Robert Allen

Detroit Free Press

The "Michigan only, Michigan forever" catchphrase embraced by Short's Brewing Co. was erased last year.

Here's a new one from Bell's Brewery: "Am I Right or Amarillo," the name of its new American IPA to be distributed only in Texas starting in 2017.

The Great Lakes State makes some of the best beer in the world, and more of the world is getting to taste it at home — from Seattle to Key West, and as far as Germany and China. Nine of Michigan's 10 largest craft breweries now distribute out of state, and they're frequently adding more.

The year 2016 brought a stunning array of announcements from Michigan's growing brewery scene. Among them: Atwater Brewing's plans to start making beer in Texas (and opening a biergarten and tap house in Grand Rapids), Short's Brewing Co. expanding beyond state borders for the first time, distribution of New Holland Brewing into the Pacific Northwest, Bell's Brewery's Texas-exclusive beer with expansion there, and Founders Brewing Co. opening a second brewery in Grand Rapids.

Craft brewing erupted nationwide the past decade with well-made, flavorful, original beers that often reflect a local identity. In Michigan, the biggest craft brewers are nearly all going beyond state lines to keep the growth moving, as well as to get a firmer foothold in an increasingly crowded industry. Their identities are shifting, drawing questions about the definition of "craft beer" as the movement rapidly evolves from modest roots.

In 2016, about 25% of the beer Grand Rapids-based Founders Brewing Co. makes was sold in Michigan, while the rest was distributed across the country and world.

Bell's Brewery, Michigan's oldest craft brewery founded in the mid-1980s, hasn't gone six months without an expansion since it moved to Comstock in 2003. It's Michigan's biggest independent craft-beer company, and it produced about 373,000 barrels (a beer barrel is 31 gallons) last year. Bell's best-selling Two-Hearted (7% alcohol by volume) is a world-class, award-winning IPA, and Oberon (5.8% ABV), a pale wheat ale, has become the symbol of winter's end for Michiganders.

Larry Bell, the founder and owner of Bell's Brewery, said the company's growth stems from reliably good beers.

"With so many new players in the marketplace, that quality piece becomes ever more important," he said. "And the consistency — so the consumer has trust in the product."

The latest expansion to the brewery's buildings mean it could eventually grow production to as high as 1 million barrels of beer annually. For scale, that would be more than the entire state of Michigan's craft breweries produced in 2015, which was 769,897 barrels, according to the Brewers Association.

The growth reflects a trend that in four years (2011-15) more than doubled the number of U.S. craft breweries — and nearly did the same in Michigan. But as craft beer gains popularity, there are only so many store shelves and beer drinkers, and Americans are actually drinking less beer overall.

It began in the '80s

Michigan's oldest craft brewery — Bell's — started with a soup kettle and some plastic garbage pails in September 1985 in Kalamazoo.

About 31 years later, the 385,000-square-foot brewery in nearby Comstock is a high-tech, bright, clean and large illustration of craft beer's potential. The robots that handle boxes look like something from an automotive factory. There's a sophisticated microbiology lab and a bottling line capable of filling 750 beers per minute, tour guide Austin Giles said.

In a room that smells like hop heaven, there are 14 massive dry-hopping fermenters, custom-designed for Two-Hearted Ale and large enough to hold 800 kegs of beer each. The yeast cultures are so precious that backups are stored on locations on the east and west coast, Giles said.

Bell's in 2015 was the seventh-largest craft brewer in the country and, not counting Founders Brewing Co., produced more beer than Michigan's next top-10 craft breweries combined. Founders, at 270,000 barrels in 2015, is the only one in Michigan to rival Bell's in size. With a newly operational second Grand Rapids brewery opened this year, Founders expects to have produced roughly 360,000 barrels in 2016, said Brian May, vice president of International business with Founders.

"Craft beer started on the more unsophisticated side," May said. "Hobbyists and home-brewers just started making beer. And more money entered the space, because it's profitable in the United States. ... If you're starting up today and you want to become a national brewery, it's going to be very challenging."

In a December 2014 announcement, the brewery explained the decision to join with Spain-based Mahou San Miguel, which includes getting Founders beers to shelves on the other side of the world. The move meant Founders is technically no longer considered a craft brewer.

May said the partnership with the 125-year-old company based in Madrid, Spain, was made with ambitions to not only build an international customer base but to help ensure a legacy, "to be on the right track to have our brewery be successful well beyond our years."

►Caves of beer:How brewers age Founders KBS

All Day IPA (4.7% ABV) is by far Founders' top-selling beer, accounting for more than half of all sales, he said. Among beer connoisseurs, the brewery has become known as a powerhouse for sought-out, limited-quantity beers such as Kentucky Breakfast Stout (11.2% ABV), an imperial stout aged in bourbon barrels in underground caves.

From Great Lakes to Gulf of Mexico

It could be the fresh, Great Lakes-region water, the conscientious brewers or the marketing prowess, but the appeal of Michigan's top beer brands is resonating across the country, competing with the nation's strongest craft brands.

New Holland Brewing announced in November that it would be adding Oregon and Washington — an area steeped in craft beer and home to the vast majority of America's hop farms — to its distribution footprint. Including the recent additions, New Holland, Founders and Bell's each distribute to more than 30 states, and Atwater to more than 20.

That's just a few of the breweries distributing outside Michigan, and several local beers are also available in foreign countries. Saugatuck Brewing Co. of Douglas, for example, distributes to China, Trinidad, Canada and multiple European countries.

In Texas, liquor store owners say Founders is quite popular, and they're excited to add more Michigan beer.

"Founders All Day IPA 15-pack cans just became our No. 1 selling non-Texas craft beer package. The combination of the liquid and price point is unbeatable," Justin Cody, beer buyer for Spec's Wine, Spirits and Fine Food said in an e-mail. The company has dozens of locations spanning Texas metro areas from El Paso to Dallas and Houston.

"Austin is a city full of folks who moved here from somewhere else; many of our customers already have familiarity with Bell’s, and are looking forward to reacquainting themselves with old favorites," said Sandra Spalding, marketing director with Twin Liquors, which has about 20 stores in the Austin area. "I know I want to enjoy a quiet evening with a six-pack of Expedition as soon as I can."

Brewers weigh a number of factors when deciding to expand into a new state, from water quality to alcohol laws, market saturation and distributor options. And it helps when a state is rich in Michigan transplants who will already recognize a brand.

"Texas is a big one," Bell said. "Because demographically, we see over the last 30 years, there's been so much population transfer from Michigan to Texas."

Bell's, which made headlines last year for its trademark dispute with a small North Carolina brewery, also is expanding to protect its brand among the thousands of existing and emerging beer labels.

"Trademark attorneys sat me down and said, 'The next two markets need to be southern California and New York City. It would help on the legal front if (we) had a presence there,' " Bell said.

Mark Rieth, owner of Atwater Brewery, said the decision to build a brewery in Texas came in part from the opportunity of a market that a few years ago was under-developed (though between 2014 and 2015 its number of breweries increased 38%, to 189). He said Atwater will bring a "born in Detroit, raised everywhere" approach with an identity celebrating Detroit, as well as the community where the brewery is located. Recently, Atwater's labels here in Michigan were changed to feature paintings from a local artist; similar plans are under way for uniquely Texan labels in Austin, Rieth said.

►Related: Atwater beer labels go artistic, chic

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His vision for the next few years includes plans to open breweries in Europe and Asia.

Growth looking 'stickier' by 2020

Craft beer's popularity accelerated with haste the past few years: There are now more than 5,000 craft breweries in the U.S., a number that has more than doubled since 2011, according to the Brewers Association. In Michigan, the number nearly doubled from 105 to 205 in 2011-15.

But while craft beer consumption last year was up 12.8%, overall beer consumption declined 0.2% in 2015, the association reports.

"We're definitely seeing a plateauing of the growth curve of the craft beer industry, nationally, out there," Bell said. "For Bell's, we're still fairly bullish on growth, because we do have some geography to cover."

He said that by 2020, "things may get a lot stickier" for craft beer makers.

"We're seeing that for the first time ever, some breweries are in negative territory for the year," Bell said.

Popular craft brewer Stone Brewing of Escondido, Calif., recently laid off 5% of its workers, about 60 people, the Los Angeles Times reports.

"I don't see a bubble bursting," said Rieth. "I see unique things happening. I think there's still room for opening up locations as long as you're well capitalized and go to areas not densely populated with breweries."

Atwater's Grand Rapids location opened in October, and Rieth said he's considering another brewery in the southeast U.S. Asked about his goals, he said, "World domination – just kidding. We want to grow organically."

He said the combination of great water, a passionate brewing culture and business acumen set Michigan apart from states with competing breweries. Michigan in 2015 was ranked sixth for total number of craft breweries (205) and tenth for barrels produced for year (769,897), the Brewers Association reports.

Cody said that while Michigan craft beers are popular — mainly because people know good beer when they taste it, regardless of where it's from — craft beer made in Texas has a "huge local interest."

The number of different beers they could fit on shelves appeared to have reached capacity years ago, he said, adding that they've somehow continued finding ways to make space.

"I continue to see local breweries pop up monthly, if not weekly. That will continue and by doing so it will lessen Texas’ need for a lot of our current out-of-state selection. We have seen that trend for 5+ years now," Cody said in the e-mail. "That being said, great beer will always have a home."

Rieth said that by actually planting roots in Texas with a brewery, he's helping the brand become "one with the culture out there" while maintaining its connections to Detroit.

The pressure will increase for out-of-state brewers to stand out among the growing local brands — especially as craft beer, with its assortment of seasonal releases and emphasis on quality ingredients, has benefited from the locavore food movement.

May said that for small brewers, it's going to become increasingly difficult to expand outside their home states. As breweries have proliferated, it's turning into a "horse race" to be one of the few national players with the distribution capability to compete where roughly two-thirds of beer sales occur: chain stores, such as Meijer and Walmart.

"All growth is going to be in the chain world as the category continues to evolve," May said. "Distribution capabilities really matter. ... A small, local brewery is probably not going to make enough to satisfy a large chain account."

For most of the state's more-than 200 breweries, the focus is indeed local. Clawson-based Black Lotus brewer Nicholas Joseph, whose barley wine won a gold medal in the 2016 World Beer Cup, said earlier this year that he likes the personal connection of brewing for the local community. As the only brewer at the small operation, he controls the entire beer-making process, including maintenance. He said it's a throwback to the pre-Prohibition era, when it was normal for every neighborhood to have its own brewery.

As recently as November 2015, Short's Brewing Co. was committed to "Michigan only, Michigan forever." But the tune abruptly changed in February.

"While our Michigan craft beer is thriving, my observation is that there is simply too much awesome beer on the shelves for everyone to enjoy sustainable growth in the near term," Short's Brewing founder Joe Short said in a note posted on the brewery's website.

Short in October told the Free Press the focus is now on being a "strong, Midwest regional brewer." The Up North brewery with operations in Elk Rapids now distributes to Wisconsin, Pennsylvania, Ohio, Illinois, Indiana and Kentucky in addition to Michigan.

►Related: Short's Brewing sells across state lines for survival

Short's Brewing is known for releasing a wide range of beers each year. Experiments such as Key Lime Pie (7.3% ABV), Bloody Beer (7% ABV) and Melt My Brain (3.5% ABV) — a gin-and-tonic beer — have won gold and silver medals at the Great American Beer Festival.

'Craft beer' lines blurred

As craft breweries scramble to build their brands, biting back are the macro-breweries (industrial-size brewers such as Budweiser and Miller, which brew many millions of barrels of beer per year) that felt that 0.2% decrease in volume last year.

Conglomerates such as AB Inbev and Molson Coors, years after creating craft-inspired brands (Shock Top and Blue Moon Brewing Co., respectively) to compete with the trends, have more recently started buying home-grown craft beer companies, such as AB InBev's purchase of Chicago's Goose Island Brewery.

"They are able to give the illusion of choice," Bell said.

Pabst Blue Ribbon, the macro-brewer which now owns Detroit's iconic Stroh Brewery Co., this year released its Stroh's Bohemian-style Pilsner (5.5% ABV), with a flavor that rivals any good craft pilsner.

May said he expects more releases in this vein from macro-brewers, but that people will continue to seek out brews like the ones Founders makes.

"You can't trick a consumer and try to call something a craft beer that isn't," he said.

Ironically, peers no longer consider Founders a craft brewer. After the company sold 30% ownership to international brand Mahou San Migual a couple years ago, the Boulder, Colo.-based Brewers Association removed Founders from its list. The national nonprofit trade organization defines "craft brewer" as a small, independent, traditional brewer — specifically, annual production of 6 million barrels of beer or less. Also, the brewer must be less than 25% owned or controlled by an alcohol industry member that is not itself defined as a craft brewer.

May said the decision to strip Founders of its craft brewer status is "kind of ridiculous."

"It seems just kind of preposterous to me that there are some people sitting around somewhere — really out of thin air" setting the standards for what defines craft beer, said May.

This situation illustrates a grassroots industry in transition. May said the brewery is "investing significantly in a key account team" to grow the brewery's presence in chain stores. The Grand Rapids-based brewery's bottles and cans will continue to appear in beer coolers and menus in more states.

"We have the visibility to get to 50," May said. "And internationally, which is where I focus, we've got a lot of runway."

Update: A previous version of this story indicated Bell's Brewery was Michigan's first craft brewery. In fact, it is Michigan's oldest craft brewery. The state's first brewery was Real Ale Co. in Chelsea, which began brewing commercially in September 1982 and is no longer in business.









