Can state’s, Boulder County’s craft brewers keep the buzz alive? – Boulder Daily Camera

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Colorado is among top five craft beer states, but industry not immune to competition

A declining per capita beer consumption in the United States and a spate of brewery closures in Colorado in recent years aren’t keeping brewmaster Chris Marchio awake at night as he gets ready to open his craft beer operations, Knotted Root Brewing Co., in Nederland in the next few months. It will be a 10-barrel brewery, making about 300-gallon batches two to four times a week, he said.

The craft beer industry has seen an extraordinary amount of growth, particularly in the Denver-Boulder area in the last five years, Marchio said, adding the market has become “a little saturated” for his taste.

“Some kind of a change is going on definitely.” But it’s still less competitive than the music or the cannabis industry, he said.

With 348 craft breweries, Colorado is among the top five craft beer states with 8.4 breweries per 100,000 adults ages 21 and older, according to the latest data from the Brewers Association, a Boulder-based trade group for the craft brewing industry. In Colorado, the industry had an economic impact of more than $3 billion in 2017, with the highest impact in the country at about $764 per 100,000 adults ages 21 and older.


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Last year about 20 craft breweries closed in Colorado, including Niwot’s Powder Keg Brewing Co., Boulder’s Vindication Brewing, Broomfield’s Nighthawk Brewery, and Longmont’s SKEYE Brewing, said Bart Watson, economist at the Brewers Association.

“Boulder County is the microcosm of Colorado,” he said.

Andres Gil Zaldana, executive director of the Colorado Brewers Guild, said the number of craft breweries went up from about 120 in 2012 to about 420 in 2019, and the craft beer industry today is facing the same business pressures as other industries.

“We’re victims of our success,” he said.

A steady increase in operational costs, competition from other alcohol-based beverages, and the recent partial federal shutdown is making the craft beer industry take a hard look at their priorities this year, Gil Zaldana said.

That means fewer breweries that have maximized sales in their taprooms will pursue wider distribution opportunities or invest in expanding their business, he said.

Stabilization of market

Openings have slowed down and closings have gone up, said Watson of the Brewers Association.

“We’re moving to a more mature market. We’re finding out how many breweries the market can sustain,” he said. “Openings still outpace closures at the national and state levels.”

Since 2018, around 60 new craft breweries have opened in Colorado, he said.

There always are brewers who think they can offer something different to consumers, Watson said. For example, Primitive Beer in Longmont opened in 2018 and focused solely on spontaneous, barrel-fermented beers, he said.

The overall production of craft beer has slowed down nationally, Watson said. “It’s not the same growth rate as seen a few years ago.”

Rock Cut Brewing Co. in Estes Park is building its sales strategy keeping in mind a decline in beer consumption, said Kirby Nelson-Hazelton, one of three owners of the brewery.

“Our distribution is not aggressive. We’ll be competing for shelf space. We’ll continue to focus on taproom experience,” she said.

Her brewery is essentially a community gathering space that has built “deep genuine” relationships with customers who keep coming back to drink their favorite brews, Nelson-Hazelton said.

Rock Cut, which opened for business in 2015, tried a test canning run for its pilsner in 2018, she said. “It went pretty well, but we decided not to pursue it.”

Rock Cut sells about 10 percent of its beer (by volume) in 32-ounce growlers. In 2018, the brewery produced 900 barrels, she said. Craft beer drinkers are becoming more selective as they have a variety of options available, she said.

It provides breweries like hers an opportunity to offer higher end (barrel-aged) limited release speciality beer, Nelson-Hazelton said. “Craft beer has to grow.”

Challenges ahead

Part of the challenge so far this year for Rock Cut was the federal shutdown. President Donald Trump on Jan. 25 signed a bill to reopen shuttered government departments until Feb. 15. Trump tweeted the deal was “in no way a concession. It was taking care of millions of people who were getting badly hurt by the Shutdown with the understanding that in 21 days, if no deal is done, it’s off to the races!”

If the president and lawmakers remain at an impasse over funding for a border wall, a second government shutdown could loom, which could make things tough, Nelson-Hazelton said. A huge slice of Rock Cut customers comes from visitors to Rocky Mountain National Park. Many out-of-state visitors, who may have heard about Colorado’s unique craft beers, want to experience craft beer at Rock Cut, she said. “We’re a destination brewery. We had a great holiday season business.”

But the closing of the national park during the 35-day government shutdown affected the flow of tourists in Estes Park and at Rock Cut Brewing. But the brewery still drew local loyalists and customers from the Front Range, including those interested in outdoor adventures, Nelson-Hazelton said.

The federal shutdown also posed a major issue for breweries that have wider distribution, said Gil Zaldana of the Colorado Brewers Guild. During the shutdown, breweries could not receive approvals (from the Alcohol and Tobacco Tax and Trade Bureau, or TTB) for labels or processes for brews meant to be distributed out of state, he said.

“With the federal shutdown temporarily ending, TTB will resume processing certificates of label approval (COLA). However, TTB is resuming with COLA labels submitted on Dec 13, and the average processing time is 48 days,” Gil Zaldana said. “This is a serious backlog that will no doubt impact beer releases. Another shutdown will add to this time delay and make it harder of label approvals to go forward.”

Dave Taylor, marketing director, Oskar Blues Brewery in Longmont said, “It’s a significant inconvenience, but one that’s certainly growing. We have more than a dozen beers we are waiting on approval for. We were lucky and got the first beer in our Can-O-Bliss IPA series and Wild Basin Boozy Sparking Water approved in time for us to distribute nationally, but we’re stuck in a holding pattern with several others.”

Taylor said his company can’t distribute its barrel-aged imperial stout, Ten FIDY, until label approval comes through.

Gil Zaldana said the shutdown also is affecting smaller breweries that are getting ready to open, he said. For example, Spice Trade Brewing in Arvada had to put its expansion plans on hold due to the lack of clearance from federal authorities, he said.

Slowing growth

Last year, there were some closures and rebrandings in the industry, but on the whole 2018 was a good year, Knotted Root Brewing Co.’s Marchio said, adding the market is becoming very competitive. “The competition will improve the quality of the beer,” but the majority of breweries will make less profit, he said.

Marchio plans to open his brewing operations in April or May.

Taylor of Oskar Blues said “2018 was a challenging year in the craft beer world.” His company’s total production increased 12 percent, but sales did not see the tremendous growth, he said.

“Our trends were on par with several of our competing, nationally distributed craft breweries,” he said

Watson of the Brewers Association said he doesn’t think the expansion of legalized marijuana is slowing down beer sales. He said per capita beer consumption had been declining for some time, primarily because Americans are drinking less as they age, and due to increased prices. He said off-premise beer prices went up 18 percent from 2008 to 2018, versus 4 percent for spirits and 1 percent for wine.

Also, the increase in the number of breweries getting into distribution is making for tougher competition for retail shelf space, Gil Zaldana said.

The impact of the new law in Colorado allowing grocery stores to carry full-strength beer has yet to become clear, Oskar Blues’ Taylor said.

“We certainly are among the beneficiaries. We are now at more places than we’re before. Sales should go up,” he said. “We haven’t seen exactly how much sales have gone up.”

Grocery store chains aren’t carrying beer made by boutique breweries, said Paul Sink, owner of Kettle & Spoke Brewery in Boulder, who got into craft brewing in 2017 to fulfill a dream to be a brewer. Some independent liquor stores might become interested in carrying beer made locally, Sink said, but his focus is on his taproom.

“We definitely increased sales in 2018. Business has been good. It’s not a huge money maker for us,” said Sink, a carpenter by trade, who runs Elk Mountain Carpentry in Niwot as his day job. “We’re a niche brewery. We expect to grow slowly.”

To him, brewing is a craft and an art. He said he gets great joy seeing customers happy after they’ve consumed his brew.

His brewery is open six days a week but hours are limited, he said. “We brew about four to five barrels a month in summer and about three barrels a month in winter.”

He brews different styles of beer including India pale ale, brown ale, amber ale and stout, among others. “We have a large collection of home brew recipes,” Sink said. Drool Reflex, a New England IPA-style beer is quite popular among the regulars at Kettle & Spoke, he said.

Looking ahead at 2019, Sink said, he isn’t thinking about making any changes.

Ditto for Ian Clark, beer chef and founder of BRU handbuilt ales & eats in east Boulder, who said 2018 was a good year. “We had a solid year. We weren’t up over the previous year, but we weren’t down either.”

But he’s not eyeing expansion. Clark plans take care of what he’s been doing since 2012 when he started brewing beer in his garage. He specializes in brew made with spices and herbs.

“We make beer we like and hope people like it, too,” he said.

Clark brews about 300 gallons a year, and has 14 rotating taps. Citrum IPA with fresh lemon zest and juniper is one of his popular beers, he said. “We want to blur the line between kitchen and brewery.”

He said he’s aware the craft beer market is levelling off and consumers are trying multiple varieties of beverages. It’s a cyclical pattern, he said.

Taylor of Oskar Blues said he believes beer consumption in the country is “diversifying and evolving.” There’re more than 7,300 breweries today, he said. “Craft as a category continues to take share from the traditional premium and domestic beer categories.”

Strategy for success

“A brewery has to find a niche these days. For us, that’s being in the mountains, in a converted barn,” said Marchio of Knotted Root Brewing. That will be a draw for folks looking to visit a destination for a unique experience, he said.

“Nederland is a cool town. Not everyone is able to open a brewery in the mountains. It takes more of an effort,” Marchio said.

The shaking down of the craft beer market to realistic levels means the focus will be on the quality of the product and customer service, he said. He plans to use social media to create a buzz about his brewery.

Bru’s success is based on word-of-mouth publicity, Clark said. He wants to focus his attention on brewing. “My wife Bryce takes care of marketing.”

Nelson-Hazelton of Rock Cut Brewing wants to develop more flavors. Her brewery organizes beer field trips for staff members to check out other breweries and sample their beer. “We are not purist by any means. We’re open to trying to new styles,” she said.

Last year, glitter beer was very popular, she said. But it faded out eventually. The exploration of new styles has to be rooted in the science of brewing, Nelson-Hazelton said. People in the craft beer industry are collaborative, and love to share ideas and work together, she said.

Rock Cut plans to continue to make beer for daily consumption and small batch exotic and innovative brews, she said.

Building relationships through social media also is part of a larger strategy to stay relevant in an evolving industry.

Breweries have to know their strengths, Gil Zaldana said. Every brewery doesn’t need to distribute widely, but instead can choose to provide a great taproom experience for its customers, he said.

Only after a brewery has maximized its taproom sales can it look to distributing through other channels. Canning is an expensive option, but breweries can use growling machines to sell beer to go, he said.

“Boulder has an ecosystem that allows all kinds of breweries to survive.”

Pratik Joshi: 303-684-5310, pjoshi@dailycamera.com

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