Sacramento breweries keep growing, but remain cautious

Every few months, it seems a new brewery opens its doors in or near Sacramento. Clearly, the local beer market is piping hot. Yet caution lingers among the region’s brewers, even seven years after an economic hiccup that saw a half-dozen Sacto-area breweries close their doors. Although drinkers in Sacramento are buzzing on beer, most local beer companies are toeing the waters cautiously and growing slowly.

But not Ryan Graham. Co-founder and head brewer of Track 7 Brewing Co., Graham has plans to get big. He and his business partner Geoff Scott have opened a second brewing facility in Natomas that will turn the faucet on production up to almost 10,000 barrels of beer in the coming year, up from 2,600 in 2014. Moreover, the new tank space will provide the infrastructure needed to increase production for nearly another decade.

Graham is confident in the thirst of Sacramento’s beer drinkers, who have a particular preference for IPAs, to buy and drink everything Track 7 brews.

In fact, demand outweighs supply, and there is almost no choice from a business perspective but to answer back by building the brewery’s production capacity, he says. Now, with Sacramento’s beer market mostly saturated with Track 7 beer, Graham is strategizing on how to conquer markets farther afield.

“It’s going to be tough to make the next jump,” he said. “At the regional scale, we’ll need to convince someone in Oregon or New Hampshire that they should buy our beer and not some locally made beer.”

Ken Anthony, founder of Device Brewing Co. in Sacramento, is also enjoying a boom in business. He has increased his production by threefold since opening in April 2013, and another addition will double the volume again by March. He predicts he will brew 1,100 barrels of beer in 2015.

Yet Anthony considers his a relatively conservative approach to running his business. He and his wife are answering slowly to the pull of the market rather than trying to push forward. Anthony notes that some brewers have, in the past, opened large starting facilities with the hope that they’ll quickly create a fan base to pay off the investment. Some succeed. Some have failed.

“I see that like putting the cart before the horse,” he said. “I’d rather have the problem of constantly running out of beer than brewing so much you can’t sell it. Every time we’ve [ramped production up to the next level], we did it because we had to.”

No one seems quite sure what happened between 2007 and 2010. The national beer industry was booming. But here in Sacramento, Elk Grove Brewing, Beermann’s, Brew It Up!, Odonata Beer Company and both locations of Sacramento Brewing Co. shut their doors and vanished.

The industry rebounded under the direction of a new crop of young brewers, who for the most part seem to agree that staying small—or at least growing conservatively—will serve as a sort of safety net in case hard times come again.

Mike Mraz, owner of Mraz Brewing Co. in El Dorado Hills, says he is funding the growth of his operation with money from the cash register, not from the bank. “That means I have no debt,” he said. “I could literally pull back and not sell a single drop of beer outside the taproom and not suffer. Growing organically keeps you safe.” Mraz has recently added new storage space for his barrel-aging program, known for its sour beer.

But prudence isn’t the only element holding breweries back. They must also consider the availability of hops, which is a constant restraint on beer production.

Mraz says the American hop supply is just barely enough to feed the beer industry. Growers generally respond to demand when deciding how many acres to plant, rather than growing a surplus, which cuts the prices they’ll ultimately receive, Mraz said. A brewer who isn’t carefully watching his books runs the risk of over-investing in tank space without the hops to make enough beer to pay back the loans.

But even between hops and economics, there seems to be nothing standing in the way of Knee Deep Brewing Co. in Auburn. Andrew Moore, the company’s general sales manager, said barrel production is ballooning.

Last year’s output of 6,200 barrels will jump to 13,000 this year, and he says Knee Deep’s hop contract gives room for the brewery to double in size every year. That means the company could be making 100,000 barrels in three years. (For comparison, Russian River Brewing Company does less than 15,000 barrels a year, and Sierra Nevada does nearly a million.)

Knee Deep beer is sold in 10 states already, and distribution is soon going to hit eight new ones. The beer is sold all around Western Europe, in Beijing and in Shanghai, while distributors in Latin America are showing interest, Moore says.

The sixth annual Sacramento Beer Week is this week and promises to be as big as the event series has ever been. Indeed, the buzz over craft beer is growing into a roar.

But John Zervas, the publisher of local Hops to Table magazine, points out that hype and excitement don’t necessarily mean great beer is flowing. Zervas says he has several favorite breweries in the area. But Sacramento, in his opinion, has a ways to go to reach levels of beer-savvy maturity seen in brew-centric places like San Diego, Portland and San Francisco.

He thinks many brewers are still inexperienced, a trait that can sometimes be tasted in their beer by educated consumers. The market is thriving in part, he says, because of consumers too green to identify subpar beer—but that equation, he warns, will not last forever.

“If the market doesn’t step up and make better beer, people will start going to other places to drink beer, and the market will crash again,” he said.

But others are more confident. Graham at Track 7 says the biggest problem he sees in the local beer market is a surplus of beer. “It used to be easy [to buy beer in a grocery store],” he says. “You had two or three choices.” Now there may be hundreds.

Anthony at Device points out that about half the people who enter his brewery are first-timers.

“But that doesn’t mean that people are only coming into my brewery once,” he said. “It means we’re getting busier and busier.”