A BREWERY IN EVERY NEIGHBORHOOD

The number of small breweries in the region has nearly doubled, bucking the national trend of declining craft beer sales.

• By Harold Brubaker
• Published Mar 9, 2023

A brewery in every neighborhood.

That’s what Evan Roth, who opened Cartesian Brewing in Passyunk Square 18 months ago, imagines for Philadelphia.

“I believe the city has the capacity,” said Roth, who also lives in South Philadelphia.

The city is on its way, due to an explosion in the number of breweries over the last six years. As of last month, Philly is home to 32 breweries — not counting taprooms that are separate from the breweries. That’s up from 17 breweries at the beginning of 2017. Five Philly-area breweries closed during that time.

Similar growth has happened across the region, outpacing growth nationally.

The five counties of Southeastern Pennsylvania are now home to 131 breweries, up from 68 in early 2017 — a sharp increase that surprises even people in the industry. And the desire to make and sell suds extends across the river: The number of breweries in Philadelphia’s South Jersey suburbs has climbed to 38 from 20 since 2017.

The surge in breweries is, in part, due to a change in state law that made it easier for brewers to sell their products and, as a result, has had major implications in how craft beer is bought and sold in Pennsylvania, helping the state buck the nation’s flat craft beer market.

As a result, many brewers in Pennsylvania have become less interested in selling their beer through bars and distributors — where consumers can buy a case of anything — and more interested in opening taprooms where they can sell their own brews directly to consumers.

For Philly’s thirsty masses, it may mean going directly to a taproom to buy a six-pack of your favorite craft beer instead of picking it up while doing your weekly grocery shopping.

National craft beer slowdown

The proliferation of Philly-area breweries may be great for beer lovers, but it’s happened during a time when the craft beer industry is slowing overall, including a decline in craft beer sales in grocery and convenience stores. The volume of craft beer sold nationally in stores fell 8% last year from 2021, according to 3 Tier Beverages, a beverage research and analytics company.

The craft beer slowdown recently hit Delaware’s Dogfish Head Brewery, which Boston Beer Co. bought for $336 million in 2019. In October, Boston Beer recognized that it paid $27 million more than Dogfish is now worth, given the “continuing negative trends in the brand’s beer products and the overall slowing craft beer industry sector.”

But the picture is not entirely gloomy.

“The bright spot for craft right now is that taprooms and brewpubs seem to be doing well, obviously not across the board, but collectively they are doing pretty well,” said Bart Watson, chief economist for the Brewers Association, a trade group in Boulder, Colo., said on a recent episode of the Craft Beer Financial Training podcast.

That’s good news for the numerous Philadelphia-area breweries that have added capacity in the last couple years or are about to, like Sacred Vice in Kensington, which cousins Matt Brodsky and Justin Steinberg opened in December 2018. Head brewer Andrew Rubenstein joined them in 2021.

The brewery, which is expanding from a tiny operation that can make 15½ gallons at a time to one that can make 310 gallons per batch, hopes to sell as much beer as possible at the new brewery which is slated to open near the end of April.

The partners are well aware of the abundance of beer and breweries in the market, but see a path to success.

“If you create an experience in your taproom that people want to come back to, it’s not about the beer as much as it is about that experience,” Brodsky said. “It becomes a place that people want to hang out.”

A momentous rule change

Sacred Vice is able to pursue that goal thanks to a law passed in 2015 that allowed Pennsylvania breweries to sell pints directly to consumers without a brew pub license — a far more profitable business than selling kegs to bars or cans to stores. Before that, breweries were only allowed to provide samples and sell growlers to go.

Lawmakers also allowed the state’s breweries, wineries, and distilleries to sell each other’s products.

Those changes allowed fledgling brewers to build a business by catering to their neighborhoods, opening up their taprooms as community centers, where people gather for yoga on Sunday mornings, like they do at Wissahickon Brewing in East Falls, or for community groups to meet.

“I see it shifting away from the liquid, and it’s more about what this location means to the neighborhood,” said Scott Rudich, owner of Round Guys Brewing in Lansdale.

Neshaminy Creek Brewing Co., which opened in 2012 in Croydon, would have taken a different approach if it had started after breweries were allowed to sell directly to consumers, said Kyle Park, the company’s director of sales and marketing.

“It’s great if you’re selling it all yourself for a number of reasons. … The beer’s going to be fresher. You control it from tank to table.”

Kyle Park, Neshaminy Creek Brewing Co.’s director of sales and marketing, said.

“We couldn’t have an actual taproom at that time. You could come here and you could get samples and growlers to go, but our main business was distribution,” said Park.

Now, Neshaminy is trying to strike a balance between distribution and taproom sales.

“It’s great if you’re selling it all yourself for a number of reasons. You keep all the profit. The beer’s going to be fresher. You control it from tank to table,” Park said.

This year the company started a membership program, called the Creek Club, to help build brand loyalty. A $100 annual membership fee gets participants Neshaminy Creek swag, discounts, access to private events, and other perks.

The company started small with one hundred spots, and they sold out, Park said.

View from the old guard

Yards Brewing Co., founded in 1994 and now considered an “old guard” Philadelphia brewery, experienced a decline in sales last year, but did better than the market as a whole, said Tom Kehoe, one of Yards’ founders. The company distributes in Pennsylvania, New Jersey, Delaware, and a large part of Maryland.

Draft beer sales in bars have fallen because fewer people are going out for a beer after work due to the proliferation of work from home, spirits have grown more popular, and ready-to-drink cocktails are taking share from packaged beer, Kehoe said.

“In New Jersey, things like High Noon, which are competing directly on the shelf next to beer, they’re having our lunch,” he said. That’s not as big a problem in Pennsylvania, where those vodka-based seltzers and canned cocktails have to go through state stores.

Meanwhile, new breweries have kept popping up, evening during the pandemic. The newest generation of small breweries is geared toward selling directly to drinkers in their taprooms, but “they’re packaging beer and selling it every way they can,” he said.

That’s what Love City Brewing did in early 2020 when the pandemic threatened to derail the strong growth that Love City had been experiencing since opening 2018, so the brewery pushed hard into distribution to grocery stores and bottle shops.

But now the company is refocusing on its taproom. “We don’t intend to grow distribution all that much more. It’s not where the significant profit margins are,” co-owner Melissa Walter said.

That highly competitive market is expected to limit the growth horizon for most new breweries. Out of the 1990s generation of breweries came not just regional breweries like Yards, but also top-50 craft brewers like Victory Brewing Co., now part of Artisanal Brewing Ventures, and Tröegs Brewing Co. in Hershey.

Those days are over, said Jake Atkinson, cofounder of Human Robot Brewery, which opened two months before COVID and plans to sell virtually all of its beer directly to consumers.

“You can’t get the penetration to the grocery stores. It’s just done,” he said. “It’s all going to be super local or massive conglomerate stuff. There’s not going to be much in between.”