n many ways, Geoff and Marcy Larson could be poster kids for the now well-established generation of regional independent brewers - the breweries that fill the niche between microbreweries and the big commercial producers.

In the early 1980s, Geoff was a chemical engineer in Juneau, AK, who homebrewed. His wife, Marcy, worked in a government office. They joked around about changing their lives; maybe they could start brewery. Over three or four years, the joke turned more serious. They began doing research and asking friends and family to invest.

In 1986, the Larsons founded Alaskan Brewing Co. Their goals were to make good beer, make a living and have fun - not necessarily in that order. Today, their beers are perennial award winners, the brewery is in the black, and the Larsons produced 60,000 barrels of fun in 1998 - up from 50,000 in 1997, for a healthy 20 percent increase.

Regional independents like the Larsons are the backbone of the craft brewing industry in North America - and its future. The future is not in the tiny microbreweries that cater to beer geeks or the brewpubs that try to be all things to all customers. Nor is it in the small breweries trying to grow big through public stock offerings and national marketing campaigns.

The regional independents occupy the healthiest niche in the brewing industry today. While micros and brewpubs are folding almost as fast today as they popped up in the early and mid-1990s, and while big commercial breweries scramble for gimmicks to boost flat sales, the regional independents continue to grow, though carefully.

There are perhaps 30 such breweries in the United States and Canada. Rogue, Algonquin, New Belgium, Otter Creek, Deschutes, Full Sail, Brick, Hale’s, Granville Island - their names are familiar to serious beer drinkers across North America. Most of these breweries confine their sales to their local markets, though some ship limited quantities to selected outlets in other states, in part, for market recognition.

The Independent Profile

The new regional independents are in some ways throwbacks to the pre-Prohibition area, when many cities and towns had competing local and regional breweries. But in other important ways, they are thoroughly new creations of late-20th-century markets and lifestyles.

Many of the regional independents share remarkably consistent profiles. Most of them were started by one or two individuals or by a small group of friends in the mid- to late-1980s. The founders typically were not beer geeks, or even people who always wanted to run a bar. They didn’t get into the business just to be around beer. Rather, many of them are people who were successful in other careers, often professional or management, who wanted to do something on their own.

They got into brewing primarily because it offered growth opportunities, not because they found it glamorous. It was manufacturing, not hospitality. Most of the founders are still there, managing the breweries day to day, a decade or more later. They have become passionate about brewing to the point that they will not or cannot sell out.

Growth at the regional independent breweries has come slowly and steadily, as the owners could afford it. Most of the breweries have become consistently profitable, but most profits are plowed right back into the business. The owners have resisted the temptation to sell out to big breweries, or to raise lots of money by going public on Wall Street. They rely on innovative local, customer-friendly marketing programs rather than slick advertising campaigns.

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New York's Brewery

Brooklyn Brewery, whose brewmaster, Garrett Oliver, concentrates on reviving traditional styles with his Brooklyn Lager, American Brown Ale, East India Pale Ale, Pilsner, Pennant Pale Ale, Black Chocolate Stout, and various other styles, has shown recent growth that is typical of the strength of the regional independent niche in recent years. Sales increased 25 percent from 1996 to 1997, and by nearly 30 percent last year, to 26,500 barrels.

“We’ve stuck to our original vision of being, first of all, New York’s brewery, and developing a special line of products,” Hindy said. He said Brooklyn and other regional independents should try to follow the examples of Sierra Nevada and Anchor, whose home markets are in northern California but also sell their beer as a premium product in many other states. “They don’t try to dominate every market they enter. They just look for people who are Anchor and Sierra drinkers,” Hindy said.

“The efforts to promote a craft beer as a national product, with the exception of Sam Adams, haven’t gone too well,” he added. “In order to be national, you need national marketing. That’s very expensive, and prohibitive for the kind of volumes you’re talking about with craft beers.”

In turn, when craft breweries try to go national by making beers with more mass appeal, those beers have been widely perceived as inferior in quality to true craft beer produced by regional independents - beers that usually explore styles forgotten by the mass market.

Like smaller microbreweries, the regional independents often brew innovative or challenging beers, but the larger aim is to balance quality and mass appeal. “Beer geeks can be disloyal. They don’t necessarily stick with your product in the long term. We want our beer to be interesting and drinkable,” said Kirby Nelson, the brewmaster at Capital Brewery in Madison, WI.

At the same time, changes in the beer are inevitable. The regional independents sometimes lead their customers, and their customers sometimes lead them as beer tastes become more sophisticated. Jerry Bailey, who quit his government job to found Old Dominion Brewing Co. nine years ago, noted how tastes have changed in Virginia, Maryland and the District of Columbia. “In 1990 if I had introduced Tupper’s Hop Pocket Ale, we would have gone out of business. But the field has grown and expanded since 1990, and there is a place for big-bodied beers as well as hoppy beers,” he said.

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Small is Beautiful

Another characteristic of the regional independents is that they have remained, for the most part, small companies. They usually are not family dominated like the local brewing dynasties of the 1800s, but many are dominated by a feeling of family, particularly among the founders and employees who have been with the brewery since the beginning.
For example, Howard Thompson, head of marketing and sales at the Creemore Springs Brewery in Creemore, Ontario, said the brewery no doubt could make and sell more beer, but the owners - one principal, John Wiggins, and two silent partners - don’t want to start operating overnight or on weekends out of concern that it would be detrimental to the family lives of their employees.

Like many other regional independents - in part to save money, in part to maintain quality control - Creemore Springs, whose proud motto is “100 Years Behind the Times,” does its own local distribution, using 11 trucks to serve 600 pubs and 300 retail shops.

Fred Bowman - who now laughs at himself for telling friends he didn’t expect anyone else to start a microbrewery in the Northwest when he founded the Portland Brewery in 1986 - said the importance of regional independent breweries goes beyond the brewing industry. The breweries have become important in their communities, not just because they make the same sort of beer that local people might have drunk before Prohibition.

“It goes beyond beer to the important impact on the local economy and local civic pride. Craft breweries have rescued and renovated old buildings. Breweries have sponsored many local events since that is an affordable means of advertising,” he said.

Indeed, money for advertising is a rare luxury for most regional independent breweries. There are so many other things to spend money on - especially on making beer, and getting it to customers. Rich Doyle, a founding shareholder in the Harpoon Brewery in Boston, said his brewery is only beginning to think about advertising. Instead, it has concentrated on marketing and public relations to build communications with the consuming public. His methods include a regular newsletter, a fan club, frequent brewery tours and special events.

Doyle said one advantage that the new independents have over the old pre-Prohibition regional breweries is that they are not locked into anything by tradition. “We do what we do and hope people like it. We serve the consumers because we are not rooted in a family tradition or brewing style. Each brew becomes its own tradition,” he said.

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A Style of Their Own

Jeff Brown, the senior manager at the Rockies Brewing Co. in Boulder, said consumers have come to expect regional breweries to offer their own distinctive interpretations of classic styles. “Our style tends to be a Colorado style, not hoppy, but a drinkable, maltier taste with some bitter finish,” he said.

Indeed, those different styles are a delight to beer aficionados. The chance to sample the everyday labels of regional breweries in other parts of North America - as opposed to the rare and exotic brews of tiny American microbreweries or specialty foreign breweries - is one of the reasons to keep going to beer festivals.

“It’s the type of business where you have to start over every day because of customer preference. The business requires a lot of trial brews in order to determine what will stick,” said Tom Allen, a former New York advertising man who was one of the founders 10 years ago of the North Coast Brewery in Mendocino County, California.

Despite their success, either in brewing or in business, few independent regional brewers feel like they have everything figured out. “If you are satisfied, then the game is over,” said Larry Bell of Michigan’s Kalamazoo Brewing Co., where sales increased from 16,600 barrels in 1997 to 18,481 barrels last year.

“Brewing is the type of business that each time you get cocky, the yeast will remind you that you are not in absolute control,” agreed Mark Stutrud, the owner-founder of Summit Brewing Co. in St. Paul, MN.

Stutrud says one advantage of regional breweries is that they can be much more nimble than the macrobreweries in taking advantage of new consumer tastes and trends. “We are not loaded down with infrastructure, so we can change at a much quicker rate than a large brewer.”

Summit, which began brewing in 1986, sold 85 percent of its 35,000 barrels in 1998 (up from 31,400 barrels in 1997) in the Twin Cities area, 90 percent of it in Minnesota, and most of the rest in Wisconsin and the Chicago area.

Stutrud foresees production increasing to 75,000 barrels in the next five years, but has no plans to capitalize by taking the company public. He said the experience of bigger craft breweries several years ago, when they had ballyhooed initial public offerings and then saw the stock prices collapse, was a lesson. “The market has collapsed, and the romantic interest that originally fueled the movement has been replaced by a tough realism of the business aspects,” he noted.

Like many regional independents, however, he is pondering ways to allow investors to realize some of their profits. In the past, the only liquidity for most private investors in regional breweries was the beer they could buy at a discount. But now more breweries either have started or are considering paying dividends, and many of them are looking for ways to allow their investors to sell all or part of their shares or partnerships for more money than they paid.

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Working for the Money

Financially, few of the regional independents would claim that they have had no bumps in the road. They virtually all admit to management mistakes, distribution mistakes, brewing mistakes, marketing mistakes. “Every kind of bonehead mistake,” Brooklyn’s Steve Hindy grimaced.

In recent years, the typical regional independent brewery gradually has grown beyond its entrepreneurial adolescence, when the most important thing was the top line, building sales to establish its brands. As the regional breweries became better organized and better managed, they shifted focus to the bottom line - and long-term survival. Sometimes they were tempted and burned by the appeal of expansion and growth. They had to retrench and refocus on their original goals of providing quality beer for their home markets.

Peter McAuslan, a former education administrator who founded the McAuslan Brewery in downtown Montreal in 1989, said his bottom line took a hit when he expanded his export program to the States. Since he has scaled back the exports and returned to his core focus - quality beer for Quebec, profits began to recover.

McAuslan, whose wife, Ellen Bounsall, is his brewer, is an example of what some business people might consider a management contradiction common among regional independent brewers. On one hand, he devotes close attention to the “nickel and dime” aspects of cost controls in order to make a profit. On the other hand, the money is not his driving motivation. “I love this business too much to go public or sell to a bigger brewery,” he said.

In his Brooklyn office above the brewery, Steve Hindy, whose training as a journalist has also made him a marketing and public relations guru for breweries trying to raise their profiles without rolling out expensive advertising campaigns, said the main reason the regional independents have been successful is that they have not forgotten the consumer.

“Speaking as someone who loves beer, it’s a wonderful thing to be able to land in Chicago and look for a Goose Island product, or in San Francisco and look for an Anchor or Sierra Nevada product, or in New Orleans and look for an Abita, or in Kansas City and look for something from Boulevard Brewing,” Hindy said.

“If you look at all those brewing companies and line up their products on a table in front of you, they offer distinctive commentaries on the regions where they are brewed. That diversity is a beautiful thing, and I’m glad it’s back. It wasn’t there 10 years ago. For anyone who loves beer, this has been a wonderful revolution. These regional breweries have had a lot to do with what has happened, and what’s going to happen in the future.”

Tim Harper was one of the original investors in the Brooklyn Brewery. He has written two beer books, including The Good Beer Book with Garrett Oliver, published by Putnam Berkley. His next book, Moscow Madness, will be published in May by McGraw-Hill. Therese Mierswa is a community affairs and business research consultant.

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This story originally appeared in All About Beer Magazine in April 1999.