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    Rich Norgrove, left, Scott Cramlet, center, and Peter Kruger prepare Rubicon's test batch Wednesday at its new brewery in West Sacramento. The recent addition to its brewing operations will help the company meet its goals of expansion, with the new facility equipped to produce 4,000 barrels a year.


    A glass of beer is drawn at Rubicon Brewing Co. at its location at 20th Street and Capitol Avenue.


    Grain and water are mixed Wednesday in the production of Rubicon Brewing’s test batch at the company’s new brewery in West Sacramento.


    Rubicon brewmaster Scott Cramlet checks the sight glass during the test.

As beer tastes change, Sacramento retailers and distributors race to keep up

Published: Sunday, Jul. 28, 2013 - 12:00 am | Page 1D
Last Modified: Monday, Jul. 29, 2013 - 7:51 pm

Five years ago, the warehouse of Woodland beverage distributor V. Santoni & Co. was stocked with fewer than 300 varieties of beer.

Today the company's inventory contains 1,800 brews, a change that reflects the exploding number of mostly small companies making craft beer. Santoni president Charley Santoni said he's had to install new shelving to make more space for the growing inventory.

"Customers' tastes are changing," said Santoni. "This is becoming more like the wine industry."

In Sacramento and across the nation, grocers and distributors are scrambling to meet the growing consumer thirst for craft beers. According to SymphonyIRI, a Chicago-based market research firm, craft beer sales in California stores increased 15.5 percent from July 2011 to July 2012, slightly more than the national average.

At the same time, tax figures show that Californians are drinking less beer overall. National domestic brands are flagging, and the beverage giants that have long dominated the U.S. beer industry are struggling to adapt as sellers push microbrews.

The shift can be seen at retailers large and small. John Yoon, who owns A&P Liquor in midtown Sacramento, said that he's gone from devoting four of his 10 coolers to large domestic brands to stocking only two of his coolers with them, and has to turn down requests to stock a new beer "almost every day."

"On the weekends, people buy more domestic beers" for entertaining, Yoon said. But during the weekdays, he said, "a lot more people drink it for the taste."

With more than 300 breweries in California alone, retailers are feeling the pressure of limited shelf space. Chris Wilcox, the beer manager of Total Wine and More on Arden Way, said that beer shelving at his store was around 90 percent full.

One level up the supply chain, the distributors who keep stores and restaurants stocked with beer are also under pressure. With a wider variety of products to sell to stores with different demands, they're swelling their sales forces and paying close attention to new breweries.

"It is becoming very competitive to try to get the distribution rights for these up-and-coming breweries," said Santoni. "I'm trying to go ahead and take some risks and pick these guys up while they're new."

But the market is crowded, and small breweries say that despite rising demand for craft beers, it can be hard to crack it.

Ryan Graham, who owns Track 7 Brewery off Sutterville Road in Sacramento, said his company distributes its own beer using employees' personal vehicles. He's interviewed several distributors, but for now, not having one means Track 7 is mostly limited to delivering beer within 15 miles of the brewery.

"A number of our restaurants have run into some supply issues in the past few months," Graham said. Sometimes, he said, they go six weeks before he can replenish their stocks.

Entering new geographic markets can be a special challenge for craft breweries. In interviews, brewers said drinkers' loyalty to local brewers could be hard to overcome, and cited Oregon and Southern California as more mature markets with lots of established breweries to compete against.

Ryan Fry, whose Davis brewery Sudwerk is one of the older craft beer makers in the Sacramento area, said distributors in distant markets are reluctant to take on new beers without marketing support from the brewer, if they can take them on at all.

Despite these challenges, Sacramento's craft beer scene is booming. Opened just a year ago, Track 7 is preparing to double its capacity by expanding into the unit next door in the warehouse-style building it occupies on West Pacific Avenue. The New Helvetia Brewing Co. opened earlier this year on Broadway, and the Ruhstaller Beer company, less than two years old, is selling its wares in many local restaurants and stores. Knee Deep Brewing in Lincoln, whose Hoptologist double IPA has a strong following, recently announced a move to Auburn and a $1 million expansion.

Glynn Phillips, owner of Rubicon Brewing Co., opened a new brewing facility in West Sacramento last week. The new facility is equipped to brew another 4,000 barrels per year, increasing Rubicon's production capacity threefold to deal with demand that has grown by more than 20 percent for each of the past three years.

"It's been borderline unmanageable," Phillips said. In the broader craft brew market, he said, "there's plenty of space for everybody."

With Sacramento buzzing about beer, it may come as a surprise that beer consumption in California has been on a long-term downward trend. From 2000 to 2011, per-capita beer consumption fell 7 percent, from 18.71 gallons to 17.38 gallons.

The boom in craft brews in California and across the country suggests that most of that reduction has been felt by bigger brewers.

Responding to this trend, huge companies like ABInbev and MillerCoors have introduced new product lines and acquired smaller breweries.

"The whole concept of think local, support local, drink local is everywhere across America," said Bump Williams, a beer industry consultant.

Williams explained that while craft beers were only about one-sixth of the U.S. beer market, their consistently high growth rate was drawing national brands into the market with what he called "introductory craft beers" like ABInbev's Shock Top.

Phillips, of Rubicon, said he isn't worried by the national competition. He called such brands "craft-y beers," and said Sacramento palates prefer darker beers anyway.

Nationally, Sacramento stands out as one of the country's largest markets for India pale ales, the largest and fastest-growing subset of craft beers. At food stores alone, Sacramento residents spent $1.7 million on IPAs in the first six months of 2012, a 56.4 percent increase from the prior year, according to SymphonyIRI.

Like IPAs, other craft specialties are surging in popularity across the country. While their share of the total beer market remains small, the industry has seen double-digit sales growth for each of the past seven years. Consumers are paying more, too: a case of craft beer is 75 percent more expensive than a premium domestic beer, and the price is rising faster.

Even though people are drinking less, beer producers and sellers are making higher margins, and there are few signs of the trend stopping anytime soon.

"They're making more money than they've ever made," Williams said.

Call The Bee's Jack Newsham, (916) 321-1100. Follow him in Twitter @TheNewsHam.

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