NORFOLK – Va., On Dec. 14, a Norfolk brewery threw itself a birthday party.
Coelacanth pulled a whole bunch of rare kegs out of storage, including a 10.5% milk stout aged for two years. With a crowd, the staff celebrated four years.
Then they prepared to close.
This month, the brewery announced it will shutter by the end of the year, citing flagging sales. And it won’t be the first. Bearded Bird, on Granby Street, shut its doors over the summer. Green Flash closed last year in Virginia Beach, quickly replaced by Atlanta-based New Realm Brewing. For the first time in recent memory, craft breweries are closing in Hampton Roads.
On the Pilot’s Facebook page, the comments section quickly filled with theories that craft beer is oversaturated, and that the closings are a symptom of too many breweries.
“The brewery bubble is finally starting to pop,” wrote one commenter.
“Won’t be the last,” wrote another.
But saturation isn’t a very helpful way to think about the craft beer industry, says Bart Watson, an economist for the Brewers Association, which lobbies for breweries and studies industry trends around the country.
“Restaurants close and no one asks if we are oversaturated,” Watson told the Pilot. “They think about why that particular one closed.”
It’s not unusual for a business to close, Watson says. What he calls “weird” is that during a decade of rapid growth in craft beer, almost no breweries failed.
“Breweries had an exceptional decade. We can look at this in a variety of ways; from FDA loan data, breweries had one of the lowest default rates of anywhere in the country. And breweries had virtually no closings. It’s unusual where everyone succeeds and everyone can find a place in the market. As supply gets closer to demand, breweries have to stand out.”Bart Watson, Economist, Brewers Association
The overall national craft beer market is still growing, albeit more slowly than before – it was up about 4% last year – and openings still outpace closings by a factor of three nationwide, according to Watson.
“But that might not be enough for every brewery to succeed,” Watson says.
If it seems like Virginia beer has been growing unusually fast, it has. The state boasted just 40 breweries in 2011, compared to about 280 today. Over the past five years the Commonwealth’s craft beer industry has grown much faster than that of other states.
In 2018, it added an estimated $1.7 billion to the state economy, according to the Brewers Association.
“If you look at the ranks, things like breweries per capita, most states don’t change. Virginia has moved a lot more than just about anybody,” Watson says.
But even though our rate of brewery openings has been dizzying, the state has actually be playing catch up. The catalyst was legislation in 2012 that allowed breweries to open tasting rooms in Virginia without serving food. That’s an obstacle brewers in most other states did not face.
Virginia is now near the middle of the pack when it comes to breweries per capita, ranking 18th in the country. And the density in Hampton Roads is about average for the state.
“We would never say we think Hampton Roads is saturated,” said Brett Vassey, the president and CEO of the Virginia Craft Brewers Guild. “Is there more competition? Sure. Is it harder to differentiate? Absolutely. But there are enough consumers for everybody. If they can continually innovate, their business model will sustain it.”
Hampton Roads has seen about three dozen breweries open over the past decade, Vassey said.
“If you look at Hampton Roads, that is a major market,” he said. “If you tap Williamsburg to Virginia Beach and Tappahannock to Suffolk, that’s a lot of consumers, plus you have the military, which is transient. We can’t discount their impact. Then you have the tourism community, which is massive.”
“I can’t tell you if we’re oversaturated or not,” says Porter Hardy, who opened Smartmouth Brewing in Norfolk in 2012 and then expanded to Virginia Beach in 2017. “I don’t think anybody knows what the magic number is, really.”
But competition is stiffer, say local brewers, even compared to three years ago. Norfolk and Hampton are particularly dense.
Kevin O’Connor, who opening O’Connor Brewing in 2010, has seen the landscape change dramatically over the past decade. After nearly 10 years in business, he laughs, he’s now considered an “old dog.”
“I definitely think it’s gotten more challenging. There’s ability for people to open. But you almost have to be perfect. You didn’t have to be perfect when I first started. Now you’ve got to have the marketing and demographics lined up, and that costs money.”Kevin O’Conner, Owner, O’Connor Brewing
Eric Tennant, Benchtop’s owner and brewer, says that to stay relevant and compete for an ever-narrowing slice of taproom dollars, he has to constantly put out new and innovative offerings. He can’t just expect consumers to come in for his usual beers.
“It’s definitely been more competition than there was when we opened. It just makes it more and more critical to stand out — not just from a quality standpoint, but bringing something unique…. We change up our selection of draft beer almost constantly, to keep it fresh.”Eric Tennant, Owner, Benchtop Brewing Company
Alongside its flagship Proven Theory IPA, Benchtop has brewed with grasshoppers, carrots, and once-forgotten Norwegian yeast strains, and has flown fresh hops accross the country on an overnight airlift.
“As it’s maturing, you’ve got to offer more and be more innovative,” Vassey said. “That’s the new challenge.”
Brewers have also attempted new ways to bring in consumers, Vassey says.
The Brewers Guild has helped breweries form partnerships with groups that aren’t traditionally associated with craft beer, such as the State Fair of Virginia and Richmond Raceway.
Brewers have also expanded their offerings beyond beer to attract a broader customer base.
“Beer is social. There are a lot of consumers and hardcore enthusiasts that bring a guest. Maybe they are not willing to go as far as drinking the local IPA, but willing to start with a hard seltzer, and that’s OK. We’ll start them there. At least it gets people in the tasting room and gives them a chance to talk about craft beer. Maybe we can convert them.”Brett Vassey, President & CEO, Virginia Craft Brewers Guild
Back Bay’s Farmhouse Brewing in Virginia Beach makes ciders. Smartmouth, Rip Rap and O’Conner have branched into hard seltzer. Many breweries have also tried to make their tasting rooms into part of the draw. The Vanguard in Hampton is a concert hall and has a distiller and restaurant, while Farmhouse is located on a sprawling century-old estate complete with a small working farm.
As a means of attracting customers from around the region, Tennant and O’Connor hope that even density itself can be a draw, as the area becomes known as a craft beer hub. Both Benchtop and O’Connor have already seen growth in sales compared to the previous year.
But with the addition of a nationally prominent brewery like Richmond’s The Veil Brewing to Norfolk’s Park Place neighborhood, the other brewers hope more beer fans will discover their neighborhood.
“I think once this whole neighborhood is finished, it’ll create a mall effect: people will bounce from one place to the other. If that pans out the way I want, we’ll be here 10 years more,” O’Connor said.
Tennant agrees: “The hope is that the tide floats all boats.”