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Beer, Beer, Everywhere

And experts say the area's craft beer market has room for more
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It’s a snowy Thursday night in November, and in Rupert’s Brew House the fireplace is blazing, a band is setting up, the bar is full and there’s a smattering of people sitting at tables.

Rupert’s, which opened in the fall of 2013 at 773 W. Michigan Ave., was one of seven breweries to start up in the Kalamazoo area in 2013 and 2014. And three more are on the way in 2015 — Brite Eyes Brewing Co., American Brewing Inc. and Texas Corners Brewing Co.

Just months before Rupert’s opened, Founders Brewing Co. CEO Mike Stevens declared in Draft Magazine, “I wouldn’t want to be a startup brewery right now. ”

“The days when you could open a brewery and really try to learn your path are over,” Stevens said. “You need a good plan from the get-go.”

Stevens might not have intended for his statement to suggest that the national craft beer boom may be over, but it has been taken and circulated that way in media from Beer Pulse to Reddit.

Perhaps Stevens’ declaration resonated because it alludes to a question on the minds of a lot of people: Can the craft beer market, especially in Kalamazoo, sustain the phenomenal growth it has experienced in the past few years?

The answer to that question is complex.

Three distinct niches

“Truly it depends,” says Hannah McKinney, a professor of economics at Kalamazoo College and former vice mayor of Kalamazoo. McKinney points out that in order to examine the craft beer market for sustainability and stability in a local economy, specifically the greater Kalamazoo area, one has to look at the ways that market is divided.

“A lot of the breweries in Kalamazoo actually serve food, so they’re classified more like restaurants,” she says. “Can we sustain this amount of new restaurants? The answer is clearly yes, because we are.”

If the market were made up of only one sector such as microbreweries, there might not be enough room for growth, McKinney says, because “there just aren’t enough places you can sell locally to support that kind of market.”

The good news for the Kalamazoo area is that its craft beer market is divided among three segments: microbreweries, brewpubs and regional craft breweries. And most Kalamazoo craft beer businesses cross over into more than one sector.

The cornerstone players in the region’s craft beer market are Bell’s Brewery and Arcadia Brewing Co./Arcadia Ales, which both operate on a large production scale (more than 15,000 barrels a year), making them regional craft breweries. But both also operate on-site restaurants and brewpubs, creating three distinct market niches.

The majority of the Kalamazoo area breweries operate as brewpubs. For example, Gonzo’s BiggDogg Brewing Co., Olde Peninsula and Latitude 42 sell most of their beer on-site, but Gonzo’s and Latitude 42 also cross over, distributing on a small scale to outside businesses.

Tibb’s, Boatyard and, for the moment, One Well (until its kitchen is up and running) create another niche in the brewpub market, as breweries that operate on small-scale production, largely distribute in-house, but do not offer full restaurant services.

Aside from the different market sectors, which create diversity and fluidity, brewpubs are opening in new locations, points out Toni Daniels, the former director of member services for the Kalamazoo Regional Chamber of Commerce (she left the position in late November).

“It’s spreading,” she says. “There’s a brewpub being put in Texas Corners in a location that’s been vacant for quite a while. That’s going to be really great for that community, and there are a lot of people who live there. It doesn’t necessarily have to be centric to downtown.”

Room for growth

The U.S. craft beer market has been on a growth spurt for the last 10 years, thriving even through the Great Recession. While U.S. domestic large-scale beer production (think Budweiser, Coors and Miller) has gone down — large-scale domestic beer sales fell 1.9 percent in 2013 alone — the domestic craft beer market rose 17.2 percent in 2013, according to the 2014 Brewers Association report.

It may seem that with all this growth, the market would tap out, but many economists point out that craft beer isn’t crowding the beer market — it only accounts for 7.8 percent of the national market overall, while domestic beer from large producers makes up the bulk. If craft beer continues to displace large-scale domestic production, then there is room in the market for growth, they say.

The number of breweries nationwide, as of early December, stood at about 3,000 and growing. According to the National Beer Wholesalers Association (NBWA), there are more than 4,500 active brewery permits in the U.S., a number that represents all of the individuals and businesses that are currently brewing or actively seeking to start brewing beer.

To give some historical perspective, the number of breweries in the U.S. only recently surpassed the number of breweries that existed before Prohibition (2,011 in 1887), and there are about 200 million more potential and future beer drinkers in the market now than there were in 1887.

A recent report by the NWBA’s chief economist says America is in the middle of the pack for breweries per capita when compared to Western European countries.Both Germany and the United Kingdom have more breweries than the U.S. but aren’t as populous. Switzerland holds the top spot, with more than 14,000 breweries.

Another way to think about the Kalamazoo craft beer market’s potential for growth is to consider the number of breweries per capita in other U.S. states and cities. California, Oregon and Colorado, the nation’s top three brewery states (Michigan is 14th), have more breweries per capita and have sustained their markets since the mid- to late ’90’s, serving as positive models for possible growth in Michigan. There are also cities with a similar population density that support more breweries and brewpubs. Bend, Ore., for example, has about the same population size and number of square miles as Kalamazoo and supports 17 breweries and brewpubs to our area’s soon-to-be 12. The point is, there’s room here to grow.

Prime craft beer territory

While Grand Rapids won the 2013 BeerCity USA designation decided on by voters from 92 countries, Kalamazoo came in second. Having two beer cities within 50 miles of each other is an irresistible tourist draw that has allowed Southwest Michigan to take part in a burgeoning craft beer market.

“I think that when you have a large concentration of breweries, you are able to draw in people who normally wouldn’t come to Kalamazoo,” says Jill Bland, executive vice president of Southwest Michigan First. “And when you look at the license plates in Bell’s parking lot, you can tell that we’re getting a lot of visitors from out of state.”

Bell’s Brewery, which began producing beer in 1985 with 135 barrels, now has two brewing facilities, in Kalamazoo and Comstock, a capacity of 500,000 barrels per year and distributes nationally. The brewery’s Kalamazoo site boasts a restaurant with a beer garden and is a popular music venue. Locals are quick to name Bell’s as a tourist destination and an important cornerstone in the local craft beer market. That even goes for fellow brewers Chris O’Neill and T.J. Waldofsky, who opened one of the newest additions to the craft brewpub scene, One Well Brewing, 4213 Portage St., in November.

“It’s because we have Bell’s that people come to check out breweries in Kalamazoo,” O’Neill says. “Same with Founder’s in Grand Rapids. Then we’re all here too, offering something different. I don’t feel like there’s anyone stepping on anyone’s toes.”

It’s that ability to offer something different — whether it’s ambiance, brews, food, entertainment or events — that keeps a healthy diversity in each of the craft brew market segments. From Bell’s live music and offbeat events such as Eccentric Day and the neighborhood bar atmosphere of Old Dog Tavern and Rupert’s Brew House to the eclectic and creative food at Gonzo’s BiggDogg Brewing Co. and Latitude 42, each brewery, brewpub and taphouse offers something unique.

In turn, the craft beer market has become a source of economic growth and part-time and full-time employment. In Michigan, craft beer has a $1 billion economic impact (10th in the nation), contributes $133 million to the economy annually and provides more than $24 million in wages. With the majority of Kalamazoo’s brewpubs having started in 2013 and 2014, it’s too soon to measure the long-term economic impact accurately for Kalamazoo, but Southwest Michigan First’s Bland says the growth has been positive from a local perspective.

“Aside from job growth, these brewpubs are bringing money into the local economy,” she says. “They’re bringing money into the local neighborhoods, hiring local people, and many are sourcing local businesses and farmers too.”

It’s still snowing when we give a nuzzle to Capt’n Stooby, the loping, black Great Dane often roaming Rupert’s, head out the door and walk a few blocks east to Gonzo’s BiggDogg Brewery. There’s a tent outside the front door covering the outside patio, where patrons can engage in beanbag throws and Jenga. Inside, the chairs are filled and it’s already standing room only, at 9 p.m. It’s no wonder: We learn this night is Gonzo’s first-year anniversary party — that pivotal milestone restaurateurs look at as a make-or-break point.

After a drink and a cookie, we head out to as many breweries as we can — Bell’s parking lot is full, Boatyard Brewery has visitors in its taproom, Tibb’s has a full bar, Olde Peninsula is filled with diners and drinkers and Arcadia is mostly full.

If there’s no more room in the Kalamazoo craft beer market, someone should tell all those who have ventured out for a pint on the first snowy night of the season.

“It’s funny you contacted me,” says McKinney when reached for an interview. “My partner and I were talking just this morning about going to one of the new breweries we haven’t been to.”

It would seem that in the case of Kalamazoo’s craft beer market, the more the merrier.

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