The epoxy floor is scrubbed clean and the fermentation tanks shine with newness at Monkless Belgian Ales on High Desert Lane in Bend.

The husband-and-wife team of Todd Clement, owner and head brewer, and Robin Clement, brewery marketing manager, expect to do well making and selling their signature Belgian ales. Their 1,550-square-foot, 20-barrel brewery on Bend’s northeast side, off Empire Avenue, was home to two breweries before Monkless. One, 10 Barrel Brewing Co., got its start there. The Clements took possession in March and brewed their first full batch in July.

They and other brewers in Central Oregon expanded in a year in which craft beer sales on a national level have slowed. But local brewers said they’re bullish on 2017 and plan aggressive growth. Nationwide this year, beer sales may increase by about 7 percent, the first year in more than 10 in which breweries fell short of double-digit growth. At the same time, some Central Oregon brewers grew their sales 30-40 percent.

“What makes me optimistic about what we’re doing is that I feel we have — I don’t like to use the word ‘niche,’ ” Todd Clement said, “— but we’re doing something a bit different than most every other brewery around. We’re focusing on a specific area.”

For the year ending Oct. 2, craft beer sales in dollars increased nationwide over the previous year by about 7.6 percent, said Dan Wandel senior vice president and beverage industry analyst for IRI, a Chicago-based market research company.

Volume sales, or sales of beer in cases, increased 4.4 percent over the same period, he said. But, Wandel added, during the four weeks ending Oct. 2, sales of craft beer were up by 1.9 percent and actual volume was down 0.5 percent during the same period.

“There’s definitely a slowdown in the segment,” he said. But, Wandel said, “You can’t look at the national numbers anymore and expect that to be the case in every local marketplace.”

Bubble bursting?

Some beer industry watchers are ready to declare the beer market bubble burst after a third-quarter slowdown for some big brewers. The share price for Boston Beer Co., the nation’s fifth-largest craft brewery, has fallen 29 percent on the New York Stock Exchange in the past year. Anheuser-Busch InBev, whose The High End division is home to nine recently acquired craft brewers, including 10 Barrel, reported its U.S. sales to retailers down 2.6 percent from the previous quarter. The company blamed, in part, sluggish sales in its craft beer business.

Wandel said Anheuser-Busch InBev could attribute its weak third-quarter in craft to one brand: Shock Top Belgian White Ale. Unlike the Brewers Association, which defines craft beer in terms of volume of beer produced annually and by ownership, IRI defines craft beer as beer sold for $27 a case or more, even if the brewery belongs to a big multinational, he said. Anheuser-Busch InBev sold $34.4 million worth of Shock Top in the year ending Oct. 2, or $900,000 less than the yearly average, according to IRI.

Despite clouds on the horizon, local brewers report nothing but continuing growth in sales. They cite continuing demand for a product with variety and quality.

“We really feel like quality is going to prevail and you’ve just got to listen to your customers,” said Robin Clement, “that’s the most important thing.”

Chris Cox, founder with his brother, Jeremy Cox, and Garrett Wales of 10 Barrel, where the three are still employed, said he was unaware of any slowdown in craft beer sales. The brewery, which this year expanded its facility on NE 18th Street in Bend and doubled its brewing capacity, is performing according to plan, Cox said.

“10 Barrel is definitely up where we want it to be,” he said. “We gained significant ground. I don’t know the exact percentage, but we’re up at the same rate as preacquisition.”

Anheuser-Busch InBev announced its acquisition of 10 Barrel in November 2014. For the year ending Oct. 2, 10 Barrel’s overall sales in dollars increased by 44.5 percent and volume sales by 39.8 percent, Wandel said. 10 Barrel sold $3.6 million worth of Apocalypse IPA, it’s best-selling beer, and moved almost 99,000 cases of Apocalypse in the same period, according to information provided by IRI. That’s more than a half-million dollar increase in sales and 13,000 cases better than the yearly sales average for that brand, according to IRI data.

Cox said he knew nothing about the reported slowdown in Anheuser-Busch’s craft segment. He looks forward to bigger numbers next year from the expanded brewery, now capable of producing 124,000 barrels.

“We’re trying to brew more (Cucumber) Crush,” he said, “that’s one of the things we’re focusing on in 2017.”

Likewise, at smaller breweries such as Three Creeks Brewing in Sisters and Wild Ride Brewing in Redmond, plans are to produce and sell more beer in the coming year. Wade Underwood, general manager at Three Creeks Brewing, said he expects to grow by half in the coming year, based on capacity added to the brewery in 2015 and aggressive plans to broaden distribution.

“Quality isn’t everywhere,” he said, “if you’re not making a quality product, you’re going to have trouble getting into the market.”

Wild Ride General Manager Brian Mitchell said the brewery this week is adding four new tanks — three fermentation tanks and a bright tank — that will increase its production capacity to 9,000 barrels. The brewery is also adding a bottling line in January, Mitchell said. Wild Ride, now 2½ years old, distributes its beer in Oregon, western Washington and eastern Idaho and looks to expand further, he said.

“We’re very much in the growth phase, still,” he said. “In 2017, we’re looking at other markets and other areas where we can find interest in our product.”

Wild Ride’s sales in Oregon alone so far this year is ahead of its 2015 pace, according to the Oregon Liquor Control Commission. Wild Ride sold 1,560 taxable barrels of beer in Oregon through August, 350 more barrels than it sold in Oregon through the same period last year. One of the brewery’s most popular beers is a peanut butter stout, Mitchell said.

“We’ve been brewing it a year now and it’s popularity has grown considerably,” he said. “It’s a beer that helped us get into Costco recently, Safeway and Albertsons.”

At Silver Moon Brewing, co-owner Matt Barrett is also thinking of expansion. The Bend-based brewing company late in 2014 signed up with Columbia Distributing and early this year started production in a new brewery in Redmond. Between January and August, Silver Moon sold 2,200 taxable barrels of beer in Oregon alone, according to latest OLCC data. That’s 990 more barrels than the brewery reported for the same eight months in 2015.

“Obviously, we’re watching pretty closely,” Barrett said. “There’s been talk the last couple of years of a bubble or a shakeout or whatever it’s going to be. Certainly, there’s going to be a lot of changes happening; that’s one of the reasons we’ve agreed to try and grow and be a regional rather than a local brewery.”

Maturing market

Wandel said he attributes hiccups in the craft beer economy to a maturing market. So far, 2017 appears to be the first year since 2005 in which craft beer sales failed to grow more than 10 percent, he said. However, big brewing companies have an outsize affect on the market; when their sales slow, it affects the big picture.

Nonetheless, plenty of light shines on local and regional breweries. According to the Tax and Trade Bureau, the arm of the U.S. Treasury Department that tracks beverage sales, on-premise sales of beer this year through August increased 65 percent over last year to 892,000 barrels nationwide. That figure embraces keg sales at large brewers, for example, but for smaller breweries means exponential growth in sales at brewpubs and taprooms, according to Bart Watson, chief economist for the Brewers Association, a nonprofit craft-brewing advocacy organization.

Breweries like Wild Ride exemplify Watson’s model. The Redmond brewery operates a taproom, but no pub. Instead, food carts parked on the lot outside provide food service independent of the brewery, which eliminates that cost for the brewer.

In another bright spot, IPAs remain popular, and flavored IPAs, what Wandel called “fruit-veggie-spiced” beers, are gaining in popularity, he said. At the same time, sales of seasonal beers are down 5.7 percent from a year ago, he said.

Innovation, a hallmark of craft brewing, which continually produces new tastes for its consumers, is on the upswing, Wandel said. New brands, new brewers and new products accounted for 51 percent of year-over-year growth in October, he said. Too much innovation, however, makes market analysts nervous, he said. They look for balance.

Overall, Wandel said, he sees reason for craft brewers to be bullish on their 2017 prospects, to a point.

“It really depends on your strategy,” he said. “We’re seeing a maturation of the (craft brewing) segment. It’s unrealistic to expect to grow the segment in double digits year after year.”

— Reporter: 541-617-7815, jditzler@bendbulletin.com

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