Craft Brewing’s Generation Y

Up-and-Comers

September 1, 2001 By Greg Kitsock

Just as they showed up, the party began to wind down.

We’re talking about craftbrewing’s Generation Y: those breweries that came on-line in the mid-1990s or later, long after the pioneers had blazed a trail. They entered a market where competition was keener, bad beer no longer tolerated, and outlets to retailers fewer as a result of distributor consolidation. The great shake-out of the late ’90s was just around the corner. They had to be leaner, meaner and smarter to survive.

Mac and Jack’s Brewery is like a sapling growing up in the shadow of two redwoods. The brewery stands in Redmond, WA, about 15 miles east of Seattle, where industry giants Redhook and Pyramid hold sway. Even in one of the country’s most mature markets, newcomer Mac and Jack’s grew about 120 percent between 1998 and 2000, topping the 20,000-barrel mark.

Asked how he managed such growth, partner Malcolm Maclean Rankin answers, “I wish I knew the answer. I’d bottle it and sell it.” Of course, he can’t bottle anything because Mac and Jack’s is a draft only brewery—probably the largest such operation in the country. That lends the products a certain mystique, allows Rankin. “You have to go to a bar to try our beer.” But he and partner Jack Schrapp have also invested a lot of sweat equity in the business since they started in 1994 with a 7-barrel brew house in Jack’s garage.

Mac and Jack’s sticks to basics, making only three beers: a wheat, an amber and a porter. “We don’t work in styles too much,” admits Rankin. “Our porter is edging into a sweet stout.” You can find the brews on tap only in Washington, Oregon and northern Idaho.

When questioned how much further he can grow the business, Rankin replies, “I wish I had a crystal ball. I don’t know. We don’t set goals that we have to be at such an amount at such a time.” But he and Schrapp will have to make some decisions soon. Their current facility will max out at 24,000 barrels, and they’re about to bump their heads on that ceiling.

In the Big Sky Country

Big Sky Brewing Co. in Missoula, MT, had a spectacular 2000 by anyone’s standards. Production was up 122 percent, reaching 15,700 barrels. Partner Brad Robinson attributes this to the introduction of bottled beer. The bottled product is currently contract-brewed by Portland Brewing Co., but Big Sky, he adds, is sinking $2 million into a brewery expansion that will make it self-sufficient.

Big Sky’s beers are available across a nine-state swath that, for the most part, is sparsely populated and conservative in politics and taste. Of Montana, Robinson says, “We tend to be three to five years behind the curve when it comes to mega-trends. Latte carts started popping up on the West and East Coasts in 1980. We got them in the early 1990s. We’re still the last state in the United States not to allow brewpubs.”

“Our single biggest strength, “ he continues, “is that we brew for ourselves, not what we think the market is looking for.”

Big Sky’s top seller is an English-style brown ale called Moose Drool. It’s an unappetizing name, but it’s helped move $250,000 worth of t-shirts, glassware and other merchandise, asserts Robinson. He’s spent thousands in legal fees to defend the brand against Moosehead of Canada, which (possibly out of sheer envy) has claimed trademark infringement.

In spite of legal and geographic challenges, Robinson sees no great obstacle to reaching the 40,000 to 50,000 barrel mark.

More than Grapevines

In California’s Napa Valley, some extraordinary small breweries have sprung up among the grapevines. Bear Republic Brewing Co. in Healdsburg (up 37 percent to 4,800 barrels) has won a national reputation for big, flavorful brews like Red Rocket (a West Coast take on a Scotch ale), Racer 5 (an IPA) and Big Bear (an imperial stout). President and CEO Richard R. Norgrove Sr. would be perfectly happy to reach 8,000 to 10,000 barrels. “You can grow yourself into bankruptcy!” he warns. He sees his potential market as “pockets of educated, discriminating beer drinkers everywhere.” Already he’s established beachheads as far away as the Carolinas and Washington, DC.

Meanwhile, Lagunitas Brewing Co. in Petaluma is selling out of its aggressively hopped IPA and off-the-wall seasonals like Hairy Eyeball Ale (a strong, dark Scotch ale) and Eye of the Hairball Ale (a wheat wine). President and owner Tony McGee says he likes to drive over to Chico and gaze at the Sierra Nevada brewery. “It’s like looking up some beautiful woman’s dress,” he says. “I wonder if I’m ever going to have a plant like that.”

Lagunitas had a good 2000, pumping out 17,700 barrels, a 20 percent increase. “It was one of our slowest growth years,” says McGee. “We’re aiming for 50,000 to 60,000 barrels,” he adds. “That’s where economies of scale appear.”

McGee worries about the dwindling number of distributors: “All they’re picking up are the cherries! A lot of good brands are being dropped.” He also sees California’s energy crisis as a major impediment. “Our utility bill last month went from $7,500 to $15,000. It’s legalized extortion! But it’s like complaining about the coming ice age.”

Southern Ways

Across the continent, the Southeast, stretching from Tidewater Virginia to the Florida Keys, has yet to spawn a sizable regional brewery. Mike Smith, CEO of Carolina Beer Co. in Mooresville, NC, hopes to remedy that situation. Carolina Beer Co. is closing in on the 10,000-barrel mark as a result of a 46 percent growth spurt last year. Smith sees his company maxing out at 50,000 barrels over the next six to eight years.

“Southern ways are hard to die,” observes Smith. “We’re very much a pilsner drinking area. It’s extremely humid and hot here.” His flagship beer, geared to the climate, is Carolina Blonde, which he describes as “more akin to a kölsch than anything else.” Carolina Beer Co. markets several fuller-bodied ales, including Cottonwood IPA, which it picked up from a defunct Boone, NC, brewery.

Smith and his partner, John Stritch (a former Miller wholesaler), are big into grass-roots marketing. They sponsor the Carolina Blonde Amateur Tour, a golf tournament that takes place over the summer in 30 southern cities, with the winners teeing off in Myrtle Beach, SC. Golf courses tend to be finicky about broken glass on the fairway, so Carolina Beer Co., as of press time, was about to introduce a plastic PET bottle. The company has also purchased a flash pasteurizer.

High Tech

Being small doesn’t mean you can’t be high tech.

In the Philadelphia suburb of Downingtown, PA, Bill Covaleski of Victory Brewing Co. was celebrating. Part of the reason was last year’s figures: production was up 52 percent to 8,200 barrels. The main reason was the birth of a daughter, Audrey Elise. Covaleski and his partner, Ron Barchet, both experienced brewers, now have six children between them. “Soon we’ll have enough to staff the business,” he laughs.

“Our competition has been atrophying for some time,” notes Covaleski, ticking off the names of several defunct Pennsylvania microbreweries. “Ron and I approached this business very selfishly—we only brew beers we’re interested in.” The biggest seller is the aptly named HopDevil IPA, but the equally assertive Prima Pils is gaining adherents.

Victory Brewing is primarily a mid-Atlantic operation but has one California distributor. “By no means do we have a national strategy, but we’ll go wherever the interest is.”

The ranks of Generation Y will probably never produce a company the size of Boston Beer Co. (1,200,000 barrels last year) or Sierra Nevada (nearly 500,000 barrels). But some will evolve into regional powers, and a few will become cult favorites with a national following. They’ll keep the industry interesting and diverse, and serve as a beacon of hope to still another generation of homebrewers who dream of making the big leagues.