Beer has flowed through the Rochester area since at least the 19thcentury, when the Genesee Brewing Co.—founded in 1878—opened its doors. Now the largest and oldest continuously operating brewery in New York, the firm completed the first stage of a $49 million modernization in early June. That part of the project included the addition of a new, state-of-the-art brew house and a 13,000-square-foot cold block that contains two-dozen new fermenters.
Though Genesee’s upgrades might reflect optimism about its market, overall beer consumption has stalled.
“The beer industry has been flat overall for a few years now,” says Gregory Dunkling, the founder and director of the University of Vermont’s Business of Craft Beer Program. “As big beer declines in consumption and production, craft beer is making up for that.”
Craft breweries are small, independent operations that individually produce less than 6 million barrels a year, according to the Brewers Association, a nonprofit craft brewery trade group. That part of the U.S. beer industry is flourishing nationally, in this state and locally, even though the industry as a whole appears to have plateaued.
Last year, 7,346 craft beer makers sold slightly more than 25.6 million barrels of their offerings, a 3.9 percent increase over 2017. Retail sales brought in $27.6 billion, 7 percent more than the year before. But will demand drive continued growth—or could craft breweries nationwide and in places like Rochester also reach overcapacity?
New York’s craft brewing industry has boomed, partly because of the state’s Farm Brewery Law, which took effect in 2013. Under that law, craft breweries that use ingredients grown in the state can be licensed to open restaurants, hold onsite tastings and distribute their products. They also can operate up to five offsite, no-fee branch stores around the state.
At the time the Farm Brewery Law took effect, 135 craft breweries called New York home. As of May, 443 craft breweries were doing business here.
“In New York State, we’re opening a (craft) brewery … every week, on average,” says Paul Leone, executive director of the New York State Brewers Association.
Local lovers of good brews have benefitted from that surge. At the end of 2018, the county was host to 26 craft breweries, Leone says. The estimated economic impact: $679.5 million.
New breweries continue to emerge. Sager Beer Works, one of the latest additions to the local craft brewery scene, opened its doors in November. The first brewery in Bushnell’s Basin, Seven Story Brewing, opened last summer and Fairport is slated to gain another, Faircraft Brauhaus, later this year, making the number of craft breweries in Monroe County a moving target.
“Monroe County is second only behind Suffolk County, in terms of total number of breweries,” Leone says, adding that the county might now host as many as 32 craft breweries.
That growing crop of craft breweries has helped draw attention to this area from far away. Rochester found itself on the “The World’s Top 10 Beer Destinations for 2019,” a list compiled by VinePair, which covers on the beers and wines around the world. The city ranked seventh. Paris topped the list.
Good-quality beers lie behind the proliferation of craft breweries, experts say. Also, they are beers that satisfy local tastes.
“It wasn’t so long ago that a brewer would just make a beer, and people would come and drink,” Leone explains. “Now, if it’s not a good beer, they’re not buying it.”
Some of the local brews have been more than good. In the last year, Rochester’s Three Heads Brewing has won gold medals for its Too Kind Double India Pale Ale and Majestic Imperial Stout in statewide competitions, and a bronze medal for its Drie Hoofden Flemish Red. The Roc Brewing Co. and the Lost Borough Brewing Co. also took home medals for their beers.
Craft breweries’ selections usually reflect their personalities and styles. Three Heads offers such brews as Lucky Chocolate Marshmallow Stout, The Kind India Pale Ale and Couch Tour Cucumber Sour. The cucumber sour’s label shows a barefoot astronaut floating high in the air on a couch.
By offering more novel beers than other establishments, or ones that are just different from those offered nearby, individual breweries make themselves stand out.
“Do you do lagers, and everybody else is doing ales?” Dunkling says. “If you don’t differentiate your product or your service, you’re not going to probably reach the projected growth that you have in your business plan.”
Keys to success
Many local operations’ relatively small sizes also might help them secure niches in the market. Kaylyn Kirkpatrick, an extension associate with Cornell University’s College of Agriculture and Life Sciences, says most of the new craft breweries in this area may put out no more than 10,000 barrels a year. They also tend to be very focused on local business.
“These small breweries are typically not distributing their product,” she says. “They’re selling it out of their tasting rooms—a lot of it is intended to be consumed onsite.”
Three Heads, one of the larger local craft breweries, expects to produce as many as 9,000 barrels of beer this year, says Daniel Nothnagle, co-owner and president. Sager Beer Works is a smaller operation. Co-owner and brew master Paul Guarracini says the brewery on track to make 250 barrels of beer this year, including its best-selling New England IPA, It’s My Jam.
“We do make beers that have a high drinkability factor,” he says. “You’ll want to have a full pint—or maybe two.”
Sager proffers its pints only in its 70-seat taproom and restaurant. By selling products mostly—or completely—on site, operations like this might help contain costs.
“Their overhead isn’t quite as big as somebody who’s got to get out and distribute their beer throughout the state,” Leone says. “That’s sustainable.”
Marketing to a largely local clientele also helps an individual brewery focus its energy on developing a recognized place in its neighborhood.
“They’re very neighborhood- and community-oriented places,” Leone explains. “Their taprooms, their personalities and their beer—it’s different in every place.”
Craft breweries also might grab potential customers’ attention with enticements other than good beer. Sager has a full kitchen and offers music on Fridays and Saturdays. The large tasting room at Three Heads hosts local bands each week or so. In the warmer months, patrons can step out onto the patio and sip their brews in the sunshine.
Keeping it local
Blandishments like these bring craft breweries to the attention of important customers—particularly millennials.
“Millennials are really into knowing where their food comes from, really being connected to local,” Leone explains. “Craft beer falls right into that category.”
According to the Dow Jones Media Group’s MarketWatch, 56 percent of millennials surveyed said they drank at least one craft beer a week. Perhaps more important to local craft brewers, about 18 percent of Monroe County residents fell within that age group in 2010.
Will craft breweries continue to multiply? Leone says he doesn’t believe the industry’s growth will end, though it might slow sometime in the future.
“Some (breweries) are going to close, because maybe their beer isn’t good enough or their atmosphere isn’t good enough … or there’s just too much competition out there,” he observes.
A recent report presents a somewhat mixed picture of the current state of the U.S. craft brewing industry. According to the Craft Beer Program report, brewery production rose by 6 percent in 2016, slipping to 5 percent the following year. The number of craft breweries that opened their doors rose by a hair, reaching 995 in 2017. That year, however, craft brewery closings totaled 165—a more than 43 percent increase over 2016.
Matt Simpson, founder and owner of the Beer Sommelier, an Atlanta-based beer consultancy, says the relatively high number of closings is the result of market forces.
“There was a huge influx of … craft breweries,” he says. “We’re now simply finding that those … incapable of sustaining themselves are being culled.”
A growth ceiling?
Is there a limit to the number of craft breweries that any area, including Monroe County, can sustain? Possibly. Dunkling says its already happened in some places.
“There are communities—Portland, Maine, areas around Boston, Burlington, Vermont—where the saturation point is either close or has crossed the line,” he says.
Some Rochester-area businesses have felt the effects of craft brewery proliferation. Unlike operations that only market locally, Three Heads’ tasting room generates only 25 percent of its revenue. The bulk comes from sales to bars and restaurants around the five-county Rochester region, though it also distributes in the Philadelphia area. The business used to sell in other states as well but pulled back.
“It’s harder and harder to sell beer away from your hometown,” Nothnagle says. “There’s so many breweries in every town.”
He says it’s possible the local market could reach saturation in the future.
“There’s only room for so much. A consumer is only going to spend so much,” he says.
Simpson says the U.S. craft brewing industry is not “anywhere near a national or a local saturation point,” but that there are some red flags to watch for.
“When you start to see a lot of them closing down in a given area over a relatively short period of time and you know that some of them were really good and well-managed, then maybe there’s a little too much competition,” he says.
Guarracini of Sager Beer Works believes Monroe County’s craft brewing industry still has room to grow.
“There are many neighborhoods, many areas that still don’t have breweries, or don’t have very many, and you could support more,” he says.