NoCo brewers talk distribution, competition and seltzers

FORT COLLINS  — Craft brewing still has room to grow in Northern Colorado, a group of brewery executives said, but they’re struggling with rising production costs when they can’t freely raise beer prices.

Participants in BizWest’s Northern Colorado Brewing CEO Roundtable. From left to right: Bryan Watkins, Elevations Credit Union, Wayne Hunter, Supermarket Liquors, Steve Fechheimer, New Belgium Brewing Co., Drew Mattox and Chris Otto, Plante Moran, Christopher Banks, Odell Brewing Co., Laird Mulderink, Red Truck Beer Co., Sabrina Nowling, Flood & Peterson, Don Chapman, Grimm Brothers Brewhouse, Frezi Bouckaert, Purpose Brewing, Tim Cochran, Horse & Dragon Brewing, Peter Bouckaert, Purpose Brewing, Carol Cochran, Horse & Dragon Brewing, Mike Grell, Plante Moran, Whitney and John Way, City Star Brewing, Aaron Eide, Flood & Peterson. Not pictured: Cy Bevenger, Timnath Beerwerks.

The brewing heads were gathered for BizWest’s Northern Colorado Brewing CEO Roundtable Tuesday afternoon at Flood & Peterson Insurance Inc..

Distributing in the age of grocery sales

Colorado repealed its Prohibition-era rule banning supermarkets and convenience stores from selling full-strength beer earlier this year, bringing the likes of King Soopers, Safeway and Wal-Mart into the sales realm traditionally held by local liquor stores.

Liquor-store owners and small brewers fretted that this would take away consumers from liquor stores that have more shelf space to carry local brews and toward groceries that tend to carry a smaller selection from the craft brewers that have distribution networks already in place.

Wayne Hunter, general manager of Supermarket Liquors in Fort Collins, originally expected craft-beer sales to drop 20 percent to 25 percent because of the law change, but he said sales were down but leveled off in the past month or so.

He thinks liquor stores can still keep a foothold for beer sales by being like hardware stores for alcohol and having a little bit of everything available, compared with supermarkets that are forced to balance their boozy offerings with the rest of their food selection.

“The chains have a limited number of (stock keeping units) for the most part, they require distributors to come in and stock their shelves almost on a daily basis,” he said.

Yet that limited space is coveted by several brewers, and competition for sales there is fierce. Laird Mulderink, general manager of Red Truck Brewing Co. in Fort Collins, said being the new brewery in town makes it difficult to get supermarkets on the phone, even if the company is well-established in Canada.

“It seems like it’s a lot harder to get yourself in there and talk to someone, and now everybody wants time to talk to corporate rather than walking in and talking to your buyer,” he said. “… It’s a lot more about reputation.”

That conversation on shrinking distribution was particularly pertinent, as Boulder Beer Co. shuttered its canning and distribution operation earlier this month and cut several jobs in a cost-saving measure.

But some brewers said there’s still growth to be found by focusing on the taproom itself. Whitney Way, co-owner of City Star Brewing in Berthoud, said the brewery shrunk its distribution footprint and focused instead on improving the bar atmosphere. For them, it’s working.

“We’re really seeing the benefits of that decision we made a few years ago,” she said.

Don Chapman, owner of Grimm Brothers Brewhouse, said the Northern Colorado market is particularly difficult to set up a retail foothold, so the Loveland brewery is instead focusing on hitting markets farther south along the Front Range and elsewhere in the state.

“We’ve attempted it, and we decided it’s not worth our time and money right now to do so,” he said.

The cost of a pint causing a margin crunch

Carol Cochran, co-owner of Horse & Dragon Brewing in Fort Collins, said the price of a beer in the taproom is generally set between $5 to $7 for almost every brewery, and trying to move that any higher to cover increasing production costs will set off the ire of customers. However, those prices don’t include costs to develop new recipes, pay for more employees or cover the cost inherent in any company trying to grow.

“Nobody wants to talk about price fixing, but the more that the consumer thinks that’s where your pricing should be, the less we can afford to stay in business,” she said.

Frezi Bouckaert, co-owner of Purpose Brewing & Cellars in Fort Collins, said the increasing cost of commercial and residential rent is a particular problem for her, especially when it means she and other breweries can’t offer higher wages to their employees.

“It’s really sad, because I still consider Fort Collins a mecca of brewing,” she said. “But I work on a daily basis, and my co-workers, they are helping together and rooming together with five people because they cannot pay the rent.”

Seltzers, wine and flavor trends

A tangible groan came over the room as the brewers started to talk about the rise of spiked seltzers. The light-tasting, low-calorie beverage had a breakout summer, and Hunter said sales for those drinks have increased three-fold over the year. He attributes that to younger audiences buying it for volume drinking, such as students at a tailgate, rather than for quality of taste.

“We like to say that they’re buying this product for what it’s not,” Odell Brewing Co. chief financial officer Christopher Banks said. “You’re buying it because it’s got no sugar, you’re buying it because it has no calories.”

It’s not just seltzers taking a cut of the alcohol market. Odell is in the midst of building a winery on site. Banks said wine production was an internal idea for two years, and they decided to jump on it after they saw competition hop into seltzers and alternative alcohol.

In terms of the trending beer styles, Peter Bouckaert of Purpose Brewing said craft fans want to try out pretty much anything new on the board and are willing to let brewers experiment with new flavors and ingredients.

“It doesn’t really matter what style it is, as long as it’s new,” he said.

For New Belgium Brewing Co. CEO Steve Fechheimer, developing new hit beers is key not just for attracting a customer base, but for bringing in the next generation of craft brewers and owners.

“The industry recruited people in 30 years ago with a set of different beers than we’re offering today,” he said. “We don’t recruit people in the same way as a Fat Tire, a (Sam Adams) Boston Lager, a Sierra Nevada Pale Ale, or whatever else at the time.

Oversaturated market? Not so fast

Fort Collins alone is home to more than 20 separate breweries, making it full of options and competition for a town of 167,000 people.

However, House & Dragon Brewing co-owner Tim Cochran said there’s still room for new breweries in the region because almost every brewery has a different focus, even if they’re right next to each other. Some focus exclusively on brewhouses, while others, such as Horse & Dragon, focus on serving restaurants and bars.

He also said the expected population growth in the area will continue to fuel demand for craft into the near future.

“The beauty is we all have a different model, and there’s room for beer everywhere,” he said.

BizWest CEO Roundtables are sponsored in Northern Colorado by Plante Moran, Flood & Peterson and Elevations Credit Union.

FORT COLLINS  — Craft brewing still has room to grow in Northern Colorado, a group of brewery executives said, but they’re struggling with rising production costs when they can’t freely raise beer prices.

Participants in BizWest’s Northern Colorado Brewing CEO Roundtable. From left to right: Bryan Watkins, Elevations Credit Union, Wayne Hunter, Supermarket Liquors, Steve Fechheimer, New Belgium Brewing Co., Drew Mattox and Chris Otto, Plante Moran, Christopher Banks, Odell Brewing Co., Laird Mulderink, Red Truck Beer Co., Sabrina Nowling, Flood & Peterson, Don Chapman, Grimm Brothers Brewhouse, Frezi Bouckaert, Purpose Brewing, Tim Cochran, Horse & Dragon Brewing, Peter Bouckaert, Purpose Brewing, Carol Cochran, Horse & Dragon Brewing, Mike Grell, Plante Moran, Whitney and John Way, City Star Brewing, Aaron Eide, Flood & Peterson. Not pictured: Cy Bevenger, Timnath Beerwerks.

The brewing heads were gathered for BizWest’s Northern Colorado Brewing CEO Roundtable Tuesday afternoon at Flood & Peterson Insurance Inc..

Distributing in the age of grocery sales

Colorado repealed its Prohibition-era rule banning supermarkets and convenience stores from selling full-strength beer earlier this year, bringing the likes of King Soopers, Safeway and Wal-Mart into the sales realm traditionally held by local liquor stores.

Liquor-store owners and small brewers fretted that this would take away consumers from liquor stores that have more shelf space to carry local brews and toward groceries that tend to carry a smaller selection from the craft brewers that have distribution…