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Florida micro surviving tough competition.

Associated Press--After surviving five years in the tough microbrewery industry, Humberto Perez should be able to kick back and toast a mug of his Ybor Gold to the future.

Instead, he paces the wood-slatted floors in his Tampa, FL, Ybor City Brewing Co., fretting about the present. Ybor City Brewing, started by Perez and his family in an old cigar factory in Ybor City five years ago, has become the biggest regional brewer in Florida and the third largest in the Southeast.

Fresh from expanding into airport lounges, Perez plans to start exporting to South America and the Caribbean in his first step outside Florida. Yet the privately held brewery turned its first profit only about four months ago, and its balance sheet still inches into the black only erratically. "Some months we do and some we don't," Perez said. "We're crossing the threshold (of profitability). We're not there yet. It's been pretty difficult."

Ybor Brewing has scrambled to find distributors in a market and industry dominated by two big brewers: Anheuser-Busch and Miller. The $150,000 a year it spends on promotion pales beside the multimillion-dollar budgets of big domestic and foreign brewers. And popular imports are cutting into the tiny market share of less than 1% divvied up among the micros and brewpubs in Florida.

Ybor's travails aren't an exception. Throughout the country, the foam is off the microbrewery craze.

David Edgar, director of the Institute for Brewing Studies in Boulder, Colo., predicts more microbreweries will close this year than will open for the first time since the industry started in the late 1970s. "It was a natural follow-up to the explosion that occurred" in microbreweries, Edgar said.

Microbreweries, defined as breweries producing fewer than 15,000 barrels a year, became chic in the 1980s as an alternative to mass-produced Buds, Millers and Heinekens.

That explosion largely missed Florida, which has only five micro-breweries. Two closed in the first half of 1999. The oldest and biggest among the survivors, producing about 8,000 barrels a year, is Ybor City Brewing.

Perez was born to brew. In 1929, his grandfather founded what became the second-largest brewery in Venezuela, C.A. Cerveceria Regional.

His father worked there 50 years until he retired. And Perez worked there for 11 years, learning the trade at the family brewery, which has since been sold.

When Perez decided to branch out on his own in the United States, he saw Florida as a golden beer opportunity. Here was the third-largest beer market in the United States and a vacation hot spot for drinkers with little exposure to different beer styles and tastes. Tampa Bay had not had a local brewery in nearly 40 years.

But there were reasons why no microbrewers paved the way for Perez in Florida. For one, the state makes companies choose between being a microbrewery, which brews beer for distribution in stores and restaurants, or a brewpub, which sells most of its beer onsite to patrons at its brewery/restaurant. About half the states let brewers do both. The brew-pub business has proved a rewarding niche for operations such as the Hops chain that began in the bay area.

Florida law also bars brewers from distributing their own products. Unlike their counterparts in states such as California and Colorado, they are required to deal with "independent" distributors, most of whom have strong ties to the giant breweries. Undaunted, Perez's family and another Venezuelan family put up $1.3 million and borrowed another $1.3 million from SouthTrust Bank for their Florida experiment.

They opened the doors of Ybor City Brewing in November 1994 in the renovated, century-old Seidenberg & Co. cigar factory at 2205 N. 20th St. Their product: a golden-colored, aromatic Pilsner, targeting a Floridian preference for lighter beers.

Favorable treatment by restaurants such as the Columbia in Ybor City helped Ybor Gold build a following. Perez also began brewing two specialty beers, Ybor Calusa Wheat and Ybor Brown Ale, along with a seasonal brew called Gaspar's Ale that is distributed only in winter in conjunction with Tampa's annual Gasparilla festival.

Ybor City's success inspired a handful of other breweries to pop up around the state. Indian River, Dunedin, Miami Brewing and Key West are the others still in operation.

With the flagship Ybor Gold accounting for most sales, Ybor Brewing established a 40 percent share of the microbrewery market in the Tampa Bay area and 10 percent of the category statewide. The brewery's next steps, into airport lounges and exporting to South America, likely will absorb enough money to keep the brewery operating in the red for the next six months. "We are barely doing now what we call the critical mass," Perez said. He said Ybor would have to more than double production to about 20,000 barrels to stay consistently profitable.

Not that he feels like a small brewer. "The big brewers treat us like a big brewer," he said. "They don't distinguish between who's and who's small. Everybody is battling for the next bottle of beer you will be drinking."

The battle with those big brewers over distribution has proved to be Ybor's biggest challenge.

Ybor Gold made an immediate splash at the start largely because of the distribution channels Perez forged with two of the biggest distributors in the bay area: Pepin Distributors Inc. in Tampa and Great Bay Distributors in Largo. They are the region's prime distributors for best-selling Anheuser-Busch beers, such as Budweiser, Bud Light and Michelob Light.

At the time, Pepin and Great Bay said Ybor Gold was good enough to draw them into carrying their first non-Anheuser-Busch products. The enthusiasm was short-lived.

Anheuser-Busch, which has a 62.5 % share of the bay area beer market, corralled its distributors 21/2 years later, offering Pepin and Great Bay incentives to stick exclusively with the St. Louis brewer's products.

Perez scrambled, lining up J.J. Taylor Distributing, the bay area distributor for Miller beer. But even now, he hasn't recaptured some restaurant and retail sites that were lost.

Ed Canty, an Ybor City Brewery employee and activist for brewer's rights, bristles about Anheuser-Busch's hard-line tactics. "What they're saying is "We're going to tell you what is supposed to be in your portfolio, Mr. Distributor,'" he said. "That's not cool."

Pepin Distributing has no problems with the exclusivity agreement and touts it A message on its answering machine urges callers, "Enjoy an ice-cold Budweiser."

Five years ago, Pepin was on a diversity drive, even carrying Gatorade. Now it wants to focus on the "cornerstone" of its success.

Bill Gieseking, Pepin's director of marketing, said the switch was a matter of economics. Each year, Pepin distributes about 7-million cases of Anheuser-Busch brands. That translates to about 500,000 barrels of beer. He cannot see the logic in sacrificing even part of that to distribute an 8,000-barrel line of beers.

To Gieseking, the market in microbrews is petering out partly because poorly produced brands watered down the reputation of the entire industry.

"The savvy consumer is afraid to take that leap of faith, investing $6 a six-pack, maybe more, when the liquor is not the quality they would expect," he said. He quickly added that Ybor Gold is an exception, with a good quality product.

Microbrewers have to worry more than they used to about taste, about packaging and about getting their brand on store shelves and restaurant menus. Only the dedicated will survive, said Edgar of the IBS.

With 13 employees, Perez has three or four fewer workers than when he started Ybor City Brewing, thanks to his crew's growing experience and efficiency. These few act as if the job is their passion as well as a paycheck.

When he's not watching the brew kettles boiling another batch of Ybor Gold, Ed Canty spends his off-hours running the Florida Brewers Guild. The not-for-profit's goal is to promote public appreciation of microbreweries and brewpubs, to fight for the brewers' interests in the Legislature and to organize social get-togethers.

Dan Stodola, a master brewer at Ybor and another industry devotee, effuses about the fine art of brewing. He speaks effusively about the varied flavors that any given ingredient can bring to the beer. He talks with admiration about his predecessor at Ybor, a beer connoisseur who could identify multiple types of grain from a single sip of beer. "There were six grains," he said, recounting one taste test, "and he nailed them."

Stodola and Canty both went into the business as home brewers and never got brewing out of their blood.

Perez shares their passion. Like his father and grandfather, Perez dreams of passing down his brewery someday to his three children, ages 15, 13 and 10. He doesn't feel he can hold back on expanding Ybor City Brewery now even if it means taking a financial hit.

"When I came into Florida, I knew what I was getting into," he said. "I don't want to blame anybody. It's just the dynamics of the market."
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Publication:Modern Brewery Age
Article Type:Brief Article
Geographic Code:1USA
Date:Dec 20, 1999
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