Colorado’s largest breweries seem primed to benefit most from this year’s new laws, which have allowed beer over 3.2% ABV to be sold in all grocery and convenience stores for the first time. As shown in part one of this series, businesses like New Belgium Brewing Company, Avery Brewing Company, Great Divide Brewing Company, and Oskar Blues Brewery need those retail channels to offset losses elsewhere, which could also leave liquor stores at a disadvantage.
But following the law’s enaction, there have been considerable ripple effects that smaller breweries are eyeing as keys to their own growth—whether in chain or liquor stores.
“There was almost this rush to jump into things with the grocery law changing, like it was this Wild West mentality and now is the time to get involved when there’s this chaos and you can establish yourself,” says Jason zumBrunnen, co-founder and brewmaster at Denver’s Ratio Beerworks. “In reality, we’re happy to let it play out, but boy is it tempting when you see those sales doing better than people thought.”
With a volume of about 4,000 barrels in 2019, Ratio isn’t yet ready to move sales from its own taproom and nearby bars and restaurants into cans and grocery stores, but zumBrunnen and his team are eyeing 2020 for such a move. The brewery has plans to open a new production space next year, which could allow it to package and sell brands like Domestica (an American Standard Ale, similar to Light Lager); a yet-to-be determined IPA; and Dear You, a Citra-hopped French Saison that’s a top-seller at the taproom.
“It’s been real temping all the time to get in now when we see people leap-frogging us,” he says, “but it’s like, ‘Patience, patience, patience.’”
Part of that waiting is seeing whom among his peers may have to adjust first. At the outset of 2019, zumBrunnen and others say that grocery and convenience stores snatched up craft brands fast so they could to fill space alongside a flood of brands from Anheuser-Busch InBev, MillerCoors, and other international companies. But it’s not the global players or small, local craft brewers that have the Ratio co-founder worried.
“In reality, we’re competing against regionals like New Belgium, Odell, Left Hand, or Oskar Blues,” he says. “Those are the guys that can squeeze us out.”
It’s not a baseless worry, as those large regional and national companies shift sales focus away from liquor stores to pick up more volume from casual shoppers. For Odell Brewing Company, the change has been “smaller” than its regional brewery peers—the company dropped “just” 18.5% in its liquor store volume as tracked by IRI, a market research firm that compiles scan data from grocery, convenience, and a variety of other outlets.
JR Wheeler, director of sales and co-owner at Odell, says that the transition into more outlets has helped reshift the brewery’s attention toward higher-volume 12-packs, including two timely brands that will move into the larger format package in 2020: Sippin' Pretty, a fruited Sour Ale, and Good Behavior Crushable IPA. The latter debuts in November and follows the ongoing trend of “better-for-you” beers with a 4% ABV and 110 calories. Sippin’ Pretty, which came out last fall, is made with guava, acai, elderberries, and pink sea salt, and has rocketed to 10-15% of the brewery’s production this year.
"I don't think it's a secret that 12-packs are big in the chain side of things," says Wheeler. "We've been telling folks how much beer we can sell, but without it happening in our home market, they don't realize what that means across the board with a potential halo effect outside of Colorado into markets that border the state."
Odell produced almost 126,000 barrels in 2018 and sees the law change—and all the new outlets that came with it—as a key opportunity. But for as much as things may change for large breweries in-and-around the Centennial State, the changing playing field has opened up the door for increased focus on what it means to be local, for breweries and retailers, too.
Colorado is home to around 400 breweries, and thanks to new retail avenues and opportunities to self-distribute, small breweries now have the potential to be slower and more deliberate when it comes to bringing products into stores in or around their production spaces.
"That led to the question: 'where do we go from here?'" Andres Gil Zaldana, then-executive director of the Colorado Brewers Guild, told GBH this spring. What he predicted was a harder shift toward locality, within a state already flush with local options. "A lot of our members had the proposition of working with one-to-15 stores, not 50 or 100. A lot of them probably can't go too that larger amount anyway."
Because changing laws suddenly gave breweries increased options for where to send packaged beer, the opportunity to go "a mile deep" in their home territories has become much easier.
“There are enough liquor stores that are now looking for smaller breweries to fill space or excite customers; I don’t think it’d be that difficult for breweries our size to get involved,” says Anthony Martuscello, founder of Lakewood’s WestFax Brewing, which will make about 600 barrels of beer in 2019, almost all of which is sold own-premise at the taproom. “Even if we doubled in size, we wouldn’t need to be in grocery stores.”
Martuscello says he’s consistently received calls from nearby liquor store owners interested in carrying his beer, most notably Urban Lumberjack, a New England-style IPA that can be bought in 16oz cans from the taproom. He’s been inspired by other Colorado breweries like WeldWerks Brewing Company and Cerebral Brewing and how they make careful decisions about how, when, and where to get into stores. He’s of the belief that staying small and local isn’t just a smart move to build community in a home market, but also plays into a “hype game” that creates excitement among drinkers and a secondary market that could send beers across the country.
“You can’t build that kind of word of mouth without a packaged product,” he says. “Of course we want people buying pints at a bar or cans at a store, but at the end of the day, there is a marketing value associated with being in smaller stores that can eventually bring people to our taproom, too.”
Liquor stores are embracing this approach, too. At Hazel’s Beverage World in Boulder, owner Bruce Dierking has put more attention toward local options. He gives particular consideration toward what he calls “true craft” brands, which represent the kind of “small and independent” businesses often touted by the Brewers Association. He’s seen success with beers made by Finkel & Garf Brewing Company (a six-mile drive from Hazel’s), Odd13 Brewing (11 miles away in Lafayette), and Wibby Brewing (14 miles away in Longmont), for instance.
“These are breweries that are never really going to be in the grocery stores, and we’re excited to give shelf space to a lot of breweries we view as more interesting,” he says. Eventually, Dierking believes grocery chain beer aisles will look more like big-box stores like Target, where only the best-selling brands from the biggest breweries will end up. New Belgium’s Fat Tire or Odell’s 90 Shilling Ale could be examples of craft that sits alongside AB InBev and MillerCoors, he says. “These stores will have some of the most popular ones, but are they going to be able to offer a beer from WeldWerks Brewing Company or Liquid Mechanics Brewing Company? Probably never.”
With different shopping experiences and potentially different customers, grocery stores have pulled volume away from liquor stores, but Dierking’s question raises another one: is there a difference in what’s being sold? That’s in part three of this series.
A Mile High and Wide, Pt. 1 — Colorado Craft Finds New Sales in Chains, But Liquor Stores Suffer
Words by Bryan Roth