Realbeer.com
 
Jul 29, 2014

More .edu

American Beer Month
The next generation of American brewing

1 | 2 | 3

A bit of perspective
The playing field isn't nearly as level today as it was in 1950. Then, the three largest brewing companies in the United States (Joseph Schlitz, Anheuser-Busch and Ballantine) produced 17 percent of the beer brewed in the country. Last year, the big three brewed almost 85 percent - and imports accounted for another 11 percent of domestic sales.

Should the members of the second tier today expect a better fate than Schaefer, Falstaff and Pfeiffer (all top 10 breweries in 1950)? Sierra Nevada vice president Steve Harrison offers a bit of perspective. "We'll see in 100 years," he said. "I can't say when we're going to stop (growing). We're in a unique niche, and we don't sell to everybody."

When Ken Grossman and Paul Camusi founded Sierra Nevada in Chico, Calif., the business plan called for production to max out at 3,000 barrels (a barrels is 31 gallons) per year, using a 10-barrel brewhouse. "We figured we could make money at that, we wouldn't get rich but we'd get by," said Grossman, now the company president.

"Jack McAuliffe (New Albion Brewing) had done a barrel and a half and that didn't seem like enough. I was homebrewing that much."

Sierra Nevada produced 1,500 barrels the first year (1980) and passed 3,000 in its fifth, 20,000 in its 10th and 150,000 in the 15th. This year the brewery will sell about 570,000 barrels. Today the main brewing kettle holds 200 barrels, another, 100 barrels. Grossman is in the process of putting in a 10-barrel pilot brewery that will be used to do everything from testing the quality of grain to making special beers for limited distribution.

"It will have more brewing capacity than we started with," he said. Grossman owns enough property in Chico to continue spreading out, so another expansion is always possible. Will it be necessary?

"We really don't know. The marketplace is evolving so quickly," he said. "The consolidation that is taking place at both the distribution and retail level is affecting the ability of even players our size to get to market."

What are hurdles for Sierra Nevada may be roadblocks for smaller breweries. "I think access to market is endangered now - and will worsen unless, as a segment, we grow our market share," explained Tom McCormick, a former pioneering distributor who edits BEERWeek, a newsletter for the specialty beer industry. "Bigger distributors, through consolidation, tend to be less craft friendly and tend to carry fewer SKU's (brands). The more we can increase market share collectively, the greater attention we will get both at the retail and distributor levels."

Who's in it for 10 years?
Tom Potter, CEO of Brooklyn Brewery, sat on the 1999 panel in Phoenix. Speaking first, he laid out facts and figures that made it apparent craft brewers couldn't reach a 10 percent share of the market within 10 years. In retrospect, it looks even clearer, because share has barely advanced in the four years since.

"Looking strictly at the numbers, it's a loaded proposition," Potter said. Potter, a banker in a former life, is a numbers guy. "But I've got two hats," he said. "When I was in college I was a poetry major. When I got married and had a child, then I went back and got an M.B.A. and became a banker." He was wearing his poet's hat for Jordan's keynote.

"I though Kim's speech was the single best speech anybody has ever given about our category," he said. "It was inspiring to hear her talk about our vision."

He finds good reason to look at the numbers another way. "We all talk about volume, but what if we talk about dollars?" he asked. After all, Heileman and Stroh tried competing on volume. Because specialty brewers sell six-packs for more and a larger percentage of their beer on draft, the dollar share of sales is higher than the share of volume. And every time one consumer walks out of a store carrying a $7.29 six-pack of specialty beer while another buys an $8.99 12-pack of mainstream beer, that share increases faster than volume grows.

"Also, who's in this for 10 years?" Potter asked. "I've been doing it 15, and I feel like we're just getting started. The real question is, can you get there doing it right? I think you can. Take away the artificial time restraint, switch the measurement from barrelage, then setting a goal of 10 percent can be a positive."

Redhook's Shipman is in the 10 percent camp. Redhook (owned in part by Anheuser-Busch) brews on both coasts, and has the capacity to make almost twice the beer is now sells, but looking at slow growth at his breweries since 1996 hasn't dimmed Shipman's optimism.

"We can continue to grow by addressing the needs of the consumer that are not addressed by the Big Three," said Shipman. The brewery enjoyed record second-quarter sales, while nationally beer sales were flat because of the weather and economy.

"In order to have a thriving industry, you have to have a variety of players with a variety of approaches being the leaders," Shipman said. "It may not be my company at the time, but the benefits are accruing to all of us in some special way.

"The dream of 10 percent will cease to be possible when you can't find somebody who is growing."

1 | 2 | 3

ADVERTISEMENT