Craft beers draw growth from young drinkers

? Major brewers are expecting to see lackluster sales this year as low-carbohydrate diets and surging popularity of distilled spirits among young drinkers send fewer consumers to the tap.

But the story is different for craft brewers, which use traditional techniques and materials when making beer. They are expecting to see strong growth.

Though there is no strict definition of a craft brewer, the Association of Brewers, a trade group based in Boulder, Colo., defines it as a firm using 100 percent malt as the sugar source in the fermentation process for more than half of its sales volume. This includes companies as large as Boston Beer Co., the maker of Samuel Adams beer, and those as small as O’Fallon Brewery in O’Fallon, Mo., which made about 1,000 barrels last year.

Craft-beer volume should grow between 4 percent and 6 percent this year after growing 3.4 percent in 2003, said Paul Gatza, director of the association.

By contrast, the U.S. beer industry’s shipments are expected to grow less than 1 percent this year after declining 0.3 percent in 2003.

Dubbing their product as better beer, the craft brewers think young drinkers looking for variety are more willing to try a wide range of styles, from dark stouts to golden lagers.

“We’re at a tipping point where we could really start to gain market share,” said Dan Kopman, vice president and chief operating officer at St. Louis Brewery Inc., the maker of Schlafly beer.

Using the association’s figures, craft brewers produced about 6.7 million barrels of beer in 2003, about 3 percent of U.S. shipments.

Craft brewing exploded in the early 1990s, but growth slowed by the end of the decade as the plethora of styles overwhelmed consumers, still accustomed to the kind of lagers made by large brewers. The rapid growth led to uneven quality, which hurt the craft industry’s reputation.

Bill Hoyt, left, and Jack Petrovic package bottles of Pale Ale at the Schlafly Bottle Works in Maplewood, Mo. Such craft brewers are expecting sales growth this coming year as young drinkers continue to try new beers.

Also, craft brewers said imported beers took away some of their steam, drawing away consumers looking for variety.

Now, the industry has matured, leaving firms that offer high-quality beers.

“It’s not a hit-and-miss thing anymore, so there is confidence these products are going to be full-flavored and high quality,” Gatza said.

As craft beers became more accepted in the past 10 years, a new generation of beer drinkers have acquired a taste for the level of hops and malt not found in mass-produced beers, said Bob Sullivan, vice president and chief marketing officer at Boulevard Brewing Co. of Kansas City, Mo.

“There always will be a huge consumer base for people who don’t want the bitterness or full-body of a craft beer, but there are more and more who like that,” he said.

The biggest growth is at established regional brewers, meaning those that brew at least 15,000 barrels a year, Gatza said.

A batch of Pale Ale rolls off the line at the Schlafly Bottle Works brewery in Maplewood, Mo.

“We are at the point where the craft-beer players are maturing,” he said. “There isn’t as much of new people trying to get in and develop brands as there are existing players slowly growing.”

Though the major brewers worry about the loyalty of drinkers 21 to 27 years old, these drinkers are a solid consumer base for Boulevard.

“Our largest per-capita-consumption markets are in the Big 12 schools,” Sullivan said, in areas such as Columbia, Mo., and Lawrence, Kan.

Sullivan believes that these younger drinkers, overloaded by advertising, see Boulevard as more expressive of their personalities and a way to differentiate themselves from an older generation of beer drinkers.

“We’re pretty much just concerned about beer,” Sullivan said. “It’s not just about race cars or women wrestling.”

Gatza said Generation Y — generally people born after 1980 — are a fertile ground for craft beer as they reach the legal drinking age.

Ten years ago, people were not ready for too many choices. But this generation is not brand loyal, Gatza said.

“We’re at the point where there could be more craft brands out there, and it wouldn’t hurt the industry like it did a number of years ago.”