Summit article in the Trib
Cheers!
http://www.startribune.com/business/91066129.html?elr=KArksUUUycaEacyU
On a recent tour of Summit Brewing Co., company President Mark
Stutrud proudly showed off a shiny new keg-filling machine that churns out 60
percent more beer per hour than its predecessor. And down in the cellar,
Stutrud pointed to the soon-to-be home of three giant new fermentation tanks,
allowing Summit to expand production by 13 percent.
It's all part of St. Paul-based Summit's biggest annual
capital outlay since 2006, and symbolic of how the nation's craft beer industry
has prospered during a recession that's flattened sales at the big mainstream
U.S. brewers.
Sales of craft beer rose 9.6 percent for the 52 weeks ending
March 6, as measured by volume, according to market researcher Nielsen Co.
During the same time, sales of domestic premium beer -- think Budweiser -- sank
6.1 percent, while volume in the nation's largest beer market, premium light --
think Bud Light -- fell 2 percent.
Brewing industry experts say the recession has hit the
mainstream beer drinker harder than the craft-brew consumer. Even though craft
beer costs more than standard brews, the craft-beer drinker is generally more
affluent. Also, craft brews fit a niche that's been hot -- recession or not --
in foodie circles: localization, be it locally produced beets, beef or beer.
Most craft brewers still are intensely local.
But perhaps most important, and a key to craft brewers'
continued prosperity, is the evolution of the American beer drinker.
"Consumers are really moving away from the mainstream," said Nick
Lake, Nielsen's vice president for beverage alcohol. They're more educated than
ever about beer, and increasingly into the variety -- hopped-up India pale
ales, chocolatey stouts, fruity Belgian styles and so on -- offered by craft
brewers, Lake said.
Plus, many beer drinkers in their 20s and early 30s have been
weaned not on pale mainstream lagers, but on the more complicated tastes of
craft beer. "They've grown up in a diverse flavor environment," Lake
said.
They're beer drinkers like Chris Pangle, a 29-year-old grocery
warehouse worker with aspirations to be a fiction writer.
He grew up, so to speak, on craft beer in Oregon, one of the
nation's top spots for microbrews. "Even in high school, there was Mirror
Pond [an Oregon craft brew] at keg parties," Pangle said recently while
nursing a Surly Furious at the CC Club in south Minneapolis.
If he's stretched for cash, Pangle said he'll buy a cheaper
non-malted alcoholic drink, rather than switch from craft beer to the standard
stuff. "It's an acquired taste, and it's hard to go back."
Stutrud said he's heard such stories from 20-somethings on brewery
tours at Summit. "Craft beer has always been there, so it doesn't seem
foreign and weird to them."
A Minnesota focus
That wasn't the case back in 1986 when Stutrud became
Minnesota's craft-brew pioneer with the founding of Summit. Yet he carved out a
niche, and Summit has steadily grown, ranking as the nation's 19th-largest
craft brewer in 2009, according to Brewers Association data released last week.
The company's flagship Extra Pale Ale -- the original Summit
brew -- still accounts for about 65 percent of its roughly $17 million in
annual sales. Its Horizon Red Ale, launched just a year ago, is its second most
popular brew with 5 percent of sales. And Summit's four seasonal beers together
comprise 16 percent of sales.
With Summit's spring beer, Maibock, almost out of stock, the
brewery's bottling line last week was humming with one of the first batches of
Hefe Weizen, its summer offering. Thousands of bottles of the wheat beer rolled
down the line, a din of clinking glass amid the fresh earthy smell of yeast.
Most of that beer will be consumed by Minnesotans,
particularly in the Twin Cities. Summit has focused primarily on Minnesota, and
89 percent of its sales are generated here, with far lesser amounts in the
Dakotas, Wisconsin and Chicago. The recession didn't totally bypass Summit and
some other craft brewers. In 2008, Summit's sales volume grew only 2 percent
while the company had budgeted for 10 percent growth. Summit had to lay off one
worker in 2008 -- the first time that had happened -- and cut its annual
capital budget.
But 2009 was much better, with sales growing 8 percent by
volume and 12 percent in dollar terms, Stutrud said. Four new jobs have been
created since mid-2009 -- it currently employs 50 -- and the company upped its
2010 capital budget to $1.4 million, double last year's. About $600,000 is
funding two new stainless steel staples: the keg-filling machine and the three
9,000-gallon fermentation vessels.
"A brewery is no place for a Norwegian with a
stainless-steel fetish because you can really blow your bank account,"
Stutrud joked.
Like Summit, New Ulm-based August Schell Brewing Co. saw a
rebound in craft-beer sales in 2009 after a significant deceleration of growth
the year before. Meanwhile, the upstart Brooklyn Center craft brewer Surly
Brewing Co. has been growing at a furious pace.
If only their big brewing brethren could say the same, or
given their already large volumes, at least say things have been looking up.
Last year, the nation's top-selling beer, Bud Light, experienced a 2.5 percent
decline in shipments, its first annual decline ever, according to Beer
Marketer's Insights, an industry publication.
Meanwhile, Coors Light, the mainstream beer business's biggest
success story in recent years, saw shipments rise only 0.7 percent in 2009,
down from 3 percent annual increases the two previous years. In terms of sales
volume, the big winner last year among the nation's nine largest beer suppliers
was Boston Beer Co., maker of Sam Adams and the nation's largest craft brewer.
Boston's shipments, while only a fraction of Anheuser-Busch's
and MillerCoors', were nonetheless up 11.8 percent in 2009 compared with the
year before. Said Beer Marketer's Insights publisher Benj Steinman, "The
craft guys have an advantage in the way they are perceived [among consumers]
that belies their size."
Indeed, while Summit seems ubiquitous in Minnesota, the
company has only about 2 percent of the state's total beer market, Stutrud
said. His plans for much of Summit's growth hinge on bringing the brewer's
Minnesota market share up to 4 percent or 5 percent over the next five to 10
years.
Stutrud doesn't have a rocket-science approach to getting
there. He says he'll keep focusing on making high-quality, full-flavored beers.
And his sales team will keep working to bring that beer into more restaurants,
bars and liquor stores.
"We have to earn our business over time," Stutrud
said.
Mike Hughlett • 612-673-7003
