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Survey Shows Local Craft Brewers Not Crying in Their Beers

Competition for shelf and tap space may be tightening amid slowing growth, but business optimism among San Diego County’s craft beer brewers has not gone flat.

The latest gauge of local brewer confidence — based on surveys conducted by Cal State University, San Marcos’ College of Business Administration — finds brewers generally optimistic about their prospects over the next year.

Among San Diego Brewers Guild members who responded to a Cal State survey, 95 percent said they expected to increase their staffing in the next 12 months. Reflecting the relatively small size of most of the region’s brewers, the bulk of those respondents — 63 percent — will be adding just 1 to 5 employees.

Just 14 percent plan to add more than 11 employees, and 5 percent plan to stay the same for staffing. Still, the general signal is for growth and not pullbacks; none of the survey respondents said they planned to decrease the size of their staffs.

Similarly, the bulk of respondents — 93 percent — expects their total barrel production to increase over the next 12 months.

The Survey

Staffing, production and distribution are among several variables used by Cal State, working with the San Diego Business Journal, in devising a Craft Brewer Confidence Index, with responses weighed into a scoring system using 50 as the baseline. A number above 50 indicates overall industry optimism, and a number below 50 indicates a lack of confidence.

The local brewer index came in at 92 in 2015, dipping to a still positive 87 in 2016 before rising to 94 after the most recent 2017 survey. Business students in Cal State’s Senior Experience Program received 56 responses from a survey sent to 103 members of the local brewers guild.

In the beer world, where overall growth of sales has been slowing during the past two years, smaller players generally have bigger prospects for growth in percentage terms. But there are still causes for concern, including an ever-growing field of producers.

Among anonymous comments collected from brewers in the Cal State survey, the recurring themes included “It’s getting crowded;” “It’s more of a fight to stay relevant;” and “Big Beer is the problem; not local.”

More Breweries on the Way

While brewers are somewhat concerned about potential saturation, trends indicate that more breweries are on the way; according to various local sources, San Diego County had 143 licensed brewing locations in operation as of mid-May, with about 25 more in various planning stages.

At least six local brewers closed during 2016. Brewers Association, a nationwide trade group, recently reported that the U.S. saw 97 brewery closings in 2016, compared with 826 openings.

“It’s not double-digit growth anymore, but still steady single-digit growth, which a lot of industries would like to have right now,” said Vince Vasquez, an independent industry analyst affiliated with National University in San Diego.

‘Corner Bar’ Approach to Growth

Vasquez said local industry optimism likely stems from several factors. One is that San Diego’s reputation as a craft beer destination has helped sustain a steady stream of craft devotees and other tourists regularly coming to the region specifically to sample the local beers, which has benefitted big and small brewers.

Another factor is that local brewers are seeing good returns from a focus on serving neighborhoods that have long been underserved by craft beer makers, setting up satellite tasting rooms in places such as Ocean Beach, Bay Park, Imperial Beach and other portions of South County.

This is a relatively modest, “corner bar” approach to growth. Vasquez said selling directly to consumers, in establishments that are convenient to them, helps build loyalty while raising profit margins and minimizing the middle-man expenses associated with distribution to retail stores, bars and restaurants.

Reality Check

For Mike Hess, co-founder and head brewer at Mike Hess Brewing Co., the neighborhood-serving approach has proven to be an effective component in a multipronged strategy to fend off growing competition in markets where Hess was among the earliest arrivals, including North Park and its flagship Miramar location.

Hess followed up on those venues by opening a satellite in Ocean Beach, and by early next year plans to have his next tasting room open in Imperial Beach, which will likely add to his current total staffing of 52.

Hess said the Cal State survey appears to be a “good barometer” of local industry sentiment. Business optimism can be sustained provided operators keep their expectations close to earth.

“The local brewers are just going to have to be realistic about what they can make in revenue and how much they can actually produce and distribute,” Hess said.

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