Beer Man

More equals less: Colorado breweries are pulling out of some states as they grow in others

Great Divide made beer drinkers in six states cry last week when the Denver brewery acknowledged that it had pulled its beers from the shelves there.

In addition to Michigan, Rhode Island, Connecticut, Kentucky, New Mexico and Alaska, the brewer is leaving Washington, D.C. and has significantly reduced its distribution in parts of Minnesota, Illinois, Pennsylvania, New York, and Virginia.

"We appreciate the kind words and understanding we have seen from our customers in these areas and appreciate everyone who drinks our beer," Great Divide, which recently expanded into Southern California, said in an early April statement. "We do not relish the decision to shift out out-of-state distribution and we hope to be back in states in the future. However, at this time, we simply do not have the capacity to meet all demand."

The news got an extra bit of attention nationwide because it came on the heels on a similar announcement by Dogfish Head, the trend-setting Delaware brewery that starred in the (recently cancelled) Discovery Channel show, "Brew Masters," last year. Dogfish Head said goodbye to Wisconsin, Indiana, Tennessee, and Rhode Island.

But Great Divide isn't alone in Colorado. Oskar Blues, Left Hand and Avery have all been pulling their beer from certain states over the past few months. And not because they are having trouble selling their beer, but because they are selling so much of it.

It seems counter-intuitive for a company to pull back if it is growing, but the reasons are clear, says C.V. Howe, the spokesman for Boulder's Avery Brewing.

"We are in a position where we can now afford to get out," he says. In the past, Avery tried to break into every market it could in order to sell its beer. Now the demand is so high that it has been forced to focus on fewer markets just to keep up.

"We had markets where we could grow by 200 perecnt if we could supply enough beer, but right now, our beers are gathering dust on the shelves in some of them and that is taking away from the markets where the beer is turning over fast," Howe explains.

Avery is now in parts of thirty states, after having left Connecticut, Rhode Island and the San Francisco Bay Area of California. And there could be more shrinkage on the way.

It's good for the brewery, Howe says, but "It's a shame for beer drinkers because there are always people in every market who are real die-hard fans. There's not much you can say to them other than, 'I wish there were 1,000 more people like you.'"

Last summer, Oskar Blues -- which is growing so fast, you can see stretch marks on its cans -- essentially ran out of beer, telling out-of-state distributors that it simply couldn't match the demand; the company also pulled out of states like Idaho and Nevada, entirely. Since then, Oskar Blues had dramatically increased capacity, but it is focusing on the states where it does the most business rather than returning to the ones it left.

Oskar Blues spokesman Chad Melis understands that the decision made some people angry, but, he says "it's a good problem to have" as a brewery. He also says the brewery hopes to return to some of those states one day.

At Left Hand Brewing, also in Longmont, demand is so high that the brewery grew by 30 percent last year and is on pace to grow by 60 percent in 2011.

As a result, Left Hand has left Alaska, Iowa, Eastern Tennessee, and the Florida and Alabama panhandles. It is now in 28 states.

Left Hand marketing director Chris Lennert echos his colleagues in saying that the goal is to increase marketshare in its biggest areas. "Honestly, I'd like to be double our size in the next five to ten years but in fewer states," he says.

Follow Westword's Beer Man on Twitter at @ColoBeerMan.

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Jonathan Shikes is a Denver native who writes about business and beer for Westword.
Contact: Jonathan Shikes

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