Growth of craft beer sales in Oregon

13.8 percent in 2014

12.3 percent in 2015

2.8 percent in 2016

0.3 percent in 2017

Growth of craft beer sales nationwide:

3.8 percent in 2017

4.7 percent in 2016

10.8 percent 2015

14.6 percent 2014

Source: IRI

There are more than 6,200 craft breweries nationwide last year, compared to 1,430 in 2003, according to Beverage Marketing Corp., a New York-based consulting firm.

Top 10 craft breweries in the United States:

1. D. G. Yuengling & Son Inc., Pottsville, Pennslyvania

2. Boston Beer Co., Boston, Massachusettes

3. Sierra Nevada Brewing Co., Chico, California

4. New Belgium Brewing Co., Fort Collins, Colorado

5. Duvel Moortgat, Paso Robles, California; Kansas City, Missouri; Cooperstown, New York

6. Gambrinus, San Antonio, Texas; Berkeley, California; and Portland, Oregon

7. Bell’s Brewery Inc., Comstock, Michigan

8. Stone Brewing Co., Escondido, California

9. CANarchy, Longmont, Colorado; Tampa, Florida;Salt Lake City, Utah; Comstock Park, Michigan

10. Deschutes Brewery, Bend

Source: Brewers Association 2017 Top 50 brewing companies by sales volume

At a time when craft breweries compete more than ever for shelf space and tap handles in pubs, industry sales are leveling off, even in Bend, known as Beer Town USA.

The slowdown has contributed to slumping sales at Bend’s biggest beer success story, Deschutes Brewery, and prompted other brewers to put more effort into their local pubs.

Craft beer sales in Oregon stores where packaged beer is sold grew 0.3 percent in 2017, compared to 13.8 percent in 2014, said Patrick Livingston, a consultant of client insights at IRI, a Chicago-based analytics firm.

In comparison, packaged craft beer sales nationwide grew 3.8 percent in 2017, compared to 14.6 percent in 2014, according to IRI figures.

Craft beer may be a niche market, but it accounts for 28.8 percent of all beer sold in Oregon, Livingston said.

The slowdown in sales is more pronounced in Oregon, Livingston said, because other segments of the market — wine, spirits, hard seltzers and malt beverages — have shown dramatic growth.

And some believe that legal recreational marijuana, which saw its first full year of business in Oregon in 2016, is a factor.

“I believe cannabis has affected sales,” said Deschutes Brewery CEO Michael LaLonde. “It’s so potent today. Someone might go and have a beer and do some edibles, and the combination of those two things means they don’t consume as much alcohol.”

After experiencing the first sales decline in its 30-year history in 2017, Deschutes Brewery has opted for more flexibility with its planned expansion in Roanoke, Virginia. Earlier this month, the brewery announced it turned down government incentives in exchange for control of the timing on building a second brewery.

The brewery went ahead and closed on the $3.2 million parcel in Roanoke and still plans to break ground in June 2019.

“We wanted to go ahead for flexibility so we can monitor the craft beer landscape in Roanoke,” LaLonde said. “We don’t know what the future is for that facility. We have committed to the location.”

Changes like this are not made lightly, LaLonde said.

Crowded market

Craft beer is still king in Central Oregon, home to 26 craft breweries.

In Oregon, craft beer accounts for 28.8 percent of all beer dollars, Livingston said. Craft beer sales totaled $194.8 million in Oregon in the past 52 weeks, he said.

“The market is very saturated with increased number of breweries and brands competing for the same shelf space,” Livingston said. “Beer is a heavily marketed category. There are more competitors and flat volume.”

There were more than 6,200 craft breweries nationwide last year, compared to 1,430 in 2003, according to Beverage Marketing Corp., a New York-based consulting firm. In Oregon, there are 252 craft breweries, according to the The Brewers Association.

Craft brewer Roger Worthington, owner of Worthy Brewing, confirmed that sales have been flat. He said brewery sales have flattened at 15,000 barrels, staying the same as 2016. But that doesn’t worry Worthington, who has a pub on Bend’s east side near U.S. Highway 20 and plans to open a tap-and-tacos pub in downtown Bend on Brooks Street in June.

“We’re seeing it, too,” Worthington said. “The competition is fierce, so the brewers are having to step up their game. In any case, the customers are the beneficiaries.

“I love the competition. I look at this as an opportunity to step up our game.”

At Worthy, the future is in enhancing the pub experience and making smaller batch beer that’s fresh and different, Worthington said.

A slowdown in craft brewing probably won’t affect the local economy much because it doesn’t employ many people, except in the pubs, said Kale Donnelly, Oregon Employment Department workforce analyst.

“It’s still a huge draw for our tourism industry,” Donnelly said. “It won’t have much impact. The growth throughout the region is slowing, which shows a maturity of the business cycle. It just shows a more sustainable level.”

Like the Central Oregon economy, the craft brewery industry is maturing, which is the reason behind the slow sales, said Bart Watson, Brewers Association chief economist. The big fish in Bend is Deschutes, Watson said, but across the United States it isn’t considered a large player, he said.

Deschutes produced about 335,000 barrels last year and distributes in 29 states and Washington, D.C., according to the company.

“What we’re finding is that consumers really trust what we do,” LaLonde said. “States like Washington and Oregon are very mature markets. We found who we are as a company matters to the consumers.”

Craft beer is defined as beer made by a small independent brewer who produces 6 million barrels or less a year, according to The Brewers Association. Three-quarters of the breweries in the United States make 1,000 barrels or less a year, Watson said. The United States consumes more than 200 million barrels of beer a year, he said.

One of the key drivers for the craft beer market, Watson said, is being local. Consumers perceive that as high-value, along with flavor and variety, he said.

“Small, locally produced breweries are doing better than the larger distributed breweries,” Watson said. “The growth in the market will come through innovation and making sure they focus their resources where their brand resonates the most.”

The big employment aspect of craft breweries comes from the pubs, not from the brewing side, said Damon Runberg, state of Oregon Employment Department regional economist.

“Deschutes (Brewery) deciding to slow down their expansion plan says more about the state of craft brewing nationally than it does about us here in Central Oregon,” Runberg said.

No one has to tell John Avella that. As the general manager of the new Boneyard Beer pub going up on NE Division Street in Bend, Avella is banking on the fact that summer tourism will be a big draw to the new pub. No date has been set yet for the opening of the pub.

“I think the market is still very strong for places like Boneyard,” Avella said. “We’ve experienced growth here, in Portland and in Seattle.”

Even though there is strong demand, the competition is fierce, he said. “Consumers want quality products that are local,” Avella said. “They want something that’s not corporate. We are proud of the product we make.”

— Reporter: 541-633-2117, sroig@bendbulletin.com

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