AP takes note of PacNW specialty slowdown.

Associated Press - Regional brewers in the Pacific Northwest who stocked store shelves with Winternachts, Snow Cap Ales and Wassail ale over the holidays are less festive than they were a year ago.

The unbridled growth of the craft brewing industry in the 1990s has brewers and analysts predicting a round of price wars and a shakeout of weaker breweries.

It seems to have begun already with six-packs of microbrews routinely priced at $5.99 and lower and the collapse of Portland's Nor'Wester Brewing Co. this fall.

"Over the next 12 months, a whole bunch of them will close their doors," predicted Russ Motley, chief executive officer of M2 Beverage Marketing Inc. in Lakewood, Colo.

The craft brewing business - as opposed to the traditional megabrewing business of Anheuser-Busch, Coors and Miller - grew so quickly this decade that it attracted too many players, Motley said.

"This industry really hasn't had to worry about being competitive over the last 10 years," said Gary Fish, president of Bend's Deschutes Brewery. "Now it's starting to look like other industries."

Small brewers were going public and finding favor on Wall Street up until a couple of years ago, when growth rates started slowing.

Even last year, sales in the category were up more than 25 percent from 1995.

"A couple of years ago," said George Hancock, president of Seattle's Pyramid Breweries Inc., "it was a question of how much you can brew and how fast you can get it to market."

For 1997, the overall craft brewing category will have grown between 5 percent and 8 percent, according to the Colorado-based Institute for Brewing Studies. That's a good growth rate for a lot of industries and still better than the domestic beer business as a whole, but it's a sharp dropoff for the craft brewing segment.

Craft beers grew quickly for several years, but still amount to no more than about 3 percent to 4 percent of the total beer market. And the total beer market has grown very slowly in recent years.

"One of the mistakes that people in this industry made, I think, is that they tried to create national brands," said Deschutes Brewery's Fish. After all, he said, Anheuser-Busch and Miller had a 100-year head start: "They didn't become national brands overnight."

Privately owned Deschutes has contented itself with building a strong franchise on the West coast, while other regional brewers adopted ambitious plans for national growth. Some went public to finance their expansion.

Stocks of the public companies have been hammered by Wall Street, which doesn't like to see declining growth and is skeptical about craft brewing.

Seattle's Redhook Brewing stock trades in the $5 range, down from $27 in January last year. Seattle's Pyramid Brewing trades under $3, down from $17.50 in January last year.

The pratfall of the year was the collapse of Nor'Wester Brewing Co., which limped through the first part of the year under heavy debt and an agreement to be sold to United Breweries of America of Sausalito, California.

When the time came to close the deal in September, Nor'Wester's finances were so weak that United backed out. Nor'Wester went out of business, and its equipment was sold to satisfy its debt Saxer Brewing Inc. of Lake Oswego bought the rights to the brand name and now brews Nor'Wester ales.

Deschutes showed a 21 percent gain in state sales through October, according to the Oregon Liquor Control Commission.

That was second in Oregon only to Portland's Widmer Brewing, though both trail far behind megabrewers Anheuser-Busch, Coors, Pabst, Miller and Stroh. BridgePort showed strong gains in the 20% range but on a smaller base than Deschutes. Saxer sales jumped 47%, on a still smaller base.

Still, nobody should draw too many conclusions from Saxer's success, said Steve Goebel, brewery president. "Anybody who wants to get in the business in Oregon has missed the bus," Goebel said. "That bus pulled out a long time ago."