THE ECONOMICS OF BEER: DEMAND FOR CRAFT BEER IS UP AS LOCAL INDUSTRY EXPANDS

Oct 7 • Drink Features, FEATURE MAIN, News, NEWS & VIEWSNo Comments on THE ECONOMICS OF BEER: DEMAND FOR CRAFT BEER IS UP AS LOCAL INDUSTRY EXPANDS

Supply and demand drives every industry, and in Wilmington the consumer’s demand for quality, innovative craft beer is an exciting phenomenon finally producing dividends. More craft beer is on the shelves of grocery stores and in area bars and restaurants, while new local breweries are popping up across New Hanover County.

A taste for craft brews is a national trend. According to the Brewers Association, craft sales were up by 17 percent in 2013, wedging in at almost 8 percent of the market share, while exported craft beer was up by 49 percent. Imported beer was down 0.6 percent. While craft continues to grow, breweries in the rest of the market are slipping or stagnant.

anna jason

GEARING UP FOR WILMINGTON BEER WEEK: Jason Adams and Anna Worobey of Lighthouse Beer and Wine founded Wilmington Beer Week (pgs 30-31) in 2013 and continue the event, which kicks off this Saturday. Photo by Bethany Turner

Home brewers in the port city—such as Mike Barlas of Flytrap Brewing and Barry Owings of Broomtail Craft Brewery—took note and drew plans to open their own microbreweries. Wilmington Homebrew Supply expanded to include Wilmington Brewing Company, now open on Kerr Avenue, and Good Hops Brewing opened in Carolina Beach. Ironclad Brewery, featuring brewmaster Ethan Hall formerly of Good Vibes Brewing Co., will open on Second Street downtown soon. Rumors of others to come abound, including Waterline Brewing Co., Fox and Crow Brewing and Wandering Willow Brewing Co.

“I look back on how it was when we opened 17 years ago, and the industry is vastly different,” Jason Adams, owner of Lighthouse Beer and Wine, conveys. “It’s like two different worlds, especially in the last three to five years. I’m super excited for Wilmington to gain some traction and speed. It’s great for the town and the people who live here; it’s just one more added benefit. With the new breweries, I think first and foremost we’ll see a bigger effect on the locals who live here. They’ll get something they can see and enjoy. I think it will take some time to affect tourism.”

Adams has been a major player in the area’s craft-beer scene, from keeping Lighthouse’s shelves and coolers stocked with West Coast favorites and Carolina newbies alike, to implementing the city’s first beer festival. The Lighthouse Beer and Wine Festival (LBWF) will take place this year on October 18 at Battleship Park.

“The participating breweries have increased dramatically,” Adams says. “This will be our thirteenth year of the festival. I think [during] year number one we had 20. Now, we’re at over 100 breweries and 50 wineries.”

It is the festival’s third year featuring wine. Last year Adams added a Wilmington Beer Week to the agenda, with a Voracious Rare Beer Festival featuring obscure craft beers (full story, pgs 30-31). “It’s small, intimate—we’ll probably have 200 people attend that event—and it’s actually on the deck of the Battleship [this year]. So how amazing is that?” he says.

Organized by Lighthouse manager Anna Worobey, Wilmington Beer Week is a testament to the demand for more craft brew events—as well as Wilmington’s ability to support them. “I organized everything by myself last year—all of the beer dinners, all of the tap takeovers,” Worobey says. “With the new breweries that have opened in town, it’s [allowed for] a whole new string of events that we can do [in 2014]. It’s awesome.”

While LBWF has a cap on attendance, Adams sees growth annually at his Wrightsville Beach store, especially in the last few years. “The demand has gone through the roof,” he remarks. “It’s really cool to see how our customers are so much more educated than they used to be. Now they come in and they know what they want; we don’t have to hold their hand like we used to. People are still learning, obviously, but the education of the consumer is dramatically improved.”

Downtown, Cape Fear Wine and Beer—who will take part in Wilmington Beer Week—also sees an increase in sales and customer base each year. “Our numbers reflect the national trend,” owner Maaike Brandis shares. “When we moved into our current location in 2008, our numbers drastically increased—we were up by 75 percent the first year! Of course, we came from an 800-square-foot unit, and we’ve now more than quadrupled that square footage. Our growing customer base reflects all ages, income levels, education levels, and genders. Craft beer is for everyone.”

Cape Fear Wine and Beer welcomed seven out-of-state breweries to the North Carolina market this year. Brandis says they are looking forward to releasing California’s Heretic Brewing Company and Florida Beer Company later in 2014. Because North Carolina allows self-distribution for companies creating less than 25,000 barrels per year, state microbreweries are infiltrating the Wilmington market.

“Several North Carolina breweries now have distribution in our area: Railhouse Brewery (Aberdeen), Double Barley Brewing (Smithfield), Unknown Brewing Company (Charlotte), Starpoint Brewing (Carrboro), White Street (Wake Forest) and Deep River (Clayton),” Brandis lists.

Broomtail Craft Brewery self-distributes, as does the popular NC brand Red Oak.

Brandis believes Wilmington’s local beer community can sustain and help growth. “We welcome new brewing operations in the city and county,” she says, offering that Broomtail’s beers are now available for purchase in her store. “New business creates jobs and revenue, and that’s always a welcome addition to our local economy.”

Daren Helms, who has been the bar manager of Fox and Hound in Mayfaire for four years, agrees North Carolina is headed in the right direction with craft beer. Though Fox and Hound opened almost a decade ago with 36 taps, it once mostly poured major domestic and imported brands. Today the restaurant has 44 taps with about 80 percent craft beer on draft.

“The changes we’ve made to the beer line-up are due to a multitude of factors,” Helms notes. “Individuals are looking for different flavor profiles and exposing their palates to a variety of tastes.”

This summer Helms added Broomtail’s Bucket List Blonde Ale and a rotating handle for the Wilmington brewery. “It’s always good to support local, no matter the product,” he relays. “It helps the immediate economy, we feed off of each other, and there is a more intimate relationship with being able to deal with people on a personal level.”

The City of Wilmington is attempting to support the burgeoning local brewery scene, as well. On September 2 the council voted to approve breweries as a defined class of business for the purpose of its planning code.

“I think the most important thing to realize is that we were getting lots of inquiries and, as a result of not having a definition for breweries, it was limiting their locations to industrial parks,” council member Charlie Rivenbark explains.

Such was the case for Broomtail, which was the first of this summer’s new breweries to open in Dutch Square Industrial Park. “The reality is these microbreweries need to be in commercial areas like the Central Business District (downtown) or commercial areas that are adjacent to established neighborhoods,” Rivenbark amends. “We hope the recent changes will spur new investment in areas of the city that have lagged behind others, such as downtown, North 4th Street, Greenfield Street, etc.”

John Horton, who operates the Cape Fear Beer Festival, Cape Fear Brewing Company and Kind Beer of Wilmington, laments that the zoning probably should have been modernized years ago. “It’s great that it has been done now,” he admits. “What the zoning does is make it possible for a nano brewery to open downtown and serve their beer in their taproom without being classified as a nightclub by the city. There is a lot of unused space on the north side that can now accommodate commercial brewing because of the changes. I see a huge growth for the Wilmington brewing community over the next few years. With our Cape Fear Brewing Company and Kind Brand Beers, we plan on being part of that very soon.”

Cape Fear Beer Festival will celebrate its fifth anniversary in 2015. “It was a slow start for year one with about 750 people, but the fourth beer fest last March was just shy of 2,000 attendees,” Horton says. “Last year we served over 125 brews, and we intend to beat that in 2015.”

While the national Brewers Association has never studied economic impact at the local level, chief economist Bart Watson, Ph.D., recognizes Wilmington’s growth is strong. He attributes a $34 billion national economic impact to craft beer over the last decade.

“North Carolina is certainly booming!” Watson exclaims. “In looking for comparable [local] cases, that’s a very high percentage growth—though there have certainly been several openings in a year in high-density brewery areas like San Diego, Portland, Seattle, Denver, etc. One other case might be right next door: Asheville, NC.”

Highland Brewing Company opened in Asheville 20 years ago. At that time, the craft beer industry across the nation was vastly different, notes Joe Rowland, the president of the Asheville Brewers Alliance and owner of Nantahala Brewing Company in Bryson City, NC. “North Carolina was one of the first states in the eastern US to embrace craft breweries and make positive changes to the laws to encourage the growth of craft breweries,” he says. “I believe that at some point this year, we passed the 100-brewery mark in NC with over 27 being located in the mountains of Western North Carolina (WNC). The craft scene over here is booming and now includes Sierra Nevada, New Belgium and Oskar Blues’ east coast breweries. With these brewers and the native breweries, we will be producing more craft beer in the Asheville area by volume than any other area in the US.”

Though he says a magic formula doesn’t really exist to attract craft brewers to any city, Rowland attributes the success in the western part of the state to the abundance of pure water that flows from the mountains. “In our region there is a long list of things that have brought us all to the area,” he concedes. “[The water] is one of the main reasons I decided to establish Nantahala, and Sierra Nevada has made it clear that the water was one of their top reasons for building their facility in Mills River.”

The Asheville Brewers Alliance (ABA) also is an excellent resource. The established a guild to help with all marketing and promotion of the creaft beer movement. In turn, education and communication has helped attract brewers and likely bumped tourism.

“If you take a look at other strong craft-beer communities in the US, you will find equally strong guilds supporting them,” Rowland notes. “The San Diego Brewers guild is a great example. With over 100 brewers just in San Diego, their guild has been instrumental in providing a means to share ideas, support each other, promote their region’s brewers and make sure everyone is supporting each other (something that is unique to this industry). Whether they are helping each other make better beer, fighting for pro-craft laws or joining together to support a local cause, the guild is the vehicle that makes that happen for their region. The ABA does the same for us in WNC and with plans for the other two regions of NC (Central and Coastal) to establish their own alliances, those grass-root organizations will provide the foundation to encourage the growth of craft brewing in those markets.”

Watson of the Brewers Association notes many of the rules that matter to breweries are state-focused. In fact, if not for the Pop the Cap law that raised the ABV from 6 percent to 15 percent in NC in 2005, this many breweries wouldn’t be located in the Tar Heel state. Together, state breweries and guilds could help lift the barrel-cap on self-distribution, too. For example, in Colorado, where there is no cap, craft beer flourishes. Likewise, a reconsideration of the excise tax, which is twice as high as the national average at almost 62 cents per gallon, would increase capital reinvestment and job growth. In California, the excise tax is 20 cents per gallon; in Colorado, it’s only 8.

Like Asheville, Wilmington has courted larger regional breweries to add an eastern location in the city. No breweries have confirmed that Wilmington will provide a new home. “The expansion of larger (and in some cases simply more established) craft brewers from the West Coast isn’t a trend—it’s the logical expansion of the industry,” Rowland says. “Craft beer isn’t bulletproof and in general its quality diminishes the further from the brewery it gets. So, building a facility closer to where the beer will be consumed is just good business.”

As well, Rowalnd says it makes sense financially and with quality control that breweries expand rather than expand and ship from existing factories. “Sierra Nevada alone will see a savings of upward of $10 million a year in reduced shipping costs,” he notes. “That’s money they can use to invest in brewing more beer.”

Local governments throughout WNC recognize the a brewery’s economic impact and have been instrumental in securing and supporting these companies. Watson says local entities can help through zoning, development assistance, infrastructure improvements, and working with breweries on water access and quality.

“There are lots of secondary things, too, related to permitting,” he adds. “A good example is being friendly to beer festivals, which are often controlled at the local level.”

The City of Wilmington would not comment on any actions it would be willing to take to attract larger regional breweries who may consider the area for an additional location. Yet, its recent approval of new zoning rules has demonstrated a willingness to accommodate breweries on the local level. In the case of WNC, the local governments followed through on many of Watson’s suggestions to land its three new breweries.

In April 2012, Mountain Xpress reported The City of Asheville will give New Belgium $3.5 million in tax reimbursements over seven years as long as it fulfilled plans to invest $175 million in building its new facilities. Additionally, the city supplied $536,970 in infrastructure improvements to the construction area, including stormwater mitigation, completion of a greenway, addition of bike lanes, and intersection improvements to better accommodate the brand’s delivery trucks. The total was $2.3 million before grants and state funds, leaving the city with the over $500,000 price tag.

New Belgium and Sierra Nevada both were awarded $1 million from the One North Carolina Fund, which allows local governments up to $3 million to recruit, expand or retain businesses. Sierra Nevada also was provided $3.75 million in incentives from Henderson County.

Asheville anticipates that after seven years, it will take in $551,000 per year in real estate and equipment taxes from New Belgium. The company estimates it will create over 150 new jobs in the next few years. Sierra Nevada expects to create 200 to 300 new jobs.

It’s exciting to watch Wilmington’s new native breweries, festivals and craft-beer shop options continue to expand. But perhaps the city and county can take a nod from Asheville’s cemented title as a beer destination and follow some of their fruitful leads  to really see an economic boost.

“We have the allure of the coast,” Lighthouse’s Adams says. “Asheville has the allure of the mountains. You’ve got to have something more than just beer—there’s got to be something that goes with that to make it the whole package, and I think we will have that for sure. As our breweries get a little more recognition, I think it will help.”

Related Posts

Leave a Reply

Your email address will not be published. Required fields are marked *


*

« »