California’s older breweries look for an edge as beer industry feels the pinch

After five years of explosive growth, it looks like the craft beer expansion era is down to its last swallow.

Roughly a dozen new breweries a year opened in the Sacramento area from 2013 to 2017. But following a nationwide trend, just 3 new breweries have opened here in the last 12 months.

And it isn’t just that there aren’t many new breweries – established names are feeling the pinch.

Bear Republic, Stone and Lagunitas all reported production drops in 2018, the first drops reported by any large brewery dating back to 2006. As always, there are outliers. Russian River opened a new brewery in Windsor last year and now distributes its brews as far away as Maine.

As the industry slows down, Karl Strauss brewmaster Matt Johnson says brewers like Karl Strauss and Russian River are well-suited to adapt.

The need for variety is obvious. Almost every brewery offers an IPA; some offer dozens of different kinds. Craft consumers don’t buy 12 packs. They want new flavors.

Karl Strauss paired with Russian River recently to make New California IPA, which is brewed with arcane hops and a bit of rye in the malt to make the taste stand out in a crowded field.

“Obviously, we’re both big IPA fans, so there were no qualms about it being an IPA,” Karl Strauss brewmaster Matt Johnson said.

New California IPA tries to split the difference between traditional, bitter West Coast IPAs and new, sweeter IPAs. The result is a beer pulling a solid 3.98 rating on Untappd, the beer rating site that goes up to 5.0.

“Nobody can sustain astronomical growth like the industry has for so long,” he said. “Yes, there are some sales that have been lost, but those companies that have had great growth, great management and excellent beer, you might see them drop a little, but they’re the ones that are gonna last. They’re the ones that have been around the longest. They know, they see it, they planned for this. We planned for this. I’m sure Russian River has planned for this. The commonality is we all brew excellent beer and consumers see that and that’s why they’ll keep coming back.”

As the market settles out, quality seems to be a difference-maker. It also helps to have a niche. North Coast Brewing is still growing, thanks in large part to its stalwart brew, Old Rasputin. The imperial stout is available across the country.

Brewery CEO Sam Kraynek said North Coast is feeling the pinch for shelf space and tap handles.

“With the continuing growth of the breweries, free-standing plus brewpubs, it’s become a really very crowded market,” Kraynek said. “I see that as a challenge, along with the other, different type of drinks that are appearing on the market.”

Kraynek was alluding to seltzers, hard sodas and even hard coffees breweries like Sam Adams have turned to in order to keep their production lines busy.

North Coast will not be making a hard root beer any time soon – but it needs a niche just the same. Instead, the company is flying its California flag high. A section of the brewery’s website is devoted to its various conservation efforts. North Coast’s Steller IPA is named after the Steller sea lions who migrate through the area, and whose population is declining. A portion of each case sale of Steller is donated to marine mammal research and rescue.

“We need to consider the planet in anything that we do,” Kraynek said. “Living on the coast here, we see the gray whale making the migration south into Mexico. This is where the orcas get as far south as here. We’re very passionate about the sea.”

It’s an interesting niche in a state with about 1,000 breweries. California has many stalwarts of the craft beer industry, including the West Coast original, Sierra Nevada. As beer drinkers’ preferences evolve to ever-more-local, ever-new beers, it’s clear sales will drop for some of the stalwarts.

As Karl Strauss’ Johnson pointed out, this is not Armageddon for the beer industry. Older breweries that have a niche will guard it and work to deepen their roots. The others will try anything to stay relevant and keep sales from going into freefall. A few will go into bankruptcy or get new owners. It’s not as fun as the expansion era, but there will be plenty of action just the same.

This story was originally published October 28, 2019 at 4:00 AM.