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Original article URL: http://bridgemi.com/2013/06/wave-of-craft-beer-washes-over-michigan/

Economy & competitive position/Quality of life

Wave of craft beer washes over Michigan

SAMPLING THE LOCAL FARE: Patrons of Founders Brewing Company in Grand Rapids enjoy some of the product of Michigan’s craft brewing industry, which continues to grow rapidly. (Bridge photo/Lance Wynn)

SAMPLING THE LOCAL FARE: Patrons of Founders Brewing Company in Grand Rapids enjoy some of the product of Michigan’s craft brewing industry, which continues to grow rapidly. (Bridge photo/Lance Wynn)

Michigan’s craft beer industry is growing so fast that leaders of the trade association representing it can’t keep track of all the activity.

“I have no idea how many breweries are under construction,” said Scott Graham, executive director of the Michigan Brewers Guild. “I used to know about everyone.”

The association estimates there are about 140 breweries, microbreweries and brewpubs in the state, many of them microbreweries that produce fewer than 30,000 barrels a year. That’s up from just three in 1991.

Michigan ranked fifth in the nation in the number of breweries last year, according to the Boulder, Colo.-based Brewers Association that represents the craft brewing industry. The state ranked eighth in craft beer output last year as brewers produced 438,383 barrels, up 23 percent from the 356,780 barrels produced in 2011. A barrel contains 31 gallons of beer.

Michigan’s craft beer industry pumped about $133 million into the state’s economy in 2012. It has also received national recognition for its brewers and beer culture.

In May, Grand Rapids was named “Beer City USA” in a national, unscientific poll. Kalamazoo came in second and Ann Arbor finished fourth.

Frothy_TimesBell’s Brewery Inc. in Galesburg, maker of the summer favorite Oberon beer, is the seventh-largest craft brewery in the country and the 14th largest overall, according to the Brewers Association, which represents the craft brewing industry. Founders Brewing Co. in Grand Rapids is the nation’s 30th largest craft brewer.

“Michigan is really at the forefront of this industry and is all of the sudden becoming a beer-focused state,” said Marcel Zondag, a food marketing professor at Western Michigan University.

The Legislature has designated July as Craft Beer Month in Michigan, though the craft brewing sector is not getting all it wants out of lawmakers in Lansing.

Brewing pace quickens

Brewery openings are rising by the week. Five breweries opened in a single day recently, Graham n oted.

“Three of them I’d never heard of,” he said. “That didn’t used to happen.”

There are 48 microbrewery license applications pending at the state Liquor Control Commission, spokeswoman Andrea Miller said.

There’s even a craft brewery located inside a state park.

Tahquamenon Falls Brewery & Pub is located on private property within the Tahquamenon Falls State Park in the eastern Upper Peninsula.

It was started 18 years ago by Lark Carlyle Ludlow, who brews beers with names such as Porcupine Pale Ale and Black Bear Stout while also managing the pub.

Ludlow said the growing popularity of craft beers is a reflection of consumers who are becoming increasingly appreciative of fresh, locally produced ingredients and beers with deeper flavors.

“After World War II, U.S. breweries were producing lighter beers that were served very cold,” she said. “I think the European style of brewing is coming around again.”

Ludlow and others say craft brewing represents the re-emergence of neighborhood breweries that largely disappeared after the end of Prohibition.

Craft brewers see themselves as innovators who “interpret historic styles with unique twists and develop new styles that have no precedent,” in the words of the Brewers Association.

The association defines a craft brewer as one who produces a maximum 6 million barrels of beer a year. But the vast majority are brewpubs and microbreweries that produce fewer than 30,000 barrels a year.

The art of naming a beer

Craft brewers also like to give their beers wacky names, such as Huma Lupa Licious, Devil Dancer and Old Gear Oil.

“The craft beer movement started on the East and West coasts. What we’ve done in Michigan is take elements from both,” said Matthew Drake, chief operating officer of Shorts Brewing Co., based in Bellaire.

“We like to brew outside of style guidelines,” he said. “Nothing is off limits as long as the beer is delicious and dignified.”

The craft beer explosion has resulted in the United States having more breweries than at any time in its history.

As of May, there were 2,514 breweries in the United States, according to the Brewers Association. That number includes large brewers such as Anheuser-Busch and MillerCoors.

The previous record was set in 1890 when there were 2,011 U.S. breweries. As recently as the late 1970s, there were fewer than 100 breweries nationwide.

Craft brewing has produced a renewed beer culture in which people enjoy tasting a variety of types of beers in taprooms and brewpubs, similar to wine tasting rooms that have popped up across Michigan.

“It’s just fun to go from brewery to brewery,” Ludlow said. “Everyone is doing it.”

Big-box retailers such as Wal-mart and Costco also have taken notice of the craft beer craze and are stocking the brands on their shelves.

“That’s been a dramatic step,” said Zondag, who has consulted with Bell’s Brewery and other on distribution issues. “There’s no way retailers can ignore the demand for craft beer. People want it.”

Still, the craft beer industry represents just a fraction of the production of large commercial brewers that have dominated the U.S. beer industry for decades.

U.S. craft brewers produced about 13.2 million barrels of beer last year. But that was just a fraction of the more than 100 million barrels produced by Anheuser-Busch, the nation’s largest brewer.

The largest craft brewer in the country is Boston Beer Co., which shipped about 2.7 million barrels of Samuel Adams beer last year.

More growth coming?

In Michigan, just 4 percent of all beer consumed last year was craft beer brewed in the state.

But the industry here is growing rapidly, fueled by new breweries and expansions of existing brewers.

Founders Brewing is undergoing a $26 million expansion that will boost its annual beer production capacity from 175,000 barrels to 340,000 barrels.

Head pub brewer Ryan Hale adds hops to a boiling Kettle at Shorts Brewing in Bellaire. (courtesy photo/Shorts)

Head pub brewer Ryan Hale adds hops to a boiling Kettle at Short’s Brewing in Bellaire. (courtesy photo/Shorts)

Short’s Brewing, which has a brewing operation in Elk Rapids and a brewpub in Bellaire, recently expanded the pub and completed a multimillion-dollar upgrade of its brewery.

The company produced 18,000 barrels of beer last year and is planning to brew 24,000 barrels this year, a projected 33 percent increase. Shorts Brewing, like many privately owned companies, does not release sales figures.

It has come a long way since 2004 when Joe Short and some volunteers converted an old hardware store into a brewpub in downtown Bellaire.

The company brewed just 178 barrels that year and nearly went bankrupt in 2005 because of a myriad of financial and operational problems. More recently, Drake said the company has been experiencing sales growth of more than 30 percent a year and now employs 80 workers.

Short’s Brewing’s business plan is to limit sales to Michigan. Its beer is available in 1,400 bars, restaurants and grocery stores around the state. Others, such as Bell’s sell their beers in other states, as well.

Even farmers are getting involved. Hop Head Farms in Barry County is among several that are growing hops for use in craft beers.

And The Right Place, an economic development agency in Grand Rapids, is working on the creation of a hop-growers cooperative that would, among other things, establish quality standards for hops cultivation.

But some question whether the double-digit annual growth of the craft beer industry can be sustained. While the number of craft brewers has grown rapidly over the past couple of years, the number of barrels per brewer has been falling on a national level.

That trend implies “that the overall attractiveness of the economics for the average craft brewer has diminished fairly significantly over the course of just two years,” said Peter Reidhead, vice president of strategy and insights at GuestMetrics, which analyzes food and beverage industry trends.

“I think it’s a reality that the market is becoming over-saturated,” Drake said. “A lot of people are coming in to the business because it seems like you can’t lose.”

GuestMetrics officials said they think the craft beer industry could see significant consolidation in the next three to five years.

But Graham of the Michigan Brewers Guild said he sees a lot more room for growth in the state.

The guild’s long-term goal is for Michigan-based craft brewers to capture 10 percent of the market here. That’s two-and-a-half times more than their current share.

“It’s hard to see where the end is,” Graham said.

Rick Haglund has had a distinguished career covering Michigan business, economics and government at newspapers throughout the state. Most recently, at Booth Newspapers he wrote a statewide business column and was one of only three such columnists in Michigan. He also covered the auto industry and Michigan’s economy extensively.

3 comments from Bridge readers.Add mine!

  1. James

    Larry Bell, founder of Bell’s Brewery, should have been interviewed for this feature. Instead, Bell’s Brewery is mentioned only in passing.

  2. TeacherPatti

    I am a craft beer enthusiast, beer blogger and occasional homebrewer and I have given much thought to the issue of saturation of brewpubs. On the one hand, I know that almost every small town had its own brewery in the pre-Prohibition times; on the other hand, those were very different times and I imagine every small town had its own pharmacy, hardware store, etc. I’ve been to many brewpubs in the lower peninsula and most are good, some are great and some are…meh. I hope to read more articles like this one…this is a very interesting topic (to me, anyway!)

    1. Bugwart

      We may reach saturation at some point, but I do not believe that we are close yet. The people who support the craft beer industry through buying craft beer are almost universally looking for quality. Therefore, if we should reach saturation, the best craft brewers will survive and the new innovators will grow.

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