States should reach an all-time high of about 7,000 breweries — the vast majority of them small brewers — by year end and the craft sector is on pace for a 5 percent increase in production compared with 2017, said Bart Watson, chief economist for the Brewers Association, the trade group representing independent and craft breweries nationwide.

Yet, the mood inside the Sacramento Convention Center was more subdued than in past years for an industry that posted 18 percent annual production growth as recently as 2014. Industry officials had conceded that level of robust growth would be unsustainable over the long haul for the $26 billion-a-year U.S. craft beer sector.

The smaller growth numbers this year, however, also coincided with some high-profile setbacks, among them San Diego’s Green Flash Brewing Co. scaling back its national distribution ambition to a few Western states due to financial woes that forced the sale of the company.

The North Bay has not been immune to the changing industry currents, as both Mendocino Brewing Co. in Ukiah and Carneros Brewing Co. in Sonoma closed this year. A local investor is attempting to revive Mendocino Brewing on a much smaller scale.

“It’s a slower growth rate. It’s a changing growth rate from what we have seen. The old order is being disrupted. It’s the order that we thought was in place five years ago,” Watson said.

The craft beer slowdown comes as big wholesalers have consolidated to gain greater market share, making it much harder for smaller brewers to secure local, regional and national retail distribution deals. In addition, the two largest U.S. brewers — Anheuser-Busch Cos. and MillerCoors — have in recent years acquired about 20 smaller craft brewers.

“There are a lot of clouds on the horizon,” said Joe Whitney, chief commercial officer for Sierra Nevada Brewing Co. of Chico. The family-owned operation is the third-largest craft brewery in the country. “You don’t have to look too far to see what has caused that.”

Still, Sonoma County has a thriving craft beer business with about 30 breweries. By comparison, there are 467 wineries in unincorporated areas of Sonoma County. While the local area is noted for its wine tourism, beer tourism is steadily catching up. For example, 400,000 people visited Russian River Brewing Co.’s downtown Santa Rosa taproom last year even with the October wildfires. And that taproom is one of the county’s top tourist destinations.

Despite the headwinds, more craft beer industry expansion activity is scheduled for the fall in the county to specifically capitalize on beer tourism.

“Visiting breweries has become a great business,” Watson said. “It probably provides the majority of dollars for a few people in this room.”

Russian River will open its more than $30 million brewery and restaurant in Windsor and Seismic Brewing Co. of Santa Rosa will debut its first taproom in Sebastopol. Another entry will be 3 Disciples Brewing Co., slated to open a taproom just north of the reunified Old Courthouse Square by November.

“I have people calling late at night asking where they can find our beers,” said James Claus, a co-founder and brewmaster for 3 Disciples, in a phone interview.

The brewery now has a small production facility in Sebastopol and its beers are only available on tap at a few local restaurants and taprooms. The Santa Rosa taproom should have 12 draft beers with at least half of the selection rotating and featuring sour beers and Belgian-style ales. The plan is to eventually add food service.

The local craft brewing business is much more competitive now than four years ago, Claus said, when he and his partners started planning the brewery. The self-financed 3 Disciples was able to generate good word-of-mouth buzz among local craft beer lovers, making it less risky to open the taproom as opposed to being a new entrant, he said.

“We probably wouldn’t jump in the game now seeing the amount of breweries out there,” Claus added.

Brian Hunt, founder of Moonlight Brewing Co. in Santa Rosa, said the sector is ending its phase of “irrational exuberance” — borrowing a phrase former Federal Reserve Board Chairman Alan Greenspan used to describe the late 1990’s dot-com bubble.

Hunt sold half of his Moonlight stake to Lagunitas Brewing Co. of Petaluma in 2016 to help secure its future because his children don’t want to operate the business. Lagunitas is owned by international brewer Heineken International.

“There will always be room for more (breweries) and there will always be failures,” Hunt said.



08 September, 2018

   
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