Wednesday, October 22, 2014

3,000 breweries and counting: what will set limits to growth?

     Bellingham, pop. 80,000 or so, awaits the opening of our seventh and eighth breweries this winter. To those who wonder where the saturation point is, the optimists point us down to Bend, Ore., similar population, seventeen or eighteen breweries.  Why can't our town be the next Bend?
    Simple geography is one reason.  Bend sits in the middle of Oregon and its brewers can seek markets east, west, north and south.  Up here east is foreclosed half the year by snowed-in passes, west is the Pacific, and north is the 49th parallel, an insurmountable wall for beer sales to Canada. That leaves south, and a wee beer market called Seattle.
   Leaving our unique geography aside, the larger question is, how many breweries can any community/region support?  Are we headed for another shakeout?  That's the word historian Tom Acitelli used to describe what happened to U.S. craft brewing between 1996 and 2000.  In 1996 we had nearly 600 breweries operating; at the millenium that count was down to just over 400.
   In The Audacity of Hops (2013), ascribes the shakeout to "bad beer, tough times, and flighty newcomers"--the latter being those folks looking to turn a quick buck without having a passion for excellence in beer. Other factors he lists: a tv expose' of Sam Adams' contract brewing arrangements, Big Beer's "phantom crafts," and some noisy skirmishing over label content.  But at the end of that day, in 2000, we still had over 400 solid craft breweries and grounds for optimism.
    Fifteen years later, we hear of over 3,000 breweries nationwide, probably close to 400 just in Oregon and Washington.  Can most survive or is another shakeout coming?  A contraction on the scale of 1996-2000 would mean nearly a thousand breweries closing, and I can't see that happening.
   Lessons have been learned.  Bad beer gets outed pronto now, with all the consumer tasting sites online.  Most of the startups I have seen of late show that passion for brewing excellence, fueled much more by owner sweat equity than by quick-return-seeking investors.
   Distribution was a problem in the late 90s.  Budweiser distributors were admonished by August Busch III to prioritize their marketing efforts to his beers and away from competing products.  A-B has had craft-like products then and now (Shock Top) and significant minority stakes in regional breweries like Redhook and Widmer Brothers.  Miller and Coors, now merged but then rivals, also had craft-style offerings--Coors' Blue Moon Belgian-style beer has been out since 1995.
   Consolidation of the big brewers led to consolidation of the wholesaler sector as well. Towns once served by three or four beer distributors now saw just two: an A-B house and a Miller-Coors house. In addition to those main brands, they are apt to carry some of the best-known imports like Heineken and Corona, and some well-established craft beers. Last year, four of the major wholesalers in western Washington launched a joint venture called the Great Artisan Beverage Co., which now carries about fifty American craft brewers in at least some of their territories.  Most of these breweries are coming up on tenth or twentieth anniversaries, so they've been around a while.
   Middle-tier mergers have fostered the rise of the "indie" wholesaler, firms like Dickerson Distributing here and Click Wholesale in the Seattle area, who handle just craft and import beers.  A perusal of their published affiliations again shows few recent entrants.  The youngest in Dickerson's lineup are Odin Brewing (2009) and Emerald City Beer (2010).  Down at Click, they distribute a 2013 startup, Ecliptic Brewing from Portland, but that is the creation of a long-time head brewer at Full Sail.  A new brewery has to make a track record to interest any distributor.
    A distributor matters only if a brewer's business plan includes elements like packaging (bottles or cans) or draft accounts in taverns and other on-premise licensees outside one's own bailiwick.  There are plenty of brewers content to keep their own taproom supplied and a few draft accounts near enough for self-distributing to be feasible.  For those with more ambitious dreams, the first few years will be a challenge.


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