Analyst: Export market key to growth of Oregon microbreweries
PORTLAND – Van Havig, co-owner of Gigantic Brewing Co. on the city’s hipster-heavy east side, has an app on his phone that provides instantly updated currency exchange rates. The company, formed by Havig and Ben Love five years ago, sells 5 to 7 percent of its beer outside the country, primarily to Canada but a bit to Japan, New Zealand and the United Kingdom. The strong U.S. dollar makes Gigantic something of an expensive choice overseas.
Nonetheless, Gigantic is exactly the size of craft brewery — producing 4,000 to 5,000 barrels a year — that a state economic analyst says ought to be pushing hard on the export market to assure continued growth.
In remarks at the Oregon Brewers Guild’s annual meeting in Portland Nov. 30, analyst Josh Lehner said Oregon’s craft beer industry is slowing down after a decade in which the number of Oregon breweries grew from 76 in 2006 to 218 in 2016.
The beer market outlook has implications up and down the economic chain, from hops and barley farmers and malt producers to stainless steel fermentation tank manufacturers, tourism and dining.
Prospects remain good for neighborhood microbreweries, said Lehner, who works for the Oregon Office of Economic Analysis.
“For these smaller breweries, I think the outlook is bright,” Lehner told brewery guild members. “The brewpub model works.”
He said demand is strong and there are still many parts of the state and country that are “under supplied” when it comes to neighborhood brewpubs. Maybe not on Portland’s east side, he added, but certainly in the suburbs.
Slightly bigger producers, however, are in fierce competition for a limited number of in-state tap handles and shelf space.
“Flagship” Oregon beers such as Deschutes’ Black Butte Porter, Widmer’s Hefeweisen and Ninkasi’s Total Domination can be found in bars and restaurants all over the state, Lehner said. The state’s five largest breweries now sell only 20 percent of their beer in Oregon, he said.
For medium- to large-size Oregon breweries, sales outside the state are a must, Lehner said. That’s complicated by the fact that the Pacific Northwest no longer has the market cornered on tasty, locally-sourced and locally-made microbrews. Good local beer can now be found all over the country, and consumers often prefer to support local businesses rather than out-of-state breweries.
International exports are a relatively untapped market, Lehner said.
“The path forward is really about reversing the Oregon Trail,” he said. “There is just too much competition and market saturation to be able to reach large production numbers by relying solely on Oregon consumers.”
Lehner said Pacific Rim nations are a good target market for Oregon beer, as they are for many other crops and food products.
About half of Oregon beer exports now go to Canada, 17 percent to Japan and about 5 percent each to China and South Korea, Lehner said. He acknowledged the strong U.S. dollar hurts sales: A $10 six-pack here costs $13 overseas. But Lehner said currency exchange rates often fluctuate, and a devalued dollar may serve as a market “tailwind” of Oregon beer.
Love, the Gigantic Brewing co-owner, agreed that targeting exports is a potentially good business model. Canada used to buy more when the exchange rate made Gigantic’s beer less expensive, he said.
In other remarks to the brewers’ guild, Lehner said job gains in the state’s alcohol cluster — beer, wine, hard cider and spirits — have outperformed the software sector, although the latter gets more media attention.
He said the Oregon brewing industry is important because it is value-added processing with good growth potential, money invested in it returns to state, and it is geographically more spread out than other industries.
Lehner said the Oregon Legislature increased the state lodging tax, and there will be $10 million more available annually for tourism and related activites. He said brewers should tap some of that to market their business.
He said “chatter” about the decline of national chain casual-dining restaurants doesn’t apply to brewpubs.
“I think it just means people don’t want to overpay for mediocre chain food,” he said. “I can get much better food at a lower price point from my neighborhood brewery.
“And of course you can’t even compare the tap lists,” he added.