🔒Craft beer industry growth slowing amid pandemic, new competition

Craft brewing has been one of the fastest-growing industries in the state over the past five-plus years, but a lengthy pandemic combined with heightened competition could signal a slowdown in the number of new, and existing, Connecticut breweries.

Connecticut is home to 125 independently-owned craft breweries, according to Connecticut Brewers’ Guild Executive Director Phil Pappas. Like many industries over the past two years, beer makers have struggled at times staying afloat during COVID-19, so Pappas and the guild have been trying to support brewers in various ways, including legislatively.

For example, the Guild successfully lobbied lawmakers last year for a 16.7% state tax cut on beer production that will take effect July 1, 2023.

“In the last two years our focus has been keeping our breweries alive and open,” Pappas said.

Even with that support and pandemic-related government grant and loan programs, several breweries in recent months have announced they were closing: 30 Mile Brewing in Old Saybrook; Better Half Brewing in Bristol; and Shebeen Brewery in Wolcott, to name a few.

Cottrell Brewing in Pawcatuck also recently announced it would be closing its taproom, though owners could be exploring other options to keep the brand alive.

The recent closures may indicate that the local industry is reaching a tipping point, but many brewers are hopeful for the future and end of the pandemic.

“We’re going to see a lot of breweries come and go, but I don’t think breweries going out of business is a detriment to new guys starting,” said Curt Cameron, who is the owner of Thomas Hooker Brewing Co., with locations in Hartford and Bloomfield. “Just like restaurants, people will think, ‘well you know what, I can do a better job.’ ”

Industry outlook

From 2016 to pre-pandemic 2020, the state was averaging about 20 new breweries a year, Pappas said. But growth slowed considerably last year, when only 11 new craft breweries opened.

“Our growth rate is definitely slowing down, but that’s still a great number in the middle of two years of a pandemic,” Pappas said.

According to the Brewers Association, U.S. small and independent brewers saw a 9% decline in production in 2020. The dip decreased the craft sector’s overall beer market share by volume to 12.3%, down from 13.6% in 2019. Data for 2021 is not yet available.

Pappas said the craft beer industry has about a $3 billion impact on Connecticut’s economy, supporting 18,000 jobs across different parts of the sector.

He predicts Connecticut can support another dozen or so breweries before there may be a saturation point. Owners of many recent brewery closures cited struggles amid COVID-19 as reasons for going out of business.

“It really goes to show that no industry is immune to a pandemic,” Pappas said.

Thomas Hooker is considered a veteran brewery in the state — in operation since 1996 and under the current name since 2003 — with taprooms in Bloomfield and Hartford. The company has about 65 full- and part-time employees.

Cameron said his taprooms were busy in 2018 and 2019, but have struggled during the pandemic. To-go orders, a strong beer distribution business and federal Paycheck Protection Program funding helped Thomas Hooker get through the last few years.

“[The pandemic] has put a huge strain on our company, either because people are sick, or they’re scared to come out right now,” Cameron said.

Cameron said more restaurants and taprooms will close if the pandemic continues.

Adding to the challenges is the highly competitive market that exists across the state and nation, said Alex Blank, co-owner of the Twelve Percent Beer Project in North Haven, which opened a taproom at the beginning of 2020, and has only known operating in a pandemic.

“It forced us to get creative,” Blank said. “The quality of beer in this state has jumped significantly. Everyone has to keep raising their games. The bar is higher than it once was.”

Pappas said the alcohol market is the most competitive it’s ever been.

“We have 8,500 breweries across the country and there are so many different seltzer brands and ready-to-drink cocktails that are coming out,” he said.

Innovate to survive

Twelve Percent is a unique business in the state’s craft brewing industry. It operates as a collective of about a dozen craft brewing brands — such as Fat Orange Cat Brew Co., Skygazer Brewing Co., and Abomination Brewing Co. — that share a large brew space in North Haven. Those brands contract with Twelve Percent to produce, can and distribute their drinks. The company has roughly 30 to 40 employees, Blank said.

“Our model is a little different. We’re not selling so much of our own beer as we’re selling our partners’ beer,” Blank said.

While the taproom is relatively new, Twelve Percent started as an import business in New York about a dozen years ago. Some of Twelve Percent’s earliest partners were Evil Twin Brewing and Omnipollo, brands that originated in Denmark and Sweden, respectively.

“We started to help them contract brew stateside,” Blank said.

Twelve Percent has been successful with contract brewing, but Blank said it can be a “tricky” business. Contract brewers must meet strict taste and quality standards expected by both the brand and customers — any deviations will be noticed, he said.

Pappas said contract brewing has been a great avenue for brands that are just starting up and want to test on a smaller scale.

“I think it’s become more of a viable business track for breweries,” Pappas said. “It gives them a little bit more of an introduction into the market.”

He said Twelve Percent and Two Roads have been great contract brewers in the state, hosting several brands at their large brewing facilities.

“As breweries grow they have two options: they can find larger spaces, add more tanks, hire more people, or they can enter a partnership with someone like us that basically helps supplement their production,” Blank said.

Some breweries, like Hanging Hills in Hartford, have turned to contract brewing to keep their brand alive. The company closed its Hartford taproom on Ledyard Street in 2020, but still makes its beer out of East Rock Brewery in New Haven.

“That’s one of the great things about contract brewing, linking up with other breweries that have distribution and an infrastructure to get your brand out there,” Pappas said.

Adding on

Meanwhile, Cameron’s brewery during the pandemic has still been expanding its in-person offerings as a means to attract more customers. Thomas Hooker’s Colt building location on Huyshope Avenue just outside downtown Hartford opened a 5,000-square-foot event space late last fall, but Cameron said he’s taken a cautious approach when booking acts and private events because of uncertainty around COVID-19.

“We have no doubt that it’s going to be successful long term, but the short term is what’s scary to us right now,” Cameron said.

The Colt facility also has its own restaurant that will receive more future investment, Cameron said.