True Brew

There's no denying that serious beer drinkers like to think of themselves as an adventurous lot, willing to embark on bold new endeavors and conquests at the drop of a hat. But when it comes to their beverage of choice, beer drinkers are about as bold as a stale-tasting bottle of lukewarm Bud. Then again, sipping on a bottle of Peaches and Cream Ale or Honey Beer just doesn't quite cut it, self- image wise.Despite the unprecedented selection and quantity of high-quality specialty beers from microbrewers from throughout the country, beer industry consultants, microbrewers and distributors say beer drinkers are rejecting many of the fancier brews like the fruit-flavored ales, beers and lagers in favor of more traditional, full-flavored imports and domestic beers.What all this means for the more than 45 breweries participating in this year's 8th Annual California Brewmasters' Classic in Monterey is that the boom times for beer may be over, and some microbrewers may not be returning to Monterey for next year's beer fest."In terms of the market in general, from the feedback I've gotten from fellow brewers, all the West Coast states, except for southern California are very saturated and breweries are having a harder time growing," says Paul Tarantino, owner and president of the Salinas-based Carmel Brewing Co. "I know a lot brewers whose sales have gone down and who can't compete on a sales level because of their size. Beer won't sell itself. You need a strong agressive sales force to stay on the shelf."Finding space on the shelf, let alone staying on the shelf, has been the biggest challenge facing microbrewers in recent years. With an estimated 950 different specialty beers available on supermarket and grocery shelves, microbrewers are struggling to carve out an identity for their individual products.In 1996, specialty beers accounted for just under three percent of all the beer sold nationwide, with Anheuser-Busch, Miller and Coors controlling 75 percent of the beer market in the US. In 1995, 250 new breweries began production, an expansion of 50 percent over the previous year. In 1996, 320 new breweries were established, a reduction in the growth rate of 25 percent. Analysts expect the number of new microbrewers to be even smaller next year, and predict that within two years, almost 60 percent of microbrewers will be out of business. "I would not start my own microbrewery right now," says Sam Boyer, a Colorado-based beer distributor and consultant for the past 10 years. "The trend is away from all these new things, and from my point of view we will see a slowing down of the growth trends among microbrewers. A lot will have difficulty next year."What accounts for the recent boom times in the microbrew business and the apparent shakedown currently underway within the industry?"The growth in the microbrew business was directly tied into the fact that the wine boom was over and people were looking for something else to drink," says a long-time northern California beer and beverage consultant who asked to speak off the record. "In the same manner people traded cheap wine for varietals, people wanted a beer with more flavor and body. Everyone who made beer picked up on that and created their own niche. Eventually, everyone went overboard and in a few years glutted the market.""Due to the success of Sierra Nevada, a lot of people had the same thought at the same time and inundated the market with different brands and esoteric flavors," agrees Geoff Couch, vice president for marketing and co-owner of Couch Distributing Company of Watsonville."The micros got more of a share of the market than anyone dreamed they would," adds Couch. "It worked for a time and local store owners were willing to give shelf space because they were hot selection. Now it's no longer a new image and people are used to them. Store owners have taken them off the shelves because they are [more] expensive, are tying up capital and not moving."By all accounts, the current shake out in the microbrew industry is attributable primarily to microbrewers creating too many choices, causing beer drinkers to pull away from the competing labels and dubious flavor combinations in favor of traditional tasting, quality imports and draught beers. It is the fruit-flavor beers in particular, say analysts, that created the biggest backlash and represented the biggest miscue by microbrewers."Fruit flavor beers are dying," agrees an analyst who asked to speak off the record. "The microbrewers went after women who still don't enjoy anything heavier than lite beers. People are still looking for a more full-bodied beer, with dark beers being very popular as well as ales, pilseners, lagers."In addition to the tremendous competition between microbreweries themselves, the biggest stumbling block to microbrewers trying to expand their marketshare is cracking the distribution market in order to compete with the major brewers for more shelf space.Major brewers' efforts to compete with the microbrewers with their own "specialty beers" has, by all accounts, been an utter failure. The sheer size of the majors and their control of the wholesale distribution business has been the big boys' most effective weapon in fighting off the microbrewers."The biggest problem with the specialty beers associated with the larger breweries is that they take up shelf space," says Tarantino. "If you talk to most retailers or wholesalers, they'll tell you those brands are not big sellers, but they're in a position where they feel obligated to carry them because they are associated with the larger breweries.""Distribution is everything, and the microbrews are at a distinct disadvantage," agrees Boyer, who contends that consumer demand has been a determining factor in terms of what is on the shelf. "The big brewers have played hardball to a certain extent but while the retail owner isn't afraid of antagonizing the big brewers, he needs to turn over his inventory fast -- and microbrews are a slow mover compared to Bud or Miller Lite."Despite analysts' gloom-and-doom assessment of the microbrew industry, brewers like Tarantino are sanguine over the industry's future. Even so, they agree that a more cautious approach will be necessary in the next few years."Overextending is dangerous and a lot of brewers in Oregon and Washington got themselves in a pinch by expanding aggressively in the boom times of the last three years," says Tarantino. "They spent tons of dollars on building larger breweries and new locations while people like ourselves popped up and took control of their home market. "I see the market growing at a slow but steady pace," adds Tarantino. "The reason people are talking 'shake out' in the industry is because people over-invested. Millions were dumped into the industry and the pay back is slow."While there will always be a market for a hot new beer, says one beer industry consultant, the glory days of the microbrew have come and gone."A great product will always prevail if you have the money and marketing know how," says the consultant speaking off the record, "but if I could give you a dollar for everyone who said they'll be the next Sierra Nevada you'd be rich. I don't see anyone taking them on." Sidebar:Meanwhile, behind the bar...Local bars and area brew pubs say the demand for beer, particularly quality beer on tap, remains healthy."People are pulling away from the honey and fruit beers and into the ales and dark beers," says Cat Henson, a bartender at Characters Sports Bar and Grill in Monterey. "People ordering bottle beer are going for the standard stuff and when they want a fancy beer they're going for ones on tap."The move towards traditional bottled beer and fancier draught beer is a trend also noted at Blue Fin Billiards, with 95 percent of its beer drinkers going for tap beers and the balance choosing traditional bottled brands like like Miller, Bud and Coors.At bars that don't cater primarily to beer drinkers, bartenders note that the resurgent popularity in martinis and mixed drinks has cut into beer consumption.According to Cibo bartender Christopher, cocktails account for 60 percent of drinks sold compared to 40 percent for beer, and of that 40 percent, a majority of drinkers are choosing standard bottled beer."Surprisingly enough at this late stage in the game, most people go 'Huh?' when you suggest handcrafted microbrews like the honey beers," says Christopher. "People go with what they know."A textbook example of changing drinking trends can be found at the Doubletree Hotel, where, according to Food and Beverage DirectorScott Vandenberg, Peter B's brew pub sells 72 percent beer while the hotel's lobby bar sells ony 25 percent beer.The future success of the microbrew business may very well depend on the future of brew pubs like Peter B's, which are going through some boom times of their own."The demand for brew pubs is 'skyrocketing'," says Charlie Meehan, owner of the Seabright Brewery in Santa Cruz. According to Meehan, approximately 300 new brew pubs are expected to open nationwide within the next year.

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