NEWS

Is Michigan craft beer at apex of its golden age?

Alexander Alusheff

Lansing State Journal

GRAND RAPIDS – Dave Engbers admits the first few years at Founders Brewing Co. in Grand Rapids were terrible.

Dave Engbers is the co-founder of Founders Brewing Co. in Grand Rapids.

“We thought we’d make a decent product at a fair price and thought everyone would buy it,” said Engbers, who opened the brewery in 1997 with Mike Stevens. “Nobody did. In West Michigan, craft beer was still new. People were loyal to the domestic brands.”

For years, the brewery flirted with bankruptcy.

"So we said, 'If we're going to go out of business, let's do it on our own terms,'" Engbers said. "Let's brew beer we wanted to drink."

Founders ditched the "unremarkable beers" on its tap list and introduced Dirty Bastard, a Scotch ale with a malty richness and a hint of smoke. And an alcohol content of 8.5%. Breakfast Stout and Devil Dancer Triple IPA would soon follow.

"The turning point for us was when we became a product-driven company," Engbers said. "Part of our success is due to our innovation."

Today, Founders is among the top 20 largest brewers in the country. Its beer can be found in 45 states and 29 countries. In Michigan, it's the second largest brewery next to Bell's Brewery in Kalamazoo.

Craft beer seems to be in the middle of a golden age in Michigan. It had an economic impact of $1.85 billion in 2014, according to the most recent statistics from the Denver-based Brewers Association. When those stats are updated later this year, it is expected to surpass the economic impact the hunting industry has on the state, which was $2.3 billion last year, said Dave Lorenz, vice president of Travel Michigan.

"Craft beer is growing rapidly," Lorenz said. "It's a huge economic driver."

Breweries continue to pop up as well. There are 287 breweries open in the state, according to Michigan Beer Guide, which has tracked the state's craft beer industry since 1997. Another 44 plan to open within the next year.

"The reason craft beer is so successful is the growing change in the Michigan consumer to want something more than the mass market, engineered, cheap beer," said Rex Halfpenny, the publisher of Michigan Beer Guide. "We want something new, something local, more artisanal."

The early years

In the 1990s, you couldn't convince someone to buy a six pack of cloudy, unfiltered beer for $8 when you could get a 12-pack of light beer for $12.

"It was quantity over quality back then," said Steve Bushka, the brewmaster of Frankenmuth Brewery, who got his start at Bell's in 1991 when it was Kalamazoo Brewing Co. "Back in the day, people's palates were different. It took time for their palates to change."

Engbers said when Founders replaced its beer menu, its business came to rely on the craft beer enthusiast niche, who were more loyal customers. He said Bell's and Frankenmuth Brewery were trailblazers for the Michigan craft beer scene before the state allowed brewpubs to open in 1994.

"They cleared the path for the second generation of breweries in the late '90s - Founders, Arcadia Ales, New Holland Brewing Co., Atwater Brewery - that helped build the craft beer community," Engbers said. "They set the standard."

The decline of Stroh's in Detroit also helped push people to craft beer, Halfpenny said.

"Stroh decided to close their Detroit brewery just as (Larry) Bell opened in Kalamazoo," he said. "Michiganders left them and went to something else."

And as people became more accustomed to these new breweries, Buskha said, "beer became a destination."

Beer tourism

An aerial view of the crowd at the 2016 Detroit Beer Festival hosted in the fall by the michigan Brewers Guild. The guilds four festivals across the state draw a combined 35,000 people each year.

When the Michigan Brewers Guild hosted its first summer beer festival in Ypsilanti in 1998, it drew roughly 600 people and 26 breweries.

This year, it expects 13,000 people and 100 breweries to attend, with 1,000 beers available to drink, said Scott Graham, executive director of the guild, a trade association for Michigan craft brewers. The guild now hosts four festivals across the state, which have a combined attendance of 35,000 people.

"We see people travel to Michigan from out of state for the sole purpose of going to breweries and beer festivals," Graham said. "(Craft beer) is going to continue to have a significant impact."

Craft beer has become a pillar of Michigan tourism over the years. Some communities have latched onto their beer scenes, even incorporating it into their brand.

Take Grand Rapids for instance, which was voted Beer City USA in 2012 and 2013 by the now-defunct Examiner.com. It was also voted Best Beer Scene by USA Today readers. If you drive west on Interstate 94 and 96, you'll eventually see billboards that read "Beer City" and "Cool City" in big, bold letters.

It's at the heart of the city's beer tourism marketing plan, said Kate Herron, director of marketing at Experience Grand Rapids. Herron said the Beer City title helps land conventions in the city and visitors from around the state and region. It also helps draw people from metro Detroit and Ann Arbor, who accounted for roughly 20% of beer tourists in 2015, according to an economic impact study commissioned by Experience Grand Rapids.

"We had a strong beer scene before, but the Beer City label was the tipping point for locals saying, 'Oh, wait. This is something people will travel for,'" Herron said. "It definitely exploded."

In 2015, beer tourism drew more than 40,000 people to Grand Rapids, the report said. It had a $12.3-million economic impact in the county, which is now home to more than 40 breweries.

To further promote the local industry, people can pick up beer passports at certain breweries and get stamps for each one they visit. If they visit eight breweries, they get a "Brewsader" t-shirt from the Grand Rapids Art Museum. So far, Experience Grand Rapids has given away 5,500 shirts.

"It's funny what people do for a t-shirt, but breweries are seeing an increase in patrons," Herron said. "Once breweries started coming in, people started seeing it as a destination."

Michigan Brewers Guild has also identified Ann Arbor, Detroit, Kalamazoo, Lansing, Marquette,Traverse City and Ypsilanti as beer-centric communities. Each have their own "beer trails" for people to visit.

"It's not about drinking as is it's about experiencing the atmosphere," Lorenz said. "Craft beer is clicking up on the list that inspire people to travel. People take vacations to go from craft brewery to craft brewery."

The end of an era?

In 2004, Michigan craft brewers accounted for 1.1% of the state market share of beer sales.

A server at the Bell's Brewery stand hands over a sample of beer at the 2016 Summer Beer festival in Ypsilanti.

By 2013, they took up 4.74% of the market share, according to the Michigan Beer Guide. It nearly doubled in 2015 to 8.59%, selling just over 500,000 barrels of beer.

"I still argue it's going to go to 20%," Graham said. "If you asked me 10 years ago, I would have had a hard time saying 10%."

But the time for rapid growth may be coming to a close.

Last year, Michigan craft beer's market share remained at 8.59% despite selling nearly 550,000 barrels of beer.

"We're slowing down now," Halfpenny said.

He attributes the slow-down to the rise in popularity of imports such as Modelo and "alcohol pops" such as Not Your Father's Rootbeer and Henry's Hard Soda. Brewers are also producing more hard cider to diversify their lineup for non-beer drinkers, Halfpenny said.

There's a tough road ahead for Michigan brewers in the distribution market.

"The choices on the shelf are dizzying," Bushka said. "Four years ago there used to be 100 choices. Now there are 300. That's where things are getting saturated."

Graham said some breweries might not be able to maintain the double-digit growth they've seen in the past.

Some Michigan brewers have changed tactics to continue their growth. Bellaire-base Short's Brewing Co. started out-of-state distribution last year to keep up. It was a big change for a company that had a Michigan-only sales philosophy.

In 2014, Founders sold a 30% stake of their company to Mahou San Miguel group of Madrid, Spain, to tap into the international market. Because the stake is larger than 25%, the Brewers Association no longer considers Founders a craft brewery and won't include its sales in the next economic impact study.

Graham said the impact won't be as high without Founders included. That's because Founder's accounted for 14.5% of all Michigan-based craft beer sales in 2016, according to state excise tax reports. The Michigan Brewers Guild still considers Founders as a craft brewery.

Once breweries leave the local market and go into distribution, Engbers said, it gets highly competitive.

"The challenge Founders has is that we're up against local, regional and national breweries that are considered the best in the world," he said. "The consumers will decide your fate."

While the distribution market is becoming crowded, brewers and industry analysts agree that the small neighborhood microbreweries will continue to pop up. Their success depends on the quality of their beer and service.

"We may start seeing the same turnover similar to what we say in the late '90s." Engbers said. "People may realize that running a brewery is not as sexy as it appears. It looks rock n' roll, but its not about drinking beer all the time. You have to dig in, have the right people and put long hours in."

Alexander Alusheff is a reporter with the Lansing State Journal. Contact him at (517) 388-5973 or aalusheff@lsj.com. Follow him on Twitter @alexalusheff.