Brewing Battleground: Craft breweries a growing trend across state, Steamboat
October 6, 2013
Types of breweries
The craft beer industry is defined by four distinct markets: brewpubs, microbreweries, regional craft breweries and contract brewing companies. Breweries also are distinguished by size.
Microbrewery: A brewery that produces less than 15,000 barrels of beer per year with 75 percent or more of its beer sold off-site.
Brewpub: A restaurant-brewery that sells 25 percent or more of its beer on-site.
Contract brewing company: A business that hires another brewery to produce its beer.
Regional craft brewery: An independent regional brewery that has either an all-malt flagship or has at least 50 percent of its volume in either all-malt beers or in beers that use adjuncts to enhance rather than lighten flavor.
Regional brewery: A brewery with an annual beer production of 15,000 to 6 million barrels.
Large brewery: A brewery with an annual beer production of more than 6 million barrels.
Source: Brewers Association
Steamboat Springs — The walk into Crazy Mountain Brewery in Edwards is as much about the craft beer culture as it is the product.
Pallets and crates dot the brewery's parking lot. Stacked kegs provide a backdrop and reverberate the sound of semitrailers traveling along Interstate 70 a few yards away.
Cornhole boards are set up outside and are circled by swanky, plastic lawn chairs. The setting feels more like a friend's backyard than one of the fastest-growing breweries in the country.
Four dogs greet visitors who enter Crazy Mountain. They run around two picnic tables, concentrating on a game of keep away with a tennis ball. The tap room is just as dog friendly as it is beer-drinker friendly.
Inside sits 29-year-old founder and CEO Kevin Selvy.
His flannel shirt, scruffy beard and easy smile fit the mountains. The constant movement of his employees brewing beer, packing crates and driving forklifts happens just over his shoulder.
His beer, business plan and unbelievable success highlight the off-the-charts growth of the craft beer industry.
"It's really grown faster than I ever dreamed possible," Selvy said.
Crazy Mountain isn't the rule, but the extraordinary rise of the Colorado-based brewery shows what is possible.
According to the Brewers Association, a trade group out of Boulder that follows the craft brewing business, there haven't been as many breweries in the U.S. as there are now since the 1880s.
In 2012, the craft brewing industry grew 15 percent by volume and 17 percent by sales. That growth was 13 and 15 percent, respectively, in 2011.
Although craft breweries hold just 6.5 percent of the market share — 90 percent of the beer sold in the U.S. is Miller-Coors or Anheuser-Busch In-Bev — they generated an estimated $10.2 billion in 2012.
Breweries are popping up everywhere, and the craft brewing trend is pushing its way into Steamboat Springs and the Yampa Valley.
Mahogany Ridge Brewery and Grill long has been a Steamboat staple, and now two new breweries are set to move into town.
Butcherknife Brewing Co. and Storm Peak Brewing Co. are preparing to enter the market, each with a different business plan and the same hopes that Selvy started with when he began Crazy Mountain in 2009.
"It's pretty simple," Selvy said. "The goal of beer and brewing beer is to make people happy."
The phenomenon of brewing beer has been on an upward trajectory for the past 30 years.
Prohibition was enacted in 1920 and repealed in 1933. However, home brewing remained illegal until 1978 when President Jimmy Carter signed a bill that made it legal.
States were able to regulate alcohol laws, and in 2013, Alabama and Mississippi became the last two states to legalize home brewing.
In 1978, there were 89 breweries in the U.S. As of August, the Brewers Association reported 2,606 breweries in the U.S. with another 1,692 in the planning stages.
"Everything we see is the demand exceeds supply," said Bart Watson, a staff economist for the Brewers Association. "At the local level, we're seeing consumers drink craft beer, support local beers and local economies."
Colorado certainly has followed the trend. It ranks fifth per capita for craft breweries (one per 33,306 people). Vermont, Oregon, Montana and Alaska come out on top for craft breweries per capita. Regardless of population, Colorado ranks third in total craft breweries with 151. California is first with 316, and Washington is second with 158, according to the Brewers Association.
In April, Fort Collins-based New Belgium Brewing Co. — the third-largest craft brewing company in the country — announced it planned to build a $175 million brewery in Asheville, N.C. Construction was put on hold until 2014. New Belgium officials told The Denver Post in May that their decision to postpone construction of the North Carolina brewery was the result of 70,000 barrels of capacity added to the Fort Collins location, allowing the company to meet its 2015 sales projections.
Breaking into the market
Mark Fitzgerald was sitting in the dentist's chair in 2010 thinking and talking about his planned brewery. While making small talk, Fitzgerald discovered a partnership he never expected.
"The dentist said, 'You've got to meet my friend Nate. He's in Germany learning to brew,'" said Fitzgerald, who owns Butcherknife Brewing with Nate Johansing.
The pair sat down and chatted, pounded out the details and created a business plan.
The company has had a slow go of it, however.
The partners still are in the process of finishing their 4,000-square-foot brewery on Elk River Road. They had hoped to be open already, but construction has gone slower than anticipated and an opening date has not been set.
The pair have been working on the business plan for years. Butcherknife will have a 30-barrel system in place to brew beer. One barrel translates to about 31 gallons of beer.
They hope to break into the market, seeing their beer sold in bars and on liquor store shelves. The hope is that Butcherknife's brand makes it out of the valley, creeping west toward Grand Junction and Utah and into the Front Range markets.
"If we're just in Steamboat, we won't survive as a business," Johansing said. "We need to be on the floor with the big guys. We need to feel the pressure of the big guys. We have to be smart and respect what the big guys are doing."
Johansing grew up in Steamboat. His family has a long history in the beer business, running Kalsec in Kalamazoo, Mich. One of the main parts of the business is providing hop extracts for beers across the world.
After learning about brewing in Germany, Johansing's plan was to work for Kalsec, never imagining that he'd eventually start his own brewery.
But when he met Fitzgerald, who fell in love with community breweries while teaching English in the Czech Republic, their ideas seemed to meld.
"Every day we have three people ask when we're opening," Fitzgerald said. "The answer changes from day to day. We're disappointed in that, but we're so excited about what we're doing. Now, it's tough to see the endgame. But we know it's there. We know we're set up to get there."
The two said opening in November is a best-case scenario. They hope, at the very least, to be up and running with six employees by the end of ski season.
"We thought we'd be selling beer by now," Fitzgerald said. "At this point, there is no way to pinpoint (an opening) right now."
Wyatt and Tyler Patterson long have had ties to Steamboat. They grew up in Denver, but trips to the Yampa Valley left a lasting impression.
When Wyatt decided to pursue his MBA at the University of Denver, he did so with brewing in mind.
"I focused all my projects on the brewery," Wyatt said. "Any kind of research project I did, it was on beer and the industry."
Now, the brothers are set to open Storm Peak Brewing in Steamboat in the next six to 18 months.
Their business model is different from Butcherknife's. The brothers want to open a tap room in town where they brew and sell their beer.
At this point, the Pattersons have no interest in getting their product into liquor stores or distributing their beer.
Right now, it's all about finding a space that will work as a tap room and brewery.
The brothers looked for spots in Denver and Golden before settling on Steamboat.
"We need high visibility," said Wyatt, who has been brewing with his brother for more than four years. "We don't want to be outside of town. We want to be on the bus loop. We want to be somewhere where you can ride your bike or walk over. We have to be highly visible. I think with what we want to do, we want to be a neighborhood tavern. For that to happen, we need to be downtown."
The Pattersons have looked at places across Steamboat but are waiting for the right space for their brewing systems. The brothers plan on brewing five to seven barrels of beer and having six beers on tap at all times.
Wyatt said the business could open as soon as three months, but he's anticipating it taking longer.
Everything is lined up, from the business plan, supplies, equipment and financing. Now, it's just about finding the perfect spot.
"I have a stack of paperwork with the address on it, and I just need to sign it," Wyatt said. "It's staring me down every day."
Sitting in the Crazy Mountain tap room on a September day with a view of the changing leaves and fresh snow on the peaks above, founder Selvy petted his chocolate Lab and talked about his entry into the craft brewing business.
For Selvy, the growth of Crazy Mountain was life changing.
Back in 2005, he was trading stocks in San Francisco and brewing beer in his backyard when he gave a friend some beer. That friend shared the brew with Anchor Brewing owner Ernst Baruth while the two were sailing together. Baruth loved the beer and got Selvy on the phone, offering him a three-month trial job with no guarantees.
"I went to my stock trading job the next morning at 5 a.m. and quit," Selvy said.
He worked at Anchor Brewing, one of America's oldest breweries, for four years before deciding in 2009 to start Crazy Mountain. As a Colorado native, he looked everywhere around the state for the perfect spot.
He didn't want to live in a city, so he scoured mountain towns for the perfect location. Originally, Steamboat was at the top of his list.
"I wanted to do it in Steamboat," he said. "I wanted to live in Steamboat. The economics didn't work as well as being on I-70. Shipping costs are huge. The difference in being on I-70 to being a couple miles off I-70 is huge."
In 2010, one of the largest distributors in the country called Selvy after he tasted Crazy Mountain while playing golf. He had an offer for Selvy to get into other states.
It didn't go along with the business plan Selvy had spent five years following, but it was an opportunity he couldn't pass up.
"The night before my wedding, we signed the distribution contract," Selvy said. "Then we went to Jamaica for two weeks for our honeymoon, and it's been mayhem ever since."
The company hit its third year sales goal by the third month. It's gone from producing 1,200 barrels in 2011 to producing 12,000 this year. Selvy said the demand is much greater than that 12,000 barrels, too.
"If we could make it," he said, "we could sell 100,000 barrels."
Last year, the brewery had 12 full-time employees. This year, that number is up to 33 and rapidly growing. According to Selvy, his business has experienced 370 percent growth each of the past two years.
There have been reports that Crazy Mountain will buy Breckenridge Brewery's plant in Denver as a second brewery. Breckenridge is the 41st-largest craft brewery in the U.S., according to the Brewers Association.
"It's a little too early to talk about that," Selvy said.
Regardless, Selvy has what so many brewers want. He's gone from making beer in his backyard to becoming the fastest-growing brewery in the nation.
He hasn't had a vacation since that trip to Jamaica, but it's been one heck of a ride.
The key, despite all the variables, remains the quality of the beer and the people with which he has surrounded himself. It's a combination he knows will make or break any brewery.
"I spent four-plus years writing a business plan, spending hours each day," Selvy said. "I met with 50 people that had started breweries around the country. I put a lot into it. But the first and foremost important thing in this business is your beer has to be good. It has to be quality, or you'll never take off."
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