Montana Brewers, Taprooms Prosper in Local Markets, Drawing Tourists

By Bill Schneider, 3-25-08

Editor's Note: A couple months ago, in a moment of weakness, I decided to take on a new challenge, a year-long tour of Montana's microbreweries and write an article on each one. Today, I'm launching that new series on NewWest.Net with this overview of the industry and how microbreweries fit into the economic and tourism pictures in Montana. I'm also posting the first of long series of features on individual breweries starting with the Lewis & Clark Brewing in Helena. You will also be able to see the articles on the Travel Montana website, visitmt.com. Throughout the year, I'll be visiting most microbreweries in the state and posting profiles on them and their owners. After I finish this series, my byline might be a little scarce for a few months while I'm in recovery.-- Bill Schneider

When you think of vacationing in Montana, you visualize the snow-crowned mountains, ski slopes and hiking trials; the wild rivers, trout and whitewater rafting; the endless prairie; the expansive ranches with their cowboys and cattle drives; the rich history with ghost towns and the famous artists; and the rest of the usual suspects that fill up tourism brochures and real estate websites.

You don't normally think about tiny breweries tucked away on side streets and their quirky taprooms. But times are a'changin. Not only are more locals drifting away from the casinos and Bud Light and into the tasting rooms for some really good beer and really friendly folks, but tourists are seeking them out as hot spots of "local color."

For the big national brewers, sales have been declining for years as the health conscious leave the customer base, but the reverse has been true with microbreweries in Montana. "The microbrewing industry is doing quite well in Montana," boasts Sam Hoffmann, president of the Montana State Brewers Association (MSBA) and owner of Red Lodge Ales. "All the breweries started up in the last ten years are well established or going through expansions. I'm pretty sure most of us are seeing double-digit growth. I sure am."

	What is it? Montana Gold -- 1,500 gallons of microbew almost cooked. Photo by Bill Schneider.

Montanans have a long tradition of enjoying their beer, and the state always scores high in per-capita consumption. That reputation hasn't been lost on a lot of tourists, at least those who like to partake in a cold brewski after a long day of skiing, hiking or flycasting.

"Montanans spend more on beer more capita than most other states, so that helps," adds Hoffmann. "And with tourists, there seems to be more interest in local products than ever."

A recent visitor-use study conducted by Travel Montana confirms the importance of microbreweries to the tourism economy. For people anticipating a vacation to Montana, 54 percent said microbreweries would be something they would "most likely participate in" while in the state and 17 percent said it would be a "primary" purpose. Of those who actually made the trip, 13 percent followed through and visited breweries or taprooms.

"We haven't as a group been promoting a Montana beer tour, which is probably a great idea, but it just hasn't happened yet," Hoffmann explains. "We all get a lot of tourists coming through our places. We probably should do more to promote beer tourism. Wineries have been doing that for a long time, so hopefully, that's coming for us."

In the mid-1900s, Montana had a dozen or more breweries surviving on local markets but restricted from selling beer directly to consumers. Then, the age of mass distribution started. After a few thousand eighteen-wheelers of Bud, Miller and Coors products unloaded in Montana, most local breweries folded.

What brought them back? Several changes in the marketplace.

	"Miller and Budweiser still think this is a fad, but they're wrong." --Sam Hoffmann, president, Montana State Brewers Assn.

Chief among them is taste. Hoffmann remembers how Anheuser-Busch trying to sweep up a 100 percent of the market by getting distributors to only sell their products, "but they failed miserably."

People wanted the good stuff, Hoffman believes, but the Bigs persisted in making tasteless, long-shelf-life beer. "The beer they made got blander and blander, and we made beer with taste."

Hoffmann feels this dissatisfaction with the product of the big brewing companies set the stage for a gang of rebellious, beer-loving entrepreneurs like himself to get back in the game.

It was the big brewing companies' market to lose, and they did. Now, the Bigs realize what's happened and are coming back for the lost market share.

Asked how much of an impact local brewers have had on the national brands, Hoffmann couldn't answer, but points out that, recently, Anheuser-Busch and Miller started making what they call "specialty bears," a sure sign, in his opinion, that local breweries are having a big impact.

"I'm not sure how much we are eating away at their market share," he notes. "But we are definitely the reason the big boys are diversifying and making specialty beers. Sales of Bud and Bud Light have been flat, for example, and they have to have growth. Hence the diversification."

And with a chuckle, he adds, "Miller and Budweiser still think this is a fad thing that will pass, but they're wrong."

As or more important than the quality of the brew was a law passed by the Montana legislature in 1999. It allowed breweries to sell directly to consumers, which made the difference in many business plans.

The 1999 law helped formerly struggling breweries find new life, and most of them started expanding. Then, about a dozen more breweries opened up, and Montana now has 25 breweries.

"Having the retail sales has been critical," Hoffmann says. "You can't overrstate the importance. We wouldn't have most of these breweries if it weren't for the taprooms. Some breweries depend almost completely on retail sales."

	Judging Montana microbrew at last year's Montana Beer Festival. Photo by Sam Porter.

Selling direct makes such a big difference for brewers because they usually sell pints at prices equal or higher to what their wholesale customers in taverns sell their keg beer, giving them double or triple the margin on taproom sales.

The business landscape for small breweries looks promising, no doubt, but it isn't all a bed of roses. The microbreweries live nervously in the shadow of Montana's 900-pound political gorilla, the Montana Tavern Association (MTA), commonly considered the most powerful lobby in the state.

The MTA doesn't object to brewers brewing beer and selling it to wholesale accounts, but when it comes to selling it directly to the public in taprooms, that's a different matter.

When brewers came to the legislature for permission to sell beer on site, the MTA opposed it, and a legislative battle ensued. When the smoke cleared, a bill passed that allowed brewers to have taprooms, but with strict sideboards such as only being able to sell up to 48 ounces of beer to any individual. Keeping track of how much beer everybody drinks is difficult, to say the least, but it isn't too serious for most taproom customers who don't want or need any more than three pints of the high-octane beer. State law allows up to 8.75 percent alcohol content (by volume), and most Montana microbrew is in the 5-7 percent range, significantly more than the punch of most national brands.

The most serious restriction is limited hours. Taprooms must close at 8 pm, driving customers home or to the taverns, which was the MTA's intent, of course. "Obviously, we'd like normal bar hours," Hoffmann says.

Hoffmann says the brewers have talked about hiring an executive director to help them lobby the legislature for more relaxed regulations. "But anything we want will be opposed by the bar owners, so we probably can't get anything passed."

Along with the MTA, the brewers have another big problem, the hop shortage.

"That's killing me," Hoffmann says, noting some brewers have had to stop making hop-rich brands because of the high prices. He sees more supply coming on the market, but it might take two or three years. "Next year, might be worse than this year."

Expensive hops translates into expensive microbrew at the taproom. Already, the cost of a pint is pushing $4 in many places. Hoffmann hasn't heard of any price resistance, though, not yet. "I feel beer is one of that last things people give up."

After all, this is Montana, right? [End of article]