Five minutes from Salt Lake City Salt Palace Convention Center is Squatters brewpub, a downtown venue that’s also a major site in craft beer history. Jeff Polychronis and Peter Cole opened the brewpub in 1989—shortly after fellow brewer Greg Schirf launched Wasatch, the state’s first brewpub, in Park City. Joining forces later as the Utah Brewers Cooperative, the Squatters and Wasatch venues operated independently until 2015, when investment firm Fireman Capital Partners created Canarchy Craft Brewery Collective, bringing them into the portfolio and soon adding the Oskar Blues and Perrin brands.
Fireman Capital Partners, led by former Reebok chairman and CEO Paul Fireman, witnessed the stunning rise of craft beer and saw an opportunity to create a canned craft beer movement. Canarchy was thus created, and today has seven breweries sprinkled across the United States, each operating as an independent craft brewer under the Canarchy umbrella. “We wanted to partner with the best brands in the most populated states,” explains Canarchy president and COO Matt Fraser. In addition to Squatters and Wasatch, Canarchy’s holdings include Oskar Blues Brewery, with locations in Longmont, Colorado and Brevard, North Carolina; Cigar City Brewing Co. in Tampa, Florida; Three Weavers Brewing Co. in Inglewood, California; Deep Ellum Brewing Co. in Dallas; and Perrin Brewing Co. in Comstock Park, Michigan.
In 2019, Canarchy—which is headquartered at Oskar Blues in Longmont, Colorado—shipped an estimated 480,000 barrels, up 14% from the previous year. Its two national brands are Oskar Blues, which is sold in all 50 states, and Cigar City, whose footprint covers 40 states. Oskar Blues’ first product, Dale’s pale ale, was launched in 2002 and today is the fifth-best selling IPA in canned 6-packs in grocery chains, based on IRI data, retailing for $9-$11. Oskar Blues founder Dale Katechis first sold his namesake product at restaurants. “Dale was a pioneer,” says Oskar Blues marketing manager Aaron Baker. “He put the beer in a can when major volume producers ruled the can market. Now a third of craft beers are sold in cans.”
Cigar City’s Jai Alai IPA has been a breakout success as one of the top selling craft 6-pack cans nationally, having shipped 125,000 barrels in 2019. “We were ahead of the curve when we launched in 2009,” says Cigar City business development manager Neil Callaghan. “The focus on IPAs then was a more bitter profile with pine notes. But we shifted to a tropical fruit and citrus profile.” Callaghan adds that Jai Alai is becoming the craft beer brand that most people associate with Florida. “Tourists return to the Midwest and other regions and take the brand interest back with them,” he notes. Jai Alai retails for an average of $11 a 6-pack of 12-ounce cans.
There are about 8,000 craft brewers now in the U.S. “Growth is continuing, but not as fast as brewery growth, meaning that the market growth is getting sliced into smaller and smaller pieces,” says Bart Watson, chief economist at the Brewers Association. “It’s more challenging than ever to make your individual brands relevant in the marketplace, especially as you travel further from your home base.”
Brewers who want to survive need capital, creativity, and moxie. “The days of opening a craft brewpub and it being packed six nights a week are getting fewer and fewer,” notes Fraser. “There’s so much competition. You have to find ways to be different, beyond just being local.”
The Brewers Association’s mid-year 2019 report estimated 4% production growth year-over-year for small and independent brewers, slightly down from 5% in 2018. That contrasts with Canarchy’s 14% sales uptick, albeit from a much smaller base. “It’s a combination of winning innovation and keeping our flagship brands healthy,” says Fraser. Canarchy has no immediate plans to add brewers, but it’s scouting expansion options in the Northeast, Midwest, and Pacific Northwest. “We have breweries calling every day, but we’re particular in terms of culture and geography,” Fraser adds.
All Beer Is Local
While dedicated to establishing cans as the proper vessel for quality craft beer, Canarchy is also riding a wave of consumer desire for more authenticity and freshness in their beer choices, and for a product experience that keeps them interested and coming back. “Our vision is to produce any brand in any facility to get fresher beer faster, locally,” says Callaghan. “If you’re a Los Angeles beer consumer and you want Jai Alai from Cigar City, it’s better for it to be shipped from a local Three Weavers production facility since consumers look for freshness and ‘canned on’ dates.”
How local consumers experience a beer is also in Canarchy’s sights. Its answer to being a cut above the typical brewpub is the Collaboratory, a new concept that aims to be a full-service restaurant, brewpub, and brewers’ innovation lab all in one. It opened last year in Asheville, North Carolina and is the first Canarchy-branded property. Cigar City brewmaster Wayne Wambles leads the weekly brewing of small batch beers on site, inviting collaboration between Canarchy properties as well as with local brewers like Hi-Wire Brewing and Asheville Brewing Co. The new expressions are poured at the restaurant and taproom and may even make their way into volume production. “It’s the next evolution of bringing minds of the collective together and coming up with new innovations,” explains Baker. One Collaboratory innovation is a top-seller on tap at the venue: Serre Cucumber Basil Wheat, a Belgian-style beer priced at $4-$6 a 10- or 16-ounce pour.
In January, the collective launched its second concept, a Cigar City-branded, full-service restaurant focused on Florida-inspired cuisine. It replaced the existing taproom facility at Cigar City’s brewery near Raymond James Stadium, where the NFL’s Buccaneers play. “We’re trying out 50-100 small batch brands annually at the taproom, using it as incubator for Cigar City,” says Callaghan.
A new flavor of local competition is emerging from boutique taprooms, according to Amy Tangaro, senior marketing manager for Wasatch and Squatters beers. Like food trucks, these pop-up taprooms have no distribution channel and do small experimental runs. “They’re taking a cult approach—appealing to consumers who are less brand-loyal and yearn for the exclusivity of limited-run beers,” says Tangaro.
The Utah brands got a big boost against the competition in 2019 when a new Utah law raised the legal abv for beer sold in grocery and convenience stores to 5%. The 1% jump is significant, allowing the local beers to compete more effectively against national brands. “Our pale ales totally sing at 5%,” says Tangaro, noting that Squatters Hop Rising Double IPA is the top selling off-premise craft beer in the state.
Craft brewers have enjoyed the rising acceptance of cans as a more upmarket package. “It was an aversion for some, but we’ve broken barriers in the last two years,” says Courtney Hamblin, beverage operations director for ten venues at the JW Marriott and Ritz Carlton’s L.A. Live properties. She offers a handful of canned craft beers throughout the menus, including Oskar Blues Mama’s Little Yella Pils ($8 a 12-ounce can) at Glance, the JW Marriott lobby bar and restaurant. Cans even grace the menu at WP 24 by Wolfgang Puck, the Ritz Carlton’s fine dining venue. “It’s about the presentation,” Hamblin says. “We show the can and pour it into the appropriate glassware. Customers like the fine dining experience, so we make it upscale.”
Canned beers are a staple item at upmarket urban venues like YellowBelly and Retreat Gastropub in St. Louis. Tim Wiggins, co-owner and beverage director of the sister properties, carries a mix of Canarchy beers and local craft brews, including its house-label brand produced by local brewer Rockwell. Retreat, an 80-seat venue in the midst of downtown startups, offers 40-50 craft beers, including ten that rotate on tap and 30 in cans. A top-seller is the 4.9% abv Oskar Blues Pinner Session IPA ($5 a 12 ounce can). “It’s the benchmark for flavor and low abv,” says Wiggins, noting that his customers are looking for less bitter, lower-alcohol beers they can consume while socializing. “Craft beer is trying to hit the volume beer consumer,” he adds. “All producers are coming out with lighter beer versions.”
Getting On The Shelf
Off-premise, the canned craft beer story is similar. Consumers’ search for the next interesting flavor profile, the pressure on retailers to bring in more variety, and the inclination to buy local first makes capturing shelf space a difficult proposition. “Regional producers are having a tough time because everybody is so focused on local—that has hurt the big national brands,” says Jay Martin, COO and executive vice president at Florida-based distributor J.J. Taylor. The firm distributes 600,000 cases of Cigar City and 12,000 cases of Oskar Blues out of a total 21 million cases of beer in Florida. Martin also oversees distribution of 6 million cases in the Minneapolis–St. Paul market. “Canarchy has the right strategy,” he says. “They play off the local trend, nurturing the brands and then turning them into retail brands.” The competition for shelf space in the craft canned beer category is getting even tougher as Sam Adams, Sierra Nevada, and other major, established brands are adding cans, Martin notes.
At California’s K&L Wine Merchants, beer and cider buyer Stephanie Vidales focuses on craft beer at the company’s locations in San Francisco, Redwood City, and Hollywood. “The number of new breweries is starting to slow down, and new ones are facing extreme competition for shelf space,” says Vidales. To attract customers, social media and a good rating on apps like Untappd are critical, she adds. About a third of K&L’s 600 craft beer SKUs are in cans. “Millennials don’t care about packaging, while older generations still hold the stigma that cans are lower quality,” Vidales says. The most popular sellers are hazy IPAs from local producers like Laughing Monk Brewing ($4-$5 a 16-ounce can) and Barebottle Brewing Co. ($4-$6). Another hit is the Seven Stills cocktail-inspired kettle sour ale, The Negroni ($4). Vidales rotates offerings constantly to satisfy customers “who want the freshest IPAs possible.”
For better or worse, the craft beer industry is now married to the hard seltzer trend. Oskar Blues’ Wild Basin Boozy sparkling water, at 5% abv, 100 calories, and zero grams of sugar, is one of four hard seltzer products that Canarchy markets. “It really aligns with the cultural shift, with consumers moving to lower-calorie offerings and becoming more conscious of what they put in their bodies,” says Fraser.
Hard seltzer, driven by the runaway success of White Claw and Truly, is finding its way into brewpub taps and cocktails. “After a few beers, our customers like to wind down with seltzer,” says Squatters’ Tangaro, who offers options like the brand’s own Grandeur Peak Ruby Red Grapefruit Spiked sparkling water on draft. “Though beer has lost share to spirits over the last few years, seltzer can bring in new drinkers and pull drinkers back into the beer category,” adds Martin of J.J. Taylor.
The next trend is CBD-infused beverages; they’re increasingly being considered by craft beer producers as marquee brands like Lagunitas step into the space. Lagunitas Hi-Fi Hops ($7 a 12-ounce can), offered at dispensaries, is a non-alcoholic, zero-calorie, zero-carb product that’s infused with THC. The Brewers Association says that it’s aware that many of its members are interested in exploring CBD use in food products. Canarchy is also looking at CBD. “We’re intrigued and following it very closely,” Fraser says. “If we see a place for us to play in it we might get into the space, but nothing is on the books. We’re a craft beverage company. We see all the beverage categories as competition.” As craft beer evolves to low alcohol, hard seltzer, and CBD possibilities, moving from “beer” to “beverage” might be the smart move.