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Annual microbrewery report: continued growth of the microbrewing segment bucks national trends.

Who could have forecast ten years ago the boom in microbrewing? Who would have predicted that the brands would become something more than oddities tucked into a corner of the retailer's cooler? And who would have guessed that a growing number of beer drinkers would actually switch from mass produced and marketed beers to brands that were brewed and bottled in their own home towns?

But that is just what is happening, and, if market indicators are correct, will continue to happen.

Has the microbrewing industry finally arrived? Not completely, perhaps, but it is definitely in the neighborhood.

For the first time since the new wave of brewers arrived on the scene in the late 70s, the small scale brewing industry has taken a piece of the market away from the national companies.

The American beer market has been stagnant for several years now -- domestic beer sales were down .04 percent from the previous year and the top six brewers registered an overall 0.5 percent drop -- but there were some bright moments for small scale brewers last year.

Sales by regional, micro and contract brewers grew by 17 percent. With almost 400,000 barrels produced last year, the microbrewing segment accounts for about 0.2 percent of the national growth. A small gain, to be sure, but a gain nonetheless. The figures reflect the almost continuous increases the microbrew segment has shown since the early 1980s.

And, though the import segment of the beer market did register a gain after a dismal 1991 performance, the encouraging growth of the microbrewing industry may indicate that consumers are beginning to look more in their own backyard for variety.

"The appeal of the imports for most people was that they were from some exotic place and they wanted to try a beer from Africa or wherever," says Gary Arnold, of James Oglethorp Brewery in Georgia, scheduled to go on line this summer. Now, he says, consumers are realizing in growing numbers that they can get that same variety from microbreweries.

No End in Sight

How big will the microbrew segment of the industry grow? "I don't think there is any reason not to consider five percent market share as a reasonable target on a national basis," says Steve Dinehart, president of Chicago Brewing Co. "The microbrewery movement is going like hot cakes, especially on the west coast. You keep thinking it is going to top off but it still hasn't, and it doesn't look like there is an end in sight yet."

Indications are that the microbrew segment is doing quite well sustaining that continuing growth.

The key word for this year seems to be expansion, as many brewers add to their facilities, their product lines and sales territory.

What follows is a sketch of the microbrewing industry drawn by a sampling of the brewers themselves, who talk about the year they had, how this year is shaping up, and what they see ahead.

Catamount Brewing Co. White River Junction, VT

"Things are going great," says president and master brewer Steve Mason. "1992 reflected continued growth in production and sales."

The brewery did quite well last year, with more than 11,800 barrels produced. "That was real close to our goal of 12,000 barrels," Mason says.

Catamount's output included the introduction of several new brands to the line. "During the fall we introduced a new product called Catamount Oktoberfest, which is a limited edition German-style lager we sold primarily in the Northeast. It did quite well," Mason says. "It was the first time we have done that product and we intend to do it again every year."

Also new to the Catamount family was Catamount Bock, introduced in late winter, which will be repeated annually.

As one of the more prolific contract brewers in the east, Catamount continued to do well. "Overall, contract brewing as a portion of our production and of our business remained stable for the year. Last year we continued production of Post Road Ale, as well as Saratoga Lager," Mason says. "We began brewing Commonwealth Boston Burton Ale, for the Commonwealth Brewing Co. in Boston. And we also began a fourth contract brewed product--Pike Place Pale Ale--for the Pike Place Brewery in Seattle."

Catamount is in the midst of planning for an expansion of the brewery, that will increase its capacity to 18,000 barrels a year, to be completed by fall.

"It's going to provide us with additional fermentation and conditioning capacities, as well as a new warehouse to be used for storage for raw materials and finished product," Mason says.

Portland Brewing Co. Portland, OR

"We produced more beer out of our little brewery than I ever dreamed possible," says Fred Bowman, president and master brewer. "It was a great year."

With just under 10,000 barrels produced last year, well over its expectations, the company realized the need to move on to the next phase of growth. Earlier this year, Portland Brewing Co. became the first microbrewer in the Northwest to publicly offer stock ownership to residents of Washington. Funds from the stock sale went to brewing equipment, pub improvement and working capital for the brewery's new 27,000 square food expansion. The new addition should be online by press time.

"We are going to triple our size. The brew house itself is about 12 times the size of what we have now and the fermentation we are starting off with is three times what we have now.

"With additional tanks we can go up to probably 70,000 barrels," Bowman says optimistically, "but if we can get to 30,000 in the first year I think that would make us pretty happy."

With that goal in reach, Bowman says the company's focus will shift from being production related to being sales related. And if past performance is any indication, that shouldn't pose too great a problem. The brewery's McTarnahan's Ale (formerly Portland Scottish Ale) has been very well received and won a gold medal at last October's Great American Beer Festival.

"That beer has really taken off for us and is becoming a lot bigger slice of our production," Bowman says.

Capital Brewery Co. Middleton, WI

"Last year went well and this year is going even better," says Capital Brewery president Richard Linck. "We are looking for a modestly profitable year again."

Like many other brewers, Capital is optimistic about the future of the industry and is laying the ground work for increased production.

"We are in a growth mode," Linck says. "We are expanding our capacity by adding tanks that should give us an additional 4,000 barrels a year." The tanks will increase Capital's capacity to about 16,000 barrels, Linck says.

"We are also introducing our new Wisconsin Amber in bottles in May or June. It has done very well on draft in the area and we think it will do even better in bottles."

D.L. Geary Portland, ME

"The company is successful, healthy, and profitable. Things are good," says David Geary, president and master brewer. "We had a 30 percent increase last year and so far this year we are up 20 percent and I see no reason for that to change."

As one of New England's oldest microbreweries, D.L. Geary has gotten past the growing pains of many a younger company. "I think because we are so old, we don't owe anyone any more money. Therefore our pricing can be very competitive and that is important," Geary says. "And as far as what we make and how we package and present it, it is superb."

The brewery has no plans--and no need--to introduce new products, Geary says. "We have our hands full with the products we have now."

D.L. Geary's Hampshire Special Ale more than doubled its sales from previous years, which caught the company somewhat off-guard. "Last year we got into a bind in the summer because demand far exceeded our ability to make it," Geary recalls. "We turned down out-of-state for the month of August," Geary says. "You hate to lose 2,000 to 3,000 cases worth of potential business but that is much better than the alternative of having 50,000 cases on the floor that you can't sell."

The brewery recently added new fermenters that will expand capacity to about 11,000 barrels.

"We are growing at an alarming rate," Geary enthuses. "The interesting thing is that our largest and fastest growing market is our local market--the state of Maine and New England. That's good news. We don't have to go very far afield to create new business."

Chicago Brewing Co. Chicago, IL

"We are doing multiple things on multiple fronts," says Steve Dinehart, president of Chicago Brewing, which began exporting its Legacy and Heartland brands to Europe last fall. "We went on sale in England at the end of October and then spread over to Scotland and Ireland. At the same time we also ran a test market in Germany that went very well and should lead to some new business. We also picked up our first order from France."

In Great Britain and France, Legacy Lager accounts for some 80 percent of the company's export sales. The German market is close to a 50-50 split between Legacy and Heartland Weiss.

"As far as I am aware, we are the only American-brewed weiss beer to be sold in Germany," Dinehart says. "It makes us feel good to know that we are standing up well enough against European-brewed beers that people are willing to pay a premium price for us in that market."

That would seem to be the case domestically as well, where the company held its own last year and is now gearing up for a bigger piece of the market.

"We didn't expand into any new states last year, but we expanded some coverage in states we already service. We have 25 distributors from 19 states that want to start carrying our beer. By the end of this year we hope to be in about 25 to 30 states."

Bricktown Brewery Oklahoma City, OK

Among the new faces on the brewing scene last year was one that was a long time coming. The Bricktown Brewery became the first (and still only) brewpub in Oklahoma since that state's law was changed to allow it in September.

"We couldn't ask for anything better," says Head Brewer Luke DiMichele. "We have been averaging about 110 to 120 barrels a month. We're doing pretty good for a brewpub."

The Bricktown Brewery has a regular lineup of four to five beers, including Copperhead Ale, Red Brick Ale, and Irish Stout. Seasonal brews are a big hit at the pub and DiMichele says the Raspberry Ale and Winter Porter were very well received.

"Reception has been very good," he says. "Oklahoma is still a new territory for this kind of thing--the novelty is still here. You can go out to California or the west coast and there are brewpubs all over the place. People here still can't believe it. They say 'Oh, you brew the beer right here?' It's real new for them but we are developing a strong following."

Strong enough, apparently, to already be considering expansion plans. "We'll be doing a different kind of concept, a deep dish pizza place. Then we would expand the fermentation and serving tanks into the next room. That would increase us to about 1,000 barrels a year with three or four beers that are unique to the pizzeria," Dimichele says. The owners are also looking toward selling kegs to remove from the premises.

Looking Ahead

The future looks bright for the microbrew industry, but as with any "new" industry, there will likely be a period of adjustment as the base consumer group establishes itself.

One segment of the market will be built on a solid core of consumers who will continue to buy the brands. The other segment is based on trend, and could artificially inflate demand before the trend wears off.

"Corona is a good example. They shot sky high and then went way down as they lost their trendiness. Now they are back on a steady growth and are still one of the largest beer importers in the country," says Chicago Brewing's Dinehart. "They have a solid base of beer drinkers. At some point we are going to see the microbrew industry over-shoot it. The point is not to build capacity on trendiness."

The success of the micros has not been lost on the big brewing companies. Miller recently introduced Miller Reserve and Reserve Ale to appeal to the growing segment of consumers drinkers who are discovering and experimenting with the wide variety of beer styles available. Likewise Coors Brewing produced Killian's, and G. Heileman came out with Windy City Ale.

The major brewers are realizing that consumers are looking for something more from their beers, says David Geary. "Obviously the nationwide trend toward flavor and character in beer has a lot to do with the growth of the microbrewing industry," he says.

The competition will ultimately be good for microbrewers says Dinehart, who welcomes it. "What that tends to do is take a Genuine Draft drinker and move him up to being a Reserve drinker," he says. "When they get to that point they say 'Hey I tried an ale, let me try another ale.' They are slowly moving up into the craft segment of the market, trading up."
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Author:Goral, Tim
Publication:Modern Brewery Age
Article Type:Industry Overview
Date:May 10, 1993
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