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Business is booming for local brewery upstarts, but is the trend sustainable?

Why craft brewers are taking share from the giants

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This story is part of a special beer month series celebrating the Queen City's beer heritage and bright future as a booming brewery town. Check every Tuesday and Thursday for a new profile of one of the 12 local breweries in the Cincinnati area.

CINCINNATI - Cincinnati’s brewery industry employed 630 people with combined wages and salaries of $83 million in 2012, according to figures obtained from the Economics Center at the University of Cincinnati.

Those employment numbers -- likely dominated by the Miller brewing facility in Trenton -- haven’t changed much since 2009, said Jeff Rexhausen, senior research associate at the Economics Center.

But you’d never know that by talking to local brewers.

“We’re in a tremendous growth phase,” said Dan Listermann, owner of Listermann Brewing Co. in Norwood.

Listermann's was a manufacturing company that made equipment for home-brewers until 2008 when it started making its own beers. Now, the eight-employee company can’t make its 10 brands fast enough to satisfy lovers of Blarney Stone Red, Jungle Honey American Pale Ale and Leopold Belgian Blonde.

“The big question for all of us is how do you make it fast enough? The minute you make it, somebody wants to buy it,” said Bobby Slattery, co-owner of 50 West Brewing Co., which operates out of the former Heritage restaurant on Wooster Pike.

Established in November, 50 West is on pace to reach $2 million in first-year sales. It recently purchased equipment to double its annual brewing capacity to 2,000 barrels.

“We’ve gotten a fantastic response in Newport,” said Jon Newberry, a former business reporter who is trying to bring back the Wiedemann beer brand in the Tri-State with a new recipe for a light-bodied pilsner beer, called Wiedemann’s Special Lager. First-year sales approached $100,000, but Newberry recently changed distributors and signed a deal with the Kroger Co. that could help Wiedemann become a $1 million brand within a few years.

Beer Biz By The Numbers

So, what gives? Is the local beer industry full and frothy? Or is it as flat as a three-year-old Budweiser? The answer is both. The nation’s biggest beer sellers have endured a run of declining sales in the last few years, as wine, liquor and craft beer sales increased.

But the overall industry had an economic output of $246.5 billion in 2012, accounting for 1.6 percent of the nation’s gross domestic product. Figures from the Beer Institute, a Washington, D.C.-based trade group for the malt beverage industry, said the eight Congressional districts nearest Cincinnati owe a combined 23,384 jobs to breweries, distributors, suppliers and retailers engaged in the beer trade. The industry produced a combined economic output of $2.4 billion in those eight districts last year.

Industry publication Beer Marketer’s Insights sheds the most light on the market share shifts among sellers of suds. Its data shows Anheuser Busch market share dipped to 46.3 percent in 2012, down from its 2003 peak of 49.6 percent. MillerCoors lost two percentage points since 2008, falling to 27.4 percent last in 2012. Four of the five biggest beer companies in the U.S. increased their shipping volumes last year, according to Beer Insights.

But quarterly financial reports from the beer makers themselves show the industry titans slipped again in the first quarter of 2013. U.S. sales for Anheuser Bush declined 4.1 percent. MillerCoors dipped 3.3 percent.

“The traditional domestic industry segments…  continued to decline modestly as brewers large and small have successfully turned their attention to numerous new flavors and innovation,” Gary Leibowitz, SABMiller’s senior vice president for investor relations told investors in an April earnings call.

“The whole beer industry had a very good first quarter last year. This year, we're all kind of suffering,” said Robert Ryder, chief financial officer for Constellation Brands Inc., which owns the Corona beer brand.

For craft brewers, revenue has grown at double-digit rates since 2008, reaching $10.2 billion in 2012 with a volume market share of 6.5 percent, according to the Brewers Association, a Boulder Colo.-based advocacy group for small breweries and home-brewers.

The association counted more than 2,400 breweries that operated for all or part of 2012. It counted 409 new small and independent brewery openings in 2012 compared to 43 closures. Cincinnati's newest breweries include Rhinegeist Brewery at 1910 Elm Street in Over-the-Rhine, Rivertown Brewing Co. at 607 Shepherd Drive in Lockland and 50 West, at 7668 Wooster Pike in Columbia Township.

Next page: Beer Scene Is Vibrant But Is It Sustainable?

As regional breweries claim tiny slivers of market share in cities all over the country, industry giants are fighting back by acquiring smaller independent breweries like Chicago’s Goose Island, now part of InBev’s Anheuser Busch lineup, and introducing craft-style and fruit-flavored beers. Some think larger forces, including a growing desire to buy local, will keep the giants from reclaiming lost share.

“There aren’t any former craft beer drinkers. Once you start drinking craft beer, you don’t go back," said brewer Dan Listermann, who thinks the craft beer segment "could get pretty big. We’re mining the Bud and Miller Light drinkers out there. We’re trying to convert them to better beer. There’s a gazillion of them.”

Slattery said the Cincinnati Reds and 21c Museum Hotel downtown are among more than 50 potential clients that expressed an interest in serving his 50 West products. But he barely has enough production capacity to serve restaurant patrons.

“It just keeps getting bigger and bigger,” he said. “The demand is outrageous for this local beer right now.”

Journalist-turned-entrepreneur Jon Newberry sees the potential for a new Wiedemann brewery in Newport. His dream is to open a brewery and tap room near the place where the George Weidemann Sr. built his pre-prohibition empire. Having covered the beer business for local newspapers, Newberry is fully aware that the brewpub trend came and went in Cincinnati, producing as many business failures as successes. But he thinks this latest industry surge has staying power.

“I think it’s different,” he said. “It’s much more widespread geographically. There are just so many brands. The competition is unbelievable. People are becoming very knowledgeable about beer brands.”

Dave Gausepohl agrees that the shift has staying power.

Gausepohl is specialty beer manager for Heidelberg Distributing in Kentucky. He was brewer at Fort Mitchell’s Oldenberg Brewing Co. in the 1980s and early 1990s. For the last 16 years, he has managed specialty beers for various wholesalers. He manages about 200 brands, roughly double his product roster five years ago.

Gausepohl was part of the brewpub and microbrewery trend that emerged nationally in the 1980s and peaked in Cincinnati in the early 1990s. Names like Oldenberg, Barrel House Brewery and Main Street Brewery have all gone the way of the dodo, but in cities like San Diego, Portland and Denver, the craze continued unabated.

“It’s absolutely a permanent shift,” Gausepohl said. U.S. consumers have “gone from common sewers to connoisseurs… people want to be rewarded with their purchases. We’re seeing it with coffee, cheese, organic groceries. People are no longer happy with the mass-produced stuff.”

Gausepohl sees the current generation of local brewery entrepreneurs as smarter and more savvy than the brewers who rose and fall in the 1990s. He is aware that the global players who dominate the U.S. brewing industry have the potential to crush small competitors, he doesn’t think it will happen.

“People ask me what is my favorite brewery. I tell them I hope the person who’ll make my favorite beer hasn’t even been born yet. I don’t think the industry has even come close to peaking yet,” he said.


This story is part of a special beer month series celebrating the Queen City's beer heritage and bright future as a booming brewery town. Check every Tuesday and Thursday for a new profile of one of the 12 local breweries in the Cincinnati area.


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