Brewery business models have been strapped to a rollercoaster for the past decade. Shifting popularity of draft versus packaged beer, a pandemic, fluctuations in consumer preferences beyond beer, and variable costs of goods and labor have all changed how and where breweries are making money. At the same time, there are more options for breweries to sell their beer than ever before: self-distribution continues to expand, customers have gotten more used to purchases via ecommerce sales, and satellite taprooms all offer ways to get breweries’ creations into drinkers’ hands.

Navigating these evolving models is tricky, and the conventional wisdom shifts faster than some breweries can adapt.

In the five years before the pandemic’s outbreak, the industry celebrated the rise of the brewery taproom: Better margins than distributed beer and a direct connection to drinkers fueled 15-20% growth for taproom beer sales around the year 2016.
Then, the pandemic was a record scratch. Taprooms, bars, and restaurants closed voluntarily or by mandate, and having packaged beer in chain grocery stores became imperative. Breweries rushed to buy canning lines or clung to mobile canning solutions like life preservers.
Then the on-premise reopened, and some analysts—dubiously—predicted a “Roaring 20s”-style return to taprooms and bars that never came to fruition.

In 2023, the dust doesn’t feel like it’s settled.

Draft beer is still hobbled: Kegged beer sales lag well behind pre-COVID levels, down roughly -20% compared to 2019.
It’s no easier for packaged beer on grocery shelves, either: Beer is collectively down -2.5% in volume sales in the most recent 52-week period tracked by market research company, Circana. Craft is down -6.7% against competition that is fiercer than ever, with many small breweries are reluctantly raising prices.
Overall on-site taproom sales appear to be up about +6% compared to last year, according to Brewers Association chief economist Bart Watson’s midyear projections, but given the increasing number of breweries, Watson says that growth isn’t evenly benefiting all taprooms.
The macro view is no easier: Beer continues to lose ground to spirits when it comes to U.S. drinkers’ attention and money.

A one-size-fits-all sales model never worked for small breweries, but against such a complex backdrop of today’s market, that reality is more stark than ever. Some breweries are betting big on hospitality, opening numerous locations across a state or region. Others are selling packaged beer in new, far-flung states, hoping to reach drinkers interested in specialty beer styles. And still others are focusing on growing sales over the bartop at their sole location, one pint at a time.

In this two-part Sightlines series, we’ll examine the opportunity—and the obstacles—facing craft breweries as they think about selling their beer through channels wide and narrow. From brewpub-only models to near-national distribution, these case studies provide lenses through which to understand the complex geography of craft beer sales in 2023.

This first installment features three hospitality-focused breweries whose sales are concentrated in their home states. Part two showcases breweries seeking sales farther afield.

At 35 years old, Denver’s Wynkoop Brewing has seen its share of craft beer booms and busts—and outlived them all. But it’s also no longer the new kid on the block in a heavily saturated craft beer market: Denver’s metropolitan area is home to about 150 breweries.

Wynkoop today has a narrow sales focus: It sells beer only over its own brewpub bar, with crowlers and growlers available to go. A decade ago, Wynkoop canned its beer and sold about twice the volume (roughly 3,000 barrels) it does today (roughly 1,500 barrels annually). However, according to head brewer Todd Bellmyer, the sole focus on own-premise sales allows Wynkoop to keep its margins lower; he notes that the costs of an aluminum can, its label, and the labor needed to package a beer are often greater than the costs to make the liquid itself. Around 2016, the brewery had a staff of nine dedicated to brewing, packaging, and selling beer off-premise. Today, it employs a brewing team of just three.

“It's very expensive to package beer, leading to smaller margins, meaning it takes a lot more sales to get those margins to make sense,” Bellmyer says.

An own-premise focus also allows Wynkoop to respond more swiftly to supply chain issues and concentrate on quality, Bellmyer says. There appears to still be room for growth, too, with Wynkoop on pace to sell about +10% more beer than it did in 2022.

“We’re one of the busiest beer markets in the country, and you’d be constantly fighting for shelf space. There’s a little more profit margin, too, in selling your beer on-site,” Bellmyer says. “Smaller can be better if you have the right location.”

Location has been everything to Wynkoop since COVID, he says. While downtowns across the country struggle with the loss of office workers and tourists, Wynkoop’s proximity to Denver’s Union Station train hub and to sports stadiums with winning teams has proven to be a godsend. Denver International Airport recovered quickly from pandemic’s lows in airline travel, and the train from the airport deposits most travelers directly across the street from Wynkoop at Union Station.

“People are getting off the train and their very first option pretty much is us,” Bellmyer says. “If they’re any kind of a beer drinker, they’ll know that Colorado is about craft beer. And if they’re Googling [breweries] on the train, they’re seeing that we’re right there.”

The past two years have also seen back-to-back championship parades for Denver teams (the NBA’s Denver Nuggets and NHL’s Colorado Avalanche) that took place two blocks from Wynkoop. The brewery has altered the name of one of its beers, a Golden Ale, to reference those teams, calling it Hop on the Bandwagon during the Nuggets playoff run, for example.

That type of flexibility wouldn’t be possible if the brewery had beers packaged and in distribution, Bellmyer says, and flexibility is more important than ever. He gives another example: In 2021, because of pandemic-related supply chain problems, the brewery couldn’t get the green chilis it uses to make its popular Patty’s Chili Beer. Instead, it bought spicier, red chilis, and named the resulting beer Angry Patty’s. (The customer reception was so positive that Bellmyer has begun adding a small dose of hot chilis to the standard Patty’s Chili Beer recipe.) Just a few weeks ago, Bellmyer had to make another ingredient swap in the brewery’s flagship Amber Ale when his supplier told him his Munich II malt order wouldn’t be delivered for two to three weeks.

“There are substitutes, but me not having to put that in a can and have it be brand loyal and super taste-specific, it’s less for me to worry about,” he says.

Keeping its sales focus tightly on the own-premise has allowed Wynkoop to respond quickly to changes, whether it’s renaming a beer for a winning local team or adjusting beer recipes in response to available ingredients.

“We’re having enough success here just in our building that if we can keep these glasses as full as we can, that’s the best way to go about it,” Bellmyer says.

FUNKY PICNIC

NAVIGATING THE POST-PANDEMIC FUNK

When two homebrewers teamed up to create Funky Picnic Brewery & Café in Fort Worth in 2019, they chose to open as a brewpub because they felt the area needed more beer options that also served food. It happened during a monumental time in Texas craft beer—the state grew from 117 breweries in 2014 to 341 the year Funky Picnic opened.

But the way the company’s owners built their business plan leading up to that opening is out of step with today’s reality, says Colin Zreet, Funky Picnic’s co-founder.

“We did all our forecasting based on what we now see was the height of the craft beer scene. Now, people are going out less in general and spending less on top of that,” he says. “Even when we’re trying to project forward right now, we can’t rely on our data. We were six months old when COVID hit.”

A series of decisions over the past three years helped the brewery survive the pandemic, but have proven to contribute their own challenges years later. For example, Funky Picnic began serving liquor and cocktails in December 2020 to generate additional revenue during COVID. Due in part to brewpub spatial expansions, sales of those cocktails now contribute 15% of the business’ revenue, up from 9% in 2021. But they come with a catch.

“At the time, we needed the immediate revenue from that,” Zreet says. But under Texas law, breweries that serve liquor can’t self-distribute. This forced Funky Picnic to sign with a distributor in order to sell a small amount of beer in the Fort Worth area. “[Adding cocktails] was good in the short term, but now we need to sign into distribution. So we signed on with a distributor, and they take a healthy cut. But because we’re not a production brewery, we can’t reach that volume and so we’re less important to them.”

Then, a year ago, the brewery expanded into the adjacent space formerly held by a pizza restaurant. At that point, Zreet says, the taproom was bustling with guests excited to spend money again after the pandemic, and more space seemed like a good idea. Today, foot traffic is down; spring is normally the brewery’s busiest season, but 2023’s numbers saw less of a jump this spring versus the year prior. Net revenues increased +15% between March and May this year versus +50% last year (and the brewery added +50% more space by opening its Back Room area in September 2022). The brewery simply needs to sell more beer volume to keep up.

Funky Picnic hopes that increased spending on marketing—across print, radio, and digital—will help drive more visitors to the brewpub, though Zreet says there’s been no tangible payoff yet. The business also gave an employee some additional sales representative duties, tasked with increasing beer sales in distribution. It’s been difficult, though, for that employee to fully devote himself to the sales role because he also bartends and performs cellar work. Right now, sales engines aren’t firing on the cylinders that the business needs them to.

“The other option is to open more locations, but that’s more risk with funds we don’t have,” Zreet says. “It’s definitely stressful. My business partner and I have had to put in personal money just to keep it going for the time being, but we’re getting to a point where we’re going to have to stop doing that.”

Funky Picnic does see some hope on the horizon, if it can keep the lights on until then. The brewery leases a space with several empty lots around it, a deliberate choice that it made—turning down more affordable leases—because it anticipated other businesses would open around it and generate more foot traffic. During COVID, no construction began. But just this year, crews have begun breaking ground.

“We have three large projects within a one block radius of us, but they still have a ways to go before completion,” Zreet says. “We are hoping to hang on and see those completed.”

Drinkers who don’t live in the Hawkeye State might be unaware of one of the fastest growing breweries in the U.S.: Big Grove Brewery. Founded in 2013, it has increased production volume +20% in each of the last four years, ending 2022 at 24,000 barrels —with sales only in its home state of Iowa. It anticipates increasing that another +50% next year when a new production facility in Iowa City comes online. The added volume represents a massive increase since 2018, when Big Grove brewed 6,600 barrels of beer, per Brewers Association data.

Big Grove sells 40%of its beer in stores via in-state distribution, with the other 60% is sold through its three taprooms in Des Moines, Iowa City, and Solon. (A fourth, in Cedar Rapids, will open in December.) The taprooms don’t only account for the majority of sales, says CEO Matt Swift, but they’re also responsible for helping drive sales of Big Grove beer at grocery stores, bars, and restaurants. History shows this is a smart combination—a brewery can have stronger packaged sales when it focuses on areas closer to where its beer is made.

“People having a positive experience when they visit us, it means something. When you’re looking at a sea of 100 different cans of IPA, how are you going to pick? I hope that we matter to people,” Swift says. “And we’re trying to matter in deeper ways—not just the packaging or the beer quality. … The impact of those actual locations has been massive. Wherever they go, the activation that follows is insane.”

When Big Grove opened in Iowa City in 2017, its three surrounding blocks included two lumber yards, a self-storage facility, and a party rental store. Today, it’s home to the brewery, 17 other businesses, and 400 apartments. Swift says that the brewery’s role in building up the neighborhood creates a meaningful bond with Iowans that wouldn’t be possible without physical taprooms.

“It’s hard to do if we just drop beer seven states over. I don’t know that we’d matter that much,” Swift says.

With a background in restaurant operations, Swift has experience in managing the logistics and staffing that Big Grove requires. (The brewery has 350 employees today, and plans to add 80-90 more in Cedar Rapids.) He says hospitality businesses, breweries included, tend to falter when multiple locations look too similar to one another, with the same beers and aesthetic.

Two of Big Grove’s locations—in Iowa City and Solon—are just 25 minutes’ drive from each other, so they need to stand out in terms of design, beer offerings, and experience. The Iowa City location, for example, is home to the University of Iowa and frequently hosts university-related events. It’s also home to a children’s play area for young families. The Des Moines location is more frequented by an after-work office crowd as well as people on their way to the city’s celebrated restaurants, encouraging Big Grove to offer frequently rotating food specials.

“I hope people would say [about Big Grove]: I love that place,” Swift says. “I hope they would feel connected to us and that they had a positive experience with us.”

Words by Kate Bernot

Good Beer Hunting

Good Beer Hunting