Sacramento's craft breweries profitable, but market shows signs of a slowdown | Crain's Sacramento

Sacramento's craft breweries profitable, but market shows signs of a slowdown

  • Greater beer selection, such as this lineup of River City Brewing Co. brews, are a key reason customers are making their way down to local craft breweries. | Photo courtesy of River City Brewing Co.

  • For Ken Anthony, center, and his family, there was no doubt about launching Device Brewing Co. But it was a lot of hard work. Pictured are Melissa and Ken Anthony with their two children (and future owners) Noelle, left, and Matteo, right. | Photo courtesy of Device Brewing Co.

Things have been good for Ken Anthony and Device Brewing Co. In a little less than five years, he’s watched his Sacramento-based craft brewery go from offering beer at a single taproom, to a business where he now supplies his line of specialty suds to establishments in 16 counties. For the first few years, double-digit growth was the norm.

But in 2017, things have slowed a bit. Device Brewing still turned a profit and expanded its business reach. But the growth rate is at single digits. And more of the same is expected in 2018.

Anthony says it’s not a surprise, given how the beer market has exploded in the past half-decade. “I heard somewhere that statewide, there are two new breweries opening each week,” he replies. “With all those new people coming late to the party, it’s going to be tough for everyone to make it unless they try really hard to stand out.”

Nationally, roughly one in eight breweries now specializes in craft beer, according to the California Craft Brewers Association. In California, it’s one in four. In the Sacramento region – which includes Sacramento, Yolo, Placer, Nevada, El Dorado and Amador counties – there were 76 breweries as of November, resulting in a site-per-clientele number that puts it on par with San Diego, the city considered birthplace of California craft beer’s new renaissance.

There were only 40 craft breweries locally in 2014, meaning the region’s suppliers have nearly doubled in about three years. “People have learned there is something more than a watered-down lager, which is what many people routinely drink at a bar,” CCBA Executive Director Tom McCormick says. “Customers are discovering there’s a variety of flavors, styles and tastes. It’s an exciting thing that has snowballed to the point where we have full, flavorful beer that now dominates the beer market across the country.”

A brewing interest

Downtown Sacramento’s revitalization – spurred by the Golden 1 Center and related construction of new eateries – is a big reason more people than ever are reaching for homebrew-styled beer instead of the traditional suds like Budweiser, Miller, Heineken and Corona that they grew up on, McCormick notes.

“On top of that scene, they’re realizing these companies are small, independent and locally owned,” he says. “And, for the most part, they’re owned by people who are passionate about brewing beer.”

Which is where brew masters like Anthony come in. He recalls regularly being given a sip of the Anchor Steam craft beer that his dad brought home during their weekly pizza nights in the 1980s, and comparing it to the sips of Budweiser that he occasionally stole from kegs at picnics. “That’s when I learned there was more to beer than bland, mass-produced domestic swill,” he notes.

The love affair eventually led to his going from making home brew on the side for friends, to him and his wife Melissa opening Device Brewing in 2013. His try-and-try-again efforts to perfect the recipes to his lagers is the type of thing that sets apart true beer crafters from the “me, too” types.

“There are basically two types of people who are involved in craft breweries,” Anthony says. “There are the ones who do it because they really want to make a good beer, and it’s what they really love to do. And there are the ones who are doing this as a side venture right now, while the market’s strong, in addition to their regular jobs, who think they can easily turn a profit. Those people are finding out that this is really a lot of work – it’s not easy. But it is very rewarding.”

The latter group is also the one that will feel it first as the beer market becomes overcrowded and customers are harder to find – and keep. “A lot of these startups are quite small, kind of like neighborhood restaurants,” McCormick says. “The bulk of their sales are on site, at their breweries, as opposed to relying on packaging and distribution. There’s a lot of room for that type of business model. But at some point, there will come a time when the downtown area, for example, will only support so many breweries.”

Oversaturation will eventually be a concern – San Diego, with about 160 breweries, is starting to go through that now – but Sacramento is only about halfway to that point, according to McCormick.

“It seems like we keep hearing that there is a new brewery/tap house opening almost once a month in this area,” says Beth Ayres-Biro, co-owner of River City Brewing Co., Sacramento’s second-oldest brew pub. “There is always the worry that the bubble is going to burst in our industry at some point.”

A hot market’s last call?

There are signs that the joyride is leveling off. Only four new Sacramento-area breweries opened during the first six months of 2017, according to CCBA data. And while none of the six dozen-plus have shut their doors this year for lack of business – two breweries closed for non-financial reasons – projections call for single-digit growth, at best, in 2018.

That’s still better than the beer market as a whole, which has been in steady decline over the past decade due to increased competition from wine and spirits, McCormick notes. And, Sacramento remains one of the state’s strongest craft beer markets.

“To survive, it will all begin and end with the quality of your product,” Anthony says. “If you don’t have that, you don’t have anything.”

Ayres-Biro agrees. “The competition to brew great beers is thick, so you really need to make sure that you are creating a great product,” she notes. “It is not easy to stand out with all the amazing breweries out there, especially in our area.”

She says the 24-year-old company has stayed at the forefront by stressing its area ties – using products from local sources whenever possible, for example – as well as not being afraid to try something new every so often.

“People’s pallets have changed, and they like having options,” Ayres-Biro says. “In the past, when you would go to your local bar or restaurant, you always had the same three or four beers to choose from – there was no variety. And, traditional tap beers of the past pretty much consisted of one flavor, maybe two, and that is boring.”

You sometimes also need to take chances. In 2015, River City Brewing Co. relocated from competition-heavy downtown Sacramento to the newly renovated Milagro Centre in suburban Carmichael. The brewery features a full-service restaurant, something purists might not agree with, but it’s an effort that gives customers another view of River City Brewing, Ayres-Biro notes.

She says she is impressed and intrigued by the past decade’s resurgence in locally produced beers. “There were only three breweries left in Sacramento in 2008,” she remarks. “I think it is cool that the craft beer industry was not only able to power through the hard times, but come out even bigger, stronger and larger.”

McCormick, involved in craft brewing locally since 1982, says he never thought he’d be part of such a wild ride – regardless of what lies down the road. “I have to say it’s blowing my mind,” he notes. “I never envisioned that Sacramento’s craft brewing industry would get anywhere near to where it is today. It’s all very exciting.”

December 12, 2017 - 1:02am