How many craft breweries can Colorado market bear?

Colorado is overflowing with craft-brewery suds, but have they saturated the market?

Maybe — and maybe not.

A spate of closings, bankruptcies, mergers and acquisitions over the past year, especially in the Boulder Valley and Northern Colorado, certainly makes the question a serious one.

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The latest news came in November, when Boulder-based Fate Restaurants LLC, doing business as Fate Brewing Co., filed for Chapter 11 bankruptcy protection. The company’s petition listed 50 to 99 creditors, with the 20 largest unsecured claims totaling $4.2 million. Its setbacks included denial of a license to operate a manufacturing brewery and brewpub at a former Avery Brewing location in Boulder and lack of customer support for a new location in Lafayette. It continues to operate its flagship Boulder location as it works to right its financial ship.

Earlier in the year, Skeye Brewing and Open Door Brewing shut down their Longmont-based operations, as did Three Four Beer Co. in Fort Collins, Powder Keg Brewing in Niwot, Vindication Brewing in Boulder and Nighthawk Brewery in Broomfield.

“The gap between openings and closings has tightened up,” acknowledged Bart Watson, chief economist for the Boulder-based Brewers Association, “The gap is a little closer together here than in the country as a whole, given that Colorado is one of the more developed craft markets in the country.”

As of Thanksgiving 2018, Watson said, Colorado had 394 active breweries and had seen 59 openings and 16 closings since the same holiday in 2017. In the previous year, 10 breweries had closed in the state.

Even though the number of closures had risen, Watson said, “we still see breweries enthusiastic about opening. We still see new entrants who think they can find a niche, either based on location or the beer styles or services they’re going to offer.”

Steve Kurowski, marketing director for the Colorado Brewers Guild, said the closures simply reflect “trends you’re seeing in a mature industry,” and that competition is only one factor.

“Owning a small business is still a hard thing to do; you’ll see that in every industry,” he said. “Leases are getting more expensive, and sometimes you have a case where the partners aren’t getting along even though the brewery is still going strong.”

Watson added that “people sometimes focus on the market and forget all the other things. Sometimes people just get tired of doing it. It’s hard for any small business.

“And yes, the competition is a factor, and maybe the tipping point might come a little bit sooner than it did in the past.”

Watson and Kurowski agreed, however, that the future holds both promise and challenge.

“It’s a moving target,” Watson said. “We’re seeing pretty strong population growth, and as the market grows, so does the number of opportunities. People moving here for economic opportunities, especially in the technology field, are right in craft breweries’ target.

“There’s also still a sense that improving the quality of the marketplace is creating opportunities for everyone,” he said. “As the fuller-flavored segment of the beer industry, craft has been increasingly successful. Beers that go beyond mass-market lager are good for everyone.”

However, craft brewers also must deal with the effects of the new law that took effect Jan. 1, allowing Colorado grocers to sell full-strength beer.

“This is going to shift where beer is sold in Colorado,” Watson said. “It’s certainly going to be more challenging for smaller brewers to sell as much beer at retail because there’s a real possibility that we’ll have a decent number of closings of small liquor stores. It’s been very easy for brewers to match up with small retailers, but they may struggle to find placement in larger chains. The grocery stores purchase at a larger scale and have their own ordering and delivery process. Small breweries are not used to dealing with a chain retailer. 

“Brewery owners just need to think long and hard about what they’re doing to attract customers, where you’re going to stand out and why people would pick your beer other the plentiful other options out there.”

Kurowski characterized the new law as “the largest change in liquor law in Colorado since Prohibition.

“Independent liquor stores worked with small breweries for years, and if we lose some of them, the brewers — especially the new ones — might lose places to put their beer,” he said. “With shelf space definitely difficult these days, maybe a better idea for small brewers would be to focus on your neighborhood and serving to a small community. It could be more profitable to sell it over the bar at your own brewery, instead of investing in a canning line, a sales rep, a truck.”

Craft brewers also have one advantage that differentiates them from other small businesses in a fiercely competitive market.

“Collaboration is a very real thing — borrowing ingredients, asking each other questions to solve problems, sharing tools, sharing resources” and featuring local competitors’ brews in their taprooms, Kurowski said. “That is unique to beer. You just don’t see it in other industries like tech firms or restaurants.”

There’s a practical reason for that collaboration, he said.

“There’s a lot of commonality in these people, so they gravitate to one another because they know that if they’re brewing bad beer, people are going to stop buying craft beer. So the ideal is to make craft beer better for everybody.”