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North Bay Business Journal

Monday, November 18, 2013, 6:50 am

Experts say craft beers on tap to boost economy

‘Fastest-growing legal industry in the county’

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    SANTA ROSA — Sonoma County’s fast-growing craft beer and beverage industry is poised to add further benefit to the local economy, producing jobs and luring tourists from all over the world to the region.

    Sonoma County Beer, Cider and Spirits ConferenceThat was the main takeaway from a host of experts speaking at the first-ever Sonoma County Beer, Cider and Spirits Conference, featuring a host of industry leaders and sponsored by the county’s Economic Development Board.

    “It’s the fastest-growing legal industry in the county,” Ben Stone, head of the EDB, told a sold-out audience of more than 300 at Santa Rosa’s Hyatt Vineyard Inn last week.

    Following up on a well-publicized report from earlier this year that found craft beer, cider and distilleries added $123 million in local economic impact, the industry is expected to add up to $200 million this year, according to the EDB.  

    The demand for craft beer in particular has surged nationally over the past decade. In Sonoma County, Petaluma-based Lagunitas Brewing Company, Healdsburg-based Bear Republic Brewing Co. and Santa Rosa’s Russian River Brewery have all significantly capitalized, both locally and nationally, on the that demand.

    Indeed, the craft beer industry nationwide last year had $12 billion in retail sales, the same size as the ultra-premium wine market, or bottles of $14 or more, according to a new report by CPA firm Frank, Rimmeran + Co., which has a St. Helena office and which was present at the conference.

    While the demand is national, Sonoma County is uniquely poised to benefit because it’s widely considered one of the original bastions of craft brews, with Sonoma’s now defunct but legendary New Albion Brewery starting the trend in the mid-1970s, according to Tom McCormick, executive director of the California Craft Brewers Association.

    “Sonoma County is really the birthplace of the modern craft brewery,” Mr. McCormick said, arguing that New Albion planted the proverbial seed for brewers nationwide to follow suit.

    Today, the Sonoma County EDB counts 20 total breweries, far more than its neighboring counties, along with at least four distilleries and five cideries.

    The county also has the infrastructure for tourism and a population that appreciates locally made products, given its agricultural and wine-making history, said Ken Weaver, a Petaluma-based writer who authored The Northern California Craft Beer Guide.

    “We already have the tourism,” he said. “Sonoma County branding fits in very strong,” with the craft beverage movement.

    With a $25 million, 300,000 square-foot brewery expansion in Chicago set to open in December, Lagunitas is a case-study in the surging popularity, although the brewery is far from alone, said Tony Magee, founder of the brewery who spoke at the conference.

    “Lagunitas and other craft breweries will be the next Anheuser,” Mr. Magee said, referring to the giant InBev-owned Anheuser-Busch that currently dominates the beer market.

    “It’s really something bigger than Lagunitas,” he added, noting that the beer giants have been forced to compete with craft brews by either acquiring established brands like Blue Moon or Shock Top or making variations to appeal to consumers increasingly attracted to a different style of beer.

    Locally made hard ciders and craft bourbons and gins are similarly gaining a strong foothold in the craft market, panelists said, similarly capitalizing on Sonoma County’s love for all things made local — as long as it’s good.

    “There’s a high level of gastronomic appreciation,” said Ron Lindenbusch of Lagunitas.

    David Cordtz, who founded Sonoma Cider in Healdsburg this year, said he and others are looking to emulate the success of the county’s breweries.

    “We hope to take a page out of the craft beer industry,” he said.

    Banks and other financiers also increasingly see value in a well-made craft beer or spirit, pumping more capital into a business that once seemed fringe and disparate.  Similarly, financial backers aren’t too concerned about market saturation, considering the size of the beer market, at $100 billion.

    According to the report from Frank, Rimmerman + Co., traditional brands such as Budweiser “are experiencing massive volume declines, creating opportunities for craft beer (and wine) to increase market share as consumers seek more flavorful alternatives.”

    “Most breweries are asset-rich,” said Brian Mulvaney, senior banker with Bank of America Merrill Lynch, noting that brewery tanks and other expensive equipment is viewed as attractive collateral given the demand for craft beer.

    Richard Norgrove, owner and president of Healdsburg -based Bear Republic, which was started in 1995, agreed that the market is increasingly favorable, both in terms of demand and available capital.

    “The market will expand,” he said. “But you still need to make a great product.”

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    Comments

    2 Comments

    1. November 18, 2013, 9:19 am

      by Keith

      Best paragraph ever:

      HeHdafdfadfaadjflkasjfdklsajfdlka;dl;sfafjdksla;fdsajfd;”Most breweries are asset-rich,” said Brian Mulvaney, senior banker with Bank of America Merrill Lynch, noting that brewery tanks and other expensive equipment is viewed as attractive collateral given the demand for craft beer.


    2. November 18, 2013, 9:38 am

      by Dan Verel, Business Journal Staff Reporter

      Thanks for pointing that out, Keith, it has since been corrected.


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