This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Craft Beer Brewers Taste Success As Team

Stocks in this article: SAM HOOK BUD TAP

With such legislation now going national with the help of the Community Alcohol Regulatory Effectiveness act, craft and regional brewers are fighting not only for the growth of the sector, but for the closet economy craft beer has become. Craft brewing accounts for more than 100,000 jobs in the U.S., according to the Brewers Association, but ancillary benefits broaden that a bit. Yuengling's Casinelli says that his brewery's success brings more than 50,000 visitors a year into Pottsville for tours of Yuengling's original facilities. That visitor base is more than triple Pottsville's population and is a boon for shops, restaurants and other area businesses.

Paul Gatza, director of the Brewers Association, says that with more than 1,700 breweries operating in the U.S. -- the most since 1905 -- the majority of Americans live within 10 miles of a brewery. That gives the breweries a sphere of influence that expands from the workers at the facility to the farmers that Koch and Casinelli say have come to their Pottsville and Boston facilities to pick up trailer loads of Yuengling and Boston Beer spent grain (and the 70% of its remaining food value) to feed their slightly tipsy dairy cattle. Craft beer site RateBeer's owner Joseph Tucker says his local Whole Foods (WFMI) in Sonoma County, Calif., uses Russian River Brewing spent grain to make bread.

"The basic economic benefit of the local brewer is that profits stay local," Tucker says. "Portions aren't sent to multinational headquarters located on another continent."

In Boston Beer's case, that profit's benefit could extend well beyond his local bases in Massachusetts, Pennsylvania and Ohio. In cooperation with microloan provider Accion USA, the brewer launched the "Samuel Adams Brewing the American Dream" microfinance program in its brewing markets in 2008 and just expanded them nationwide this year. Already among its success stories are Voltage in Cambridge, Mass., which started with a $2,000 loan to buy an espresso machine for a catering business that grew into an eight-employee coffehouse and art gallery near the Massachusetts Institute of Technology. While the program has also helped start and grow a Venezuelan restaurant in Astoria, N.Y., Koch says he'd really like to see it produce the next Sam Adams -- even if that beer takes 20 years to succeed just like his did.

"That's what I would envision for the craft brewing component of Brewing the American Dream: Somebody who has a small brewery but, with a $10,000 loan, can buy a fermenter and some kegs that will enable them to grow their business 50%," Koch says. "Hopefully they'll do that, pay the loan back and we can give them a bigger loan."

Giant temptations
Patience can be a problem, however. Even big craft brewers acknowledge there's often a small window for success. The Craft Brewers Alliance and its Red Hook, Widmer and Kona breweries came about largely because of a distribution deal that gave Anheuser-Busch InBev part ownership. As Goose Island discovered, the price of that big distribution can be a buyout of the brewery. Seattle Pyramid Breweries, meanwhile, was bought by Vermont-based Magic Hat, which was then bought by private equity firm North American Breweries -- which also owns Rochester, N.Y.-based Gennessee and Dundee brewing companies and rights to U.S. production of Labatt's. Former executives of Campari Group's Skyy spirits, meanwhile, bought San Francisco steam beer mainstay Anchor Brewing last year with promises to boost production and increase distribution. Koch cautions that such moves can increase sales, but change the spirit of the brewer until "it becomes just a business."

"There are two ways to get that kind of distribution range: One is to earn it year by year, which can take decades, and another is to sell out and get it automatically," Koch says. "Sometimes it can be very attractive to sell out and get millions of dollars."

For those who remain independent, however, the pint of craft brew is more than half full. Along with increased U.S. sales, craft beers are seeing a change that a precious few American industries can boast of -- increasing exports. The amount of American craft beer sold overseas increased 28% by volume, according to the Brewers Association, with demand in some regions increasing 90%. While that may draw even more players into the craft mix, veterans such as Casinelli cautions that not every brewer's strategy will work for someone else. When he started at Yuengling "there were a lot of people who thought everything we did was wrong." Even within the craft brewing community it seems accepted that if a colleague can offer ingredients, equipment or a hand with formulation or brewing, it doesn't mean they'll necessarily offer great advice.

"Maybe we've built the ivory tower strong enough, but people don't show up on our doorstep asking questions unless they're in the industry," says Victory's Covaleski. "Business success attracts people who think you know something -- boy are they fooled."

-- Written by Jason Notte in Boston.



>To contact the writer of this article, click here: Jason Notte.

>To follow the writer on Twitter, go to http://twitter.com/notteham.

>To submit a news tip, send an email to: tips@thestreet.com.

RELATED STORIES:



Jason Notte is a reporter for TheStreet.com. His writing has appeared in The New York Times, The Huffington Post, Esquire.com, Time Out New York, the Boston Herald, The Boston Phoenix, Metro newspaper and the Colorado Springs Independent.
4 of 4

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,804.80 +26.65 0.15%
S&P 500 2,070.65 +9.42 0.46%
NASDAQ 4,765.38 +16.9840 0.36%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs