close

Articles

State of Craft Beer in PA: How Long Before the Suds Explosion Goes Flat?

Brewing beer was never part of Al Kominski’s grand plan.

The owner of Al’s of Hampden near Mechanicsburg was selling an eclectic mix of craft beers to appeal to the pizza and sub-eating crowd.

Those thirsty for the latest and most innovative pilsners, stouts and pale ales headed to Al’s. But as the popularity of craft beer exploded, so did the number of bars, grocery stores and restaurants selling it.

Competition spiked. So Kominski pivoted.

In 2012, driven by the boom and antiquated state liquor laws, he began brewing beer under the Pizza Boy Brewing label. He envisioned 100 gallon batches would easily meet demand.

“I didn’t want to sell the same beer as anyone else. I started to brew beer, so we had an edge. I never thought we would be brewing 1,600-gallon batches,” Kominski said.

These days, Pizza Boy is holding its own, even as the craft landscape is showing signs of leveling off after years of explosive growth. Kominski’s brewery produces dozens of beers, many on tap at the restaurant and for sale in Pennsylvania and New York. Along the way it has picked up a slew of medals and accolades.

Recently, the brand partnered with Official BBQ & Burgers in Lower Paxton Township. Customers can sip 20 different Pizza Boy beers on draft at a taproom alongside orders of ribs, pulled pork and brisket sandwiches.

Across the nation, the craft beer movement boomed in the past decade thanks to brewers such as Kominski. Breweries and taprooms have popped up faster than beer drinkers can order pints of hazy IPAs and barrel-aged sours.

Roughly 7,450 breweries operated in the United States in 2018, a jump from 1,500 a decade earlier, according to the Brewers Association, a trade group representing independent brewers in Boulder, Colorado.

Pennsylvania has been a major player in the industry’s rise.

Eighty-eight breweries operated in the state in 2008. Today, there are more than 354, and, according to the Brewers Association’s most recent figures, Pennsylvania ranks No. 1 in craft beer production at 3.71 million barrels and No. 2 in economic output at $6.3 billion.

“It’s odd to have an industry where in the past decade everyone has succeeded,” said Bart Watson, the group’s chief economist. “The closing rates have been shockingly low.”

A thirst for fuller flavor, greater variety and locally made products is driving demand. But while many are raising a toast to a decade or more of success, others are wondering if the buzz is starting to wear off.

Two years ago, a record 219 craft breweries ceased operations, according to the association. Craft beer volume growth also slowed for the third straight year at 4 percent. In central Pennsylvania a couple of small brewers have closed in the past year.

Some craft brewers have joined forces to ensure they can compete with – or avoid being consumed by – the beer industry titans. In 2016, Victory Brewing, an earlier pioneer in Pennsylvania craft brewing, merged with Southern Tier Brewing in N.Y.

“It’s in our culture”

Beer has influenced Pennsylvania’s history since the 1680s, when William Penn founded the state. During colonial times, Philadelphia was considered a “world class brewing center.”

By 1829, D.G. Yuengling & Son opened in Pottsville, and continues to brew under the “America’s Oldest Brewery” moniker, with other longtime brands such as Straub Brewery in St. Mary’s and Iron City Brewing in western Pennsylvania.

Before Prohibition, the state was the largest producer of beer in the country.

Pennsylvania was also a leader among microbreweries prior to the current craft beer craze, with the opening of Dock Street Brewery in 1985 and Stoudt’s Brewing Company in Adamstown in 1987.

“It’s something that is under-appreciated on the public level. Pennsylvania has always historically had a lot of breweries,” said Fred Maier, co-founder of Susquehanna Brewing Co. in Pittston.

Today, Pennsylvania ranks sixth in the nation for number of breweries with 354, behind No. 1 ranked California with 841 breweries, according to the Brewers Association. Colorado slides into second with 396, followed by Washington state with 394.

Partly fueling recent growth have been significant revisions to the state’s liquor laws, said Jim Weber, columnist for Mid-Atlantic Brew News.

The big push started in 2015 when revisions paved the way and allowed breweries to sell beer directly to consumers. For the first time, brewers could open taprooms and and two off-site satellite locations.

The following year, Gov. Tom Wolf signed Act 39, allowing breweries to sell Pennsylvania wines and spirits – essentially a full bar. Those reforms gave brewers a more competitive edge without having to invest in hard-to-find and expensive restaurant liquor licenses, some priced upwards of $500,000.

“It definitely opened up full bar potential in a very expensive liquor license market,” Weber said.

Pennsylvania’s reputation also has been boosted by a few key players. When you look at the numbers, the state is tops in production thanks to Yuengling and Sam Adams, Kominski said.

The Boston Beer Co, producer of Sam Adams, brews in Breinigsville and is the nation’s second top craft producer in sales volume. Last year, Boston Beer acquired Dogfish Head Brewery in Delaware, aiming to hold steady as international beer giants have bought smaller breweries.

Meanwhile, Yuengling reigns as the nation’s largest craft brewer. It was propelled to the top in 2014 when the Brewers Association made a controversial revision to the definition of craft beer to allow corn as an ingredient. Under the association’s guidelines, a company must produce fewer than six million barrels of beer per year to be considered a craft brewer.

When you think about it, Pennsylvania is no different than other states, said Alan Miller, owner of Boneshire Brew Works in Swatara Township.

“What has happened is there is a strong local connection for people. Breweries are becoming the neighborhood watering hole,” he said.

Competition creates better beer

From sprawling beer halls to tiny taprooms with a few stools, the number of places to imbibe in the latest and greatest craft beers is expanding at a rapid rate. These days beer drinkers can be discriminating about where they go and what they drink.

“The quality of brewing has risen in general,” said Mid-Atlantic’s Weber. “Nobody is really making bad beer, so it’s harder to stand out. Now is the best time in the history of the world to be a beer drinker.”

Three years ago, Miller opened Boneshire in a small, nondescript shopping center along Derry Street. The 40-seat taproom pours a wide variety of styles — Irish Red Ale to coffee stout to a Pink Hippo fruit beer, along with craft sodas and Pennsylvania wines and spirits.

Since then, he estimates about 20 breweries have emerged or are on the cusp of opening in central Pennsylvania. Nearby, Newfangled Brew pulled into Lower Paxton Township in 2018 in the Union Station development.

Hershey is not only a place for chocolate and coasters. It has been a hotbed of brewing activity. Iron Hill Brewery & Restaurant joined the Hershey Towne Square, Tattered Flag Brewery & Still Works in Middletown opened a lounge on West Chocolate Avenue and Englewood Barn is due to begin brewing later this year near the Penn State Health Milton S. Hershey Medical Center. Rubber Soul Brewing is on pace to open in Hummelstown.

In Perry County, Lindgren Craft Brewery is on tap and Liquid Noise Brewing Co. hosted a grand opening last weekend. On the West Shore, Wolf Brewing Co. is planning to open a brewery and taproom in Landmark Legacy Park in Mechanicsburg, while Hemauer Brewing Company will open one in Lower Allen Township and Millworks is aiming to open in Camp Hill.

But it’s not just a barrage of newcomers breweries face. Miller said more bars and restaurants are dedicating taps to craft beer, while the popularity of alternative beverages like hard seltzer grow. The boozy, fizzy water come in such flavors such as black cherry, lime and watermelon, and are bubbling up in the market — and cutting into beer sales.

Forbes reported that according to Nielsen, sales of the adult beverages at off-premise retail stores reached $1.3 billion over a 52-week period ending Nov. 2, 2019. Drinkers spent more on seltzer than they did on on sauvignon blanc or craft beer 12-packs, according to the report.

Pat Devlin, co-founder of Tattered Flag Brewery and Still Works in Middletown, said while beer enthusiasts used to be satisfied drinking mediocre brews, now they need a reason to patronize an establishment. Breweries have to remain relevant if they want to succeed, he said.

That can often mean configuring new products, from seltzers to experimental beers. Now you see breweries pouring more adventuresome beverages – fruity goses to breakfast cereal stouts, gluten-free pale ales, low-calorie and even non-alcoholic entrants.

“These things don’t get started unless you have so much competition and you try and be innovative. This is a good time for innovations. I think the consumer is going to win,” Devlin said.

Unfortunately, Devlin noted that for the brewers who want to stay on top, it’s a constant merry-go-round of investments, whether it’s new equipment or paying for marketing or new labels. This year, Tattered Flag is experimenting with different yeast strains, releasing a low-calorie IPA and possibly canning hard seltzer.

Devlin said a product startup can come with a $3,000 or more price tag, depending on equipment and laboratory work.

Pizza Boy’s Kominski said factoring in raw ingredients such as hops, malt and water, it costs about one to three cents an ounce to produce most craft beer. When you consider labor and equipment, the beer becomes more expensive, he said.

Kominski said he’d love to brew just a few beers, “But I’m not buying the beer, the customers are. We have to brew what the customers want, and through detail reporting we see what is selling and that’s what we brew.”

Ultimately, Susquehanna Brewing’s Maier said craft brewers aren’t competing against each other as much as they are trying to attract beer drinkers, who for years have believed good beer is made in St. Louis and Milwaukee.

People think the craft beer market is three times bigger than it is, he said, adding it’s a fraction of the market at 12-13 percent. The majority of beer drinkers are still buying factory-made brands like Miller Lite and Budweiser.

In some cases, the giants are taking over independent brands, such as Anheuser-Busch InBev’s purchase of Goose Island, Blue Point and Elysian.

“So, every time you get someone to put down a mass-produced beer and pick up a Pennsylvania craft beer, we are winning,” Maier said

Gazing into the crystal ball

In five or 10 years, the craft beer industry won’t look like it does today. The days of unprecedented growth are behind us, which is not to say more breweries won’t open.

The Brewers Association’s Watson said the past decade was “weird,” but in the coming years the market will begin to mature. As new breweries come on board with new products or unique settings, it might displace someone else, Watson said.

This week, Crystal Ball Brewing in York County announced it is closing. Owner Jesse De Salvo told the York Daily Record, “Things are 100 percent not how they were when we opened. … We didn’t go into this thing thinking we were going to be out in five years, but things change.”

Last year, two central Pa. players — JoBoy’s Brew Pub in Lititz and Harty Brewing in Silver Spring Township — closed. On a social media post JoBoy’s owners said the landlord refused to work toward a solution and terminated the lease.

Harty Brewing faced a similar situation in September. Owners Michael Hardy and Lauren Ishaq said they were forced out by Charter Homes & Neighborhoods over an issue with unpaid rent.

In Easton, Weyerbacher Brewing Company didn’t close but sold a majority stake to a Philadelphia-based private investment group and filed for Chapter 11 bankruptcy. The brewer said it fell into trouble after incurring debt from a $2-million-dollar expansion project, as well as competition in the pumpkin beer sector.

Beyond Pennsylvania, there have been other closings. This month, Colorado’s oldest craft brewery, Boulder Beer Company, shut down its Boulder taproom after 40 years. Lompoc Brewing, one of the first craft brewers in Portland, Ore., closed its doors last year. Lake Superior Brewing in Duluth, Minnesota, also closed for an undetermined amount of time.

Theodore Zeller, general counsel for the Brewers of Pennsylvania trade group, said mid-sized brewers are struggling the most as they compete for tap and shelf space in a crowded beer market.

“Couple that with our millennial consumer, [who] is easily distracted to what is new as opposed to brand loyalty,” he said.

Zeller pointed to Sierra Nevada Brewing, which after two years of declining sales recovered with Hazy Little Thing, a New England-style IPA. Sierra Nevada’s chief commercial officer Joe Whitney told BrewBound, an industry-wide publication, the declines resulted from lagging sales of its products at restaurants and bars. The arrival of thousands of breweries, he said, is driving demand for more local products.

“Every year we’ve seen people chipping away at us,” Whitney said.

Many say the casualties have little to do with over-saturation and more to do with knowing how to run a business.

“I think we have a saturation of bad business owners or inexperienced business owners,” Kominski said. “A lot of people opening a brewery think it would be cool, so they think they can run a business. It’s not real life. I can make a pizza at home but can I run a pizza shop?

“Returning to our roots.”

The past 40 years have brought major change and innovation to the beer industry, one that is more than 200 years old, said Susquehanna’s Maier.

He said he likes to quote Garrett Oliver, owner of Brooklyn Brewery in Brooklyn, who has said craft brewing is not a trend but a “return to normality.”

“We’re just on the leading edge of returning to our roots,” Maier said.

Pennsylvania is helping to ensure craft thrives. In December, Gov. Wolf announced the Pennsylvania Liquor Control Board approved $1.2 million in grants for 18 projects to increase the production of Pennsylvania-made malt and brewed beverages.

The money will be used to boost the state’s image as top destination for craft beer, support the black brewing community and fund “Poured in Pennsylvania, The Series,” a series focusing on the impact of the craft beer industry in the state.

The Brewer’s Association’s Watson said there are still opportunities but brewers need to be cautious. He added the industry wouldn’t be where it is today without loyal beer drinkers.

“Fundamentally this is driven by demand. You don’t get as many breweries without customers liking them,” he said.