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Delaware brewers challenged to stand out in ‘24

Katie Tabeling December 19, 2023

NEWARK — Delaware’s craft brewery business, much like the industry on whole, saw the tap slow down this year. With significant headwinds, craft brewers in a small state are going to have to rethink their strategies to bring people to the bar stool. The Brewers Association, a trade group for small and independent American brewers,

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Fordham & Dominion, one of Delaware's oldest breweries, closed at the end of October. National experts say the closure is less of a sign of a bubble bursting and more of market saturation in the First State. | DBT PHOTO BY KATIE TABELING[/caption] NEWARK — Delaware’s craft brewery business, much like the industry on whole, saw the tap slow down this year. With significant headwinds, craft brewers in a small state are going to have to rethink their strategies to bring people to the bar stool. The Brewers Association, a trade group for small and independent American brewers, reported that craft beer production was up less than 1% in 2022. Its mid-year survey indicates that production will be down in 2023, the first time since 2020 there’s been a decline. Nationwide, there’s been 385 breweries that closed for good, and in Delaware that included two of the oldest breweries in the First State: Blue Earl Brewing Company and Fordham & Dominion. Blue Earl Brewing Company, which was the seventh brewery in the state, closed in late September. Blue Earl owner Ronnie Price cited a crowded market to compete for customers in liquor stores and at bars, and distribution wasn’t making up for it. He told the Delaware State News that package sales were shattering records in 2020 and 2021, but it dropped off around 20%. Fordham & Dominion opened in 2003 in Dover and closed at the end of October with no explanation to customers, but will continue to serve legacy beers on tap in Baltimore and Florida. But Brewers Association Chief Economist Bart Watson said it’s less of a bubble burst and more market maturation. “What’s really unusual is in the last decade you had all these businesses open and no one closing, and the market just grew. That’s pretty unusual, what other industry can you say that about?” Watson told the Delaware Business Times. “We had this particular era where demand was so big that everyone could succeed. Now, it’s moving into a normalized marker where some concepts work and some don’t.” In Delaware, 260,564 barrels of craft beer are made per year — 10 gallons per every adult over age 21 — and it brought in $357 million in economic impact in 2022. With 35 craft breweries, Delaware is among the bottom five of states with the most breweries. Looking at the larger picture, Watson also noted that the boom in canned cocktails and hard seltzer have been eating into the alcoholic beverage market. Inflation has also been a major influence, with aluminum prices rising 24% between June 2021 and January 2022. Carbon dioxide, a key component, rose 27% between 2020 and 2023, according to the US Producer Price Index. “There’s challenges all over the place, and if anything it’s been showing how flexible small breweries have been since we haven’t seen a bigger spike in closing,” Watson said. “But with the competitive landscape that craft breweries are facing, there’s more choices out there. The strategy of being the local brewery maybe won’t cut it anymore and businesses are going to have to find more ways to stand out.” Delaware’s brewing scene has a strong legacy, because Dogfish Head Brewery pioneered the business since it opened in 1995 before it boomed. Iron Hill, another major pioneer for its craft kitchen in Newark, started a year later. If anything, Watson added, Delaware’s market may be more developed than other places and may be facing more challenges than others. Another possible complicating factor is the local laws regulating the market. Delaware uniquely caps brew pub licenses to just three locations and prohibits brewery to retailer sales without a distributor. For craft breweries, retail distribution is less about profit and more a marketing tool, said Jimmy Vennard, the president of the Delaware Brewers Guild. “If someone in a liquor store sees your beer, it could inspire them to come by. I do think some of the restrictions can restrict diversity in the market, especially the cap,” said Vennard, who also is the founder of Autumn Arch Beer Project in Glasgow. “That’s a proven growth model and the product you sell in the taproom has the highest margin of cost-profit.” In a state with just over a million people, Vennard thinks competition will still be fierce for every dollar spent in a tap room, and with the cost of goods still eating into the profits. But he also argues that in this case, necessity is the mother of invention. “Brewers are really going to have to look at their strategies and make sure they’re doing something compelling and distinctive to keep customers engaged,” Vennard said. “You may say that’s the case in any year, but I think there’s less room for error than in years past. Businesses are also going to have to be smart with their marketing dollars as well.”

Delaware brewers challenged to stand out in ‘24

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