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Craft Beer Rolls Over the State Line

After a six-year boom, Alabama’s craft beer industry has room to grow, with 20 to 30 percent of market share still up for grabs. And the trucks are rolling across the borders.

Head brewer Jason Malone (left) and Michael Sellers at the newly refurbished Good People Brewing Co. in Birmingham. The co-owners have started the push to distribute their beer across state lines.

Head brewer Jason Malone (left) and Michael Sellers at the newly refurbished Good People Brewing Co. in Birmingham. The co-owners have started the push to distribute their beer across state lines.

Like a frothy draft creeping over the edge of a cold mug, Alabama’s fledgling brewery business is beginning to expand beyond the confines of the state lines.

Passage of the Free The Hops Gourmet Beer Bill in 2009 and the Brewery Modernization Act in 2011 removed a number of restrictions on beer production and consumption in Alabama and, in the process, improved the economic feasibility of brewery operation within the state. Since then, Alabama has seen a rapid rise in the creation of small craft breweries — also known as microbreweries.

In May 2009, when the Free the Hops bill passed, the year-old Good People Brewing Co. in Birmingham was the state’s lone brewery. Gadsden’s Back Forty Beer Co. released its first offering a month later. Now there are 24 craft breweries, with several more in the works. And these breweries have become so accepted locally that most bars and restaurants — including some national chains — now stock state-produced beers. 

“Four years ago, you’d refer to a place as being a craft-beer bar, because they were one of the few places selling these beers,” Good People co-owner Michael Sellers says. “That’s kind of gone away. Now every bar offers multiple craft beers. Local retailers have really bought into this.”

So the next step for some breweries is to venture beyond Alabama and tap into new out-of-state markets. Back Forty began distributing in Mississippi and Georgia in 2013, then moved into Nashville and the Florida panhandle last year. The brewery even shipped one truckload (approximately 750 cases) to Canada, in an attempt to begin developing an export program.

Checking the progress in the Good People brewery facilities

 

Good People also has begun distribution in Tennessee and expects to move into the Florida panhandle later this year. Fairhope Brewing Co. plans to follow Good People into Florida as soon as it completes an expansion. In the works now, the expansion will improve Fairhope’s bottling capabilities and increase production capacity from a 10-barrel operation to a 30-barrel operation, with space to move up to 60 barrels. That should increase output to 4,500 barrels per year.

Tripp Collins, the COO of Back Forty, says overall growth in the number of breweries within Alabama is one of the reasons the company has started selling its suds out of state.

“The increased competition has dictated this a little bit,” Collins says. “We’re still focused on Alabama and have room to grow here. But, at the same time, we’re going to let some of the other guys fight it out at their local bars and restaurants, and we’re going to take some steps and plant some seeds to grow out of state as well.”

The level of demand for craft beers certainly can give microbreweries reason to be optimistic about expansion these days. According to the craft beer trade group The Brewers Association, there has been double-digit production growth in the national craft-brewing sector in seven of the past nine years, with an 18 percent increase in 2014. Craft brewers produced 22.2 million barrels last year, with an estimated retail value of $19.6 billion.

But even though the share of U.S. beer sales for craft brewers has more than doubled over the past five years, it still stands at only 11 percent. National breweries, such as Anheuser-Busch and Miller, continue to dominate the market. That means there is plenty of room for growth, even as the number of craft breweries steadily increases — 615 opened in the U.S. last year, bringing the national total to nearly 3,500.

“In places like Portland and San Diego, we’re seeing the market share for craft breweries get into the 30 to 40 percent range,” Brewers Association chief economist Bart Watson says. “So in Alabama and the Southeast, where they are currently below the national average, there’s probably 20 to 30 percent of the market share up for grabs as craft grows and continues to eat into the beer business.”

That is what Sellers is counting on as Good People begins to implement its expansion plans. Still, he says the company will move slowly and carefully as it ventures out of state, simply because so much about the economics of the craft-beer market remains uncertain.

Good People Brown cans jostle down the line on their way to being filled with ale.

 

“This environment is so dynamic. Something new happens every day,” Sellers says. “The real boom in craft beer is only about five years old. And since this is the first time we’ve ever seen a craft-beer boom, there’s no historical data to look back on to see how it’s going to play out.

“If you were in real estate before 2007, it seemed like you couldn’t lose. Then the bubble burst. I think there is a little bit of that bubble in craft beer. But what’s promising is our overall market share is still so small. There’s a lot of meat left on that bone, we just don’t know how much yet. So we’re going to have a cautiousness in our expanding.”

Plus, beginning to ship and sell alcohol across state lines is not something that happens quickly or easily. In addition to the federal regulations, each state has different alcohol laws. In Tennessee, for example, beer with an alcohol-by-volume (ABV) content of more than 6.3 percent cannot be sold in grocery stores, but it can in Alabama.

And while distributors handle much of the paperwork and logistics, it is still a major move for a brewery to take that first step into another state. That is one of the reasons why Fairhope Brewing is currently willing to ship its product more than 350 miles to Huntsville but has yet to make the 45-minute trip across the Florida line to Pensacola.

“When brewers move across state lines, they face the challenge of not only a new marketing environment but also a new regulatory environment,” Watson says. “They find they have to modify their strategy somewhat because of different opportunities available based upon the regulations.”

There is also the challenge of simply learning the tastes and preferences of a different market. What proves to be popular in Alabama might not go over so well in another state. But Fairhope Brewing managing partner Brian Kane says the element of the unknown can actually be a benefit for microbreweries, since many craft-beer consumers enjoy trying new products.

“They aren’t necessarily loyal to a brewery. They’re loyal to a style,” Kane says. “They love an IPA or a stout. The competition is just to get on the tap in the first place. Once you do, there are people everywhere who are always wanting to try new, fresh stuff.”

And increasingly, Alabama’s craft breweries are working to give it to them, throughout the state and beyond.

“Craft beer is continuing to push the limit of what we thought was possible when we started,” Collins says. “Five years ago, having 10 percent (of the overall beer market) was the goal. Now because of the momentum and growth of our industry, that goal has risen to 20 percent. Our market and potential customer base is primed and ready for us to keep growing over the next 15 to 20 years.”

Craft beer labels must be as rich and appealing as the beer inside, according to Roy Burns of Lewis Communications, which worked with Good People Brewing Co.
 

Designs that Dance on the Shelf

Walking the aisles of a store that sells craft beers can be a bit of a surreal experience. On one side there is a fish sitting in a lounge chair on the beach, warming his fins by a fire. On the other side, a man and a woman carry separate pieces of an oversized mechanical heart. Over there is a dinosaur with a beer-keg body, and next to it are two skeletons in wedding outfits. And is that a screaming monkey in an astronaut suit?

Welcome to the wild world of craft-beer packaging. Unlike the labels found on traditional beer cans and bottles that consist primarily of a standard logo and the name of the beer, craft beer labels are often miniature works of art. And some of them are quite intricate, with details that can truly be appreciated only by holding the container up close and carefully examining it.

There are two main reasons for this. The first is simply an attempt for the container to stand out in the increasingly crowded craft-beer market. There are nearly 3,500 breweries operating in the United States alone, and thousands more in foreign countries that import beer to the U.S. As a result, a single craft-beer specialty store, such as Hop City in Birmingham, can easily have more than 1,000 different offerings lining the shelves.

Products from Madison’s Blue Pants and Birmingham’s Avondale craft breweries line the shelves at Hop City in Birmingham, vying for the attention of thirsty shoppers.

 

“Because of the sheer amount of beer available now, it’s more important than ever to stand out on the shelf,” says Roy Burns, creative director for Lewis Communications, which has designed labeling for Birmingham’s Good People Brewing Co. “With so many choices, some consumers make a decision based on what appeals to them visually.

“We will go into a store and take photos of the shelf, and then get on a computer and mock in our designs just to see if they’re standing out or blending in. They might all be great designs, but it has to function on the shelf.”

In addition, since one of the main objectives of craft brewers is to come up with new and interesting beer tastes, many of them want that type of imagination and inventiveness reflected in their containers.

“Craft brewing in general brings in a pretty creative bunch,” says Matt Broadhurst, who has an art degree and has designed more than 20 labels for Straight to Ale Brewing in Huntsville. “So they want something more than the old-school, standard beer-in-a-bottle look.”

Straight to Ale’s designs have become so popular — especially the space helmet-wearing primate featured on the Monkeynaut IPA — that the company sells posters of many of them at $20 a pop. Hundreds of interesting designs from throughout the world can be seen on the blog ohbeautifulbeer.com. And for the past six years, The Dieline Awards design competition has honored an artistic winner in the “Beer, Malt Beverages and Tobacco” category. 

“You’re seeing a lot more influence from the graphic world in craft-beer packaging,” Good People co-owner Michael Sellers says. “We didn’t have anybody when we started. The first cans we put out, a guy who had just graduated from Alabama designed them for us. We didn’t really have much competition at the time, so there wasn’t anybody to compare ourselves to.

“Now it’s very competitive to get your face out there. A lot of the intricate design is because of the amount of different brands. Everybody’s vying for attention, and we’re all looking for something that stands out.”

Cary Estes and Cary Norton are freelance contributors to Business Alabama. Both are based in Birmingham.

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