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The inner workings of  Two Brothers Brewing.

Craft brew is booming, but Illinois lags national trend

by Siddhartha Vaidyanathan and J.H. Freeman
May 28, 2009

View Craft breweries across the US in a larger map

With its rising sales in an otherwise struggling beverage market, the craft-brewing industry is bucking the trend on a national scale. But experts say Illinois has some catching up to do, citing such roadblocks as geography, lack of distribution, strict licensing requirements and a region dominated by bigger household names.

“There’s a much more developed craft segment in the Pacific Northwest and New England,” said Benj Steinman, editor at West Nyak, N.Y.-based Beer Marketer’s Insights Inc. “More consumer demand for these kinds of brands is in these urban coastal markets.”

The Boulder, Colo.-based Brewers Association ranked the top 50 craft breweries by sales volume in 2008. Not one Illinois establishment made the cut. Other Midwest states like Wisconsin, Missouri, Michigan, and Ohio all have breweries in the top 50.

According to the Brewers Association, the oft-cited Goose Island in Chicago has upped its production to such an extent that it no longer qualifies as a craft brewery. This means that its annual production of beer is under 2 million barrels, and less than 25 percent of the craft brewery is owned or controlled by an alcoholic beverage industry member that is not itself a craft brewer.

For small craft brewers in Illinois, the biggest impediments to growth are licensing criteria and finding the right distributor.

“Let’s say you want to be a small little brewery, it’s hard to get in with the big name distributors,” said Travis Biggs, a beer specialist and salesman at Sam’s Wine and Spirits in Downers Grove. Biggs said the smaller craft breweries can’t produce the bulk amounts required to sign on with larger distributors.

In contrast, Goose Island’s distributor is Anheuser-Busch InBev NV and its concoctions are available at Sam’s as well as overseas. But Biggs says he can’t sell craft brews by the recently founded and Chicago-based Half Acre Co., only a 40-minute drive from the city, due to the limited reach of its distributor Chicago Beverage Systems.

The Warrenville-based Two Brothers Brewing Co. gave up looking for a big name and simply started its own distributorship, called, appropriately, Windy City.

"We started Windy City because at the time there were no distributors in Chicago that would carry our beer," said Jason Ebel, co-founder of Two Brothers Brewing. "The craft beer scene was almost non-existent back then and distributors did not want a brand to start from scratch."

Before fretting over distribution, simply opening a craft brewery in Illinois can be daunting.

Mike Urseth, managing editor of Ridgeland,Wis.-based Brewer’s Digest, said the process of obtaining a liquor license in Illinois is nettlesome, replete with thorough health and safety inspections and sizeable application fees.

Nearby states don’t have to hop the same hurdles, and it shows. Wisconsin, whose population is half that of Illinois, has 66 craft breweries to Illinois’ 41. Colorado (103), Michigan (70), and Ohio (42) all outpace Illinois in terms of number of microbreweries.

“The Chicago area is difficult, it’s an expensive market to build in,” Urseth said. “It’s a pretty successful one but they sell a lot of craft beer that comes from Wisconsin, Michigan and Colorado.”

Biggs agrees. Of the craft brew brands on sale at Sam’s, around 95 percent are from outside Illinois, he said.
Ray Daniels, director of the Chicago-based Cicerone Certification Program that trains people to become beer sommeliers, said Chicago’s geographic location puts local brewers at a disadvantage.

“You have Milwaukee on one side and St Louis at the other,” he said, referring to the Miller Brewing Co. and Anheuser-Busch InBev, two giants that are based in the two cities. “So the big boys from there are going to try and grab the Chicago market.”

But the problem is deeper, according to Jeff Sparrow, the treasurer of the Illinois Craft Brewers Guild. “The regulation around new breweries and restaurants is really cost prohibitive,” he said. “You’ve got to deal with massive taxes and major union regulation.”

Gabriel Magliaro, president and founder of Half Acre, began the process in mid-2006 and sold his first beer in August 2007.

"It's really challenging - the paperwork is extensive, [and there are] a lot of requirements,” Magliaro said. “It's labor intensive and costs thousands of dollars."

Despite the hurdles Illinois-based brewers face, Biggs is confident that the sales of craft beer in the state will eventually catch up with the national trend.

“It seems like every month we’re picking up a new brewery,” Biggs said.