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Brewers Deal With Production, Distribution Growing Pains

02.09.15

Originally published in the North Bay Business Journal

The numbers speak for themselves.

As of 2013, there were 18 craft breweries in Sonoma County with almost half of those having opened in the previous two years. Currently, the Economic Development Board is tracking 23 breweries, seven cideries and 10 distilleries, up from three just two years ago.

In 2013, craft beer, cider and distilleries added $123 million in local economic impact, and the industry was expected to add up to $200 million more in 2014.

Craft brewing makes up 10 percent of the national beer market and was responsible for much of the overall beer industry growth. While national beer sales rose just 0.9 percent in U.S., craft brewing sales increased 15 percent in 2013. That’s on top of a 13 percent increase in 2011.

At an annual growth rate of 15 percent a year, craft beer annual production is estimated at 31.5 million barrels by 2018.

As a result of this growth, “there’s a lot of noise lately around craft beer,” said Ken Dansie, CPA and Craft Beverage Industry Group Leader for BPM, accountants and consultants.

Mr. Dansie has also been the trusted adviser to Lagunitas Brewing Company since about 1997. As the sixth-largest craft brewer nationwide, Lagunitas Brewing Company, located in Petaluma, is the granddaddy of craft brewers. From 2011 to 2012, it saw a 40 percent increase in sales and is producing more than 600,000 barrels per year. Along with Moonlight Brewing Company in Santa Rosa, Lagunitas made the list of 100 Best Beers in the World by Men’s Journal last year.

Locally made hard ciders and craft bourbons and gins are similarly gaining a strong foothold in the craft beverage market. Cider sales were up 70 percent nationwide in 2012, which followed a 31 percent jump the previous year.

Bringing the international spotlight onto Sonoma County’s craft beverage industry most recently, Pliny the Younger, a brew from Russian River Brewing Company, was named as one of the 10 Most Travelled-for Beers in America by Orbitz.com. And Sonoma Cider made Forbes’ list of “Hottest Startups” of 2013.

The EDB is currently working on a report with figures from 2014, which will be announced at the Sonoma County Beer, Cider & Spirits Conference Feb. 27.

Challenges for the growing industry
Walk into just about any restaurant serving alcohol these days and you’ll find four, five, or six craft beers on tap. And while craft beer drinkers are swelling in ranks and attending events like San Francisco Beer week in record numbers, craft beer makers are enjoying the boon, and also trying to stay on this fast moving train.

The challenge before the industry besides quality control and consistency, according to the EDB, permits and local regulations are recognized as the highest impediment to growth for the brewery, cidery and distillery industry.

Distribution is pivotal. Distributors require a dependable amount of product, which most likely results in a brewery needing to add another production line, more employees and invest more.

At St. Florian’s Brewery in Windsor, owners Amy and Aron Levin just completed a large expansion and upgrade of their bottling facility. They also added tanks and a few part-time employees to their 2-year-old company. Distribution and keeping up with production has been the biggest challenge for them, they said.

“We had no choice but to keep up with production. Our customers wanted more beer, and we love offering it to our fan base,” Amy Levin said.

Securing funding for the expansion was also a challenge, she added, because they are a new business without an established history.

The good news is banks and other financiers are increasingly seeing value in a well-made craft beer or spirit, and private equity firms are looking to get in on investment possibilities.

Sonoma County Beer, Cider & Spirits Conference
The Feb. 27 Sonoma County Beer, Cider & Spirits Conference is bringing together the largest gathering of Sonoma County beer, cider and spirits producers to date. A broad range of topics will be discussed by leaders from every stage of the industry, from retail to finance to distribution to regulations.

Keynote speakers will be Fritz Maytag and Keith Greggor, the previous and current owner of Anchor Brewing Company. Mr. Maytag developed Anchor Brewing Company into one of the most well established craft brewing companies in the nation, and after 45 years as CEO, he sold it to Greggor and Anchor Brewers & Distillers LLC was formed.

Mr. Dansie of BPM will lead a breakout session. Session topics include wastewater, retail, financing, and regulations.

Sponsored by the Sonoma County Economic Development Board, the first event took place in 2013 with a sold-out audience of more than 300. More than 400 are expected this year.

The conference takes place from 1 to 5:30 p.m. at the Hyatt Vineyard Creek Hotel, 170 Railroad St., Santa Rosa. Tickets are $50. For registration information visit or contact Francesca Schott at 707-565-7170.

 

North Bay participants
 
101 North Brewing Co. Petaluma
Anderson Valley Brewing Company Boonville
Baeltane Brewing Novato
Bear Republic Brewing Company Cloverdale
Eel River Brewing Company Fortuna
HenHouse Brewing Company Petaluma
Iron Springs Pub & Brewery Fairfax
Lagunitas Brewing Company Petaluma
Marin Brewing Company Larkspur
Mendocino Brewing Co. Hopland
Moonlight Brewing Co. Fulton (north Santa Rosa)
Moylan’s Brewing Co. Novato
Napa Smith Brewery Napa
North Coast Brewing Fort Bragg
Petaluma Hills Brewing Company Petaluma
Russian River Brewing Company Santa Rosa
Sonoma Springs Brewing Co Sonoma
St. Florian’s Brewery Windsor
Third Street Aleworks Santa Rosa
Woodfour Brewing Co. Sebastopol

San Francisco’s annual Beer Week

The nine-day Beer Week in San Francisco is a marathon of more than 600 beer dinners, tastings, tap takeovers, and educational events that will occur all over the Bay Area. The sold-out event runs from Feb. 6–15.

At the opening gala, more than 2,500 craft beer enthusiasts will unite for a tasting celebration with more than 80 Northern California breweries. Some of those include 21st Amendment Brewery, Baeltane Brewing, Cleophus Quealy Beer Company, Drake’s Brewing, Magnolia Brewing, Speakeasy Ales & Lagers, ThirstyBear Brewing, and many others.

Each year, the San Francisco Brewers Guild unites in creating a collaboration beer for the event. This year ‘Swept by Fire’ will be brewed at Fort Point Beer Company in San Francisco. The hoppy smoked pale ale is a tribute to the city’s brewing industry in 1906, which was decimated by the great earthquake and fire. The beer will be made with smoked beachwood malt and charred almond wood, roasted at the brewery, and balanced with hop flavors and aroma that verge on tropical fruit, citrus, and candy. Swept by Fire will be available at events throughout SF Beer Week 2015.