Craft Beer Booming In Nebraska
February 5th, 2013
When the economic recession hit in 2008, many industries experienced a drop-off in sales and growth. Not true for the craft brewing industry, which had double digit growth throughout the recession. In Nebraska, new breweries weren’t just created during the recession, but thrived as well.
Few people can say they work with Certified Evil on a daily basis, but at Lucky Bucket Brewing Company in La Vista, Neb. it’s quite common. Certified Evil isn’t some sinister villain. It’s a Belgian style strong ale and one of Lucky Bucket’s top sellers.
The brewery is housed in an 18,000 square foot facility, containing six fermenting tanks standing three stories tall. Adam Cunningham has worked at Lucky Bucket since 2009. Like everyone at the brewery, he wears many hats. In addition to running the bottling line and brewing on occasion, he is also the man in charge of getting the beer out of the tanks and into the kegs.
“We’re not brewing beer to try and out do someone else,” Cunningham said. “We’re just trying to make the best beer we can make, and hopefully people like it.”
Lucky Bucket is part of the growing craft beer industry in Nebraska. The Brewers Association defines a craft brewer as small, independent, and traditional. Small means they produce less than 6 million barrels of beer a year. Independent in that they’re at least 75% owned or controlled by a craft brewer, and traditional meaning half of their brews are malt beer.
Craft breweries are not necessarily micro-breweries. According to the Brewers Association, micro-breweries produce less beer, and are usually housed in brew pubs (restaurants which make their own beer). Also, not all micro-brews use malted barley in their beer.
According to a leading market research company, Mintel in Chicago, the national craft beer industry has nearly doubled in the last five years. The Brewers Association ranked Nebraska at 14th per capita in craft breweries in 2011, with roughly one brewery for every 101,000 residents.
Lucky Bucket started crafting beer four years ago. Jason Payne is the owner, founder and president. The 35-year-old holds degrees in biology and chemistry, which he said helps him formulate the recipes enjoyed by increasingly more Nebraskans.
“I think the first year we did about 400 barrels. The second year we did about 4,000 barrels,” Payne said. “This year, we’re just under 7,000 barrels, but we’re aiming high; we’re shooting for maybe 10 (thousand) next year.”
While brewing may be a science, not every brewer is a scientist like Payne. Brian Podwinski was a Lincoln police officer for six years. After drinking his first craft beer around 10 years ago, he said he was bitten by the brew bug.
“After we brewed for a while, more and more of our friends said they really liked our product and wanted to have us brew different things for fun,” Podwinski said, “and we figured we’d take it to the next level and brew it professionally.”
Podwinski is now the president of Blue Blood Brewing Company in Lincoln. While making beer is fun, he said making a living in the industry isn’t always easy.
Podwinski says craft brewers need to overcome a domestic beer culture by educating consumers about the different flavors and varieties.
Craft brewers are also in competition with companies like Anheuser-Busch, a subsidiary of Inbev, a Belgium based beer giant.
Anheuser-Busch Inbev, through its many brands, provides Americans with more than half of all their beer.
Many craft brewers, however, say the sheer size of companies like InBev is what’s driving more consumers to buy local.
Caleb Pollard is partial owner of Scratchtown Brewery. Pollard and his partners are currently in the process of constructing their facility in the Central Nebraska town of Ord, Neb. and should be open this summer. He said Scratchtown represents a movement in the beer industry of returning to the pre-prohibition model of regional brewers.
“What we’re trying to do,” Pollard explained, “is carve out a major part of the market from the large scale domestic brewers, of which, aren’t even owned by American companies anymore.
“We’re going against a system, a domestic beer producing system, that is focused on investor return, focused on market share, and is focused on profits,” Pollard continued, “and when you look at the craft beer industry, the primary responsibility of the craft beer industry is to produce good beer, and be passionate about producing good beer, and the profits are following that.”
Pollard said he’s confident Scratchtown will do just fine in Ord. Finding someone to deliver his product to retailers, however, may be easier said than done, since Ord is 65 miles from the nearest distributor.
Scratchtown may have some difficulty finding a distributor, but most craft breweries in Lincoln and Omaha enjoy the benefits of being close to distributors.
At K&Z Distributing Company Inc. in Lincoln, forklifts moving swiftly to fill orders is a common sight. K & Z primarily distributes products from MillerCoors, but President Deder Knezovich said he has plenty of craft brews in his portfolio to offer clients.
Knezovich said craft beers must be carefully chosen for distribution, because competition at the retail level is fierce.
“It’s a fight in the stores, because you have limited shelf space,” Knezovich explained, “and in the bars you have limited draft handles, so you’ve got to do your best on how you differentiate yourself.”
A family-owned business, K & Z has been in operation for more than four decades, and they distribute primarily MillerCoors products in a 50-mile radius around Lincoln. K & Z started playing a vital part in Nebraska’s craft beer industry when they began carrying craft brews nine years ago.
Distributors like K & Z are sometimes referred to as the “gatekeepers to the beer world” by craft brewers. After prohibition ended, a three-tier system was established to distribute beer. Under the system, breweries must use distributors to deliver their products to stores. Knezovich said sometimes offering a new craft beer might mean taking one of his other products off his clients’ shelves, what he called a “management decision.”
But Knezovich said he and other distributors are quick to recognize the sales boom craft beers are creating. Knezovich said they easily make up the fastest growing segment of his portfolio, accounting for nearly 25 percent of his business.
As Knezovich described it, it’s the kind of growth which is forcing larger beer brewers to take notice and adapt.
“They even have differentiated themselves, the MillerCoors portfolio, as having established a micro-craft area or brand focus in their own corporation,” Knezovich said. “So they’re noticing there’s a big player out there to differentiate and go from there too.”
Even though distributors like K & Z and Double Eagle Beverage in Lincoln and Quality Brands of Omaha are more than willing to distribute craft beer, because breweries are prohibited from self-distribution, some smaller brewers feel they’re at a competitive disadvantage. That’s why there are now talks to change the system.
Paul Kavulak, owner of Nebraska Brewing Company in Papillion, Neb. is also the president of the Nebraska Craft Brewers Guild. He’s working with brewers like Pollard and Podwinski, as well as state legislators, to try and change Nebraska’s laws to make it easier for smaller craft breweries to do business.
“In many cases, it doesn’t make a lot of economic sense,” Kavulak said, “for [the brewer] or the distributor, so there’s some thought that maybe things should change a little bit to let these startups have some ability to service their own products and avoid the unnecessary struggle of trying to get this thing off the ground.
“When they grow up big enough that the distributors are very attracted by [the brewers],” Kavulak continued, “and there’s a great economic model for both of them, then the model shifts.”
Kavulak said making it easier for smaller breweries to do business will not only help grow the industry, but it would create more jobs as well.
In addition to employing people at the brewery, Pollard said local farmers could benefit as well by growing hops and barley, key ingredients in craft beers.
“There are plenty of opportunities for Nebraska producers to look at the craft beer industry, not just in Nebraska, but on a global scale, and look at possible secondary activities on their farm,” Pollard said. “Value added ag opportunities on their farm that can help margin the differences between market fluctuations in corn, soy beans, and the other types of row crops with specialty crops that are servicing a growing industry.”
A growing industry with growing demands, which craft brewers in Nebraska look forward to meeting.
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