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Doubling Down Central Oregon's breweries are betting that the craft brew market isn't yet tapped 

Craft brewers are cashing in on the Bend brand and the industry shows no signs of slowing its rapid growth.

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A little-known fact: a year from now, barring any unforeseen setbacks, the capacity of the Central Oregon brewing industrywill increase by about 60 percent.

All of a sudden, six of the region's ten breweries are expanding,twobig newbrewhousesare opening and Deschutes Brewery is upping capacity by 30 percent.

After all the changes (see the What's Happening sidebar for details), we are talking about Central Oregon being capable of putting out 350,000 barrels, or more than 10 million gallons, of beer per year.

That's a lot of beer. In fact, that's more microbrew than the entire state of Oregon consumed in 2008, according to the 2010 Oregon Brewfest fact sheet.

All theselocal companiesare trying to grab a share of the ever-growing national microbrew industry. They are betting that the Bend brand will help them do it and, regardless of a coming battle for Central Oregon's tap handles, brewers in this town say there is room for more.

Beer industry analyst Bump Williams isn't surprised at their optimism. Last year alone, and during a recession, craft sales increased somewhere in the neighborhood of 11 to 13 percent, said the former St. Louis Cardinals pitcher who is now a beer industry consultant and regularly prepares reports for The Wall Street Journal and The New York Times.

There are also more breweries in America than ever before, according to The Brewers Association, the trade organization that represents breweries around the nation. As of March, the association estimates that there are more than 600 new breweries in the planning stages around the country.

Williams said Bend has become the place to open up shop and ride this trend for a bunch of reasons.

"There's good water, good brewing talent," he said. "And where else to brew craft beer than where the highest consumption rates are?"

He might be suggesting we drink too much. But his point is well taken. The image of Bend as good, clean country inhabited by talented people who like to drink high quality brews is very sellable. Not only that, but Williams said Central Oregon now has a critical mass of breweries that boost the power of the Bend brand.

Brewers and brewery owners agree. They say as long as the quality of all breweries remains high, there's little concern whether this town can handle more brewhouses.

"The more breweries that come, the better for everyone, as long as the overall beer climate remains strong inBend,"said Chris Cox, an owner of 10 Barrel Brewing Company.

Cox and his brother were part of the second wave of craft brewers to get in the market, well after pioneers like Deschutes Brewery, Cascade Lakes and Bend Brewing Co., but before the Boneyard and the soon to-be-opened Noble Brewing.

10 Barrel Brewing Company started out under the name Wildfire Brewing and was only available in the Cox brother's downtown bar, JC's. After a copyright conflict over the Wildfire name, the Cox brothers rebranded as 10 Barrel Brewing Company and embarked on ambitious expansion that saw the brewery ramp up its production while courting beer drinkers in Portland, thanks to an efficient distribution network. The company also staked its claim on the Bend market by opening an immensely popular westside pub last year that has become a favorite among local beer drinkers.

Now, Cox, his brother and their two partners are opening a new 50-barrel brewery in northeast Bend by Jan. 1 to allow for additional growth.

The story of their brewery is a reflection of the kind of success possible in this rapidly expanding industry.

There's still so much room for growth because the craft market is still fairly untapped compared to the rest of the beer industry, said Cox's partner Garrett Wales.

"Craft is the only segment still growing," said Wales. "A lot of that speaks to the idea that this industry is still young."

This optimism and hope means the brewers in this town are tight. Many feel they are part of a fraternity.

"Bend is a true microbrewery bastion," said Dave Love owner of Old Mill Brew Werks, who brews a line of his own beer in collaboration with Silver Moon Brewing. Love said that there is a certain intimacy to the brewing climate here "as opposed to a place like Seattle... which is just focused on production."

But for all the camaraderie and respect that brewers and brewery owners have for one another, there is an acknowledgement that increased competition is on the horizon.

It's like this: most breweries in Central Oregon rely on at least some distribution out of town, but they all depend on securing tap handles in this region for a chunk of sales.

A relatively finite number of tap handles in Central Oregon plus more breweries equals more competition as breweries begin to elbow each other for space at the bar.

"It's gonna get tough, especially with Noble coming in," said John Machell, owner of Brother Jon's Public House on Galveston, referring to the impending arrival of Noble Brewing Co., which will soon open a new commercial brewery in the Century Center with a capacity that will immediately top several of the existing breweries, including Bend Brewing Co., Silver Moon and Boneyard Beer.

Pub owners like Machell are seeing kegs from some local breweries move several times faster than other breweries in town.

"Some people are going to be swept away by it," he said of the growing competition. "Saying, 'We are Deschutes; you have to put us on,' isn't going to work anymore."

This reality has a growing number of the breweries in the area looking to markets over the mountains or east, to Idaho. And expansions of brewhouses are the key to making enough beer for widespread distribution.

Cascade Lakes Brewery owner Chris Justema recently hired two new sales representatives to push the brand in Southern Oregon and Idaho. A recent investment in new equipment will help the brewery meet the additional demand his sales people will generate.

The Cox brothers said they will push deeper into Portland and Southern Oregon as soon as they have the capacity.

And Silver Moon Brewing had its best day of sales ever last week when 35 kegs were picked up for delivery to the Portland market by a new distributor, said brewer Brett Thomas.

All this expansion is causing some people to question where the ride is headed, said Tony Lawrence, co-owner of Boneyard Beer.

Is the beer industry going through a period of rapid growth that could end like the most recent housing boom or the dot-com market?, he asked.

Lawrence, whose company has focused on getting beer out of this territory from its beginnings, thinks the answer is no.

"Is it a bubble, or is it for real?" he said. "And I think it's for real. It's an unstoppable industry."

Central Oregon breweries are about to bet on it.

Growing, Growing, Gone

Municipal water supply and treatment capacity could impact breweries growth plans

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While local breweries may be ready to compete with a few additional brewhouses, Bend's wastewater system is not.

"We are at sewer capacity in most locations around the city," said Paul Rheault, Bend public works director.

This is a problem for breweries, especially big ones, because it takes a lot of water to make good beer. Depending on the efficiency of the brewery, it can take anywhere from three to 10 gallons of water to make one gallon of beer, according to local brewers.

And after that water is used in the beer brewing process it has to go down the drain.

"Say ABC brewery comes to Bend," said Rheault. "We find out how much wastewater they'll produce. If large, we ask, 'Can the collection system handle that amount of flow in addition to the current capacity in the city pipes?'"

With the capacity limitations Bend faces, the answer to that question is more often no than yes, particularly on the westside and in southeast Bend, he said.

It's a problem that could limit Bend's ability to attract new business, said Rheault, particularly water-intensive businesses like breweries.

The city is working to upgrade portions of the wastewater system, but it is very expensive. A $35 million new sewer intercepter leading from southeast Bend up to the wastewater facility in northeast Bend is already in progress and will make a big difference, but funding other expansions is difficult.

"It's certainly a very important decision about where the money is going to come from," he said.

The owners of 10 Barrel Brewing Company recently worked closely with the city to find an appropriate location for the company's new 50-barrel brewhouse, said Chris Cox, an owner of the brewery.

The northeast ended up being the best site for a variety of reasons, but specifically because the city's infrastructure could handle a brewhouse better there than other places, Cox said.

The solution for Deschutes Brewery isn't so easy.

To accommodate its upcoming expansion, Deschutes must create a plan to upgrade the portions of the wastewater system most affected and bring that to the city, said Rheault.

Larry Sidor, brewmaster at Deschutes Brewery, said the brewery is committed to doing its share.

"We have to improve the wastewater system as we grow," he said.

In the future, it will continue to be up to new breweries moving into the area to demonstrate that their facility will not max out the sewer lines and, if necessary, help with the costs of upgrades.

"They have to show this is going to work," said Rheault. "It's not the city's responsibility to rectify that for them."

Brewery Expansion Plans and Completions From Fall 2010 to Jan. 1, 2012

Deschutes Brewery will add new fermentation tanks and is required to upgrade portions of the sewer system on the westside to accommodate the new capacity. Brewmaster Larry Sidor said this would allow the brewery to add roughly another 100,000 barrels to current production levels of about 200,000 barrels per year.

10 Barrel Brewing Company will move into a new brewhouse on Empire Avenue and 18th Street with a 50-barrel system. The brewery will cease production at its current location and move the 10-barrel system to the new location for small batch brews. (The small batch production that will be headed up by Tonya Cornett of BBC who will split her time between the two breweries.) As a result, 10 Barrel's capacity will jump from roughly 2,700 barrels to about 15,000 barrels per year. The company hopes to be brewing in the new brewhouse by Jan. 1.

Noble Brewing Company is currently under construction on SW Commerce Avenue attached to the new Century Center. The brewery, Bend's newest, will hold a 50-barrel brewery and, like 10 Barrel Brewing Company, could brew a minimum of somewhere around 15,000 barrels per year.

Cascade Lakes Brewing Company recently replaced 17-year-old equipment at its Redmond brewery with newer, larger pieces, including all new malt handling equipment. This will help up capacity to 8,000 barrels per year from current levels, said owner Chris Justema. The brewery has also added sales reps in Portland and Boise, broadening the company's reach outside of Central Oregon.

Old Mill Brew Werks will move into 10 Barrel's current location after that brewery moves to its larger space sometime this fall, said owner Dave Love. Silver Moon Brewing currently brews about 150 barrels per year for Brew Werks, but that will end when Love installs a seven-barrel system at the new location. Love expects to brew 450 barrels the first year there, part of that amount will be beers crafted by area homebrewers on Brew Werks' system and sold in the Brew Werks restaurant.

Boneyard Beer celebrated its one-year birthday in April after brewing 1,300 barrels in its rookie campaign. New fermenters will be added in the next month or so, which brewer Tony Lawrence expects will help the brewery hit about 4,500 barrels this year. The brewery has already purchased canning equipment and could be the first to get its ale in a can.

Three Creeks Brewing in Sisters recently added new equipment allowing the brewery to brew more efficiently and more quickly. The company was also granted a license for a second location that will serve purely as a storage facility and allow the brewery to work with more barrel-aged beers, said owner Wade Underwood.


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