NEW YORK (MainStreet) – Local production has been a cornerstone of U.S. craft beer — one that craft's growth may undercut.
According to a Nielsen report issued this year, 53% of beer consumers ages 21 to 34 cite local production as important in choosing what beer they buy, compared with just 45% among all drinkers over 21. Among those same 21- to 34-year-olds, 32% say locally produced beer has only become more important to them over the past few years, compared with just 22% of all 21-and-over beer drinkers who've reached the same conclusion.
Bart Watson, chief economist at the Brewers Association craft beer industry group, felt this information was not only worth touting, but points out that 75% of Americans 21 and older now live within 10 miles of a brewery. There are now more than 3,400 licensed breweries in the United States contributing to a $19.6 billion craft beer industry, according to the Brewers Association. There are another 2,000+ on the way.
A locavore following is great for all of those brewers, right? Kind of.
That love of local beer is tremendous news for the 1,412 local brewpubs in the U.S. They not only get to serve their own beer in house, but get people to sit down to a meal and drink multiples of them without handing a dime to distributors, bar owners or anyone but the brewery and its employees. A quarter of your beer is sold in the pub setting. This is akin to village breweries in Germany and Belgium creating captive audiences among people in their town or region and becoming centers of civic life.
But keeping it small keeps profits small as well. John Laffler, co-founder and brewmaster at Chicago’s Off Color Brewing and former Goose Island brewer, told Business Insider back in 2013 that keeping it small means you're “locked in making $35,000 a year.” If your brewpub lasts more than 10 years, you're among the fortunate. Those looking for more have to scale up, and that's where it gets dicey and, in some cases, decidedly less “local.”
Boston Beer made more than 3 million barrels of beer last year and has tied its Samuel Adams brand to its birthplace in Boston. But aside from corporate headquarters and a research and development brewery in Boston, Boston Beer has two large breweries in Cincinnati and Pennsylvania's Lehigh Valley, its Alchemy & Science brewery in Burlington, Vt., its Concrete City brewery in Miami and the Angel City brewery it owns in Los Angeles. That's a lot of places to be “local.”
Redhook was founded in Seattle and moved to Woodinville, Wash., but opened a second brewery in Portsmouth, N.H., in 1995. It's made Seattle a big part of its brand, but its East Coast beers are far more “local” to New England.
Within the past five years, Sierra Nevada (in Chico, Calif), New Belgium (in Fort Collins, Colo.) and Oskar Blues (in Longmont, Colo.) have all built breweries near Asheville, N.C., and have tried to establish a “local” presence there while expanding throughout the East Coast. During that same span, Petaluma, Calif.-based Lagunitas opened shop in Chicago, while San Diego-based Green Flash and Stone announced plans for breweries in Virginia.
Meanwhile, Stone is opening a brewery in Berlin, Brooklyn Brewery is opening a brewery in Stockholm, St. Louis-based Urban Chestnut is opening a brewery in Bavaria and Buelton, Calif.-based Figueroa Mountain Brewery announced plans for a Bavarian brewery of its own. They're local, but they have vacation breweries in far-flung places.
We haven't even touched on breweries that have been bought out and now have parent companies far outside town. Anheuser-Busch InBev bought Seattle's Elysian, Bend, Ore.-based 10 Barrel and Long Island-based Blue Point all within the past two years after buying Chicago's Goose Island in 2011. The debate still rages about how “local” any of those bought breweries are. Meanwhile, Oskar Blues bought Michigan-based Perrin this year with the stated intention of purchasing more small craft breweries. Perrin maintains its local brewing facilities and brewpub, but with its parent company splitting time between Colorado and North Carolina, would Perrin still qualify as “local?”
Oskar Blues, in turn, sold a majority stake to Boston-based Fireman Capital following similar private equity sales by Hood River, Ore.-based Full Sail (to San Francisco's Encore Consumer Capital), the Utah Brewers Cooperative (also to Fireman), Lakewood, N.Y.-based Southern Tier (to New York-based Ulysses Management) and Salt Lake City's Uinta (to New York/Cleveland-based Riverside). While each retains its local headquarters and presence, their funding and business decisions are coming from folks seated elsewhere.
That leaves consumers at a crossroads. Is “local” defined by where brewer makes its beer, where it employs the most people, where it was founded or where it is headquartered? Is a brewery still “local” if its parent company maintains a local presence? Craft beer hasn't produced any clear answers to that question, which is going to create some big problems if drinkers who place utmost importance on “local” beer can't decide if a beer is local. Either consumers will have to compromise or craft will have to re-adapt to the cozy confines of the brewpub. It's a local issue, but it's going to have national repercussions for craft beer and its acolytes.
— Written by Jason Notte in Portland, Ore., for MainStreet
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This article is commentary by an independent contributor. At the time of publication, the author held TK positions in the stocks mentioned.