Thursday, May 10, 2012

The Politics and Economics of Beer in Colorado

Here is a very interesting article about the death of a bill in the Colorado legislature that would have allowed brewpubs to expand bayond 60,000 barrels a year to up to 300,000 barrels a year.  It was the baby of Breckenridge Brewery, the Denver brewery that has seen impressive growth recently and has smacked up against the 60,000 limit.

There is some talk about the mounting tensions among Colorado breweries which is addressed by Doug O'Dell, founder and Brewmaster of O'Dell Brewing Company:
Odell did talk about how quickly the craft beer landscape is changing as breweries like Sierra Nevada, New Belgium, Oskar Blues and Lagunitas jockey for position and market penetration in an industry that saw 13 percent growth last year nationwide in terms of volume and 15 percent in terms of sales.

The four companies plan to build second locations in the next two years on the East Coast (all but Lagunitas in North Carolina) to better serve customers there.

"All four have said it's primarily because of shipping costs. In the case of New Belgium and Sierra Nevada, they are also running out of capacity. Todd [Usry] has said the same thing about Breckenridge and shipping and that they are running out of room.... And he is from Virginia, and I think he would like to move back there one day," Odell says.

"As far as shelf space is concerned, it is finite. There keeps being more and more breweries opening up all the time, so it seems logical that something has to give after a while," Odell adds. "As long as the craft beer market is growing like it is, there is room for people to grow. But if volume declines, that's when I think it will get ugly."
Which is precisely what I have been saying for some time.  The market is experiencing boffo growth and so everyone can get along and be happy, but it will end at some point and I think that point is soon.  When I think about the new breweries, like Gigantic, that are opening up in the Portland area and are planning on packaging and selling in stores, I think about the shelves in my local markets which have maxed their craft capacity.  What is going to give, I often wonder, if you put some Gigantic beer up there who gets pushed out? 

But back to Colorado, the politics and regulations concerning alcohol there are byzantine and deserve to be scrapped.  The decision of craft brewers to oppose the lifting of the 3.2% ABV limit in supermarkets was absurd and counterproductive.  If anyone should be for market liberalization, it is they.

And as an aside, to almost every brewery we went in England, Doug O'Dell had either been to or was coming to.  He, more than any I have heard of, loves and embraces traditional English beer.  And O'Dell's beer is more English in being more malt forward and less aggressively hopped than typical NW beer.  All the brewers spoke glowingly of him and so, though I have never met him, I have formed to impression of a great and passionate beer enthusiast.  I used to quite enjoy the 5 Barrel Pale Ale when I lived in Colorado - a nice English style pale. 

Thornbridge was one of the places he had both been and was coming back to to do a collaborative brew.  Caolan was our host at the Thornbridge Brewery and was excited about his upcoming trip to Colorado to visit O'Dell.  Cut to a few months later and here he is talking about Pond Hopper - the beer itself:


Okobojicat said...

There are actually pretty logical reasons for supporting the 3.2% abv limit in Colorado - from a brewer's perspective. From a consumer's perspective, its fricken annoying.

Because all alcohol sold over 3.2 must be sold in a liquor store, you create a market for liquor stores. They can only dedicate so much shelf space to bud/miller/coors and to low quality gin/vodka/whiskey that they put in other categories that have absurdly high markup - wine and craft beer.

Small breweries have found it easier to get themselves on liquor stores in CO than they think it will be to get fair shelf space in large grocery stores. Experience in Oregon and WA contradict this (I was just in a Fred Meyer over lunch and holy crap did they have a lot of beer on the shelves). However, the brewers feel that the it is critical to expanding the market supply that they keep the smaller liquor stores and keep driving people to them for good beer.

As a consumer, prices will be cheaper at large grocery stores and easier access.

Jack R. said...

I agree will all of Okobojicat's points, except 'liquor stores ... dedicate so much shelf space to bud/miller/coors'. The 3-4 liquor stores I frequent in Boulder County dedicate much more space to craft than BMC beer. Albeit, the sample set may be distorted by my proclivity.