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Craft Brewers Expand Capacity At A Rapid Pace

May 31, 2012

For U.S. craft brewers in the current economy, the beer glass is neither half full nor half empty: it’s filling up fast. Although craft beer still comprises less than 5% of the U.S. beer market, the segment has enjoyed double-digit growth for several years and is up 14% this year, according to the Brewers Association. Aiming to keep pace with demand, major craft players are expanding aggressively.

Fort Collins, Colorado-based craft player New Belgium Brewing Co. has extended its national footprint dramatically in recent years. In August, New Belgium will enter Michigan, bringing its distribution to 29 states and Washington, D.C. Last month, the company unveiled plans to build a new brewery in Asheville, North Carolina—a $100-million facility with a capacity of 400,000 barrels, a 200-barrel brewing system, tasting facility and on-site wastewater treatment center. Construction is slated to begin early next year and conclude by 2015.

New Belgium has also made additions to its Colorado brewery, adding a tank farm and new canning line. Led by core brand Fat Tire Amber Ale, New Belgium is the third-largest craft brewer in the United States with annual volume of more than 9 million (2.25-gallon) cases.

Chico, California-based Sierra Nevada Brewing Co.—the nation’s number-two craft brewer after the Boston Beer Co. and biggest single-location craft player—is also building a new brewery in North Carolina, choosing the town of Mills River, about 12 miles south of Asheville. The new brewery will employ 90 workers and have an initial capacity of 300,000 barrels. It will brew the flagship Sierra Nevada Pale Ale as well as seasonal and specialty beers, all for distribution in the eastern United States. Sierra Nevada founder Ken Grossman expects the facility to be ready by 2014.

Meanwhile, Lagunitas Brewing Co. of Petaluma, California is also in expansion mode. Lagunitas grew 48% last year to 106,000 barrels and is on pace to hit 240,000 barrels in 2012, according to head brewer Ron Lindenbusch. The company has a $9.5 million project underway to install a 250-barrel brew house and raise capacity to 550,000 barrels by November.

In May, Lagunitas, which is currently sold in 32 states, also announced plans to build a new brewery in Chicago. The facility will have the same 250-barrel system being installed at the Petaluma brewery. A taproom is also planned for the site, which should open by mid-2013.

These are just some examples of craft expansion around the country. While such bold moves are often needed to sustain growth, sometimes expansion can lead to a brewery’s demise, as occurred with Nor’Wester in Oregon and other craft players in the late 1990s. “But one of the biggest differences between now and then is that there’s a far greater population of educated consumers,” says New Belgium marketing director Bryan Simpson. “They’re not going back to industrial lagers.”

 

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