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Friday, 27 March 2015 15:04

Heightened demand prompts West Michigan craft brewers to increase exports; some remain wary

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Tim Suprise, the owner of the Battle Creek- and Kalamazoo-based Arcadia Brewing Co. Tim Suprise, the owner of the Battle Creek- and Kalamazoo-based Arcadia Brewing Co.

As global consumers continue to develop an appetite for American craft beers, many Michigan-based microbreweries have seized the opportunity to expand distribution into foreign markets.

While a handful of larger craft breweries have steadily built up their export network over the years, the growing international demand has now spurred smaller operations in West Michigan to earmark a portion of their production for overseas customers.

To capitalize on the international growth potential for craft beer, Arcadia Brewing Co. plans to begin exporting a handful its hop-forward beers – namely its Sky High Rye and IPA – as well as other ales to select European markets this year, said Tim Suprise, the owner of the Battle Creek - and Kalamazoo-based microbrewery.

“There’s a nice demand for good American craft beers right now,” Suprise said. “We don’t need to be everywhere, but we want to be a part of that contingent that’s offering beer internationally.”

Arcadia plans to export about 1,500 barrels — roughly 10 percent of its projected output for 2015 — to markets in the U.K. and Spain.

Arcadia is among the growing number of craft breweries expanding into international markets in recent years. According to recently released data from the Boulder, Colo.-based Brewers Association, the volume of U.S. craft beer exported last year grew to approximately $99.7 million – the equivalent of around 383,422 barrels, up nearly 36 percent from the previous year. In 2012, the craft brewing industry group estimated that American craft breweries exported $49.1 million in beer to international markets.

For Suprise, the growing international market for American craft beer underscores a larger shift in the global beer consumer’s palate.

“We’re almost at a tipping point,” he said. “I’m not going to say it’s a harbinger for people’s taste to change. There are some parts of the world where standard domestic lagers are going to be the preferred beer of choice. When you’re in Thailand, sometimes a thick chewy stout doesn’t do it for you.”

While Arcadia has been watching the industry’s export market grow over the last two years, Suprise wanted to be “very deliberate” in beginning the process and wait until the company’s latest expansion was complete. During the expansion in which the company opened a more than $6 million brewery and taproom in Kalamazoo, Arcadia invested in both its capacity and its packaging quality to ultimately position the craft brewer to consider distributing overseas.

“I wouldn’t have considered exporting until our expansion was complete,” Suprise said. “You want to make sure that your beer is going to hold up in the time it’s going to take to get to market and into people’s mouths.”

Arcadia’s move to export hoppy beers comes as international consumers have shifted to India Pale Ale (IPA) styles that feature unique hop profiles, sources said. It seems American consumers have similar tastes: IPA offerings in the $5.1 billion craft beer industry accounted for more than a quarter of the production volume at craft breweries in the U.S. last year, according to a report this month from IBISWorld.

While Canada and Sweden see the lion’s share of craft beer exports from U.S. breweries, the companies have also started to send more beer to markets in South America and the Asian-Pacific region (excluding Japan), according to the Brewers Association data. Exports to Brazil grew 64 percent since 2013, making it the strongest growth market, followed by 38 percent growth in exports to the Asian-Pacific market.

Given the growth potential for selling beer globally, Grand Rapids-based Founders Brewing Co. plans to increase its international business to between 15 percent and 20 percent of its volume, said executive Bob Kaiser.

“We think that we punch above our weight right now in the international market,” said Kaiser, the international marketing manager for Founders. “That’s been done purposely to get in front of what we feel is going to be a huge development and worldwide revolution in craft beers.”

Currently, Founder’s international push has been in a “holding pattern,” but the company plans to bolster its presence in its current markets and move into new territories when it finishes its latest production expansion in July, Kaiser said. The company is in the midst of a $40.4 million expansion of its production facility that will have the brewery take up an entire block in the city of Grand Rapids and give it room to expand its capacity to up to 900,000 barrels.

Founders exported roughly 7,500 barrels in 2014, which accounted for approximately 4 percent of its total volume at that time, Kaiser said. The brewery currently exports the majority of its beer to markets in Europe as well as Australia and Hong Kong.

Founders previously operated distribution networks in both Canada and Brazil but recently exited those regions in favor of other markets, Kaiser said.


DOMESTIC BENT

Despite the growth potential, not every Michigan brewery has been eager to dive into export sales. To export successfully, breweries need to take into account the added strain of managing international sales networks — many foreign markets lack a three-tiered distribution model —  along with ensuring product quality while the beer is shipped, sources said.

Bellaire-based Short’s Brewing Co. has committed to distribute only within Michigan to keep its operation as streamlined as possible and maintain its local relationship with consumers, said Partner Scott Newman-Bale.

“Our theory is that the craft movement is going so well because it’s a local product,” Newman-Bale said. “In general, the success of the industry is built on those personal relationships.”

While it does not have any plans to consider international expansion, Short’s is growing by adding a new brand, Starcut Ciders, which it expects to distribute in the Grand Rapids market by mid-May.

On a larger scale at Galesburg-based Bell’s Brewery Inc., the decision to eschew exports comes down to sheer production numbers as well as maintaining domestic distribution and quality control, said founder Larry Bell.

Instead of looking abroad, Michigan’s largest producer of craft beer will focus solely on ensuring a steady supply of product for its domestic market – which includes 20 states, along with Washington, D.C. and Puerto Rico.

“We’re too damn busy selling beer in the 20 states we sell to right now,” Bell said. “You have to take care of your backyard. When we fill up the U.S. with beer, we’ll start thinking about it.”

Read 5294 times Last modified on Tuesday, 31 March 2015 18:53

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