Arizona brewers believe there is plenty of room for their industry to grow

http://www.azcentral.com/story/money...-grow/2232380/
Helen Tracey-Noren, Special to The Republic

Arizona is known for the five C's: copper, citrus, climate, cotton and cattle. It has not been known as a craft-beer destination. But with a rapidly expanding beer economy, the craft-brew industry is hoping to change that.

With only 64 microbrewery licenses issued in Arizona, according to the Arizona Alcohol and Tobacco Tax and Trade Bureau, many local brewers believe there is plenty of room for expansion in the craft-brewing industry. This is compared to Oregon, where Portland alone has more than 140 breweries.

Portland's established "beer-conomy" might be a learning model for Phoenix. Rob Fullmer, the executive director of the Arizona Craft Brewers Guild, said that breweries in this state are attempting to grow, but that the state needs to be more brewery-friendly in order to do so.

"We're seeing craft-beer growth and we're seeing places trying to grow in the neighborhoods," Fullmer said. "We sort of have a compression because our biggest breweries aren't as big as other states' biggest breweries, so the whole market gets compressed a little bit. We need to have a state where our biggest ones can grow as large as some of these reg

ional breweries across the country and that'll allow our mid-sized ones to grow and our smaller ones to grow."

The Brewers Association, a non-profit trade association representing small and independent American brewers that winds down its celebration of American Craft Beer Week today, defines a craft brewery as "a brewery that produces less than 15,000 barrels of beer per year with 75 percent or more of its beer sold off-site." One barrel of beer is equal to two kegs or 31 gallons. Larger craft breweries like Samuel Adams are classified as regional craft breweries, limited to 6 million barrels produced annually.

Portland's 6,684-square-mile metro area is one-third the size of Phoenix and has half the population of Phoenix, which had 1.49 million people according to the most recent figures from the U.S. Census Bureau. If Portland can support almost three times the number of breweries, this shows promise for brewery growth in Phoenix, industry leaders say.

As of June 2013, the Brewers Association tallied 2,538 breweries in the United States. More than 360,000 jobs were added nationwide in 2012 alone as a result of the craft-brewing industry, according to the association.

Fullmer estimated that there are 51 active breweries in Arizona. He said that 47 of these Arizona breweries are members of the state's Craft Brewers Guild, and he knows of 20 more that are planning to open in the near future.

"I think (breweries) are an indicator of how small businesses are doing," Fullmer said. "If small breweries are doing well, then small businesses are doing well. If we're serious about having a thriving culture in general, where we have a thriving downtown, we need to embrace breweries, restaurants; we need to have grocery stores downtown. It's part of the whole package. Breweries definitely attract things. In 2007, downtown Chandler was very patchy. There was no nightlife. Without (San Tan Brewing Co.), that downtown would not be the same."

Portland brewer Alex Ganum, owner and head brewer at Upright Brewing Co., shared the same sentiment at his own brewery.

"I've always been a big fan of small business for a local economy," Ganum said. "There's nothing better for the economy than small business, in general. I think a very small percentage of the money we spend as a business goes outside the state. We look back at all the money we've spent, and I feel really good about keeping it all around here."

With more than 140 breweries, one might think that the craft-beer market in Portland would be at its maximum capacity. Justin Miller, a brewer at Hopworks Urban Brewery in Portland, doesn't believe this is true.

"The market is not oversaturated," Miller said. "It's just about converting larger beer drinkers into micro-beer drinkers. That's where a lot of the market is in the city of Portland. And with a city like this, if the neighborhood supports you and you stay small and the neighborhood likes you, you'll be fine."

Irene Firmat, CEO of Portland's Full Sail Brewing Co. and one of only a handful of women in the brewing spotlight, said that craft beer is a local movement in Portland and Oregon, but also an entire culture.

"It's very much part of the culture here," Firmat said. "Just recently the state Legislature declared yeast the state microbe. We're a major reason why people come out here for tourism, to visit the brewery and experience the whole culture of craft beer. We have the largest percentage of people in the country here that drink craft beer; it's over 30 percent of the market. Nationally it's only 6 percent, to give you an idea of what the culture is like here."

Bob Grayson, a brewer at Four Peaks Brewery, one of Arizona's largest craft breweries, agrees that drinking local products and having a strong community presence are key to state economic growth. He said before distributing to other states, Four Peaks wants to increase visibility in its home state first.

"There's still room to grow in Arizona," Grayson said. "We want to produce as much as we can in the state and, once we can't grow in the state anymore, then look to expanding outside it. I think that the motto "Drink locally" is really good for our industry that is growing and expanding every day."

However, Joe Campbell, co-owner and brewmaster at Desert Eagle Brewing Co. in Mesa, said to expand there first need to be legislative and policy changes, especially for distribution.

"We're not getting the proper representation that we should," Campbell said. "At one point the cap was higher in self-distribution, now it's lower. So everyone is pretty much forced to go through a distributor to stay in business in Arizona. Literally, what you do is give your beer to a distributor and they can stick it wherever they want to. With self-distribution, it allows a smaller brewer to get their limited quantity of beer out to a place that the most people would be impacted, where they can try the beer and get excited about it."

Like Oregon, Arizona uses the three-tier system to distribute beer. The craft breweries produce the beer and sell it to distributors at a wholesale price. The distributors then sell the beer to stores and taprooms for up to 30 percent more than what they paid the brewery for the product. Then grocery and liquor stores sell the beer to the general public at an additional markup.

Fullmer agrees with Campbell that policy needs to change. However, he admits that some of the problem is that brewers need to gain more education on public-policy matters before the problem is fixed.

"I represent these guys, they all do very well, they're all very smart people, they work well in their neighborhoods," Fullmer said. "I want to harness all their energy, all their great ideas and help public policy understand. If I can make these guys successful throughout the state and if I can help them influence public policy, then I think we can be our own version of Portland."

Beer Economies

Portland

Oregon contributed $1.29 billion to the U.S. economy in 2012.

Portland alone has more than 140 breweries.

Notable breweries: Full Sail Brewing Co., Widmer Brothers Brewing and Deschutes Brewery.

Phoenix

Arizona contributed $664.2 million to the U.S. economy in 2013.

64 microbrewery licenses have been issued in the state.

Notable breweries: Four Peaks Brewery, Desert Eagle Brewing Co., San Tan Brewing Co.