Recently, I released a new report on North County’s craft beer industry, updating 2013 research I conducted for the North County Economic Development Council. From analyzing survey responses, economic software, and public datasets, it’s clear there have been significant market changes over the last three years. For all the continued promise breweries and brewpubs have in the region, there are also some potential red flags that industry supporters and participants should be aware of. I am pleased to share with you two key observations, with additional analysis and information that are exclusive to West Coaster.
North County craft breweries are mostly small, profitable, and locally-focused. The majority of respondents indicated they have a 10 BBL brewing capacity, with a handful of breweries owning larger systems. With regard to 2016 gross sales, smaller, newer breweries ranged in responses from $200,000 to $300,000, while breweries with larger square footage, closer to the coast, and with brewers that have earned medals at the Great American Beer Festival earned more than $1 million annually. Most survey respondents (68%) indicated they brew 1,000 or less barrels of beer annually, and virtually all (99%) of that beer is sold in California.
With most (90%+) of North County residents now living within a 10 minute drive from a local brewery or brewpub, establishments that seem to be doing best financially are those that are following more of a neighborhood tavern business model. Finding ways to increase foot traffic, repeat business, and customer rewards are priorities for commercial success. For elected officials and planning boards, approving longer operating hours, amplified music, special events and greater signage/lighting for taprooms could go a long way to facilitating greater industry investment.
North County breweries & brewpubs are concerned about distribution. We asked respondents “looking towards future growth for your business, please rank only the top five issues that are impediments to growth.” We offered respondents twelve major policy categories to select from, based on prior surveys and industry interviews. Overall, “distribution” was the clear top choice, followed by a tie between “labor costs” and “access to capital.”
Nationally, retailers are reaching the point where adding more tap lines doesn’t add to more craft beer sales. There have been projections that craft beer has peaked for on-premise accounts, while off-premise accounts still have some place to expand. Tourists comprise only a small portion of annual sales in North County (10-15%), however given that most tourists to North County breweries are in the “drive market” (Orange County, Inland Empire, Vegas, Phoenix), prioritizing distribution to bars, restaurants, liquor stores and grocery stores, particularly the in-state areas, is a smart strategy. North County beer is consumed virtually entirely in California. Tourism partnerships, branding and marketing will become larger components of commercial success in North County in coming years.
Vince Vasquez is a craft brewing industry analyst based in Carlsbad.