The future is theirs

Joe Owades, brewing chemist and a walking encyclopedia of beer, was visiting the Matt Brewing Co. in Utica, NY, not long ago. He ambled up to company president Nick Matt at one point and said, "You guys are really to be congratulated."

Matt said, "Thanks, Joe, but for what?"

"I think you're the only regional brewery in the country that has totally reinvented itself into a specialty brewery."

A nice compliment, if not exactly accurate, Matt reflected; others have done somewhat the same, and the antique regional brewery still turns out the pale American lagers that have largely paid the bills since 1888. "Still, our specialty line of Saranac beers is far and away the largest of our brands," said Matt. "Barely 10 years, ago 90 percent of our business came from Utica Club and Matts Premium. Today our business is half Saranac, a third production of contract brews. The remainder is a minor part of the business, but people here still love Matts and Utica Club, and there's a lot of history in them. So we continue to make them." Ten years ago it was easy to describe what a regional brewery was: going, or gone. With the rise of national breweries, the regionals were between a rock and a hard place-making beer just like the megabrewers, but probably not as well and for more money. For many, the only way ahead was the way out. Others managed to hang on, among them: Matts; August Schell and Cold Spring in Minnesota; Yuengling, Jones, Straub, Lion in Pennsylvania; Jacob Leinenkugel in Wisconsin. They've taken somewhat different paths to survival, but they've survived. Ten years ago it wasn't hard to recognize the name of every brewery in the United States, because there were fewer than 100. Now there are over 1,000. Ten years ago, people were beginning to stop using the irritating term, "boutique breweries," in favor of microbrewery or craft brewery to describe the modest number of emerging new breweries. The Institute of Brewing Studies helpfully established a benchmark of 15,000 barrels as a way of defining a micro. Regionals were over that, though shy of the barrelage that would put them in the "Large" category. But that was 10 years ago. The new regionals Nominations are now being accepted for the most famous glass of beer ever imbibed. Is it the first tipple of the 13th-century Belgium duke, Jan Primus, who would become known as Gambrinus, the King of Beer, said to be able to toss back 144 pints on special occasions? The first taste of a pilsner that some enterprising sort who outside of Pilsen savored? Charlie Papazian's gagging sip of his first batch of homebrew, that he had to toss out even as he vowed to do better next time? For the less fortunate, perhaps the last beer before waking up in a cheap motel married to a complete stranger? My vote goes to the beer that a graduate student named Fritz Maytag was sipping in 1965 in a San Francisco joint called the Old Spaghetti Factory, when the owner let slip that the company that made the beer, Anchor Brewing, would be closing its doors in a matter of days. The rest is modern beer history. Most know that Maytag stepped in and saved the company from extinction, refashioning it into the quintessential small-scale all-malt brewery that it remains today -- if not so small anymore (103,000 barrels in 1995). There are few knowledgeable beer drinkers these days who don't admire Maytag and Anchor, not only for the continuing quality of the Anchor beers, but also the unquestioned influence the company has had on the craft brewing movement. Craft brewing has grown with such vigor that it has thrown the categorization business into befuddlement, as specialty brewers have reinvented themselves-or grown into-the new regionals. "What's in a name?" Steven Harrison of Sierra Nevada pondered, as well he might. In 1981 the tiny new Chico, CA, micro brewed 500 barrels of Sierra Nevada Pale Ale, in a brewery patched together from used dairy, ice cream and Anchor Brewing equipment. Its last year in the old brewery, 1988, it brewed 12,000 barrels. Last year, it reached 200,000 barrels as the largest (noncontract) specialty brewer. The company's ales are in 40 states, but Harrison said, "We're still very regional -- 68 percent of our sales were in California, and there's still room to expand in this market." But the brewery's next largest market?: New York. Jim Parker, IBS administrator, said, "It was in the late '80s when we started seeing places bump above that bubble where calling them a microbrewery just wasn't working; they weren't that micro anymore. The new term is 'Regional Specialty Brewery,' and yes, it's a cumbersome sort of thing. "My boss [IBS director David Edgar] says we have to come up with a new term, but it's not easy. These breweries have grown enough to no longer be micros, but to compare them with the A-Bs, Millers and Coors of the worlds-they're not that big. What happens when Sierra Nevada passes 500,000 barrels? Hard to say. For now these breweries are in those awkward teenage years-beer adolescence." It's a useful metaphor: If the old regionals are working to stave off the rickety infirmities of the mature years (aging equipment, reluctance to shed old ideas), the new regionals have to find ways to survive to adulthood while coping with wild hormonal growth and the nature of their identity. Not to mention lust. "The typical thing that happens in an expanding market like this," said Harrison, "is that everyone jumps in and thinks it's unlimited, starts spending big bucks on breweries. If their sales don't come through right away, something isn't going to add up. When that hammer comes down, it comes down fast. I think there are going to be some disappointments. We have a really good reputation, but we've been at it for 16 years. It doesn't happen overnight, and no one has unlimited capital." One in eight In its monthly statistics, the IBS dutifully lists the failure rate for US microbreweries as one in eight (one in seven for brewpubs). For years now, brewers have been bugged by the recurring question: "Is there a saturation point to the market, in terms of beer or breweries?" Everyone seems to think there must be one, but no one really sees it on the horizon. So the new regionals continue to grow, if in different ways. Some plan for it; others react to demand; some, like Anchor, almost seem to resist it. "Our current thinking is quite modest," said Phil Rogers of Anchor. "Fritz is conservative, not numbers driven. We're not looking to maximize growth but to stay profitable, update equipment, keep supporting our market and maintaining quality, which always has been and remains the most important thing. What we call ourselves probably isn't too important, though we consider ourselves a small brewer with a regional emphasis." Anchor's base is in the West, but it is in virtually every state and is doing what Rogers termed "a modest amount of exporting." Not counting contract breweries, the top 10 new regionals (based on IBS figures for 1995 shipments) are Sierra Nevada, Redhook, Pyramid, Anchor, Full Sail, Widmer, Portland Brewing, Nor'Wester, Rockies Brewing, and New Belgium. Fred Forsley, president of the Shipyard Brewing Co. of Portland, ME (number 13 on the list), said, "The new regionals still service a regional area. They're regional because there's regional demand, and because it doesn't make sense to send your beer too far. We'll always do better in Boston and Connecticut and New York City than in the Midwest, for example. But, through current technology and strategic alliances, you can open up other areas. We're opening up a 20-barrel brewery in Orlando. That's going to allow us to supply product as a local Florida brewery."

"The beer is what it's all about, rather than the size of the kettle." Strategic alliances include Shipyard's 50/50 partnership with Miller Brewing, a route previously taken by Celis and Leinenkugel. Anheuser-Busch has a 25 percent stake and a "distribution alliance" with Redhook of Washington state, though the latter's new brewery in New Hampshire (Redhook New England) was funded by a public offering. It's a long way from 1981, when Redhook opened up in a former Lee Myles transmission shop and produced 1,000 barrels. My nephew, Doug Honker, of Atlanta, remembers how excited he was when on a business trip in San Diego years ago, and he noticed a Redhook truck parked at a beer outlet. "I loved Redhook but couldn't find it at home for love or money. So I drove across two lanes of the interstate, followed the truck and bagged a few six-packs to take back home." Doug admitted that the bloom is somewhat off the rose, though the interstates may be safer: "Now I can buy it practically across the street." IPO's were the route for the former Hart, now Pyramid Breweries. George Hancock, president and CEO said, "We did a public offering in December last year to build a network of small shipping breweries and take the Pyramid brands [which include Thomas Kemper Lagers] national. The first new one will begin test brewing in Berkeley in December, and we're looking at Chicago, the Northeast, Texas. Pyramid's stock performance has been disappointing and a stockholder suit is in progress, but Hancock is undeterred: "The stock is going badly but the strategy is going well. Five years from now we will be a national craft brewery with breweries in the major metropolitan areas supplying fresh ales to a large customer base." Nor'Wester Brewery of Portland is barely three years old. It's public offering, aimed mainly at beer enthusiasts, was well over-subscribed. The company started with a five-year plan to grow to a 10 to 15,000 barrel brewery by 1998. In 1995, its second year, it shipped over 32,000 barrels. Micah Nasarow, brewing chemist and quality assurance manager said, "Did we expect to get this big? Yes. But not this fast. "Now we have four other 'sister' breweries around the country: Aviator Ales in Woodinville, WA; Timberline Ales in Denver; Bayhawk Ales in Irvine, CA, and North Country Brewing in Saratoga Springs, NY. All of these breweries are new and need to fill up their brewery capacity. So they're doing some cooperative brewing for Nor'Wester, getting our product out fresher to other markets around the United States. This way we can keep the small hand-crafted style of beers the same, instead of making one huge 250-barrel brewhouse, or larger, in one area and trying to ship around the country. " A brewery is a brewery is a brewery The new regionals are anywhere; the older ones survive mostly east of the Rockies. Pick a state-say, Minnesota-and they exist almost side by side. The August Schell Brewing Co. in New Ulm opened during the Civil War and is the third oldest operating brewery in the United States. It has followed a script similar to Matt's: brewing some distinctive specialty beers (a pleasing Doppel Bock, a Schmaltz's Alt), some mainstream American lagers, and a stable of contract brews. In Cold Spring, the Cold Spring Brewing Co. is showing signs of revival with its regular line of lagers, a pale ale and some contract brews. And in St. Paul, the Summit Brewing Co. has grown from a 1986 micro to an anticipated 28,000 barrels next year of its Extra Pale Ale, Great Northern Porter and others. "But the categories don't really mean anything," said Summit operations manager Chris Seitz. "We've never even been fond of the term 'micro' as much as 'craft brewery,' which is more to the heart of what we're doing. But we're definitely a regional brewery, with 90 percent of our sales within the metro area of the twin cities. Five percent is in other parts of Minnesota, and the last 5 percent in the four other Midwest states and Chicago. There's plenty more beer to be sold locally; going national is not a part of our plan." The Rockies Brewing Co., once Boulder Brewing, began going national while it was still micro. That's when the trouble began, said general manager Jeff Brown. "At its height the company had 5 to 6,000 barrels spread out over 26 states, neglecting the local region. So when the new management came on board in 1990, we basically pulled out of the other states they hadn't been booted out of already. We concentrated on Colorado, on recreating local customer loyalty." It took some time, but the company sunk its roots deep enough into the region that it could grow again-and look again at sending the Boulder ales into distribution channels in mature markets. "Now 60 percent of our market is here, but 40 percent is in 20 other states. But there are many ways of growing, and it's all a natural evolution of a growing industry." "The beer is what it's all about, rather than the size of the kettle," said Pyramid's Hancock. "I think a case could be made for just calling every one a brewer, no matter what or how much they brew. Fine, separate production breweries from brewpubs. But beyond that, why differentiate? Just to distinguish those brewing mass-market beers from craft brewing? But what about those now doing both? Where do they fit in?" Good questions. Clear as mud To brewers, no terms, labels or categories have that much meaning. When philosophical concepts (craft brewing versus typical American pale lager brewing) collide with notions of size (barrelage), the waters are going to get muddy. The answer to what is in store for the brewing industry may come from Gertrude Stein: "My writing is as clear as mud. But mud settles." "Sierra Nevada began because there were no good ales around," said Harrison. "They were all imported and old. Our attitude was to bring back the traditions of fine ale brewing. It's still the attitude. My title is marketing and sales director, but the truth is we have a zero media advertising budget. Nothing. We're not trying to push it at all. We don't have that type of ambition. And yet we're still growing like crazy. We're flying." The Matt Brewing Co. received the first permit to sell beer after Prohibition, and when word got out that bottles of Utica Club were available, the brewery was besieged by thousands of parched fans. Police were called in to discourage hijackers. The company had survived what had killed so many brewers. Now it has adapted again. "We don't really define ourselves as a regional any more," said Nick Matt. "New York is still our largest market and we expect it always will be, but it no longer accounts for the majority of our sales. We're in 18 states and California. That's a big change for us. But it's a changed business." There are a lot of new faces at the company these days, but what hasn't changed is that the ones named Matt are still there. "We all still get along pretty well; we don't have too many fist fights. And what we, and lots of other people, are doing is going about our business, trying to make some great beers. The new regional breweries certainly discovered, and have led the charge, toward specialty beers. All I know is, we're happy to be in the pack."

This story origionally appeared in All About Beer Magazine in November 1996.