Magazine Manufacturing September/October 2015

Brewing Up Business

September/October 2015 Issue

Arkansas’ craft beer industry has seen major growth over the past few years, bringing with it jobs and tax dollars, but no one can yet quantify its total economic impact on the state.

 


Cover Story:  Part 1 | Part 2 | Part 3


Top Photo: Core Brewing and Distilling Co. – The Springdale-based company produces 10 year-round beers as well as a couple of seasonal brews. Photo by Beth Hall.
Just a few years ago, Arkansas had only a handful of breweries. Mainstays, like Vino’s Brewpub and Diamond Bear Brewing Co., thrived for years with devoted customers and little competition.

But, that has changed over the past few years, as Arkansas’ craft beer industry has seen significant growth, along with new competition. The number of breweries in the state has more than tripled in recent years, and even more are on the way.

Today, 29 breweries hold licenses in the state, and each operates under a unique business model — some have restaurants; some can and bottle their brews; and some want to stay small, while others are looking to expand beyond Arkansas’ borders.

Stone’s Throw Brewing

Stone’s Throw Brewing. Photo by Janet Warlick.

Stone’s Throw Brewing - Ian Beard, co-founder, produces four year-round options and three quarterly seasonal beers. Photos by Janet Warlick.

Stone’s Throw Brewing –
Ian Beard, co-founder, produces four year-round options and three quarterly seasonal beers. Photo by Janet Warlick.

“There’s a lot of feeling that we’re playing a little bit of catch up to the rest of the country,” said Ian Beard, co-founder of Stone’s Throw Brewing in Little Rock, which opened in 2013. “We’ve got a ways until we peak, and there’s a heck of a lot of potential.”

Arkansas’ craft beer industry has grown so fast that no one in the state has been able to fully grasp its economic impact. Nonetheless, Bud Roberts, director of the state Alcoholic Beverage Control Division, or ABC, which licenses and regulates breweries, said it’s on his to-do list.

“The growth of the number of permit holders has picked up in the last five years, the last three years,” he said. “That tells me that we’re going to see some acceleration in numbers.”

In July 2015, the Beer Institute, a national brewing industry trade association, and National Beer Wholesalers Association, released the “Beer Serves America” annual report, which estimated the economic impact of Arkansas’ beer industry — brewing, wholesaling and retailing — at about $1.4 billion, contributing to about $334 million in wages and more than 8,500 jobs.

While the numbers, based on 2014 data, are already outdated because several new breweries have opened in 2015, the growth is obvious. Since 2012, when the state had fewer than 15 breweries, the economic impact has increased more than 30 percent, according to the institute.

“What a lot of people don’t think about when they pick up a beer is the chain of jobs that go into putting that beer in front of them,” said Jim McGreevy, Beer Institute president and CEO, based in Washington, D.C. “We’re talking not just brewers, but the farmers and the factory workers. In Arkansas, we’ve seen a great story emerge when you look at the industry’s growth in the last two years.”

And, in Arkansas, it is estimated that 44 percent of the retail price of beer goes toward federal and state taxes, according to the “Beer Serves America” report.

Nationally, beer is a $252.6 billion industry that employs more than 50,000 people and contributes $48.5 billion in tax revenue, McGreevy said.

The beer industry also drives tourism, said Gretchen Hall, president and CEO of the Little Rock Convention and Visitors Bureau. In October 2015, the agency is launching the Locally Labeled in Little Rock: A Guide to Central Arkansas’s Ales, Spirits, & Wines campaign, with a map and promotional materials for visitors.

The Fayetteville Ale Trail promotes all of Northwest Arkansas’ breweries, and while Jessica Leonard, communications manager at Fayetteville Visitors Bureau, said she doesn’t know the tourism impact of breweries in the region, about 30,000 trail “passports” have been distributed.

Barrel Production

Contributing to local economies and being an active, visible member of a community has led to industrywide and individual brewery growth, said Jonas Dunnaway, sales manager at Core Brewing and Distilling Co. in Springdale.

“Breweries are cool things,” he said. “It’s not difficult to get momentum and find people who want to support their local beer company.”

“If you’re local, you lend yourself to buying local products,” said Russ Melton, president of Diamond Bear, which began production in 2000.

In July 2014, the company moved to North Little Rock and completed a $3 million expansion, including the addition of a restaurant. Diamond Bear is available in Arkansas, Memphis, northern Louisiana and northern Mississippi, with beers sold on tap, in cans and by the bottle.

Production has hovered around 3,500 barrels of beer per year, but with the new space, Melton said he expects to exceed 5,000 barrels by the end of 2015.

A barrel, equal to 31 gallons, is a standard beer-industry measurement.

Core, which began production in 2012, also has big expansion plans. Its bottled and canned beers will be available in about 200 Wal-Mart stores in Arkansas and Missouri this fall, Dunnaway said.

Industry expansion - Core plans to have bottled and canned beers available in about 200 Wal-Mart stores in Arkansas and Missouri this fall. Photo by Beth Hall Photo by Beth Hall

Industry expansion – Core plans to have bottled and canned beers available in about 200 Wal-Mart stores in Arkansas and Missouri this fall. Photo by Beth Hall.

“That’s going to be a big push on our production team to be able to feed that beast,” he said.

Dunnaway expects to reach 5,000 barrels by the end of the year. The company produced 3,000 barrels in 2014, and had already reached 3,000 from January to June 2015, he said.

Core operates taprooms in Rogers and Fayetteville, and it plans to have its beers in St. Louis and Kansas City within the next year. It has also added a distillery at its Springdale headquarters and will release its first distilled products this fall.

Lost Forty Brewing, owned by Little Rock restaurant group Yellow Rocket Concepts, is likely one of the fastest-growing breweries in the state. It opened in Little Rock in December 2014 and has already expanded three times, adding canning to its process, said co-owner and brewer John Beachboard.

In the second quarter of 2015, the company is making beer at approximately a 5,500-barrels-per-year rate. Even with such dramatic growth, Lost Forty products are only available in Pulaski County.

“We want to stay put in central Arkansas for a while and see what we can do just in our backyard,” Beachboard said. “Then, we’ll probably do another round of expansion and go outside of that.”

Beard of Stone’s Throw said his business is also growing, but he appreciates staying small.

“We’re as close to home brewing as could be and still producing on a commercial scale,” he said, explaining that Stones Throw produces about 600 barrels per year, with products available on-site and in some restaurants and bars.

Industry Optimism

Quantifying total statewide beer production is seemingly impossible at this time. Historically, breweries were not required to report production levels to ABC, Roberts said, but that will soon change. He explained that reporting is now mandated by Arkansas Act 857 of 2015, so, in the future, Arkansas’ beer production rates can be better assessed.

Act 857 created the small brewery license, replacing the previous native brewers permit. It also increased production caps for small breweries and microbrewery restaurants, the two licenses available in Arkansas.

Arkansas has 20 small brewery permit holders, which can produce up to 45,000 barrels per year, and nine microbrewery restaurants, which must operate a restaurant and are capped at 20,000 barrels per year.

Because no brewery in the state has come close to reaching the barrel caps, Roberts said this ensures the industry has room to grow.

“We certainly wouldn’t want to stand in the way of that kind of growth,” he said. “I’m very optimistic about it. I think that market can be expanded.”

Beard said Arkansas’ brewing laws, which Melton helped to craft, are the envy of many other states. The ability to self-distribute is one aspect that particularly helps the industry, Melton explained, because it helps small breweries “get off the ground.”

AR-WetDryCounties

“Self-distribution allows you to go out and prove your product and give it a fair chance,” he said, adding that Diamond Bear now uses Glazer’s Distributors of Arkansas. Many other Arkansas breweries self-distribute.

The fact that breweries are allowed on-site sales in growlers, bottles and cans seven days a week is another boost to the industry, Beard said. “It’s very advantageous to give [breweries] an automatic niche to allow them to compete with larger and better-funded parts of the industry,” he said.

However, Northwest Arkansas breweries don’t see the same advantages of on-site Sunday sales, Dunnaway said. Springdale is among 12 cities in Arkansas that allow off-premise alcohol sales on Sunday.

While some laws seem aimed at growing the craft beer industry, others, like those keeping about half of Arkansas counties “dry,” may stymie growth. Beard speculates that dry counties, like Faulkner and Craighead, would likely see breweries open if they became “wet.”

AR-ProducedAlcoholPermitHolders

Benton County, for example, became wet in 2012 and already has five breweries. The most recent to open is Bentonville Brewing Co. in June 2015.

As the craft beer industry grows, competition has remained friendly, though store shelf space and tap handles may soon become limited.

“With the local beer scene, I feel like the more successful one or all of us are, we’ll just continue it,” Dunnaway said.

Competition remains in large-scale national and international production breweries. Beachboard said Arkansas’ breweries combined represent about 2 percent of the state’s overall beer market.

“With younger people, that wall is being torn down,” Dunnaway said. “As breweries are getting bigger and bigger, each year craft beer keeps taking some of the market share. Craft beer has made it to Arkansas, and it’s here to stay. “


Cover Story:  Part 1 | Part 2 | Part 3

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