What The Rise, Fall Of San Diego’s Green Flash Means For Local Craft Beer Industry

>> This is KPBS Midday Edition. I am Maureen Cavanaugh. There is also a larger issue at play. If one of San Diego's most established beer companies is having trouble staying afloat, in an increasingly competitive market, what happens to other members of the local craft beer community? Joining me is Peter Rowe, future writer and writer and beer critic at the San Diego Union Tribune. How did they wind up in a situation where it could make its loan payments? >> That's the kind of 160 brewery question in San Diego County. Green flash had overextended it self. But all of this came about at a time when they misread where the industry was going. It looked like craft beer was kind of recession proof, it was going to continue growing and growing. What happened though, was that craft beer was so popular around the country, that breweries were popping up so fast, that the competition just got fiercer and fiercer. There is also an emphasis within craft beer circles on hyper local so, these days, it's not just a, I want to go to San Diego and get a beer, it's hey, I want to get a Northpark beer, I want to get a Mesa beer. People are really gravitating towards the neighborhood breweries. Green flash decided to start a 50 state kind of approach, they were distributing and it was in every state of the union. They opened up a rather large and expensive brewery in Virginia Beach. And thought, between the brewery here in San Diego, and the one on the East Coast, they would do right and divvy up the country but they realize there was not a demand to support all of their expenses. >> In a note to green flash shareholders, for CEO wrote that there had been a general slowdown in the industry. Are we seeing the growth of the craft beer industry leveling off? >> Yes, we are. Bart Watson who is the economist for the Brewers Association, which is the industry group, kind of overseeing craft beer. Points out that it's a lot harder to have 40% growth, year-over-year, when your industry is matured and right now, craft beer has grown from you know, negligible amounts of sales in the country to 13% of all beer sales in the country. 13% obviously, that means that most people are drinking what are known as the macro beers. You know, the Miller, Coors, the Bud Light. But, 13% is a huge huge amount of money. When we are looking at something as large as the beer industry. So, this craft beer has matured, it's gotten larger, we have more breweries today, in the country than ever in our history. But, part of what comes with that kind of growth is you can no longer grow by 40, 50, 60% as some of the breweries were doing. >> How many brewers are operating in town now and is that sort of leveling off? >> Yeah, there are about 160 breweries right now depending on how you count them. That is countywide. The speed in which breweries are opening, is slowing. And we are seeing some closures, for instance with the foreclosure on green flash, they did shut down. The brewery that they have in Pali. So, at the same time, more breweries are opening than closing. It isn't at the sort of rate that we were seeing maybe, five years ago. But, it is still happening. >> In the industry, you hear that there is only so much store shelf space, only so many tap handles in bars. How has the industry reach that point? >> I believe they have, I think that is something that Green Flash bumped up against, if you have 160 breweries in the county, I would say that maybe, 30 or 40 of those are bottling and canning. The rest of them, trying to get into restaurants, into bars, you know, trying to capture some tap handles. Competition is really fierce. There are a few places that can handle hundred and 60 tap handles and hundred and 60 different breweries, let alone all the beer that is coming from these theories. -- Beer breweries. You do see this going on, and one thing that kind of freaked out the local brewing scene was a year ago, when 10 barrel moved into town, 10 barrel was a craft brewery based in Oregon. Then, it was purchased by Anheuser-Busch and after Anheuser Busch purchased it, they begin expanding with brewpubs around the country, and they targeted markets in the West, that were particularly dear crazy. So they went into Portland, they went into Boise, and they went into San Diego. So, you are saying the larger breweries that have deep pockets, and can undercut other folks in terms of the price, that they are willing to sell a keg of beer at. Moving into these local markets, and that is really causing havoc. >> Moving forward, how do you think the craft beer industry is going to evolve? >> I think we are going to see more failures this year than we did last year. I think the market will continue to tighten up. I am looking to see what happens to Green Flash. I frankly would not be surprised if this year, we see them sold. It really looks to me like they are getting position for a sale. I think we will see some of the weaker, breweries go by the wayside. On the other hand, some of the stronger players in town, and right now, I'm thinking of stone, I'm thinking of Alice point, thinking of ale Smith. Oh, I don't know, some of the up and comers like modern times. They will do very well. And I think they are really onto something right now. I don't think craft beer is a trend. It's just going to dry up and go away. Definitely the market is getting a lot tighter, competition is getting a lot fiercer. >> I have been speaking with Peter Rowe, feature writer and beer critic at the San Diego Union Tribune. Peter, thank you very much. >> My pleasure. Take care.