Craft Beer Industry Heads Back Up Again

PORTLAND, Maine —  Rob Tod had plenty of company when he decided to get into the beer business.

He launched Allagash Brewing Co. in 1995 after a five-year period in which the number of craft breweries and brew pubs tripled and production grew sevenfold. Then in the late 1990s, the explosive growth slowed to a trickle--more than 400 pubs and breweries eventually closed their doors.

But signs are looking better for small brewers like Tod who stuck it out. Sales grew slightly in 1999 and were stronger last year.

“It was a tough time to get into the business on one hand,” Tod recalled. “On the other hand, it was a good time to get into it because to some degree we were able to learn from mistakes other brewers made.”

Figures released last month by the Institute for Brewing Studies showed that craft-brew sales increased 4.1% in 2000, twice the rate of the previous year.

“The mood has moved from a cautious optimism . . . to a more confident optimism,” said David Edgar, director of IBS, a division of the Assn. of Brewers in Boulder, Colo. “The days of wild and crazy growth are over, however.”

Tod wasn’t typical of those entering the business during the days when observers thought craft beer would one day make up 10% of a market dominated by the likes of Anheuser-Busch and Miller Brewing Co. Today, craft beer accounts for about 3% of U.S. sales.

Instead of jumping in with great expectations, he started as a one-man operation making only one beer, and he built the business with sweat equity instead of large loans. The first year, he produced 120 barrels. Last year’s output was 1,650 barrels.

Allagash has tried to expand gradually and at a sustainable level. “We’ve pushed for growth, but we’ve pushed for smart growth,” Tod said. “You just don’t want to overdo it.”

It was a lesson others learned the hard way when the market could not support all of the newcomers. More than 900 brew pubs and microbreweries went into business over a three-year period leading up to 1998. Today, there are about 1,500 craft breweries and brew pubs nationwide, compared to just 211 back in 1990.

Some companies such as Boston Beer Co. and Sierra Nevada Brewing Co. managed to go beyond regional markets to national distribution. Boston, maker of the Samuel Adams brews, now tops 1 million barrels in annual production.

But those are the exceptions. More than half of the nation’s microbreweries brewers produce fewer than 1,000 barrels a year, Edgar said.

At Allagash Brewing Co., part of Tod’s business plan was to succeed by doing something different in a state where there are 31 beer companies and brew pubs. So he chose Belgian-style beers, a style he learned to like while working at Otter Creek Brewing Co. in Vermont.

His best-selling beer is Allagash White, an unfiltered wheat ale spiced with coriander and orange peel. He’s also producing a Dubbel and Tripel Reserve brew in which the beer is placed in a champagne-style bottle with a wired cork.

“By doing unique beers, we’ve been able to carve out a niche in the business,” he said.

The lesson of modest expectations grew out of the experience of those companies that spent large sums on advertising and expanding distribution only to go belly up because they failed to tend to their core markets, analysts say.

The companies still in business are more committed to the craft, and the quality of the typical brew is much better today, Edgar said.

Tony Forder, editor of Ale Street News, said not all beer-makers suffered during the downturn and that some continued to post sales growth even in the industry’s flat times.

Nonetheless, individual sales have picked up now that the number of competitors has been winnowed. More importantly, Forder said, consumers have become familiar and accepting of new styles of beer.

“The whole awareness of beer has changed in this country,” he said.

On the Net:

Institute for Brewing Studies: https://www.beertown.org

Allagash Brewing Co.: https://www.allagashbrewing.com