Clockwise, from left: Mark Ruedrich, co-founder, president and brewmaster, North Coast Brewing Co.; Steve Hindy, co-founder and president, Brooklyn Brewery; Jack Joyce, co-founder, and Brett Joyce, CEO, Rogue; Gary Fish, founder & CEO, Deschutes Brewery; Pat & Dan Conway, co-founders, Great Lakes Brewing Co.
Nineteen-eighty-eight. The Reagan era was winding down as his veep and Michael Dukakis slugged it out for his job. “Who Framed Roger Rabbit” was the top-grossing film of the year. “Roseanne” debuted on ABC.
It was also that year, a quarter century ago, that craft brewing—then still using “micro-brewing” as the catch-all umbrella term—hit what was then a magic number: 100. That’s how many such small, independent operations—including brewpubs—were operating in the U.S. It was about double that of the prior year and would reach 124, according to the Brewers Association, by the time the ball dropped on Dec. 31, 1988.
The segment was in the early days of its initial boom, which would slow less than a decade later, thanks to what many say was some strategically placed negative press and the chickens coming home to roost for a significant number of entrants more concerned with jumping on the bandwagon and trying to get rich than with producing a quality product.
But there were a lot of 1988 newbies—not to mention some notable ones that predated them—that managed to not only make it through the first wave, but grow to become iconic in their own right and celebrate 25 years in the business. And they’re doing so in a year when the number of craft breweries has reached a figure that’s, somewhat coincidentally, nearly 25 times what it was the year they got started. (The Brewers Association’s most recent count, as of a couple of months ago, is 2,483. It is very likely that there are considerably more than 2,500 at press time, especially since there are about 1,605 breweries in planning that have yet to open).
Just as it’s difficult to think of a craft brewing scene without the likes of early adopters Sierra Nevada (est. 1980), Bell’s (est. 1983), Boston Beer (est. 1984), Widmer Brothers (est. 1984) and Full Sail (est. 1987) and ’90s arrivals like New Belgium (est. 1991), Dogfish Head (est. 1995), Stone Brewing (est. 1996) and BW Craft Brewer of the Year Oskar Blues (est. 1997), it’s nearly impossible to envision it without the folks known collectively as the Class of ’88. Distinguished alumni of that year include West Coasters Deschutes Brewery (Bend, Ore.) North Coast Brewing (Fort Bragg, Calif.) and Rogue Ales (Newport, Ore.), Midwesterners Goose Island (Chicago, acquired by Anheuser-Busch InBev in 2011) and Great Lakes Brewing (Cleveland, Ohio) and the East Coast’s Brooklyn Brewery (Brooklyn, N.Y.). Also among them are two of the best-known brewpubs in the country that also package some of their offerings for distribution: Wynkoop Brewing Co. (Denver’s first craft brewery and Colorado’s first brewpub, founded by the state’s current governor, John Hickenlooper) and Gritty McDuff’s in Portland, Maine.
“It’s a different world,” says Brooklyn Brewery president and co-founder Steve Hindy. “Back then we were basically pioneering craft beer in all of our various markets. Most of us were selling amber ale or amber lager and maybe a porter and a stout. And those styles were pretty foreign in most markets.” Hindy famously left a history-witnessing career as a foreign news correspondent to make a little history of his own by convincing neighbor Tom Potter to also quit his job and partner with him on creating a brewery. Hindy had taken up home brewing, as one cannot purchase alcohol throughout much of Middle East. The two founders co-authored the book, Beer School: Bottling Success at the Brooklyn Brewery.
Potter left the brewery just under a decade ago and got into craft distilling, co-founding New York Distilling Co.
The scene Hindy recalls on the East Coast is very similar to the one his good friend and fellow Class of ’88 alum, Gary Fish, remembers when he was launching Deschutes Brewery in Bend, Ore. “Back then there was no marketplace, there was no customer, there was no industry,” points out Fish, Deschutes’ CEO. “All of that had to be created.”
For Great Lakes Brewing Co., there wasn’t even the right glassware available.
“In 1988, we couldn’t find pint glasses, so we had to buy cases of gin shakers,” recalls Patrick Conway, who co-founded Great Lakes with his brother Daniel as a brew pub before they started packaging and self-distributing its brews in 1990. “No one was pouring craft beer, so no one had 16-ounce pints,” Conway remembers.
And that means it was still a foreign concept to those whose attention the brewers needed perhaps the most: the distributors.
“Wholesalers viewed us as kind of an amusing oddity,” recalls Hindy, who just wrapped up his latest book, “The Craft Beer Revolution: How a Band of Microbrewers Transformed the World’s Favorite Drink,” which details the history and development of the segment. “Here we were trying to sell these strangely flavored beers and we had no marketing money.
And many of us didn’t even have any posters or coasters, any point of sale material. We just had unusual beers and a lot of passion for what we were doing.”
Night and Day
Fast-forward to 2013 and the picture is considerably different. There’s a thriving market for those “strangely flavored beers”—which are relatively mainstream now by today’s craft standards. And distributors are aggressively seeking out craft brands to fill their portfolios. That’s a dynamic that only started to emerge in the past decade when more and more wholesalers got hip to the fact that a case of craft is considerably more profitable than a case of mass-produced lager.
“I think what led to that change was the sort of slump in the large brewers’ sales,” observes Hindy, whose brewery expects to move between 210,000 and 220,000 barrels for calendar year 2013. This year it released its Silver Anniversary Lager to commemorate its quarter-century milestone.
“In the last five years the large brewers have lost an incredible volume of beer, like around 12 million barrels,” Hindy continues. “So a lot of these wholesalers are suddenly seeing a decline in their sales and at the same time they’ve recognized that the craft segment is growing very rapidly. Finally they’ve gotten the message that the margins on craft beer are much richer than the margins on mainstream beer. They make a lot more money on a case of Brooklyn Lager than they do on a case of Budweiser or Coors or Miller.”
Craft beer had been on the radar of Orion, Mich.-based Powers Distributing since the early days—the company was an early wholesaler of Samuel Adams brands—and the company continued to pick up brands that had great potential throughout the ’90s. But there was a lot more caution back then. Powers COO and general manager Gary Thompson says there were some key characteristics that distinguished the credible players from the fly-by-nights. “One was a real commitment to beer and quality beer and the second was the kind of access to capital that could actually turn [the business] into something or a business plan that could turn it into something that went beyond,” Thompson says.
It was about a decade ago that the craft segment had evolved to the point where Powers was ready to make it an active part of its future strategy.
“We started to look around in 2002, 2003 and say, ‘This is a real movement, with real brewers, making really good beer, and the consumer’s ready for it,’” Thompson says. “And everybody understands quality, so let’s take this quality concept and beer to another level up.”
About eight years later, in 2011, Powers was named Craft Beer Distributor of the Year by the National Beer Wholesalers Association and the Brewers Assocation.
But for the market to get to the point where it even warranted such an award—a collaboration between the trade association for the nation’s beer distributors and the one for its small brewers—a pretty steep learning curve had to be conquered.
The Distribution Learning Curve
The often uphill educational battle is still very fresh in the mind of Mark Ruedrich, co-founder, president and brew master of the Class of ‘88’s North Coast Brewing Co.
“I don’t know if you could fairly call it a complicated situation,” Ruedrich points out. “The math is pretty easy, but you actually did have to sit down with pencil and paper—not just with wholesalers, but with retailers—and say, ‘Look, these are your margins with our beer and these are your margins if you’re just moving boxes of the big brewers’ beers. And if you could move the sort of volume that we believe you can of our beer, you can make more money.’”
Working out the math did get distributors’ and retailers’ attention, but, Ruedrich concedes, there was some concern among those potential customers that this micro-brew thing could be nothing more than a flash in the pan.
“They had to, first of all, believe that this wasn’t just some passing fad,” Ruedrich explains. “The longer you stay around and the more you capture the imagination of the beer-drinking public, the better your argument is that it’s not just a fad and that we’re here to stay—we are legitimate businesses, our colleagues are legitimate and people are starting to take notice around the world.”
North Coast had to work extra hard to get its beer out into markets that were quite a distance from its home base. The business was originally launched as a brew pub, but Ruedrich and his team soon realized that long-term survival meant packaging and shipping beyond Fort Bragg—a town of about 5,000 with an additional 20,000 people within about 30 miles in either direction up and down the California coast. “The whole county only has 80,000 people in it,” Ruedrich notes. “There is no local market.”
Like restaurants in its immediate vicinity, it relies on summer tourism, but the rest of the year the area’s generally pretty dead. North Coast’s brands, which include Red Seal Ale, Scrimshaw Pilsner and Old Rasputin Russian Imperial Stout, are now available in 49 U.S. states, all but West Virginia. The company expects to move 60,000 barrels this year.
About 350 miles northeast of Fort Bragg, in the similarly sleepy town of Ashland, Ore., another brewpub was opening up that would encounter a market conundrum not unlike that of North Coast.
“We opened in October of ’88 in Ashland and it was readily apparent that if we didn’t do something, we’d go broke,” remembers Jack Joyce, co-founder of Rogue Ales. “And we decided that the logical thing would be to open up another one.”
That other location was in the fishing community of Newport, Ore., which has been Rogue’s home base ever since.”
And, like North Coast, the Rogue team soon came to the realization that the future was outside its immediate area. “We were on the Oregon coast, in a town of 8,500 people where there were more cows than people within 50 miles,” says Joyce. “We realized pretty quickly that you had Portland, but you also had Full Sail, Bridgeport, you had Widmer and Deschutes, all with more ties to Portland. So we’d have to do something else.”
Lucky for Rogue, its recipes, under the guidance of renowned brew master John Maier—who joined the company less than a year after its launch—tend to be on the hoppier side. That means they travel better, as hops are natural preservatives.
“I think everybody in Oregon got the requests from [wholesalers and retailers] out of state to carry their beer; we just responded positively and said yes,” Joyce notes.
Rogue’s brews, which include Dead Guy Ale (and Double Dead Guy), Shakespeare Stout, Brutal Bitter and Mocha Porter, have been available in 48 states for the past decade. Last year, Rogue produced 114,000 barrels, up 25 percent from 2011’s tally of 91,000 barrels. The company’s management is already in its second generation, with Joyce’s son, Brett, coming on as CEO about seven and a half years ago. Brett left a career at Adidas to join his father.
“It was kind of one of those things, even though we never talked about it, it seemed really natural and it didn’t take me long to decide to move back to Oregon and return to the business I’d grown up around,” Brett Joyce recalls. “I’m really glad that I did.”
Close to Home
The other Oregonian among the Class of ’88ers, Deschutes, has been considerably more reserved in its state-by-state rollout. It’s currently available in 21 states and a Canadian province. “Historically we have been a Western U.S. brewer and our approach to new markets has always been very methodical,” says Deschutes’ Fish. “We want to make sure we’re taking good care of our existing markets before we open new ones. I don’t quite frankly understand the idea of going at the market with a shotgun and sending beer all over the place when you can’t look after it. And if you think the retailers and the wholesalers are going to look after your beer for you—it’s highly perishable and doesn’t survive well under adverse conditions—you’re wrong.”
That strategy seems to have worked for Deschutes: Last year the brewery produced about 252,000 barrels of brands like Mirror Pond Pale Ale, Black Butte Porter and Obsidian Stout, making it the No. 5 craft brewery in the country. In addition to its operation in Bend, it now also runs a popular brewpub in Portland, Ore.
It’s also proved to be a smart strategy for Great Lakes, whose business model continues to limit its distribution to markets within a 500-mile radius of Cleveland. “No more than a day’s drive from Cleveland,” says Patrick Conway. “Within 500 miles of Cleveland is about 65 percent of the U.S. population. We try to keep it in our back yard. I think that better positions you for a better product….Everyone has their own strategy and not one is right or wrong, that’s just how we do it.” Great Lakes is now the 19th largest craft brewery in the U.S., expecting to produce between 140,000 and 145,000 barrels of brands like Edmund Fitzgerald Porter, Dortmunder Gold and Eliot Ness Amber Lager in 2013. Not bad for an operation whose brands are only available in 13 states.
It aligns a lot with one of the key assertions of Deschutes’ Fish: “You’ve got to be able to have people in the market. You’ve got to be able to have people there with their eyes and ears out there, paying attention to your brand, paying attention to the beer on store shelves and on tap, making sure that everything is properly maintained and that the customer is getting exactly the beer you want them to get.”
Having said that, it’s not unthinkable that Deschutes will one day be accessible nationwide. “Certainly, one day, we look forward to being available in all 50 states, we just can’t tell you which day that is,” Fish reveals. “And it may just take us an awfully long time—it may take us another 25 years to get there.”
The New Class
If it indeed does take that long, it will happen the year many of this year’s new startups—call them the ‘Class of ’13’—hope to be celebrating their own quarter-century milestones. And just because there’s a thriving craft beer market in 2013 versus a mostly nonexistent one in 1988 and that financial institutions are a lot more eager to fund new breweries, it doesn’t necessarily mean the rookies are going to have an easier time getting to their respective 25th anniversaries.
“For the new brewers coming on line now, there’s a customer that’s willing and interested in new things, there’s a distributor that’s frequently interested in taking on new brands and there’s a marketplace already set up of some 2,500 breweries—6.5 to 7 percent of the market in the U.S. that exists that wasn’t there 20, 25 years ago,” observes Fish. “It really is a better situation, but at the same time, the bar is higher. In the early days, the customer didn’t really know what good beer was. And now they really do.”
With so much competition for tap handles and shelf space, many doubt anyone starting up now could become the sort of significant regional or, in some cases, national player that many of their more venerable predecessors are. The future, they say, is local. “Long-term, it’s going to be a lot harder for you to get regional and stay in control of your own destiny,” observes Powers’ Thompson. “I think it’s going to be easier for [new brewers] in the local realm. Consumers are already starting to make the leap from craft to local craft. As a result of that, if you’re a local craft beer and you want to stay local, your time is going to be now.”
Brooklyn’s Hindy agrees, noting that the already-local nature of the business should caution new breweries about trying to go too wide too fast. “I think the breweries that have rushed out there to become national brands have seen an erosion of their presence in a lot of far-flung markets,” Hindy says, “because distributors and beer drinkers have been gravitating to local brands.”
There’s also the pressure that comes with an increasingly savvy consumer: Brewers will need to constantly innovate to give those in-the-know craft drinkers something they truly haven’t had before.
“I think it’s harder and harder for people to find niches, but you’ve got to look for the one that’s going to be yours and that you can stake your territory out in,” says Fish.
Every half-decade or so, the definition of “niche” changes. And it will continue to do so, if craft beer history is any indication, Hindy projects. And that’s an aspect he’s been researching a great deal lately, as he wrapped up his latest book.
“The one thing I discovered working on my book is a lot of people viewed the mid-’90s, say ’95 to 2000, as almost a desperate time for the craft brewing movement, a time of shakeout,” Hindy relates, pointing to the flattening of the first wave. “It’s true, there were some spectacular failures during that period. But at the same time you had an incredible wave of innovation that began during that period.”
Among the examples he points to is New Belgium, which launched as a Belgian-style brewery—then relatively unheard of in the states—and now has grown to be the third-largest craft brewer in the country, likely to brew 800,000 barrels this year. Others that emerged during the ’90s that Hindy cites are Portland, Maine-based Allagash, another Belgian-style brewer, as well as California’s Stone Brewing, Lagunitas and Russian River. All are highly regarded and very successful and were founded during the supposed dark period.
And, Hindy’s own company in 1994 hired brew master Garrett Oliver, who helped bring Brooklyn further into innovative territory. Oliver’s also a key player in the beer-and-food movement, having penned the widely read The Brew Master’s Table.
“The first beer [Oliver] did for us was Brooklyn Black Chocolate Stout, which was, at the time, really kind of pushing the envelope,” Hindy remembers.
Now, imperial stouts—imperial “anything” for that matter—are practically considered de rigueur in brewing circles. So one can only imagine the level of innovation the Class of ‘13 is going to have to bring to the brew house, to the pub and to the off-premise shelf.
“Who knows what the next big thing is going to be,” ponders Deschutes’ Fish.
But he knows what it’s not going to be. “I’m not that interested in people,” he says, “who are interested in being average.”