Look Who’s Brewing Too

Sacramento makes a lot of fantastic beer! Just check out the lineup offered at my local Nugget (and thank them for offering a particularly good selection of local craft beers). While Sacramentality’s loyal readers will recall, our region is far from the biggest brewing region in the state, it has been the fastest growing over the last five years, taking a 5x multiplier to its 2011 size.

Sacramento’s brewing scene has gone through some difficult times over the 15 years we have data from the Board of Equalization (Thanks again, BOE!). Production was flat through the onset of the recession, when the closure of two of the region’s largest breweries saw production decline dramatically, even as craft beer continued to grow across the state and nationally. Production increased slowly through the recession but has caught fire since 2013.

The Old Faithful

In 2016, seven breweries remained from the first few years of the 21st century. Sudwerk has grown slowly, but unevenly over the last decade. It became the largest brewery in the region in 2007, when Sacramento Brewing Co. began its decline, despite seeing no growth over the previous year. It fell from the top spot in 2014 after Knee Deep opened their Auburn facility. In 2016 they fell to third behind Track 7 and Berryessa may soon be nipping at their heels.

Rubicon saw several years of steady, but limited growth in the years of Sacramento Brewing’s collapse and closure, doubling from 34 thousand to 68 thousand gallons between 2006 and 2012. Production would double again over the next three years with the new brewery in place, but with little growth in 2016, it was falling well short of the planned 10x pace, leaving it destined for a duplicate appearance in our next section.

Jack Russell and Hoppy are about the same mid-size breweries they were in 2002 while the other five began and remain tiny as well.

The Dearly Departed

Prior to the recession, production in our region was dominated by Sudwerk, Sacramento Brewing Company, Beermann’s Brewerks and Brew It Up. At their peak, these four collectively produced about three quarters of Sacramento’s local beer between 2003 and 2005. Of those four, only Sudwerk still exists. While Rubicon was smaller at the time, they grew significantly in the vacuum the larger breweries left behind, but called it quits in 2017. Similarly, American River grew relatively quickly in the New Wave, but also shut their doors last year. Brew It Up has been revived across the river in YOLO County, so perhaps we have not all enjoyed our last Monkey Knife Fight?

The New Wave

Auburn Alehouse was the first of the New Wave, opening in 2007. As something of a tweener, they opened their doors just before the string of major closures in 2009. They grew slowly for the first several years, before significantly increasing distribution in more recent years, growing to 87 thousand gallons in 2015, before declining slightly in 2016, leaving them well behind the biggest producers, but still the sixth largest brewery in the region.

With an economy in shambles and the region’s brewing scene crashing, it was no surprise that no new breweries of significance opened over the next three years. 2011, however, would prove to be the beginning of something very big. That spring Knee Deep began brewing in the old Beermann’s location. Starting with a respectable 26 thousand gallons, they would double in 2012 and, after reaching capacity at their original location and after beginning to level off in 2013, moved to their new brewery in Auburn. The new facility allowed a tripling of production in 2014, doubling that in 2015 and increasing again by nearly one-third in 2016.

Track 7 got off to a slower start. They did not begin production until the very end of 2011 (leading to their annual New Year’s Eve anniversary parties) and grew more slowly within the confines of their Curtis Park location. Since opening their larger Natomas production facility in 2015, however, Track 7 has been catching up quickly.
2011 also saw Loomis Basin and Berryessa open their doors. Loomis Basin started larger and tripled in size by 2016, becoming the seventh largest brewery in the region.

Berryessa started smaller, in the tiny Winters market, but took off starting in 2013, passing Loomis Basin in 2015 and Auburn Alehouse in 2016, reaching the fifth spot. An early look at 2017 data suggests they have continued to grow quickly.

The next few years were not only been categorized by the growth of its biggest players, but also an explosion in the number of breweries producing craft beer, nearly tripling over the last five years. Perhaps most notable is the growth in that juicy middle of the local market. In 2016, the nineteen breweries producing between 10 and 40 thousand gallons collectively account for one quarter of the market (with New Glory, Bike Dog and New Helvetia at the high end and Monks Cellar, Jack Rabbit and Mraz at the low end), providing a substantial, highly localized cornerstone of the market – and the kind of competition that can drive delicious innovation across the region. Nearly all of these breweries opened their doors in 2012 or later, offering the real possibility that many of them could follow the paths of the older, bigger brewers in the new wave.

I’ve seen our local mid-sized breweries employ two primary strategies to significantly push past their tap room-generated demand.

While nearly all breweries have limited release specialty and one-off beers they produce, some take this to a much more extreme, social media-fueled level. Visitors to New Glory in Sacramento or Moonraker in Auburn will rarely see the same beer again. While they both have a number of excellent, highly regarded beers, they only brew any given variety occasionally. When their most popular beers roll off the canning line, the most enthusiastic beer fans show up sometimes hours before the breweries open to ensure they get their share. Flatland in Elk Grove takes it further, literally never serving the same beer twice.

By creating the perception of scarcity and making each release feel like a “can’t miss” event, they help to create a buzz around their best beers and ensure that newer experiments will sell, even if they don’t live up to the reputation of their cousins.
The second approach worked very well for Track 7, but disastrously for Rubicon. If a main component of your business is operating a dedicated retail establishment to sell the product in a local market, adding more locations in more markets gives breweries the opportunity to sell more beer at much higher margins than when a distributor gets involved. Track 7 grew up as the local brewery in the relatively small Curtis Park market, but by adding their second location, they became the go-to brewery for the much larger Natomas community. Rubicon’s new West Sacramento location was likewise opening an untapped market (although the tap room opened later than the attached production facility, perhaps letting their new West Sacramento competition get too strong of a toehold in the community). While new markets offer the promise of long term stability, beyond the whims of offering the hot product on social media, it also means substantial capital investment; disappointing returns, as Rubicon experienced, could be disastrous.

Both of these earlier examples sought to double down on their investment, not just opening a second retail location, but also substantially expanded production capacity in the new location, increasing the potential for growth, the cost and the risk. The investment saw Track 7 take off, growing from a local tap room to a major regional player in just two years, while Rubicon was left with a bill it lacked the consistent revenue stream to pay down. Today, others are taking a more limited approach. Bike Dog added a new tap room just two miles from their West Sacramento brewery. The river and its unfortunate lack of bridges (a future article?), however, makes the few hundred feet between West Sacramento and West Broadway a veritable chasm. Going even further, Device is tripling down, adding Midtown and Pocket locations to their business. Their experience will be interesting to watch, as they are both going head-to-head with numerous breweries and bars in Midtown’s busy market, while also becoming the only brewery on the I-5 corridor between Broadway and Elk Grove with over two miles to the nearest bar in the Pocket. Here in the Pocket, we are excited to have them and rooting for their success!

Going beyond the local markets and becoming the kind of breweries that add their region to the state’s leaders will take something more, however. When you look down the list of the state’s top craft breweries, you see:

Sierra Nevada, whose generous use of cascade hops came to define the west coast style and their classic pale ale remains California’s go-to craft beer decades later;

Stone, whose arrogant gargoyles were at the forefront of giving packaging real personality and who made big, high alcohol, high flavor beers the driving force of west coast craft brewing through the beginning of the 21st century;

Lagunitas, who took that full flavor, high alcohol form and reproduced it at a more consumer-friendly price point; and

Ballast Point, whose Grapefruit Sculpin caught the big wave of fruity IPA’s and rode it to near perfection.

If one of our fantastic breweries is going to make that leap, it will probably take a genre-defining effort. Perhaps Moonraker will be able to leverage their reputation for truly fantastic hazy IPAs (and a recently announced brewery expansion) and make Auburn the west coast’s New-New England if the “haze craze” spreads to mainstream markets. Or if the market for subtle but flavorful craft lagers expands (making so many brewers’ dreams comes true), Sactown Union’s focus and talents in that area could pay huge dividends – or perhaps Sudwerk’s established market share and capacity will give them the edge. Maybe our talented and creative brewers may dream up something I could not even imagine that will set the beer world on fire. Or maybe the future of craft brewing will revert back to a more local focus, leaving the larger breweries struggling for market share as consumers seek out their favorite local flavors.

No matter way the market goes, I suspect our very last chart of the article will change substantially over the next several years – and I cannot wait to taste it – or to write about it. You can look forward to the next article in the Look Who’s Brewing series this summer when 2017’s data is released.