00:00Americans are drinking fewer alcoholic beverages than at any time in recorded history.
00:05The trend is driven by a decline in young people imbibing.
00:09The adjustment in consumption has taken a toll on craft breweries throughout the nation,
00:13forcing some to close and others to adapt to keep their doors open.
00:18I had no prior experience other than I enjoyed a cocktail from time to time and obviously
00:25a beer from time to time, but I was in insurance and financial services for 29 years.
00:29Jerry Schultz, along with Ryan Kolka and Mark Cotter, are partners with Gray Duck Spirits
00:35out of Minneapolis, Minnesota.
00:37Back in 2017, we had the end zone celebration on Monday Night Football where Kyle Rudolph
00:43scored a touchdown late in the game.
00:45He got the guys in a circle to play Duck Duck and he said Goose.
00:49The Gray Duck is part of the Minnesota identity.
00:52Kids in schools throughout the country play a game called Duck Duck Goose, but not in Minnesota.
00:58Kids there play Duck Duck, Gray Duck.
01:01And then everybody in Minnesota lit up and said, hey, it's not Duck Duck Goose in Minnesota,
01:05it's Duck Duck Gray Duck.
01:06Knowing a goose already existed in the vodka space, I thought it might be a good idea to
01:10create our own vodka if it didn't exist.
01:12And the founders of the company filed the trademark the very next day.
01:16In the years since the launch of the vodka, they've taken on bourbon, beer, seltzers and
01:21THC beverages.
01:23Sports has been a huge part of the brand's success thanks to a current partnership with
01:27the Minnesota Twins and the Dinkytown Athletes Collective, the organization handling name,
01:32image and likeness deals for the Minnesota Gophers.
01:35But while Gray Duck got through the growing pains to offer a number of options, not every
01:40brewery has had the same luck.
01:42To understand why, we've got to take our time machine back 10 to 15 years.
01:47We were seeing growth in consumer demand, and that was leading to expansion of where
01:51craft beer was sold, increasing market share and an increase in the number of breweries
01:55that was fueled by a bunch of stuff.
01:57Bart Watson is the president and CEO of the Brewers Association, a trade group representing
02:025,000 of America's small and independent craft breweries.
02:07According to his organization, in 2015, there were more than 4,800 craft breweries.
02:12Flash forward to the end of 2024, and there are more than 9,700.
02:16But concern is fermenting after more craft breweries closed than opened in 2024, causing
02:22the total number to decline for the first time in more than a decade.
02:26We're in a more mature market.
02:29Demand isn't growing the way it was.
02:32Interest rates are higher.
02:33Costs have risen.
02:34So it's a tougher demand environment.
02:35It's a tougher operating environment than it once was.
02:38And generally, that means it's more challenging to be a small brewery than it was 10 or 15 years
02:41ago.
02:42There are a barrel of reasons for the industry's struggles.
02:46One reason is the decline in the number of young people drinking alcohol.
02:50According to Gallup, since the turn of the century, there are 11% fewer regular drinkers
02:55between the ages of 18 and 34.
02:58That same group is also cutting back by 1.6 drinks per week.
03:02With changes in consumption habits and the number of breweries doubling over the last 10
03:07years, competition in the space is taking a toll.
03:10You know, where you might have been the only local brewery before.
03:13Now there's almost certainly competition, no matter what business model you are.
03:17When you have a static market, right, if somebody's growing, that means they're taking share from
03:22somebody else.
03:23Meanwhile, in the decade plus since the start of the craft beer boom, the types of alcoholic
03:27beverages available on the market have exploded.
03:30And now, you know, go to a supermarket in a store, you know, in a state where they sell
03:34basically everything.
03:35You're going to find hard seltzers, hard kombuchas, ready-drink canned cocktails in some states,
03:41hemp-derived THC beverages.
03:42You're going to find competition in terms of flavor and variety at a variety of ABV points
03:47that you didn't see 10 years ago.
03:48Some brew houses take an increase in choices as an if-you-can't-beat-em-join-em type of situation.
03:53I think you just need to be good listeners in any business, but especially for us, you
03:58just need to listen to, you know, what the consumers want.
04:01And the great part about Greyduck is we've shown that we can be nimble, we can be flexible.
04:06While the beverage space has expanded with things like craft cocktails and seltzers, the
04:10craft beer space, especially in stores, has narrowed.
04:14And certainly post-COVID, I think one thing we saw is distributors and retailers chose to
04:17focus more on simplification, that they wanted fewer offerings, they wanted them to move a
04:22little bit faster, and that was a move away from more variety that we had seen, the, you
04:27know, 150 tap handle concepts that were very popular for a moment.
04:31But that doesn't mean your favorite taproom won't have a wall of oat sodas to try.
04:35And for a lot of craft brewers, selling right to customers is the most lucrative proposition,
04:41not to mention the FaceTime you get with fans.
04:43Really grow the taproom, get back to the hyper-local, hyper-community-focused events that we do.
04:49Jeff Handijo is the co-founder of Houston Brewery 11 Below.
04:53He's no stranger to making a pivot to keep customers pouring through the doors.
04:57For example, during the height of the COVID pandemic, 11 Below upped their to-go offerings,
05:02which Jeff says wasn't a big part of the business before.
05:06Yeah, our Taco Tuesday, that was born out of COVID.
05:09Taco Tuesday is our salt and lime margarita-style beer that was, literally came out of COVID.
05:15Remember, it was kind of hot back in early COVID, this kind of early summer time.
05:20It kind of became our number one seller that year.
05:23Last year, 11 Below made another major move to keep the business going.
05:27This was certainly a merger of three breweries, actually.
05:32It was ourselves, you know, 11 Below, B52 Brewing up in Conroe,
05:38and then Fortress Brewing, which is out in spring.
05:40If this merger hadn't happened, we would have closed our doors.
05:43I mean, liquidation was really going to be the only other viable option.
05:48The three breweries merged in an effort to maximize their strengths and reduce their costs.
05:53You know, not to go into financial structures or whatnot,
05:57just our bourgeois location was very expensive.
05:59The cost of real estate has been a major issue for a lot of breweries having to turn off the taps.
06:05I think the number one reason when we see closures is something related to lease costs.
06:11And that's a big consideration for breweries that kicked off in the last few years.
06:15Minnesota's Gray Duck handles the distilling of spirits on premises,
06:19but the other products are produced off-site.
06:22Gray Duck is also without a taproom location.
06:25Just never has been the right fit.
06:26And some of it comes down with, you know, cost and where you're going to put the space,
06:31what's it cost to lease it, all that fun stuff.
06:34Watson admits a lot of breweries have helped energize and revitalize areas of cities and towns throughout the country.
06:40And that can lead to being forced out due to cost.
06:43You know, they were part of going into these areas that now cost a lot more.
06:47And we are recycling a lot of 10-year leases,
06:50which was really around the peak of the boom in terms of number of breweries opening.
06:54For Straight Arrow News, I'm Chris Francis.
06:56Maggie Gordon has an in-depth look at the situation and how it specifically affects Texas.
07:01Head to san.com and search craft beer.
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