John Boyle

jboyle@citizen-times.com

It's a question that pops up every time a new brewery opens in the mountains: Just how many of these can we sustain?

The answer, apparently, is "a lot more than you'd think."

Asheville alone has 26 craft breweries, while the region boasts a whopping 60. Over the past decade or so, when the local craft brewing scene exploded, just one of those breweries has gone under, Craggy Brewing.

So talk of a saturation point may be a bit premature, even though Asheville, with a population of about 89,000, ranked No. 1 in the country for breweries per capita, outpacing Portland, Maine. Just last year the city ranked third, according to Forbes magazine.

Still, that's a lot of suds for a lot of people to knock back to keep all these places in business.

When considering opening a brewery — and investing half a million dollars in the process — potential owners at least must consider the saturation point as a possibility.

"We’re not worried about it yet, but it’s definitely a question we asked a lot in this process of getting started," said Greig Hillman.

The Hillmans are investing $500,000 in loans and their own money in a 4,000-square foot building that used to house a nightclub — and that price tag does not include the building or land. They're leasing, although they all say they wish they could've bought the building, which will have three other brewpubs within a block or two — Burial Brewing's second location, Catawba and French Broad.

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"We think this is going to become another beer district like the South Slope has become," said Brad Hillman, who will be the brewmaster, referring to the bustling brew hub just south of downtown Asheville. "If somebody wants to try out four different breweries and not have to drive all around town, they can park at one and walk to the rest."

They plan to keep about 15 beers on tap, including a mix of ales from their own five-barrel system and some from other local brewers.

Brandi Hillman pointed out that they're almost equidistant to Interstate 40 and the gate to the Biltmore House, which will help attract some of the 10 million tourists Asheville receives every year.

"But we’re expecting a lot of locals, too," Brandi Hillman said. "Oakley is such a walkable community and these 300 apartments going in here will help, and we're certainly walkable from (Biltmore) Village, so we're expecting a strong local crowd."

That's probably a good bet, according to Thomas Micelli, who with his family opened Whistle Hop Brewing in Fairview in early December, a time of year not known for huge crowds — or running out of beer because of them. Their place is centered around a bright red, completely renovated caboose, which seats about 20, and a huge outdoor deck.

"We’ve been overwhelmed with business, especially with the nicer weather and being a mostly outdoor venue," Micelli said. "I really cannot keep up with the beer demand for our system."

He means that literally. The brewery is operating a one-barrel system right now, although they just brought in a three-barrel system.

"In what should’ve been our slow season we’ve almost completely run out of beer," Micelli said. "Honestly, I think at least up to this point, the more breweries that come in, it’s really drawing more people to the area."

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He describes the local beer scene as very collaborative, not competitive," noting that Whistle Hop makes and sells its own beers but also several from "guest taps" from local breweries such as Burial and Pisgah, as well as cider from Urban Orchard.

Those guests taps are often serving guests from out of town, as Asheville's beer scene has become part of the area's draw, and that ranges from people wanting to see the big players such as Sierra Nevada and New Belgium to those looking for a more intimate space on the South Slope.

"Ten years ago our microbreweries were not a factor in motivating a visit to Asheville, but new research shows more than a quarter of visitors to Asheville stop by one of our breweries, and 14 percent say our beer scene was one of the primary reasons for their visit," said Marla Tambellini, vice president of marketing and public relations at the Asheville Convention & Visitors Bureau. "Considering that visitors to our community account for $1.7 billion in local spending in our county each year, support nearly 25,000 jobs and contribute to the sustainability and growth of our small, locally-owned businesses, beer tourism is definitely providing an economic lift.”

Dark clouds looming?

Angela Dills, WCU’s Gimelstob-Landy Professor in Regional Economic Development at Western Carolina University, thinks a saturation point — where multiple brewpubs or breweries begin to fail — remains improbable in the near term. Of course, a major economic downturn could upend the business, but the combination of beer tourism and local consumers who have a high level of beer appreciation should keep the brewpubs rolling for the foreseeable future.

But then again, every industry can overdo it, Dills said, so a saturation point could be lurking.

"The question is whether that's necessarily a bad thing," Dills said. "I could see a situation where new micro-breweries are opening and the less successful ones go out of business."

Dennis Thies, owner of Green Man Brewing in Asheville, which opened a $5 million-plus expansion on the South Slope last year that some locals refer to as the "Green Mansion," says that saturation point might be coming faster than some in the industry expect. Local breweries have two components: the retail side, which includes tasting rooms and the pubs; and the wholesale component, which involves distributing beer in kegs, bottles and cans.

Green Man, now celebrating its 20th anniversary, distributes in five states, and with a solid reputation for good beers, its business in both the retail and wholesale segments is strong. Behind Highland Brewing, Green Man is the second-oldest craft brewer in the area, and it opened the first tasting room in Asheville more than 12 years ago.

"The saturation is happening on both fronts, for sure," Thies said. "On the retail front less so, because I think there's so much interest and demand for breweries — people are going to breweries before they're going to bars. I feel like it’s hurting the bars in town."

While most of the local breweries produce good-to-excellent beers and ales, Thies believes quality is slipping some.

"I used to get excited to see new breweries coming in, but I see a lot of amateur stuff now," Thies said. "Guys that open on a shoestring, don't own their building and they're making crappy home brew. And the novice consumer doesn’t know the difference between mediocre beer and really great beer."

Tim Kent, executive director of the North Carolina Beer & Wine Wholesalers Association, which represents 28 companies statewide, agrees with Thies that all the new brewpubs are driving traditional bars out of business. He cites Nielsen research that shows about 16 percent of neighborhood bars have closed across the country over the past decade.

But while the craft beer industry is a growing niche in a booming industry — craft beer accounted for $22.3 billion in sales in 2015, out of a total U.S. beer market of about $106 billion, and that dollar amount for crafts grew by 16 percent — growth last year was more sluggish, Kent said.

"All told, the top 36 craft brewers in the country were up an aggregate of 1.8 percent," Kent said. "All of the others were up 13.9 percent."

The website Brewbound reported last year that "volume sales of mainstream craft flagships like Sierra Nevada Pale Ale, Boston Lager, and New Belgium Fat Tire were down 5.9 percent, 13.8 percent and 5 percent through May 15, respectively."

Nothing is teetering yet, but in Kent's assessment some stagnation has set in, particularly in the wholesale market. He notes that 16 of the top 36 craft brewers had negative growth in 2016.

"The craft business is becoming more and more hyper-local," Kent said. "Taprooms are becoming the new epicenter of brand building, and it’s not just an opportunity for them to grow a brand but also to run a fairly profitable business."

The "on-premise" businesses — taprooms, basically — can turn a nice profit.

"People have told me who are involved in the brewing business that you're selling beer for $5, $6 a pint, and the actual cost of making that beer is about 75 cents, so in terms of a profitable business model, that’s it," Kent said.

But it's not all butterflies and unicorns. Kent points to research that shows beer consumption is actually dropping in North Carolina, down from 27.6 gallons annually per adult in 2010 to 25.3 gallons last year, mainly because of competition from wine and liquor. That comes at a time when the percentage of North Carolinians of drinking age actually grew, from 71.8 percent in 2010 to 73.1 percent in 2015.

"I think one of the big takeaways is that there's a huge competition for that 'share of the throat,'" Kent said.

Also, according to Nielsen, consumer loyalty to particular brands has declined, with the average craft beer drinker claiming 20.3 brands as their favorites.

"So today's beer drinker is becoming increasingly more promiscuous," Kent said with a chuckle. "And in that kind of an atmosphere, quality matters and developing a product that stands out above all the others really matters."

Finding that uniqueness

Another of Asheville's founding fathers of brewing, Asheville Brewing head Mike Rangel, said a new brewery simply has to bring "something fresh, a new creative outlook" to the market to make it.

"The beer IQ of the average Asheville beer drinker is probably three times that of someone in another city," Rangel said. "Beer is sort of in our fabric. It's a double-edged sword — people have high expectations and support local breweries, but you better be pretty damn good."

Asheville Brewing has two locations, one in North Asheville that includes a movie theater, and another on the South Slope that opened eight years ago when the area was close to dead, beer scene-wise. Known for its pale ales, Asheville Brewing has improved exponentially over the years, and Rangel makes no bones that "if we were selling the beer now we were making in 1999, we'd be out of business."

Being a sharp businessman, Rangel knows "there has to be a bubble" in the local beer economy, just because "that’s how economics works.

"But I think every time five new breweries open it seems like somebody else is opening a hotel, so there is a balance to that," he said. "We keep building them and they keep coming. Right now, 2017 looks like it's going to be even bigger than 2016."

The Hillmans agree. They're going for a "warm industrial" feel on the inside, and they're doing a lot of the work in the building themselves.

For food, they're leasing the kitchen Brandon Murray, who will open a deli called Rise Above, with homemade bread and hand-crafted sandwiches. They're all banking on that saturation point still being a few years off, Greig Hillman said.

"We did our research and built our business plan, and we feel confident in our business plan," he said. "And the numbers are there."

Beer by the numbers:

26 — Number of breweries in Asheville, with several more on the way in 2017.

60 — Number of breweries in the mountain region, up from 35 about a year and a half ago.

4,201 — Number of breweries in operation at the end of 2015. There were 4,269 that operated for all or part of 2015, with 68 closings. The number exceeded 5,000 last year.

21 percent -- The market share, in dollars, that craft brew accounted for in the U.S. in 2015. That's a 12.2 percent share by volume in 2015.

179 — Brewery permits on file with the North Carolina ABC Board in 2016.

Sources: Asheville Brewers Alliance, N.C. Beer & Wine Wholesalers Association, Brewers Association.