September 28, 2013

Colorado Drinking September 2013 -- Part 1

I haven't posted in a little over a week because I just returned from a week long visit to Colorado, where I drank... a lot. I have several other Beer Adventures that I've posted about in the past, including my prior trips to Colorado. They are good opportunities for me to organize notes about breweries and beers and give some promotion for breweries/beers I enjoy. Usually I try to wrestle out some information or access to parts of the brewery that isn't usually available to the public but this trip I spent the majority of my time just enjoying good beer and absorbing the drinking experience. As I usually do with these series of posts, I'll start off with some general observations.

General observations about Colorado brewing/beer

Denver is definitely swelling with breweries and the rest of the state is not far behind. People talk about the craft beer bubble and how in a few years we will probably see a contraction in the market and a lot of young breweries collapse. I generally agree there will be a bursting of the bubble but I'm not sure we are that close, at least nationally or in areas like Dallas/Fort Worth where I live. Places like Denver and Bend have neighborhoods with a number of breweries in walking distance. Here, we have a handful of breweries and we're the fifth largest consumer market in the nation. What Denver shows is that the beer tourism is a key part of developing and sustaining a vibrant beer scene because people will go places where they can try lots of beers, whether it is walking a neighborhood or a bar with 1000 taps. The ability to brewery hop in a neighborhood also makes it much easier for smaller breweries under 5BBL to survive thanks to the foot traffic. It may also be significant that cities like Denver and Bend have strong neighborhood identities where people can spend the day enjoying eating, drinking and shopping in the same area.

However, it may be a double edged sword. Denver brewers are moving into popular areas to take advantage of the foot traffic but that premium space comes at a price. Popular neighborhoods can demand several thousand dollars per month in rent. While that space markets itself, a lot of beer has to be sold to break even. A small 1-5BBL system is going to have little choice but to deploy all or the vast majority of its production to serve the taproom. That's not necessarily a bad thing and I'm told that many of the small breweries around Denver are turning at least some profit on that model. It's definitely an easier model to sell all your beer on premise than to worry about running a bottling line or trying to keep up with keg sales to bars; however, it seems like a very difficult business model to scale up and even a challenge to generate a lot of profit, particularly if you have a lot of investors with their hands in the cookie jar.

The popular neighborhoods can also be a double-edged sword thanks to their popularity. The "in" neighborhoods change over time in many cities, especially in large cities. Popular areas today may not provide the foot traffic in a few years that they do today. On the other hand, too much popularity can invite too much competition from other brewers and bars. If you don't have beer that is competitive in quality then you might get crowded out by your neighbors, although it seems like even in the most brewery-crowded areas that is at least a few years away. I'm certainly no expert in the issue. I didn't choose a storefront model for my law firm, although I intentionally picked an area with a lot of vehicle traffic, at the intersection of two major freeways.

Another trend that I noticed is the division in brewing strategies between breweries that focus on their taproom and those that focus on production brewing for packaged sales. This isn't just a Denver thing but it is something I noticed in the midst of so many breweries. Breweries that don't focus on on-premise sales tend to sell a small number of beers. Usually there are 3-5 staples plus a handful of seasonals. This shouldn't be very surprising. The brewery needs to produce beers in volume to supply their accounts (both distributors and direct sales to bars) to keep the accounts happy. You won't keep a lot of bar business if you can't fill their demands. (In Texas, we just changed our laws this summer to allow on-premise sales so most breweries are still operating on this model.) Brewers who focus on taproom sales, especially small breweries, tend to sell a wider range of beers. This is for a fairly obvious reason: it's easier to keep people in your taproom buying beers if you have a lot for people to sample. It also lends itself to the high margin taster tray. It's not uncommon to see taprooms with more than seven beers currently on tap. I saw some brewers featuring over a dozen beers at once. My wife and I's friends in Denver (who are working on starting a brewery of their own: Tiny Ass Brewery) tell us a lot of new brewers improve their beers after a year or so of sales. That makes sense. Trying to perfect a dozen beers takes some time.

Ok, enough about the brewing business. Here's something new I learned about beer. Apparently brewing with carrots is becoming a big thing. Maybe I have missed hearing about this in the past or the trend hasn't hit here in Texas but apparently that's a thing now. It makes sense. Carrots are starchy and sweet, which makes them good candidates for brewing. I'm sure they make for interesting beers and probably more to my liking than the round of beet-infused beers that were popular a year or two ago.

That's a good start to my blabbering about Colorado beer. In the remaining post or two I'll talk about beer and brewing and leave the business talk behind.

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