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transcript
C S P October 2013104
How brewpubs and tasting rooms are redefi ning the beer market, and what we can learn from their success
By Melissa Vonder Haar and Angel Abcede mvonderhaar@cspnet.com, aabcede@cspnet.com
Holy
[competitive watch]
HolyCraft!
C S P October 2013 105
Once people go outside
from the macro and
drink something with
the intention of being
fresh and not consumed
in mass quantities,
they’re not going to go
back.
“Once people go “Once people go
““
e’re gonna need a
bigger boat.”
This is what, in a CSP column earlier
this year, one former Anheuser-Busch
employee and current beer connoisseur
predicted c-store retailers would need to
accommodate the increasingly successful
craft beer segment.
It’s a success that the numbers clearly
support. “Last year craft brewers grew
15% by volume, having sold more than
13 million barrels,” says Jennifer Litz, who
covers craft beers for Beer Business Daily.
“Craft reached a 6.5% volume share and a
10.2% dollar share during the same time.”
Yet during that same time, craft
accounted for only 2% of convenience-
store beer sales. Perhaps some retailers
are indeed strapped for space to stock
both the c-store standard brands and
the dizzying number of craft and local
options. Perhaps others feel it’s not worth
the space, anticipating a burst in the craft-
beer bubble. Either way, those closest to
the craft scene warn it’s a subsegment
that’s not going away.
“Contrary to what some people are
saying, we are not in a bubble,” Brewers
Association president Charlie Papazian
said at the April 2012 Craft Brewers Con-
ference. “We are knee-deep in foam, and
the level is rising.”
Though the number of breweries in
the United States dipped to fewer than
100 in the 1980s, the Brewers Association
reports there were a record 2,538 U.S.
breweries as of June 20—with nearly
2,500 designated under the label of craft.
And 1,605 breweries are already in the
planning stages.
Of those craft breweries bursting onto
the scene, most belong to a segment that
historically would not be considered
competition—or as an opportunity—for
the c-store industry: the brewpub.
“Brewpubs are restaurant-breweries
that sell 25% or more of their beer on
site,” says Litz. “Of last year’s 2,347 total
craft breweries, 1,132 were brewpubs.”
The majority of these brewpubs have
centered their business model on the
simple concept of a tasting room, pro-
viding consumers great, fresh beer offer-
ings from knowledgeable employees in a
unique setting.
It’s a concept that has worked well
for a number of brewpubs, as well as
for brewers who technically fall into the
category of a microbrewery or regional
brewery, but who have recognized the
power of the tasting-room model. Not
only does it allow consumers to sample
fresh products, but it also draws a variety
of new beer drinkers into the segment.
“They can be from anywhere; they
don’t have to be rich. People want to
drink something that tastes good,” says
Eric Kapraun, cultural coordinator for
Chicago’s Half Acre Beer Co. “I think
once people go outside from the macro
and drink something with the intention
of being fresh and not consumed in mass
quantities, they’re not going to go back.”
So space limitations or not, it’s impor-
tant for c-store retailers to at least sample
what the local craft segment is brewing up.
Craft AppealAccording to the Brewers Association, the
craft segment is broken down into three
technical categories: Microbreweries
that produce 15,000 barrels a year or less,
regional breweries that produce 15,000
to 6 million barrels a year, and the previ-
ously described brewpubs. These defi-
nitions can get confusing, especially as
larger brewers invest in unoffi cial brew-
pubs (at least by the Brewers Association’s
defi nition) or brewpubs increase capacity,
technically becoming microbreweries or
even regional breweries.
Dogfish Head Brewery is just one
of many examples. Founded in 1995
as Dogfish Head Brewings and Eats in
Rehoboth Beach, Del., it was the state’s
very fi rst brewpub and had the capacity
to brew only 12 gallons of beer at a time.
The company has now grown into one of
the most popular regional breweries in
the country, with a 75,000-gallon-a-year
capacity and three more beer-centered
restaurants (branded as Dogfish Head
Alehouses) located in neighboring states.
“The demand for products these
brewpubs generate via on-premise
brand building should only strengthen
off-premise sales for craft in general, with
the rise of beer tourism and the locavore
movement,” Litz says.
“I see great things from craft brewers
and brewpubs,” adds Bump Williams,
president of Stratford, Conn.-based
Bump Williams Consulting Co., a fre-
quent adviser to craft brewers. “They have
worked hard to bring new beer drinkers
into their segment, they have actually
increased the frequency at which people
sample craft beer, and they have increased
the volume per shopping occasion for
craft beer. These three things are the only
tried-and-true way to build a business.”
Perhaps out of a desire to bring new
“W
C S P October 2013 107
drinkers into the segment, craft brewers
have demonstrated an ability to set aside
rivalries and work toward the common
goal of providing beer drinkers with a
bevy of high-quality options. This kind of
team spirit has allowed for an impressive
number of operators to thrive in brew-
ery-dense states such as Colorado, which
The Beer Institute ranked No. 1 in terms
of gross beer production and comes in
fifth in terms of breweries-per-capita,
according to the Brewers Association.
“It’s a competitive environment, but
also a very collaborative environment,
especially here in Colorado,” says Steve
Kaczeus, who opened Bootstrap Brewing
of Niwot, Colo., in June 2012. “If I’m low
on hops or grains, I know I can call any
number of brewers in the area and they’re
happy to help me out. Likewise, when we
started bottling, an avid brewer let us use
his labeling machine when he heard we
were doing it by hand.”
Kapraun of Half Acre agreed: “It’s not
super-competitive; all the breweries get
along. The more people like good beer,
the more we’re selling out of what we
make.”
A Fresh ExperienceWhile companies such as Bootstrap have
benefited from operating in a brewery-
heavy location, others are finding suc-
cess by bringing the craft movement to
uncharted territories. When Half Acre’s
founder, Gabriel Magliaro, moved from
Colorado’s beer mecca to Chicago, he
quickly took note of the lack of local beer.
“There was only Goose Island within
the city and Two Brothers out in the sub-
urbs, but almost no smaller craft brewer-
ies in the city,” says Kapraun. “Basically, it
was an empty market, and this is one of
the biggest cities in the country.”
Started out of a spare bedroom in
2006, Half Acre now boasts a retail store
and taproom, producing nearly 15,000
barrels per year.
“It’s far exceeded expectations,”
Kapraun says, pointing out that he
expected to take another five years to hit
the 15,000 mark. “It grew more rapidly
than we thought.”
Such growth is understandable for
a metropolis such as Chicago. But what
about a city where “big brewing” has
reigned supreme for more than a century?
“St. Louis is certainly a beer and base-
ball town,” admits Kevin Lemp, president
of the recently opened Four Hands Brew-
ery in St. Louis. “I don’t think that will
ever change.”
However, even St. Louis drinkers are
apparently willing to explore the craft
movement. Located less than 2 miles
from Anheuser-Busch, Four Hands has
had no problem tempting locals to the
craft side with options such as Prunus
Saison, a cherry seasonal that landed on
Draft Magazine’s Top 25 Beers of 2012
list; and Smoked Pigasus, a collaboration
with a local barbecue joint that includes
malts smoked in the restaurant’s meat
smoker.
“The community has been very recep-
tive to our brand,” Lemp says. “I believe
they appreciate our creativeness and our
passion for the city.”
In many ways, the craft-beer move-
ment is part of a larger trend toward
high-end local products across the board.
From farm-to-table dining to commu-
nity-supported agriculture groups (CSA)
and farmers’ markets, consumers across
the country are showing a willingness
Creative Minds: Developing a story behind each Half Acre beer line through label design and blog entries stirs fantasies and elevates the product from commodity to customer experience.
C S P October 2013108
to spend more in exchange for quality,
locally produced goods. Beer is no excep-
tion.
“That consumer wants to know and
understand the product they are enjoy-
ing,” says Lemp. “They become passionate
about the brewing process. They want to
know more about the farm that raised
what is now on their plate.”
Many brewers recognize the power
of this consumer base and cater beers
toward the fresh “foodie” crowd.
One of Half Acre’s beers is called
Sticky Fat, named after a fictitious bear
that “comes out of the mountains every
year to eat the fresh hops off the vine,”
Kapraun says. Half Acre brews Sticky
Fat only once a year, when it can get the
freshest possible hops from the Pacific
Northwest or Michigan. “The hops are
picked on a Tuesday, and we’re brewing
on a Wednesday,” he says.
The result is a crowd that flocks to
tasting rooms such as Half Acre’s to enjoy
a freshly brewed draft, surrounded by
other beer enthusiasts and the brewers
behind the beers. It hits on yet another
unique aspect of these brewpubs and
microbrewers: the appeal of the tasting
room.
“I believe we are able to capture such
a great clientele at our tasting room
because of the experience we offer,” says
Lemp. “We offer a very inviting space with
passionate team members behind the bar,
a 2-foot-by-20-foot window looking into
the brewery, and food that pairs great
with our beer. There is something fun
about drinking a beer 20 feet from where
it was made.”
A key highlight of these tasting rooms
is the passionate and often colorful indi-
viduals serving up the suds. Whether it’s
the brewmaster or a part-timer behind
the bar, the craft-brewing movement
seems to have perfected the hiring process
to ensure a personable expert is serving
their clientele.
“The personal interaction with the
drinker and the tasting-room servers
is an awesome personal relationship
where stories are swapped, questions
are answered, appetites are whetted and
loyalties take root,” says Williams.
This combination of local, quality beer,
a fun environment to sample it in and
knowledgeable pourers has helped expand
the business of countless craft brewers.
“The retail store opened in August
2009 as a place where people could not
only interact with the people who brew
beer and run the company but also get
the ‘freshest beer possible,’ ” says Kapraun.
“I think that’s what made this company
successful … being able to interact with
people who work here.”
Untapped PotentialWith all it has going for it, the craft move-
ment has plenty of room to grow. And
it is.
Litz of Beer Business Daily says, “Amer-
ica’s 1,132 brewpubs were up 7.25% in
2012; 1,118 microbreweries were up 33%,
and a lot of companies in this bracket
are doubling in size every year. The 97
regional craft breweries were up 13%.”
And as great as the tasting room
experience is, it’s the expansion into bar,
restaurant and off-premise accounts that
has allowed the craft movement to thrive.
“The majority of our consumption is
done outside of the brewery,” Lemp says.
“Our tasting room represents about 10%
of our total sales.”
This transition to wider distribution
is one that has happened much more
rapidly than many brewers anticipated,
further proving the power of the craft
consumer.
“Distributing to other accounts wasn’t
something we had planned to do right
away,” says Kaczeus. “But within weeks
Sample Here or at Home: Many tasting rooms—such as this St. Louis Four Hands location—offer customers take-home options such as growlers and specialty bottles.
C S P October 2013110
of opening, I had restaurant guys in here
leaving their cards so they could bring
Bootstrap into their locations.”
Likewise, less than two years since
opening, Four Hands went from focus-
ing only on draft beer, with a capacity
of just over 1,500 barrels per year, to an
8,000-barrel-per-year (and growing)
capacity, with 22-ounce bottles of their
core line and plans for 12-ounce four-
packs. The bottled products came about
largely to meet growing demand from a
variety of markets.
“We currently have over 250 on-prem-
ise customers carrying our brand in the
State of Missouri and roughly 100 off-
premise accounts; this number continues
to grow every month,” and the brewery
also has distribution in metro Illinois and
Philadelphia, Kaczeus says.
It’s this expansion outside of the tap-
room and brewpubs that c-store retailers
should take note of. While the convenience
channel may not be able to duplicate the
full experience of these tasting rooms, they
can offer craft consumers a convenient
way to bring that experience home.
“C-store chains from Circle K to
ampm are generally adding more craft—
full doors or even growler stations, in
the case of Sunoco—as a way to bring
in a new consumer and make up for
domestic-premium losses,” says Litz.
Williams sees growlers as a great
option for off-premise retailers to rep-
licate some of the tasting-room experi-
ence, saying, “Nothing tastes better than a
freshly brewed and well-poured draught
beer. It allows me to bring the brewpub
home with me and savor the drinking
experience all over again, any time, day
or night.”
Still, he’s quick to warn that a growler
program is certainly not for every retailer.
Some states have legal restrictions, and
there’s a signifi cant amount of work (and
cost) that needs to go into successfully
implementing a growler bar.
“But for those states where it’s legal,
where the retailers have implemented
a strict quality-control procedure and
have a well-educated and knowledgeable
staff who can talk to shoppers, it’s a great
way to generate trial, traffi c and higher
market-basket rings,” says Williams.
Growlers aside, craft is quickly prov-
ing to be a segment ripe with potential for
c-store retailers: a growing, loyal, high-
spending consumer base that has often
been limited in off-premise options.
“As the volume of beer coming out
of taprooms and brewpubs continues
to rise, share of craft in the off-premise
channels of c-stores, grocery and others
continues to climb,” Litz says.
It may be worth getting that bigger
boat to accommodate this segment. Why
surrender such an opportunity to gro-
cery, liquor or drug? ■
The demand for products these
brewpubs generate via on-premise
brand building should only
strengthen off-premise sales for
craft in general.”
“The “The