Consumer demand for craft beers continued to grow in 2013, even as overall beer demand declined. Total U.S. beer volume sold in the United States during 2013 fell slightly (1.4%) to 2.8 billion 2.25-gallon cases, compared to 2.84 billion in 2012, according to market tracking firm Technomic. Craft beer production grew 9.6% to capture 7% of the total beer market. The results continue a trend of recent years of craft beer grabbing more of the total beer market. After making up 5.5% of the total beer volume in 2011, craft beer increased to 6.3% in 2012.
As popular enthusiasm for craft beer continues to grow, more and more communities are beginning to focus on the economic impacts of these uniquely local businesses. While national beer sales data are informative, sometimes it is the local stories that make clear just how much potential lies within this growing niche of the alcohol beverage industry.
The Remarkable Case of Heady Topper
In December of 2013, Vermont alcohol regulators charged a 28-year-old Burlington woman with illegally selling without a license five cases of a popular, hard-to-get beer online. Investigators from the Vermont Department of Liquor Control allege they discovered an online ad for Heady Topper. Undercover investigators subsequently met with Stephanie Hoffman, who sold them over one hundred 16-ounce cans of the highly desired brew for $825. Hoffman was cited in Franklin County criminal court with a charge of selling an alcohol beverage without authorization.
Ms. Hoffman’s guilt or innocence is not the pertinent fact in this tale. Rather, it’s the incredible demand generated by a locally brewed brand of beer, and the economic impact it can have on its community. Heady Topper is considered by some to be the best craft beer in America. It’s produced by the Alchemist Brewery in Waterbury Vermont. Everybody wants it, and the demand towers well over the available supply – so much so that the month prior to Ms. Hoffman’s unlicensed escapade, the craft brewery announced online that Nov. 15, 2013 was be the last day the company would sell Heady Topper at its retail shop because it simply could not keep up with demand.
Then the company’s website crashed.
The website crash — and what it says about people’s devotion to Heady Topper — is a kind of confirmation of the decision by the brewers, John and Jen Kimmich.
John Kimmich was quoted by local papers at the time as saying:
"The fact that we have thousands of people climbing on there all at once, it’s kind of analogous to what we’re going through here at the cannery, . . . Every time something happens like this it always catches us off-guard. We’re just in our own little bubble here making beer. And it overwhelms us every time. We have become busier at the cannery than we ever thought we would be here at this location."
The Alchemist opened in September, 2011, a successor to The Alchemist Pub and Brewery, which was a brew-pub the Kimmichs owned on Main Street in Waterbury, Vermont. The restaurant and its basement brewing operation were damaged by flooding from Tropical Storm Irene. In the wake of the flooding, the Kimmichs closed their restaurant and focused their attention on the brewery.
The Alchemist brews one kind of beer: Heady Topper, a double IPA with an 8 percent alcohol content that is packaged and sold in 16-ounce cans. That beer became an overwhelming success, attracting consumers from well-beyond Vermont to its Waterbury location. Even with a one-case limit per customer, the brewery is selling 70 percent of its Heady Topper on-site out of the small retail space. Customers, who can taste the beer at the brewery premises, crowd around the counter or by the front door as they watch cans of Heady Topper roll along a canning belt.
Meanwhile, the Alchemist has been maintaining Heady Topper supplies at 150 accounts — stores, restaurants and bars within 30 miles of Waterbury. These local stores recognize that Heady Topper is an economic engine for their businesses as well. According to John Kimmich: "We worked really hard to make sure they got their one or two cases, so we sacrificed here at the brewery. We ran out. We realized how many other businesses depended on our beer. All these little mom and pop places calling and emailing us; they said they were busier just because they had Heady Topper."
When the Alchemist opened two years ago, the brewery was making 30 barrels of Heady Topper a week. Production has increased six-fold to brewing and canning 180 barrels of Heady Topper a week, or almost 2,000 cases. The Alchemist brews four days a week, three brews each day.
The brewery is now embarking on an "unbelievably daunting undertaking" to ensure that its regional wholesale accounts — including businesses in Stowe, the Mad River Valley, Montpelier, Waterbury and Burlington — get the right amount of Heady Topper each week, handle and store it as the Alchemist expects, and don’t hold on to the inventory.
"This is no light decision to make," Kimmich said. "But better now than two years from now. ... In the end, it might not be the most convenient thing for our customers, but the good it does for the Vermont economy and all the stores that sell our beer far outweighs it. Hurray!"
Not every craft brewer meets with the success of the Alchemist and its Heady Topper. But, many communities throughout America are reporting similar benefits from the craft brewers who call them home. New Glarus, Wisconsin is understandably proud of the work that Daniel and Deb Carey have put into making New Glarus one of the country’s best breweries. The community also has benefitted substantially in terms of enhanced tax revenues, expanded tourism and additional local employment associated with the brewery’s phenomenal success.
Likewise, Tampa Bay is a huge benefactor of the success achieved by Joey Redner and his Cigar City Brewing Company. Aside from all the prestige associated with Cigar City’s nationally-recognized brands, Tampa and its surrounding communities have seen several spin-off businesses in the form of retail stores and on-premises bistros develop from the craft brewer’s success.
Greater tourism, more jobs, increasing tax revenues, and the ripple effect of expanding enterprises are all values added by successful craft brewers. These benefits are proving to be just the tonic needed by local economies that finally are beginning to pull out of the Great Recession.
This article is published in the March 2014 issue of Fintech Focus. For more information, click here.