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Craft brewers talk industry growth

San Diego’s craft beer industry continues to grow, but some of its most established players grew their businesses during a lean period that still informs their expectations.

At a panel discussion presented by 6 Degrees San Diego, four of the city’s longest running craft beer leaders reflected on their roles building the local scene, and warned of looming dangers of unrelenting growth.

One of the industry’s most outspoken individuals — Stone Brewing Co. CEO and co-founder Greg Koch — made a firm commitment to continued independence.

“I will never sell out,” Koch said when asked if growth could eventually lead to being purchased by a large company, such as AB InBev, which recently added Chicago craft stalwart Goose Island to its portfolio of international brands. “There isn’t enough money in the world. I will always be independent.”

Chris Cramer, CEO and co-founder of Karl Strauss Brewing Co., said the industry is still looking at untapped growth capacity. Nationwide, craft beer represents just under 6 percent of all beer consumed. In Seattle and Portland, meanwhile, that number is nearly 30 percent.

If the national industry can reach just half the market saturation as in the Pacific Northwest, then, it would triple in size, Cramer said.

“The overall trend is very much in our favor,” he said. However, he qualified that optimism by saying he was concerned that reaching that capacity could mean certain purveyors would expand geographically in ways that limit their ability to control for quality.

As the craft industry has grown, it’s become increasingly attractive as an investment. That means many of the new entrants are investment backed, unlike the boot-strap, family funded startups that represent today’s top producers.

But Koch said it’s not necessarily the case that new breweries represent a change in the industry.

He commended Hess Brewing and Societe Brewing Co. as two of San Diego’s newest manufacturers who’ve stepped in and continued the commitment to quality that initially established the city.

The only new breweries he’s concerned about, regardless of the nature of their funding, are those who lower the standards — whether in creating a quality product, or engaging in illegal and unethical distribution practices — that he considers essential to the local industry.

“We’re at a time of irrational exuberance,” he said.

He compared the industry to a crowded bus in a Third World city, with luggage strapped to the top and people hanging off the sides — it’s the newest passengers, clinging to the roof and hanging out the windows who are in danger if the bus hits a pothole.

Jack White, CEO and co-founder of Ballast Point Brewing & Spirits, said anyone expecting immediate returns on investment from a brewery is going to be disappointed, and the market will go through a natural weeding out process.

“In the meantime, are they spreading a message we don’t embody?” White asked.

There’s precedent for the concerns White, Koch and Cramer mentioned, and they come up most times when people discuss the future of the craft beer industry.

Scott Stamp, co-founder of San Diego Brewing Co., explained Tuesday a collapse in the beer industry during the late 1990s following a flood of subpar beers to the market. Consumers couldn’t trust the quality of a beer they’d never tried, so they stopped drinking them.

“As long as we keep that quality up, we can build that base,” Stamp said.

But Koch pointed out that he, White and Stamp all started their companies around that period, during “the beginning of the end for craft beer.” Operating at that time taught those who survived how to be lean, he said.

Then followed a lengthy period of growth spent rebuilding the public’s trust in a higher cost, higher quality product. The explosion of popularity in recent years has put the industry in what he called its fourth wave of growth.

“Just a few years ago, people wouldn’t have filled a room to see us speak,” he said, to a full crowd at the Hall of Champions.

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Karl Strauss Brewing Co.

Company Website

5985 Santa Fe St.
San Diego, CA 92109

Karl Strauss Brewing Co. Executive(s):

Chris Cramer

  • Chief Executive Officer, Co-Founder

Matt Rattner

  • Co-Founder, President

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2013