(As seen on WZZM TV 13) The beer industry is still in an age of discovery, and 2016 will be no different, especially in Grand Rapids.
In 2012, the city saw a flurry of breweries open, creating a buzz around the craft beer industry as Grand Rapids was named BeerCity USA. The rate of openings lulled, but the industry across the country continued to grow. Grand Rapids is now set to see another flurry of openings in 2016.
The new wave actually started in the latter two months of 2015, as two communities gained entry into the industry: Cedar Springs with Cedar Springs Brewing Co., and Wyoming with Kitzingen Brewery at 1760 44th St. SW.
In Grand Rapids, Harmony Hall opened on the west side on Bridge Street.
In 2016, the trend will continue with two major regional players opening taprooms less than a mile from each other: New Holland Brewing Co. on Bridge Street NW, and Detroit’s Atwater Brewery across the river at Monroe Avenue and Michigan Street in The Rowe. As secondary locations, the taprooms are a trend to watch across the nation, said Chris Furnari, editor of beer business publication Brewbound.com.
“I do believe that more regional crafts will continue to expand via secondary facilities — be they taproom, production breweries or brewpubs,” Furnari wrote in an email to the Business Journal. “This will probably function a couple different ways. You’ll see companies — say, like Epic Brewing out of Utah — look to open outposts in different states.
“Others will look to fortify their position in their home markets and try to grow via taprooms and retail outposts at home.”
Atwater, in particular, has plans for taprooms and breweries across the country, including breweries in North Carolina and Texas. Brewpubs like the one in Grand Rapids will open in approximately 10 markets, such as Boston and Chicago, said Mark Rieth, Atwater’s owner.
“We want to be closer to our customers,” Rieth told the Business Journal in October.
“The farther you get from home base, the harder it is to penetrate a market because there is so much great beer. We want to bring Detroit everywhere, but we want to be a part of the local community, hire local people and help the local economy.
Due north from Atwater, City Built Brewery will open in 616 Development’s 616 Lofts on Monroe, offering uniquely crafted beers and Puerto Rican-inspired food.
Farther north, on Plainfield Avenue, the new Creston Brewery will open with hopes of celebrating its diverse neighborhood with globally inspired food and music.
The local growth of breweries reflects a national trend. This month, the Brewers Association reported the U.S. has reached a record level of breweries at 4,200. The previous high was in 1873 when the nation had 4,131.
“This is a remarkable achievement, and it’s just the beginning,” Brewers Association Chief Economist Bart Watson said. “Beer has always been a hallmark of this country, and it is even more apparent today as America’s beer culture continues to expand.”
Brewbound.com’s Furnari said the current rate of 1.7 breweries opening every day across the country is a trend that isn’t likely to continue.
“The rate of brewery openings will eventually slow down,” he said. “As the market becomes more saturated and as category-wide growth slows, I’d think would-be craft entrepreneurs might reconsider.”
Most of the breweries that are just opening will stay small, and that’s OK with many of those entrepreneurs. For many beer consumers in America, it’s more important than ever that the product they drink is made near home, and even more important is that there’s a place to enjoy it in their neighborhood.
Cedar Springs Brewing owner David Ringler is quick to point out the previous record level of breweries came when the nation’s population was 42 million people, much lower than today’s 312 million.
“We’re still a long way from saturation,” Ringler said. “Even then, there was a lot of consolidation, and a lot of the breweries were really small. The future is a lot of small breweries.”
Consolidation is a major topic on the national beer scene, as larger brewing companies, such as AB InBev, are buying smaller craft breweries, such as last week’s acquisition of Arizona’s Four Peaks Brewing Co.
Some smaller breweries also are seeking outside investment, be it from larger brewing companies or private equity firms.
In September, California-based Lagunitas Brewing Co. sold a 50 percent stake to Heineken for $500 million. As Lagunitas sat in the top 10 craft breweries in terms of production, the valuation cap was blown away by Constellation Brands’ purchase of San Diego’s Ballast Point Brewing Co. — smaller than Founders Brewing Co. — for $1 billion.
Ballast Point was able to command that price tag for a variety of reasons, including a high growth rate, strong brand recognition and high quality product, Furnari said.
“It is one of the most profitable craft brands in the U.S. at more than $55 per case equivalent. It also has brands like Sculpin IPA and Grapefruit Sculpin that are incredibly in demand — something that a company like Constellation is willing to pay more for,” he said.
“Ballast Point has national appeal and plenty of run room. Constellation, as a ‘beer’ company, seems to prefer executing behind a few brands versus spending money on a bunch of different brands, say like A-B might. Ballast Point was no doubt the outlier this year — $3,500 a barrel is an extraordinary valuation.”
Grand Rapids breweries haven’t been immune to outside investment: Founders sold a 30 percent stake to Spanish family-owned brewery Mahou San Miguel, and Perrin Brewing Co. was purchased in an interesting deal with Colorado-based Oskar Blues Brewery, which is majority-owned by a private equity firm.
Furnari said the deals won’t slow down, at least for the first part of 2016, although the likelihood of another deal of Ballast Point’s magnitude is unlikely. However, New Belgium Brewing Co., the nation’s third-largest craft brewer, is rumored to be seeking a buyer and could command a similar amount.
“Nevertheless, I don’t think we will see another deal that large, for a company of that size,” Furnari said. Once the strategic buyers get their fill, valuations will come down and the buyer pool will shrink, leaving craft brewers with fewer exit options.
“I expect to see improved marketing and branding, larger sales organizations, and better execution from those companies that bring on a new financial partner,” Furnari said.
The rise in larger and smaller competition will make it more important for a brewery like Founders to continue pushing its flagship brands, such as All Day IPA.
“For me, the real question is whether or not the larger craft companies can grow their flagships/overall biz and mainstream as fast or faster than the smaller craft companies are growing,” Furnari said. “Some of the top 10 companies, despite their growth, are actually losing craft share to the smaller companies.
“I think they need to ‘mainstream’ their products faster, and I think flagship sales will be a big part of that.”