Tapped out

As brewmaster Brian Cofresi led the way into the ramped brewhouse, the smells of sweet warm mash and steam teased my nose.

He has worked as brewmaster at River City Brewing Company since 1999. Noting the high number of craft breweries per capita in Portland, Ore., he figured, why not have a thriving beer scene here in Sacramento? So he slapped a yellow sticker on the side of the brewing tanks facing the crowds of strolling Downtown Plaza shoppers:

“Support your local brewery.”

“It started out as kind of a joke,” Cofresi said, swirling golden liquid in a sampling glass. Then the economic downturn hit, and the joke turned serious, as one after the other, Sacramento breweries began closing the taps. Underneath the yellow sticker, Cofresi drew a tombstone—“RIP Local Brew,” reads the epitaph—and began listing the fallen: Elk Grove Brewery, Beermann’s Beerworks, Greenhouse and both of Sacramento Brewing Company’s locations.

I met Cofresi two weeks ago when I stopped in to sample his brews. To celebrate the first Sacramento Beer Week, SN&R sent me to local breweries to find the best suds in Sacramento. (Tough job, I know. Check out the article in next week’s special insert.) Hopping from one brewery to the next, I learned that local brewers like Cofresi make damn good beer.

However, as I made my rounds, another story emerged: Sacramento has lost half of its most well-known breweries, many of them in the last 12 months. In part, it’s because the economy has compelled diners to eat at home. In addition, the breweries that have survived have had to adapt to rising grain prices and, according to some, a lack of interest from Sacramento drinkers. Add it all up, and Sacramento stands alone in losing so many breweries, according to Julia Herz, craft beer program director at Brewers Association, an organization representing around 70 percent of the nation’s brewers.

The loss of so many Sacramento brewers is “not something that we are seeing as a trend,” Herz said, noting that nationwide, fewer breweries closed in 2008 than in 2007. Tom McCormick, executive director of the California Small Brewers Association, also said he doesn’t see the decline in Sacramento breweries as a statewide trend “in any broad basis.” California has seen more openings than closings. Sacramento’s closures are “kind of unique to the area.”

McCormick closely follows the local beer business. He even makes a point to get to know the local brewers. For the most part, “Sales are up, and continuing to go up. It’s just getting harder to stay in the black.” At regional breweries like Auburn Ale House, Truckee’s Fifty Fifty Brewing Company and Chico’s Sierra Nevada Brewing Company, sales are up across the board.

While the story behind each now-shuttered Sacramento brewery is unique, they had one thing in common, McCormick said: “Each one was struggling and on the fence before the economic downturn.”

Elk Grove Brewery?

“Location, location, location,” said McCormick. “That Old Elk Grove location was not good for an on-premise [brewing] business.”

Beermann’s Beerworks?

“They didn’t find a good point of differentiation in the market,” he said, meaning their beers didn’t stand out from the competition. They also did a lot of low-margin contract brewing, renting out their tanks to other brewers.

Greenhouse?

“They went in and out of business very quickly. That was just bad timing,” McCormick explained.

In 2007, word spread around the industry that hops would soon be in short supply. “Buy your hops now or you won’t have anything to brew this year,” remembered Peter Hoey, formerly brewmaster at SBC. A major fire in a hop warehouse didn’t help, either. Hop prices skyrocketed. River City’s Cofresi said premium German hop prices jumped from $5 per pound in spring 2007 to $35 per pound just a year later. Malt prices soon doubled. The result? Slimmer margins for brewers and higher prices for consumers. Remember when microbrew six-packs sold for around $7? Now they’re creeping towards $10.

Let’s be clear about one thing: Sacramento’s brewery problems don’t stem from bad beer. Even with the price increases, people keep drinking local beers. Area brewhouses have brought home slews of awards. At Brew It Up, the downtown brew-it-yourself restaurant, dozens of award ribbons are tacked to the walls in the fermentation room. Rubicon Brewing Company has taken home awards from both the Great American Beer Festival and the World Beer Cup.

When I visited Rubicon, Sudwerk Privatbrauerei Hubsch, River City and Hoppy Brewing Company, the bar areas were packed—sometimes elbow to elbow. The restaurants? Less than half the seats were filled.

Hoey said the drop in restaurant traffic in part killed SBC. He also pointed out how the multilevel, two-kitchen Beermann’s struggled to keep its seats filled. The bigger the restaurant, the harder it is to gauge how many staff you’ll need for the night. Service suffers when understaffed restaurants handle large, unexpected crowds. Too many staff and you lose revenue. This problem isn’t confined to breweries, either.

“Larger restaurants have higher labor costs,” Hoey said. “Just look at all the Applebee’s and Chili’s that have shut down.”

Hoey pointed to Rubicon as a good balance between bar and restaurant space. “With just one bartender and two servers, they can cover the entire floor,” he said. “The economy is forcing entrepreneurs to be more creative with their capital.” He should know; after SBC closed, he started up Odonata Beer Company, which contracts tanks at Sudwerk. His supply is moving so fast he can’t keep enough beer in stock. After he dropped off the last three cases of his top-rated Rorie’s Ale in San Francisco, it sold out in 20 minutes.

Hoey holds a degree and “half of a master’s” in economics and believes the market is forcing today’s breweries to adopt more traditional business models, including business plans and marketing strategies. Recently, Sudwerk hired a marketing guru to take its award-winning beers to a larger national market, a first since its 1989 opening. Rubicon plans to finally jump back into national and international competitions. Each of the brewers I spoke with hoped Beer Week would give their bottom lines a much-needed boost.

Odonata is currently working with the city to find a location of their own. For now, Hoey hopes to cash in on the strong “eat local” movement and get people drinking local beers.

“There isn’t a fiercely loyal local following like in Portland or San Diego,” Hoey said, referring to the burgeoning local craft-brew movements in those cities. (Take it from this former San Diegan: America’s Finest City loves their local brews. What beer lover hasn’t heard of Stone Brewing’s Arrogant Bastard Ale or the Karl Strauss line?)

Where does that leave established breweries like River City? The odds may be stacked against them. These days, businesses at the Downtown Plaza barely hobble along. But Cofresi smiled as he sipped from his sample glass and nodded when I asked if this was still his dream job. The last line on his grim tank-side memorial seemed somehow optimistic. It reads:

“This space left unintentionally blank.”