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Domestic Craft Beer On the Rise Again

Sales of domestic craft beers grew 7 percent last year, faster than the wine, spirits and imported beer segments, according to the Brewers Association.

So what's behind the volume increase? Consumer palates are more sophisticated, the beer industry has matured and beer drinkers feel more comfortable than in the past with local craft beers, according to industry pundits.

Some craft brewers such as the Smuttynose Brewery, based in Portsmouth, N.H., are far outpacing the national numbers. Last year's revenues increased 26 percent and so far this year sales are up 50 percent over prior year, said Peter Egelston, president of Smuttynose, which was founded 11 years ago.

"We've been watching the growth of the craft beer segment for almost two decades now," Egelston told the Portsmouth Heraldsaid. "We did release a new product, and that accounts for some of the growth. And if you do something long enough, people start to recognize you. We're seen as a survivor in the industry."

Egelston also attributes the success of his craft beers to Smuttynose's longstanding and strong relationships with its wholesale distributors "Wholesalers didn't know what to make of all the microbrewers popping up, and the relationship between the wholesalers and small brewers was strained. But now the relationship with wholesalers has matured. Even though we represent a small volume, the profit margin is higher than with a Budweiser."

More craft brewers mean more consumer awareness, but this can also lead to less quality control.

"It's interesting. The craft beer industry has always seen growth since the early '80s," said Jerry Prial, president of Redhook Brewery in Portsmouth. "I began my career in the '70s, and back then there were 80 to 85 breweries. Now, there are 1,400."

"We like flavorful beers now and we're not going to drink the same old domestic beers," said Ray Daniels, craft beer marketing director for the Brewers Association. "And now there are a smaller number of brands and those brands are stable, so there's less brand confusion." He added that the shakeout of lower quality brands have contributed to the segment's growth.

"In the '90s, we had a big slowdown. There were so many brands out there not putting quality in the bottle. Consumers were confused and dismayed. We saw growth shift from domestic craft beers to imports," Daniels said.

The Brewers Association also attributes craft beer growth to the rising costs and price of imported beer. Daniels noted in the Portsmouth Herald report that while consumers developed a taste for more flavorful imported beers, they began to find that quality and flavor in lower priced domestic craft beers, which don't cross the ocean. They're fresher and the transportation costs are not a big factor.

Egelston likens the rise in interest in craft beers with the increase interest over the past decade in many artisan products such as specialty coffee, handmade ice cream, artisan cheeses, single malt scotch, organic vegetables and fruits.

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