Joanne S. Lawton
The craft brewing industry in Greater Washington has boomed in the last couple of years and is now home to 27 breweries and brew pubs.
The founders of D.C. Brau — the city’s first production brewery to open in decades — scraped together about $620,000 to get their Northeast D.C. operations off the ground in 2011.
Just two years later in 2013, the forthcoming Fair Winds Brewing Company collected $1.4 million from investors for a new Northern Virginia brewery.
What a difference a few years make.
“It was impossible to get people to give us money in the middle of the recession,” said D.C. Brau co-founder Brandon Skall as he sat behind his desk in the brewery’s tasting room in late February. “I can’t imagine what we would have done with $1.5 million.”
D.C. Brau made 1,600 barrels of beer in its first year. The company expects to brew 16,000 barrels in 2014 — almost around the clock.
The timing makes the story of the Washington region’s booming beer industry even more compelling. The first production breweries to open in decades popped up the wake of the Great Recession, and yet, an increasingly strong craft beer market has made the industry ripe for growth.
Grocery store sales of craft beer in the Washington region are well above the national average: During the last three months of 2013, they accounted for 25 percent of overall beer sales revenue in the Washington-Baltimore grocery market. Nationally craft sales accounted for 15.5 percent of total grocery store beer sales in that same period, according to Information Resources Inc.
That market share has also grown significantly in the Washington region. Of the 35 top metro areas, craft beer experienced the highest gain in market share in Baltimore-Washington during the past four years. That 25 percent of sales in 2013 was up from 13.5 percent of sales during the same period in 2009.
And D.C.’s beer market is still relatively immature. The D.C. region has 27 breweries or brewpubs serving about 5.8 million people — and that includes chains such as Gordon Biersch and Rock Bottom. Compare that with more than 70 breweries or brewpubs serving the Portland, Ore., area, which is just 2.3 million people strong, or Seattle’s 67 breweries or brewpubs serving 1.9 million people.
That market saturation in other cities is the single most often-cited factor when local brewers talk about why they’re bullish on the D.C. beer market. At least four other breweries are in the works and most of the region’s existing brewers plan expansions. Some are doing so with bank loans for the first time.
D.C. Brau just added a $200,000 canning line to its operations. A few miles away, 3 Stars Brewing Company owners Dave Coleman and Mike McGarvey are adding fermentation vessels that will triple brewing capacity in 2014. Atlas Brew Works, which opened in the middle of 2013, is also adding fermentation vessels to increase capacity by 42 percent in 2014. Atlas estimates it will brew 2,500 barrels for about $450,000 in revenue this year.
“This has far exceeded any plans we had,” said Skall, who had just returned from a trip to Philadelphia to check on D.C. Brau’s new accounts there.
The same goes for brewpubs, which are breweries combined with a full-service restaurant that produce beer for the restaurants on site. Mad Fox Brewing Company, which opened in Falls Church in 2010, plans to open a second location in D.C.’s Glover Park neighborhood later this year.
At Right Proper Brewpub from former Brasserie Beck beverage manager Thor Cheston, brewers haven’t been able to keep up with demand since they opened in December.
“There’s been a few days where we only have two of our own beers on draft, because we’re going through the beers so quickly,” Cheston said. He’s already looking at the possibility of doing a production brewery somewhere in D.C. that could supply the Shaw brewpub as well as other clients.
Demographics were a big part of why Cheston decided to open Right Proper in Shaw — he cites average household income of $90,000 and the 33.5 average age of residents as two big factors.
The increasing youthfulness of the Washington region plays a role for craft beer here, according to many of the brewers. Bill Madden, CEO of Mad Fox, points out that craft beer was a much tougher sell to the masses when he began filling barrels at Capitol City Brewing Company back in the 1990s.
“Now, we’ve got 20-something-year-olds who have grown up with a lifetime of having craft beer,” he said. “They embrace it much more than the 20-somethings of 1997. They’re really searching it out and sourcing what’s local.”
The rapid rise in D.C.’s craft beer drinking public may be bringing more business to breweries, but it doesn’t mean that brewers are blind to the possibility of a beer bubble, like the one that burst in the early 1990s. And now, although craft beer continues to grow, beer overall continues to lose market share within the alcohol market to spirits and wine.
“If they’ve grown too fast or are over-extended, they’re going to have a hard time down the road,” said Madden, who saw the downturn in the 1990s at Capitol City.
In part, that’s because as a market matures, just being the local brew isn’t necessarily enough, points out Greg Engert, the beer director for the Neighborhood Restaurant Group, which is now in both the brewing and the beer selling business. At its newly open Bluejacket near Nationals Park, NRG is brewing beers for its own in-house restaurant, The Arsenal, and eventually for distribution. But Engert is also managing beer programs at a dozen of NRG’s other restaurants.
“In a lot of markets, local gets by by just being local. Sometimes, the same kind of flavor that you might hold nonlocals to is not necessarily held to for local brewers,” Engert said. “But it’s not like those amazing craft brewers from all over the country, and overseas, are holding back on anything.”
Within the past year, six or seven new craft brands from out of town have made their way into the D.C. market, vying for space at bars alongside all the locals.
“I know I can speak personally for the programs I run, I feel like I’m running out of room at all the different restaurants and bars to continue to pour the beers I think are of the highest caliber,” Engert said. “So I do think there’s a crunch, particularly in D.C.”
So while brewers are experiencing a boom, they’re mindful of those pitfalls.
“There’s no evidence to suggest that there is a bubble, but it’s reckless as a business owner to base plans on the thought that that could never occur,” Skall said.
“Just because that money is available doesn’t mean we have to take it.”
Growth potential? It’s in the can
Across the board, breweries in Greater Washington are planning for the future in three major areas:
No longer is it enough to be selling kegs to D.C.’s finite cadre of upscale restaurants and bars. Nearly every brewery that doesn’t already bottle or can beer has plans to do so, mainly so that they can penetrate markets — such as the big-box beer retailers of Northern Virginia or the non-draft beer bars — currently unavailable to them.
“Packaging is a nice growth area for us,” said Mike McGarvey of 3 Stars. “Bars have a much higher markup on bottles, and there are a lot of great restaurants that don’t have draft.”
2. Focusing on local
While a couple of the region’s breweries have branched out to other parts of the East Coast — to Philadelphia and New York, for example — most of them aren’t looking to be the next Sam Adams with nationwide distribution.
“We don’t need to travel very far to sell all the beer we plan to make,” said Bill Butcher of Port City Brewing Company in Alexandria. “That also plays into the quality. Unpasteurized, unfiltered craft beer doesn’t last very long, and we can ensure customers get great-tasting beer by keeping it local.”
It also means capitalizing on the overall dining preference for all kinds of products that are local, points out Dave Coleman of 3 Stars.
“So many of our accounts in D.C. go along with the local, fresh, sustainable model,” Coleman said. “So when I call someone, and say, ‘I have this, I just kegged it today,’ they’re saying, ‘Yeah, of course I want that.’ That helps.”
At fledgling Atlas Brew Works, its local focus means branching out of the District into Northern Virginia and Maryland.
“There’s a lot of market we haven’t even scratched right now,” said Atlas brewer Will Durgin. It also means partnering with larger customers within the region, including Nationals Park.
The stadium plans to up its number of local craft beer carts this year, and Atlas will be among the offerings there, as well as in the Red Porch bar area and other locations. In all the brewery is planning to provide upward of 25 barrels — 50 kegs — of beer to Nats Park for each of the team’s home stands this season.
“We’re brewing our asses off right now in anticipation of baseball season,” Durgin said.
3. Banding together to bring more craft converts into the fold
“If you go into a bar in D.C. and ask if they support local beer, they show you a list, and there might be two or three,” Butcher said. “I think we can bring more momentum with more breweries opening up and more local options.”
The brewers in D.C. proper recently formed the D.C. Brewers Guild to work on larger issues facing the city’s beer industry.
“The real goal is to pull percentage points away from the megabrewers,” said D.C. Brau’s Brandon Skall. “You’re a fool if you don’t think craft brewers cannibalize each other, but the goal should be to increase the general population of the craft drinking market.”
By the looks of it, D.C. may be well on its way to that.
Rebecca Cooper covers retail, restaurants, tourism and the arts.