Business Monday

Craft beer business bubbles up in South Florida

At Wynwood Brewing Co., founder Luis G. Brignoni is eagerly awaiting the arrival of new, stainless steel fermentation tanks that will triple the capacity of his 4-month-old brewery.

“We thought we had the perfect size space and all the tanks we’d need, and then things just took off,” he said, standing on the concrete slab where the new equipment will go, any day now. “We’re trying to keep up while maintaining consistent quality.”

Funky Buddha Brewery, which opened in June in Oakland Park, also is expecting a shipment of big, shiny tanks this month that will help boost the brewery’s 2014 production capacity to 15,000 barrels of beer, more than three times the 4,000 barrels it brewed last year. (A barrel holds about 31 gallons, roughly 331 pulls of 12-ounce beer.)

“We started with 18 retail accounts, and now we’re in something like 400 bars and restaurants from Sebastian to Key West,” said John Linn, Funky Buddha’s brand manager. “Meteoric is really the only way to describe it.”

In Boynton Beach, Mike Halker’s Due South Brewing Co. is growing, too. He said he plans to double his production this year, to 6,000 barrels. When asked about sales, he gestured toward his 18-month-old brewery’s rows of tanks full of beer:

“Everything in those is already sold,” Halker said with a smile. “The distributor is always asking for more.”

South Florida, it turns out, is pretty thirsty for craft beer. The brewers say they suspected that was the case, and it was only a matter of time before they started filling demand.

Now, at least a handful of other hopeful brewers and their investors are planning to open soon in Miami-Dade County (see sidebar), following the footsteps of places like Due South, Funky Buddha and Wynwood.

“I’m very happy for the Wynwood guys, who sort of paved the way for us,” said Diego Ganoza of soon-to-open Gravity Brewlab. “Because of them, we all have fewer hoops to jump through, or we have a better idea of how to get through them.”

Ganoza said he is close to signing a lease on a warehouse space in the 2100 block of Northwest First Avenue in Wynwood for his brewery-and-beer-garden concept. Like the other newly opened breweries, Gravity won’t have a kitchen but will be food-truck friendly and will allow customers to bring in food.

For the past year and a half, while Ganoza and his partners have searched for the right brick-and-mortar location, they have poured home-brewed Gravity samples for free at dozens of restaurants, food events and festivals. They do it to get Gravity’s name out there and build a fan base, but it doesn’t come cheap. Ganoza estimated he has spent about $40,000 of his money on ingredients, equipment and travel costs in that time.

Ganoza said he has a $650,000 backing from his father, an uncle and his own finances to get Gravity off the ground; he also has two nonequity brewing partners.

“Opening a brewery is definitely a big expense, and I’ve learned that it can be very frustrating, between the permits and the licenses and the lease negotiations,” said Ganoza, a Peru native and Barry University graduate who works in marketing. “But I can see the light at the end of the tunnel. This is the thing I love the most, so why stop now?”

South Florida’s trend toward craft beer — generally defined by the Colorado-based Brewers Association as being made by independently owned breweries that produce fewer than 6 million barrels a year — is part of a national wave that has been steadily swelling for several years. There are more than 2,500 craft breweries in the United States, and about another 1,500 in the planning stages, the association notes.

Year-over-year production of craft beer was up 9.6 percent in 2013, according to a recent report from marketing firm Technomic. That accounted for about 7 percent of the total beer market, which is dominated by multinational megabrewers Anheuser-Busch InBev and MillerCoors. While sales of macro beers have fallen flat or declined, craft brew has gobbled up market share, raking in 6.3 percent of the beer market in 2012 and 5.5 percent in 2011, Technomic reported.

“In Florida, our [craft] market share is still like 4 percent, maybe even less,” said Funky Buddha’s Linn. “We have a bigger piece of the pie to capture, and we know we have tons of potential customers out there who are looking to drink something better than fizzy yellow swill.”

South Florida’s beer drinkers aren’t the only ones who seem to be rooting for craft breweries to succeed. Local governments also have been welcoming breweries with open arms and checkbooks.

Oakland Park, seeking to build up its downtown Culinary Arts District, sent a community-development employee to a high-end beer festival in Washington, D.C., with instructions to find a brewery to lure to the city, according to Linn. The staffer happened to run in to Ryan Sentz, who founded Funky Buddha in 2007 as a Boca Raton hookah bar that he eventually turned into a brewpub.

“The city didn’t even know about us, but we were looking for a location at that time, and we liked the Fort Lauderdale area’s central proximity to Miami and Palm Beach, so it worked,” Linn said.

Oakland Park spent $400,000 on a community plaza that doubles as Funky Buddha’s front patio and occasional band stage, he added.

Brignoni and his father, Luis C. Brignoni, opened Wynwood Brewing in October with the help of a $420,000 government loan. The seven-year, interest-free loan, which requires no payments for the first two years, came from funds from the federal government’s Community Development Block Grants but is administered by the city.

The Brignonis and their investors contributed another $900,000 to get the brewery running.

After their new brewing tanks are added to expand production capacity, the next major investment decision the local breweries will have to make is whether to add bottling or canning lines to their operations. (A growing number of craft breweries has chosen to can their beers, as the vessels provide beer better protection than glass bottles from light and oxygen, and they’re cheaper to ship.)

Since late fall, Due South has contracted with a mobile canning company to get its Category 3 and 5 India pale ales and its UXO American strong ale in cans and on retail shelves. Halker said he plans to install a permanent canning line in his brewery this year.

Funky Buddha occasionally fills 22-ounce bottles for specialty beers, like next month’s 700-bottle release of Nib Smuggler, its porter brewed with cocoa nibs. Linn said a full bottling line should be up and running by fall, allowing the brewery to package six-packs of 12-ounce bottles. At Wynwood, the younger Brignoni said his brewery will continue to focus on draft beer this year and may move into other packaging formats in 2015.

The big brewers have caught on to craft beer’s popularity and profitability. Anheuser-Busch InBev paid $39 million in 2011 to acquire Chicago-based craft brewer Goose Island. This month, A-B InBev bought New York’s Blue Point Brewing for an undisclosed amount.

With that kind of money floating around, the possibility of an eventual buyout is somewhere in every craft brewer’s mind.

“The day that someone offers me $10 million for this place? I’ll say, ‘Here you go, it’s yours!’ ” the elder Brignoni laughed.

“No, you won’t,” his son retorted. “Never sell.”

Due South’s Halker served in the military and owned motorcycle shops and a restaurant in North Carolina before taking his home-brewing professional with a brewery in Boynton Beach. Through the brewery, he said, he has been able to foster a sense of community.

Halker sources honey and oranges for his beers from local farms, he sends his spent brewing grain to a cattle farm in Delray Beach, and he chats up customers at his on-site tap room and at local establishments that carry Due South.

“Would I ever sell this?” Halker asked himself. “I can’t imagine what else I’d do that would make me this happy.”

Halker is president of the Florida Brewers Guild, which includes about 70 breweries and non-production brewpubs across the state, including a dozen in South Florida.

The group is poised for a busy upcoming legislative session in Tallahassee. It is being opposed by the beer wholesale lobby on bills that would allow beer sampling in grocery stores, similar to the way markets host wine tastings, and that would allow the sale of sealed 64-ounce containers of beer called growlers. Under current law, beer can be sold in 32- and 128-ounce growlers, but the common 64-ounce variety is illegal.

“The growler law is archaic and ridiculous, and we’ve got good momentum this year to get it changed,” Halker said.

Florida is a three-tier state when it comes to alcohol control. Manufacturers (breweries) must sell their products only to wholesalers (distributors), which in turn can sell to retailers (bars, restaurants, convenience stores, beer shops). The three-tier system stands even in the case of breweries that operate tap rooms, like Wynwood, Due South and Funky Buddha; the beers sold over the bar have to be sold to and then purchased from a distributor. All three breweries are distributed by Brown Distributing.

But alcohol laws and eventual acquisition offers are secondary thoughts for South Florida’s new crop of craft brewers. They’re busy keeping up with demand, and having a good time while doing it.

From Funky Buddha’s tap room, which includes an indoor bocce court, bean-bag games and oversize Jenga blocks, Linn talked about expanding the brewery’s reach to Tampa and Orlando this year, and rolling out bottled six-packs.

“Our core focus is always going to be serving the Florida market, especially South Florida,” he said. “This is home to us. These are the people who supported us since Day One. We feel that connection to them, and if they feel that connection to us and to our beer? That’s an easy sell.”

Follow @EvanBenn on Twitter.