At CoBiz, we took notice several years ago that craft brewing was a flourishing business in Colorado and we wanted to get involved. Now craft brewing is one of our bank niche specialties.
To get an update on what's going on in the brewing industry, we talked with Greg Atkinson, senior commercial banking manager at Colorado Business Bank and our craft brewing banking expert.
What's going on in the brewery industry right now?
Atkinson: Two major forces that have been in play for a while in the brewery industry both deal with competition. One is the sheer number of breweries that are now in business — the competition is very fierce. With Colorado state laws supporting brewery self-distribution and with Colorado banks more than willing to provide financing for canning lines, many small breweries have been able to get their packaged products onto the liquor store shelves. Consumers have accepted "craft in a can" which makes distribution easier for smaller operations, significantly contributing to the boom in competition.
Now we have hundreds of breweries competing for those sales dollars. The growth of the microbreweries has had an impact on the larger, more established breweries.
So now consumers have a huge selection to choose from.
Atkinson: Exactly. Which makes it more difficult for each individual brewery to differentiate itself. A few years ago, if you made really good beer, word got out about your quality. But now, the selection is so large, it's becoming harder for consumers to discern what quality beer is and what it is not.
So, what are breweries doing to address the competition?
Atkinson: Basically, my clients continue to strive to be innovative, make great beers, introduce new and exciting styles, and continue to lead the way in terms of what consumers want as far as trends and preferences. Consistently producing quality beer is still a huge differentiator. The breweries — many of whom have been in the business for a long time — have begun to focus on educating consumers on quality as well as how supporting local, independent breweries has a positive impact on the community.
But we are starting to see somewhat of a "thinning of the herd." We have too many breweries operating in the current environment. With so much competition, there is no longer the perceived financial upside that was there five years ago. As a result, we're starting to see some breweries shut their doors.
Another interesting trend affecting the craft brewing industry is "Big Beer" buying regional breweries as part of a strategy of "if you can't beat 'em, join 'em."
The problem is that consumers don't realize this and they think they are supporting a local brewery when in fact they are purchasing beer made by a much larger organization. The craft brewing industry needs to combat this with more consumer education. Consumers should know what businesses their purchases are supporting and be able to choose the local, independent brewery if that is their preference.
What else is on the horizon for the craft brewing industry?
Atkinson: As a result of Colorado Senate bill 16-197, which will go into effect in January 2019, what is known as "3.2 beer" will go away, meaning that retailers previously limited to selling 3.2 beer will be able to sell full-strength beer. While the impact of this change will take time to fully develop, this change will be significant for all Colorado craft breweries. It will create opportunities for our regional breweries and present some challenges for how the smaller breweries continue to grow their businesses.
The brewery community is known as being a tight-knit group. Have you experienced this?
Atkinson: Definitely. I really like being a part of these breweries' success. The brew process is both complicated and quite interesting. Our brewery clients wear many hats. They are manufacturers, consumer product companies, and in some cases, distributors — all rolled into one. The industry is dynamic and ever-changing. The brewers have always been collaborative and there's a real bond among the craft brewers. The people who work in breweries are very passionate about what they do, and I've found it's really fun to work with people who love what they do.
Why do you think CoBiz and craft brewing work well together?
Greg: Having supported the craft breweries for as long as we have, we really understand the industry and the business. We are able to find a financial solution because of our experience and understanding of the industry.
And, because we are a smaller lending organization, we are close to our customers and understand their needs.
Connect with Greg Atkinson at gatkinson@cobizbank.com or at 303-383-1277.
Colorado Business Bank’s experienced bankers offer a broad range of sophisticated banking services including credit, treasury management, real estate and deposit products. Our brewery clients include Left Hand Brewing, Avery Brewing Co., Epic Brewing Company, Station 26 Brewing and Bootstrap Brewing Company.