Bubbling optimism Small is big: Craft beers, the products of microbreweries and brew pubs, are sipping away at an increasing share of the nation's suds market.

February 13, 1996|By Jay Hancock | Jay Hancock,SUN STAFF

Because of inaccurate information supplied to The Sun, an article in yesterday's business section incorrectly stated the amount of money the Frederick Brewing Co. hopes to raise in a public stock offering. The company expects to raise between $2.5 million and $4.8 million.

The Sun regrets the errors.

Hugh Sisson's Baltimore County brewery is about four times as big as he needs right now.

But he's got an excuse. He's been selling suds for only a few weeks. When the rest of the East Coast discovers his beers over the next five years, he figures, Clipper City Brewing Co. will grow into its oversized britches.

No, Mr. Sisson hasn't been sampling too much of his own product. The rest of the industry is also tipsy with optimism over the outlook for microbreweries and "craft-brewed" beer.

FOR THE RECORD - CORRECTION

Like Mr. Sisson, they expect no abatement of the craft-beer boom. Like Mr. Sisson, they are spending millions on brew kettles, bottling lines and mash mixers in the expectation that if you build it, customers will quaff.

Counting brew-pubs, which sell beer on the premises, the country has been adding three beer makers a week over the past 18 months, said Tony Forder, editor and co-publisher of Ale Street News, an industry paper based in Maywood, N.J.

"The market share that the craft brewer has now is approaching 2 percent, and analysts don't seem to have a problem with it going to 5 percent," Mr. Forder said. "In some areas it's up around 20 percent."

It's not as though Maryland doesn't have regional specialty brewers already: Frederick Brewing Co. in Frederick, the Oxford Brewing Co. in Linthicum and Wild Goose Brewery in Cambridge, plus various brew pubs.

They're adding to production, too.

Frederick Brewing Co., producer of the Blue Ridge brand, hopes to raise more than $750,000 next month in a public stock offering -- the first for a Maryland microbrewery. The money will go toward a new plant and boost capacity from 12,500 barrels annually to 50,000, said CEO Kevin Brannon. A barrel is 31 gallons.

Oxford is increasing its in-house capacity from about 5,000 barrels to more than 7,500, said general manager Mike Jaeger. Oxford also hires other breweries to produce 3,000 gallons or so a year.

Wild Goose is getting bigger, too. Two years ago its annual capacity was 20,000 barrels. This spring it'll be up to 40,000.

"The industry's been growing at about 40 percent a year, and we're just kind of keeping up with the rest of them," said Wild Goose President Jim Lutz.

Clipper City's Mr. Sisson isn't a newcomer. He made beer for years at the Federal Hill pub and restaurant that bears his family's name, but he wanted to expand.

Last year he sold $1 million in stock to local private investors and landed an $800,000 bank loan plus a $200,000 credit line.

The next job was to find a brewery site. Mr. Sisson looked at several buildings in the city, but "we kept running into zoning problems," he said. "We found a couple that were in a gray area in the city, but we couldn't get the zoning people to bend our way."

Clipper City ended up leasing and equipping 15,000 square feet on Hollins Ferry Road, near the huge G. Heileman brewery in Baltimore County's Halethorpe. The first suds came off the line in kegs late last year for sale to restaurants and bars; the first bottled beer was released last week and is being sold in area liquor stores.

The brewery employs three full-time workers and expects to add two more full-timers plus some part-time help, too.

Clipper City comes in two varieties: a full-bodied pale ale and a smooth, malty lager. The company hopes eventually to make four or five year-round products, plus seasonal beers. Mr. Sisson is focusing on the Maryland market for the time being but eventually hopes to ship up and down the East Coast.

If sales in his first year bubble up to expectations, he'll make about 13,000 barrels -- worth roughly $2 million in sales. He hopes to get up to the plant's 60,000-plus-barrel capacity within five years. Boston Beer, by contrast, brewer of Samuel Adams and one of the bigger regional breweries, sells 1 million barrels a year.

Wall Street's taste for microbrews is sufficiently whetted that deal-seeking investment bankers regularly call Mr. Sisson and the other Maryland brewers. Other than Frederick, none plans to sell public stock soon.

In the 19th century, the United States had about 4,000 breweries. Twenty years go, it was down to about 70. Now there are 800 or 900.

Not everybody thinks the market is unlimited. "I do think there's going to be a shakeout in the next 12 to 18 months, and some of us will be here and some of us won't," said Wild Goose's Mr. Lutz.

But the conventional wisdom these days is that for craft brewers, bigger is better, at least relatively. "We believe that competitive pressures are coming to bear that will let the larger craft breweries prosper and will be increasingly tough on the small ones," said Frederick Brewing's Mr. Brannon.

Mr. Sisson, with his thousands of barrels of excess capacity, will drink to that.

"The growth is good, and we still don't know where it's going to end up," he said. "I don't see it becoming cutthroat until the category stops growing."

You could say that, at Clipper City, the glass is three-quarters empty right now. Mr. Sisson thinks the tap is just beginning to pour.

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