A sea of competition: Market saturation pressures Boulder Beer, Colorado’s oldest craft brewery, to retrench for 40th anniversary
The times, they are a'changing
When Boulder Beer sent out the letter announcing to the world that they would be ending their distribution, they did so with a heavy heart. After all, they’ve been brewing in Boulder and distributing their beer across the state and across the nation for 40 years now. They’re Colorado’s oldest craft brewery.
But the industry is changing. The very ground beneath their feet is shifting and the business of selling beer is not what it used to be.
“I was shocked [by the decision to stop distributing] but I wasn't surprised, if that makes any sense,” says Tess McFadden, the marketing director of Boulder Beer. “The ownership team really, really dug into the numbers with a fine-tooth comb and looked at several different courses of action.”
But, they kept coming to the same conclusion: They needed to cut distribution out.
“It was a really hard decision to make,” McFadden says. “But we're selling our current equipment, and we'll be bringing in a smaller 7-barrel system to be a true pub-sized brew house.”
For the last decade in Colorado, the craft beer industry has been erupting with seemingly endless momentum. Brewery’s have been blossoming into fruition across the state, popping up like wildflowers, growing like weeds, flourishing in an insatiable market. Now, when you go brewery hopping in Denver, Boulder or Fort Collins you barely have to walk a block between beers. Now, when you go to the liquor store, there are hundreds of different breweries and styles to choose from.
And this isn’t just happening in Colorado, any more, either. Now, there are over 7,000 breweries in the US — some big, some small, some national, some local — that are all competing for the same space on liquor store shelves and taps at the local bars.
It’s the result of an over-saturated market. Turns out, there is such a thing as too much beer, and we might be fast approaching the mark.
Market saturation and the death of customer loyalty
Market saturation in the world of craft beer has been a long time coming. Like a tidal wave approaching shore, people have seen this on the horizon for a while now. But it’s only recently started to really send ripples through the industry.
Back when there were just a handful of craft breweries putting out beer, beer drinkers generally knew what they liked and what they didn’t. A lot of people picked a brand and they stuck to it. Customer loyalty was something that breweries depended on and fought for.
Bars were similar: Many of them would feature permanent draft lines; supporting the same breweries, by ordering the same kegs month after month. Draft lists at most bars, didn’t used to change all that often. (Or at least, they didn’t used to change as much as they do today.)
“It's not a bad thing,” says McFadden, of Boulder Beer. “But there's just very little brand loyalty anymore. People are into experimentation and they want to try different beers.”
And she’s right. With over 7,000 breweries nationwide, consumption patterns have started to change. People now have a buffet of options. And in other states, they don’t have to rely on Colorado’s craft beer anymore — these days, nearly every state has its own craft beer scene. Which is changing the status quo on a lot of levels.
Many bars and tap houses, who might have once offered the same beers year-round, now pride themselves on their ever-rotating draft list. Many people who walk into the overwhelmingly abundant, colorful and varietous craft beer section of a liquor store, are too tempted by their own curiosity and experimentalism.
There are just too many options to try out there, to stick to the same style from the same brand — and that’s put the squeeze on some national distributors.
“It’s made it really tough,” says McFadden. “It’s just a sea of competition.”
And it’s why, come 2020, you won’t be able to find Boulder Beer at liquor stores or bars anymore. If you want a Mojo, Hazed and Infused or a Buffalo Gold, you’re just going to have to visit them at the brewpub on Wilderness Place in Boulder.
The dynamics of distribution
The challenges that come with a saturated market, are challenges that most everyone in the craft beer industry has felt to some degree. The dynamics of distribution are changing, and there’s not much that breweries can do about it — legally speaking.
“In Colorado we have the three-tier system,” explains Ryan Minior, the director of sales and distribution for Avery Brewing Company. It’s a system designed to keep the production, distribution and sale sides of the liquor industry, separate, in three different tiers. “So, if you brew over a certain number of barrels — and I think it’s a relatively small number — you have to either create a distribution network for yourself or you need to go through a distributor.”
Meaning that, once a brewery is over that threshold number of barrels, they are required by law to start distributing their beer — either through their own distribution network (which would be expensive and time consuming to set up and operate) or through a distributor (which is cheaper and a lot easier).
“Distributors do a lot,” admits Minior. He explains that Avery’s distributor, Breakthu Beverages, picks up their beer at the brewery, transports it in refrigeration and handles both the ‘on-premise’ and ‘off-premise’ sides of distribution. On-premise distribution deals with the bar and restaurant side of things: they hook the kegs up to the establishment’s taps, clean and maintain the lines and remove spent keg shells. Off-premise distribution goes to liquor stores, where it’s the distributor’s responsibility to make sure that stocks are full and rotated and that the beers are fresh.
“It's kind of neat, that a distributor does all that work for you,” Minior says.
Even for a brewery Avery’s size, they wouldn’t be able to cover all of Colorado without their distributor Breakthu Beverages. They wouldn’t be able to get all the way out to Grand Junction, Durango, Pueblo and Fort Collins every week to rotate out their beers, restock and return all of their kegs and service every tap line, while at the same time trying to brew inspired beer at the brewery. It would be too much to juggle, Minior says.
The only breweries that really have the financial wherewithal to create their own distribution network like that, are monster companies like Anhauser Busch and Molson Coors. For every other moderately sized brewery out there, distributors are the only realistic way to get their product out, which they are legally obligated to do.
So, Avery works with Breakthu Beverages and things are going smoothly according to Minior.
But there is a third option. Besides setting up a personal distribution network or paying for a distributor to do the distributing, a brewery can also be small enough that they essentially fly under the radar. If someone’s just barely brewing enough beer to service their own brewpub establishment, then they are in the clear. They can either choose to distribute small batches directly, themselves, or just not bother with distribution at all.
Without the costs associated with canning/bottling, and paying a distributor, a small brew-pub sized brewery has more resources to focus on the quality of their beer instead of the quantity they brew. Which is part of Boulder Beer’s strategy.
And, McFadden points out, Boulder Beer hasn’t severed their connections with their distributors, by any means. They left those doors open, just in case sometime in the future they decide to get back out there.
“When we pop out of this wave and see what’s on the other side we’ll see where we're at,” McFadden says. “Maybe we will get back into distribution eventually. The option will be there. It's just, right now, this is a safer move for us.”
So what does it take to stay afloat in a sea of competition?
Well, for one, a brewery needs to sell well in its own home town or state. According to Minior, “The further away you get from your local epicenter, the harder and harder it is to sell.”
So, establish a solid local foundation. But even that’s not enough on its own — as mentioned, there’s so much variety and diversity out there, that maintaining customer loyalty can be difficult, even locally. So what else is there to keep a brewery’s product moving?
According to Derek Ridge, the beer manager for Hazel’s Liquor, innovation seems to be a key factor in how much beer a brewery sells at liquor stores. People like to see new flavors and new styles and they like to see them often, he says.
“Breweries that have like two or three new flavors a week or a month seem to always get a lot of people excited,” Ridge says.
He says that breweries like Weld Works, who are constantly distributing new beers, seem to do the best. He’s continually restocking their shelf, simply because people like to taste the beers they’ve never seen before.
“I think that's the real trick these days is to try to bring out some new flavors to keep people interested,” Ridge says.
That’s something that Avery’s Minior echoed, as well.
“One thing that we do at Avery, that we've always done, is we try to have a really broad book, with a ton of innovation,” he says. “Customers are always looking for that, since they’re not overly loyal anymore.”
Keeping a customer interested isn’t impossible, he says. It just takes a little more effort to provide them with fresh styles and new beers they haven’t tried before. Riding the same list of beers for years and decades on end, is a tough model in a world so full of eager, hungry competition.
Minior acknowledges that Avery has felt some of the same pressures that Boulder Beer has, with decreased customer loyalty and lower sales out of state. Just, not to the same degree.
“Our problems are not as pronounced as Boulder Beer’s,” Minior says. “But we're still seeing similar issues.”
Boulder Beer isn’t the first brewery to amputate their distribution arm. In 2016, Twisted Pine did the same thing, in order to focus more on their brewpub, their quality of beer and the food they serve at the restaurant. And today, they’re still killing it. Twisted Pine won a gold medal at GABF this year for their Northstar Imperial Porter. And when you visit their taproom it’s always a’bustlin’.
This isn’t the end for Boulder Beer, not by a long shot. There’s a reason why they kept their relationships with their distributors, and a reason why they didn’t just sell the company to some corporate mega-machine: they want to stay local, they want to stay privately owned, they want to stay authentic so that they can continue to serve their community.
Just like they’ve done for the last 40 years.