According to the Brewers Association, there were 2,822 U.S. breweries in operation in 2013. Of that count, 2,768 were considered craft beer breweries, which means this subcategory of the larger beer market accounted for 98 percent of all U.S. breweries. Its actual share in terms of volume and retail dollars, however, remains much smaller than national and international commercial beers since the craft beer market consists of smaller brewpubs, microbreweries and regional craft breweries. But still, the market’s growth over the past decade-plus has been impressive. Last year, the craft beer market reached $14.3 billion in revenue – a 20 percent growth over 2012.
Dave McLean, brewmaster and owner of Magnolia Brewing Co., has witnessed this growth in his own operation. McLean began homebrewing as a hobby in 1992 and went on to graduate from the brewing science program at University of California Davis in 1994. His beloved hobby became a legitimate business in 1997 when he opened Magnolia Gastropub and Brewery on the famed Haight Street in San Francisco’s Ashbury Neighborhood. The small neighborhood brewpub and restaurant have been a local success. The restaurant’s focus on made-from-scratch and seasonal foods resonated with the heart of the neighborhood, and the drafts – ranging from Proving Ground IPA, Blue Bell Bitter, Cole Porter and Kalifornia Kölsch – expanded the city’s education of what beer can be.
“When we first opened, it felt like we had to teach everyone who walked in the door, so consumer education was our primary challenge at the time,” Mclean says. “Now it’s the opposite and there are so many passionate beer lovers. There’s a degree of sophistication now that we could have only dreamed of 17 years ago.”
The number of conversions from craft beer newbie to expert continues to grow, which made it difficult for Magnolia’s 1,000-barrels-per-year facility to keep up with the demand. That fact spurred McLean to continue on his next venture and open a second brewery that will help it keep up with internal demands and create opportunities for external growth.
Second Time Around
“We sold a little off-site to beer-centric restaurants in the area, but not much,” McLean says. “The size of our first brewery was to support its own restaurant operations, but we were having trouble even keeping up with that,” McLean explains. “The craft beer industry has exploded around us and there is demand coming from all directions for us to make our beer available outside of the restaurant. We could’ve just built a small brewery to satisfy our own restaurant needs, but we took the opportunity to make a leap and become a wider-distributed beer.”
Last year, Magnolia opened its second brewery located in San Francisco’s Dogpatch neighborhood. The 10,000-square-foot brewery was custom-renovated to Magnolia’s brewing needs and has a capacity of 5,000 barrels a year with room to expand to 12,000 barrels a year as the company continues to grow. Like its first location, the brewery also supports an attached restaurant, this time its Smokestack, a barbecue house headed by Chef and barbecue Pit Master Dennis Lee. In addition to barbecue and beer, Smokestack serves up a spirited menu of whiskeys and cocktails. Between its two restaurants and 30-plus beers (some seasonal), McLean says the public has many touch points to experience Magnolia.
“I like the business model of having different concepts within the primary concept and being able to reach people and satisfy different needs at different times,” McLean says. “The way we have things set up now, with the breweries and two restaurants, there’s a trinity of ways people can engage with our brand. If they like one aspect of it, it will motivate them to try one of our other concepts.”