The Rise of the Craft Brewing Industry
The brew crew is working to finish yet another batch of their delicious Double D Blonde as the sound of classic rock blasts through the walls of the Hop Valley Brewery. The beer is pumped into the fermentors as the crew scrubs down the three giant tanks to get ready for the next batch. Creating this single batch of brew takes much time and effort, but it will not compare to their large-scale production set to begin in 2013.
Throughout the past several years, the craft brewing industry has grown steadily. Even through tough economic times, craft breweries are continuing to thrive. Companies such as Hop Valley Brewing have become so popular that their production has no option but to expand. These small craft breweries are gaining huge followings that are boosting their regional sales and turning them into the major beer labels of the area.
The amount of craft breweries in the United States grew at a rate of fourteen percent over the last year, according to the Brewers Association. While new breweries are opening up all over the country, the two most prominent locations are the Midwest and the Northwest. According to the annual Brewers Association statistics, in 2010, Oregon rose to 2nd for the most craft breweries per capita.
The northwest has become one of the most popular locations to launch new craft breweries. According to Oakshire Brewing’s sales manager, Cameron Langham, in the state of Oregon, approximately 40 percent of people who consume beer drink local craft brews. While many new breweries only produce beer, the vast majority has turned their businesses into brewpubs, serving both food and alcohol.
In Oregon, the mass amount of pub-crawls and beer festivals that occur throughout the entire state brings a bit of a cult following to the local breweries. With so many breweries located throughout the state, multiple pub-crawls occur every month. Portland also holds the annual Oregon Brewers Festival every summer, where visitors can taste the many different craft beers made by over 75 breweries.
The massive following and the large number in craft beer sales is what makes Oregon a great location to open up new breweries each year. Although craft beer in Oregon is in such high demand, the vast amount of breweries per capita creates much more competition.
The toughest part is to get the company started, purchasing all the necessary equipment and hiring the correct staff to produce good beer. But once the company has been started, producing the beer is inexpensive and an easy process to pursue.
Because of the large following of craft breweries in Oregon, people are always looking to try new beers from many different companies. “Oregonians love a good craft beer, one that they know is made at the highest quality,” said Julia Herz, Program Director for Brewers Association. People prefer the quality beers that are produced locally, which makes new businesses able to thrive directly from the beginning.
How Craft Beer Affects the Economy
While United States has gone through a major recession, the beer industry has had very little trouble making it through the tough times. Although the demand for many consumer goods drastically decreased, the demand for beer has continued to persist.
In 2008, according to the marketing and advertising research company, Nielsen, beer was considered number four on the most recession-proof consumer goods. According to the study, Americans were willing to spend the extra cash to relax with their favorite beer.
Many of the major domestic labels have been losing money in the past several years. From 2009 to 2010, companies such as Anheuser-Busch and MillerCoors have been down in sales by as low as two percent, according to Beer Scribe. Since then, very few companies have been able to make major sales profits.
On the other hand, the craft brewing industry’s numbers have been skyrocketing. In 2008, independent craft breweries increased by an average of six percent in volume and 10.5 percent in sales. Since then, the industry has continued to grow rapidly, increasing by thirteen percent in volume and fifteen percent in sales from 2011 to 2012, according to the Brewers Association.
The craft breweries have done so well through the recession because of recent consumer trends. According to the director of the Brewers Association, Paul Gatza, people are doing way more entertaining at home, which leads them to buying more quality beers to impress their friends. Consumers are beginning to put some intention and thought into how they spend their money.
While the increase in craft beer sales is occurring partly because of the down economy, the rapid expansion in the industry is also helping to boost the regional economy. This is by increasing the amount of employment and boosting the tax income for the local government.
In 2011, in Oregon alone, over 25,000 jobs had been added in the craft brewing industry. These jobs included growing the ingredients, brewing, wholesaling, and retailing. In addition to the increase in jobs, over 165 million dollars in company taxes have been put back into the Oregon economy, all according to the National Beer Wholesalers Association.
“If everybody was to buy products locally, imagine what that would do to for the local economy,” said Marty Tremaine, Sales Manager at Hop Valley Brewing. “The money would not only flow into the local businesses, but also into the whole region.”
Distributing the Product
What makes local craft brewers so different from the nationwide corporations is the distribution aspect. Rather than using regional distributors, majority of the craft breweries self-distribute their products. This means that people working within the company are in charge of the entire distribution process, from finding the stores and restaurants to sell their products, to driving the beer to its final destination.
Some craft breweries use distributers such as the Odom Corporation to deliver their products to regional locations, but this is generally for the largest craft breweries in the area. Most companies look to use these distributers once they have expanded their production, but until then, self-distribution is the most efficient and cost effective.
The distribution process begins with sales managers finding the locations to distribute their products. Meetings are arranged with certain convenient stores and restaurants to establish a contract to sell their beer.
The majority of sales are in kegs for draft beer in restaurants, but profits can be made from selling both bottles and cans. Kegs account for 65 percent of sales for most Oregon craft breweries, while only 35 percent is in bottles and cans, according to Marty Ochs, Sales Manager at Ninkasi Brewing.
“Although we sell more kegs, there is a lot of potential for growth with the bottles and cans.” Marty Tremaine said. “The prices are higher and it is so easy to can the beer.” While an outside company comes in to bottle the beer every three weeks, the brew crew is able to can a large supply on any given day.
The bottling line is a much more efficient process. “It takes about six people to operate and we can fill and cap six bottles every ten seconds,” Brewer Patrick Whiting said. “The canning line is a very manual system. We can put out about six to eight cans every minute if were really going fast.”
No matter how it is packaged, the company is making major profits by selling cans and bottles to supermarkets and convenient stores. Although the cost to produce the cans and bottles is higher, so are the profits.
The success of every craft brewery depends on the distribution aspect. While brewpubs are able to make decent money through their own restaurant and bar sales, majority of the profits come from the selling across the state. Without a good distribution method, craft breweries have very little chance of succeeding.
Craft Breweries’ Expansions
As the craft brewing industry continues to expand, so do many of the companies. Each year, more and more breweries are opening, while previously established companies are looking to expand in the future.
As the demand for certain craft beers increases, so does the amount of effort to produce the beer. As companies such as Hop Valley Brewing become known throughout all of Oregon, their regional sales continue to increase, causing them to look into major expansions.
Although it sounds simple, the main way to expand is to brew good beer. “We have an excellent brew master in Trevor Howard,” Hop Valley General Manager Ed Lackington said. He had a decent following when he worked at the famous Rogue Ales, so when he created Hop Valley Brewing, a lot of people wanted to try his beer.
After purchasing the Springfield property, Howard began to arrange his brand new brewery. Three large tanks were set up for the brewing of the beer, four fermentors to let the beer sit, and five conditioning tanks to keep the beer carbonated. According to Howard, once production began, it was not long until it grew into a full-scale operation.
Currently, Hop Valley Brewing produces around 3,000 barrels annually, which is average for a smaller craft brewery. But in January of 2013, the company is moving to a brand new 30,000 square foot location in Eugene, Oregon.
“Next year we will probably produce around ten to fifteen thousand barrels, and in about five years, we will most likely produce around 50,000,” Howard said. This massive jump in production will put Hop Valley on the list of the largest breweries in Oregon.
Once Hop Valley Brewing locates to their new building, the self-distribution will no longer be able to keep up with the mass production and high demand for their beer. Although the company is still searching, they are planning on hiring an outside distributer to conduct majority of their sales.
As the craft brewing industry is continuing to grow, so is the volume of many breweries. The companies that are able to produce top quality beer and market it correctly have grown to enormous sizes. Ninkasi Brewing was founded in 2006 and has already become one of the largest breweries in Oregon, while Hop Valley Brewing is not far behind, only beginning in 2008.
As long as they keep producing quality beer, the local consumers are going to continue to buy it. People love to drink Oregon craft beer because they are becoming national known for producing quality products. As long as the trends continue to stay with the local craft breweries, these companies are going to continue to expand into the future.