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Crafting a Brew

Here's a reason to raise a nice cold one—even though beer sales overall are down, craft breweries experienced more than 10 percent growth in 2009.

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Todd Usry, general manager of Breckenridge Brewery, and his colleagues in the craft-brewing industry should have reduced production last year, the conventional wisdom says.

After all, consumers had cut back on discretionary purchases and shopped at lower-cost eateries and stores.

But while overall U.S. beer industry sales dipped 2.2 percent in 2009, sales at craft breweries—which typically charge more for their products—grew 10.3 percent and national volume rose 7.2 percent.

That’s led some of Colorado’s roughly 115 craft breweries to invest in expansions or new facilities in recent months.

Breckenridge Brewery, for example, is building a special-events beer garden at its main facility and beginning construction on an upscale restaurant just five miles away.

Oskar Blues Brewery in Longmont, Colorado, just began work on its second major expansion since it moved into its current facility in August 2007.

Odell Brewing Co. of Fort Collins, Colorado, has just completed an expansion that doubled the size of its facility and its production capacity.

And New Belgium Brewing Co. of Fort Collins, Colorado, seeks a brewing facility in Northern California that would be the first attempt by any Colorado craft brewery to produce beer outside its home state.

Craft brewers have just 4.4 percent of the American beer market by volume and 6.9 percent share by sales. They are defined as those brewers who make less than 2 million barrels of beer a year, are controlled less than 25 percent by a noncraft-brewing interest and do at least 50 percent of their production volume in all-malt beers rather than using additives that remove flavor.

But Paul Gatza, director of the Boulder, Colorado-based Brewers Association, said he sees no end to the six years of robust growth in the industry. It caters to a growing number of consumers who want to buy products made close to home—as long as their price is within reasonable range of the lowest-cost option.

“It’s where the American public is. They’re trending toward small and local and independent companies when they can for their choices and products,” Gatza said. “Craft brewers are just rocking. They’re picking up share from the big brewers and the imports.”

Colorado is at the epicenter of the craft-beer movement, putting six of its beermakers on the Brewers Association’s recent list of America’s 50 largest craft breweries and earning the nickname, “the Napa Valley of beer.” The nation’s 22nd-most populous state annually is ranked first or second in overall beer production, boosted by the presence of major brewers Coors and Anheuser-Busch.

In 2009, Oskar Blues grew revenue by 83.7 percent and shipments by 70.5 percent, growing in markets in the 27 states where it sells beer, said Chad Melis, marketing manager. It began work this month on adding two 200-barrel fermenters that will increase its production capacity 25 percent, he said.

New Belgium, the largest Colorado craft brewer and the third largest in the nation, grew production 18 percent to 583,000 barrels a year, said Bryan Simpson, media relations manager. Its goal is to open a couple of regional facilities throughout the country—a rarity for craft brewers—to expand beyond its current 26 states.

Breckenridge Brewery, whose sales grew 28 percent in the first quarter of 2010, has bought the historic Amato of Denver statue company property for $2.1 million and plans more than $1 million in upgrades to turn it into an upscale, beer-themed restaurant.

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