ST. LOUIS — Beer sales shot up 36 percent last year at O'Fallon Brewery, a microbrewer located in an industrial park off Interstate 70 in O'Fallon, Mo. And yet, there was disappointment.
"We had hoped it would be a little bit higher," said Fran Caradonna, who with her husband owns the maker of brews such as 5-Day IPA, Cocoa Cream Stout and Pumpkin Beer.
Caradonna's reaction might sound surprising. Last year was horrible for U.S. beer sales. Shipments were down 2.2 percent from 2008, the worst single-year decline since the mid-1950s, according to trade publication Beer Marketer's Insights.
But the pain was not shared equally.
The big boys took the hardest hits. Anheuser-Busch was off 2.1 percent nationwide. MillerCoors was down 1.9 percent. Both companies combined represent almost 80 percent of the U.S. market.
At the same time, craft brewers saw shipments leap almost 9 percent. They added capacity. They tapped new markets. At O'Fallon, for example, brewing was outsourced to increase production, and the company's beer made its debut in Springfield, Mo. Other brewers mapped out future expansions. Some even hired people -- notable in an industry that has been making headlines with layoffs.
And two craft brewers, Boston Beer Co. and Yuengling of Pottsville, Pa., managed to do so well in 2009 that they are now too big to be called craft brewers (defined as producing fewer than 2 million barrels a year).
"The trend is towards flavor, innovation and localness, which craft is playing on," said Benj Steinman, president of Beer Marketer's Insights.
Craft brewers -- made up of regional brewers, microbrewers and brewpubs -- still occupy a small niche, hundreds of brewers who together add up to about 4.7 percent of the U.S. beer market. But the stouts, porters and ales that once found the fancy of just beer snobs have discovered a broader audience in recent years. And 2009 might prove to be the breakout year.
"In the worst recession as far as the beer business is concerned, we did pretty well," said Bob Sullivan, vice president of sales and marketing at Boulevard Brewing Co. in Kansas City.
Boulevard is a big craft brewer -- 150,000 barrels a year, sold in 13 states and a dozen varieties, including Bully! Porter and Boulevard Pilsner. It has 87 workers. Earlier this month, the brewer launched a $4 million capital project to install three huge fermentation tanks so it can boost annual production by 40,000 barrels.
Its recent growth has been powered by "a cultural phenomenon over the last two years of young people going out less and entertaining at home," Sullivan said, pointing out that "young people" in the beer business means 21 to 34 years old.
That was illustrated by Boulevard's sales to bars and restaurants falling 6 percent last year, while sales to retail and grocery stores rose 15 percent, Sullivan said.
Retailers have noticed, too. QuikTrip, which operates more than 500 gas and convenience stores, has seen speciality beers grow to occupy 10 percent of its beer shelf space, said spokesman Mike Thornbrugh.
At Dierbergs Markets, sales of major beer brands -- the Budweisers and Miller Lites -- have declined 2 to 4 percent, said Todd Vasel, assistant director of marketing and advertising. But craft and speciality beer sales have been growing, allowing overall beer sales to remain flat.
But the drop in restaurant business has hurt some brewpubs that sell their beers only in-house. Mattingly Brewing Co. in St. Louis, which opened in 2008, saw its beer sales stay fairly flat, said owner Doug Mattingly.
And Trailhead Brewing Co. of St. Charles said sales of its brews, like Riverboat Raspberry Beer, finished unchanged from 2008 -- a year that saw record-breaking beer sales at its two restaurants. "And we were flat to that," said owner Bob Kirkwood. "So we were certainly happy."
Despite the struggles of big beer, the mega-companies are still posting healthy profits, thanks to price increases and cost cuts. A-B declined to comment ahead of the release of Anheuser-Busch InBev's annual report in a few weeks.
Many of the trends playing out for craft brewers can be seen in the growth of St. Louis Brewery Inc., maker of Schlafly. The brewer saw shipments increase 28 percent last year.
"We've never been up that much," co-owner Dan Kopman said of the 18-year-old company.
Schlafly is focused on the St. Louis area market, where 90 percent of its beer is sold. And the company sells beer at both its two brewpubs and retailers. But the company has morphed from one dependent on its brewpubs to one where its popular beers are driving the traffic. So while the eateries were a bit of a drag last year, beer sales still allowed it to post a 15 to 20 percent revenue increase.
And St. Louis Brewery Inc. hired five people last year, bringing the brewery work force to 30. Expansion plans also are afoot. New fermentation tanks arrive next month, allowing the brewer to boost shipments.
Last year, Schlafly's market share of beer sales in the St. Louis area's retail and grocery stores trailed only A-B and MillerCoors. Its share, which jumped almost a full point from 2008, was still just a fraction of those two mega-brewers, but ahead of such notable brands as Heineken, Pabst and Grupo Modelo, maker of Corona.
Even an experienced beer guy like Kopman was surprised.
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