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Bubble or boom? Growth of craft brewing raises questions

Busy laborers hammer, saw and measure as Josh Divers and Jordan Serulneck walk through the site of the future Seven Sirens Brewing Company in Bethlehem. The two men, just 32 and 30 respectively, are co-owners of the microbrewery, set to open in late September or early October.

Jordan Serulneck (left) and Joshua Divers (right), co-owners of the soon-to-be opened Seven Sirens Brewing Company in Bethlehem, stand with Seven Sirens Event Coordinator Kyra Barron at a recent beerfest.

A lot is on the line for the pair. Josh is married with two sons, ages 3 and 6, while Jordan is recently engaged. Both put their houses on the line for collateral in order to obtain a small-business loan.

“Failure is not an option,” said Jordan. “We can’t not succeed; that’s how I know we will succeed.”

Seven Sirens will be the latest in a burst of micro-breweries in the Lehigh Valley. From Funk to Fegley’s, Bonn Place to Bangor Trust, there is a microbrewery (or two or three) in many local communities.

But will the growing supply outpace the demand? And with so many specialty beers, can any beer be special?

“I think it depends on how the business is conceived,” said Troy Reynard, president of the Lehigh Valley Brewers Guild, and one of the owners of Two Rivers Brewing, a brewpub located in an historic former tavern in Easton’s West Ward neighborhood.

“We’ve tried to be relevant to the community and stay on top of trends,” he said. “Our smaller size, too, is the most successful in the industry. The biggest mistake many make is trying to grow too fast.”

Reynard also believes that having enough capital to float the business in the early days is key. Most startups will take at least two years before a profit can be taken out of the business, he said.

“I’ve seen people quit their jobs, wrongly assuming they will be able to take money out of the business right away,” said Reynard. “To succeed, you need a great product, a good location and enough capital.”

Reynard sees a “correction” in the industry in the near future, with some microbreweries closing.

In fact, Salmon Pants Brewery, which was located on East Susquehanna St. in Allentown, closed in July after being open for less than a year.

While Reynard said having so many breweries in one area dilutes the audience to some extent, he believes that if a brewery has a good product and is the right size for the community, that there is still an opportunity to be successful.

Reynard also thinks it is a smart move for local craft breweries to open additional tap rooms in different neighborhoods.

“You make more money selling retail than wholesale,” continued Reynard. “We opened a tap room in Quakertown. We keep looking at trends, at what’s hot. Brewed IPAs were a thing on the West Coast, and we were the first to do that here.”

Two Rivers also has a restaurant, which Reynard feels is an advantage. “We get so much business from people who went into Weyerbacher for a couple of beers, but then they need somewhere to eat.”

“Pre-prohibition there were four breweries in Easton,” he said. “People forget that. It was a part of the way of life and it can be again.”

Hey, let’s make beer, that will be fun

Just up the hill from Two Rivers is the granddaddy of craft breweries in the Valley, Weyerbacher Brewing, founded in 1995 by Dan and Sue Weirback, and now located on Line Street on the South Side in Easton.

Weyerbacher filed for Chapter 11 bankruptcy in April and underwent corporate restructuring, with a private investment group now holding the majority of stock in the business.

Josh Lampe took over as president of Weyerbacher in 2015, which he described as a pivotal year.

“You started to see breweries our size and age get hit, as one-to-five-year-old breweries started skyrocketing,” he said. “We had been doing double-digit growth for six, seven years at that point and that stopped. Part of my job is dealing with the over-saturation of craft breweries in the market.”

Lampe said there are a lot of people who think, “Hey, let’s make beer, that will be fun,” without realizing that a craft brewery is a business first and foremost and must be focused on as such.

“If we see the number of breweries continue to open at the rate they have been,” he said, “you are going to start to see people eating each other. If they are all trying to be what we are now, that’s not sustainable for everyone. If you don’t have a quality business plan and great beer out of the gate, there is no room to screw up anymore.”

Lampe was also quick to point out, however, that there can be benefits to having a number of breweries in one small area.

“We’ve actually got a really tightknit community of brewers here,” he said. “If we need hops, we will ask Funk (a craft brewery in Emmaus). We all share. We are contract brewing for some of the local breweries.”

One of Weyerbacher’s contracts is with Funk. The deal allows Funk to avoid investing in the expensive infrastructure needed to brew larger quantities and gives Weyerbacher additional cash flow.

Lampe also mentioned that communities that have several breweries can attract beer tourists.

“From a wine perspective, go up into the Finger Lakes,” he said. “They were just voted best wine country in the U.S. by USA Today. There are so many wineries there that they have created a whole tourist industry around it.”

“In Easton,” he continued, “We’ve got Two Rivers, Boser Geist, there’s so much you can do in a small area. Beer tourism is a real thing.”

Lampe said Weyerbacher frequently attracts beer tourists from as far as four hours away and that Weyerbacher recommends the travelers visit other breweries in the area.

Ted Zeller, general counsel for the Brewers of Pennsylvania, the state’s official brewers’ guild, believes that beer tourism can be a tremendous economic opportunity for community redevelopment.

Ted Zeller Esq., general counsel for the Brewers of Pennsylvania – submitted

“There are an overwhelming amount of microbreweries in Phoenixville, and it’s literally just turned that community around,” he said. “High tide raises all boats. Competition makes everyone better.”

Zeller maintains that there is no “beer bubble,” but, like Reynard and Lampe, he said, the breweries that will fail are the ones that do not have a good product or business plan.

“The new beer drinker is more ‘What have you done for me lately?’” he said. “There isn’t a tremendous amount of loyalty in the consumer.”

And with every craft brewery marketing its own special editions, those rare craft brews that collectors once hunted for have started to lose a bit of their cache.

“There are still the rare beer unicorns,” said Weyerbacher’s Lampe. “There is still collectorism. Our Sunday Morning Stout flew, it was gone. People will always want something new, but yeah, when you have a can release every weekend, and you can go to Lost Tavern Brewing in Hellertown, Funk … when everyone has a can release, it loses something. And that’s ok, you might lose a bit of the lines, but people will still buy beer.”

For Weyerbacher, continuing to stay relevant in a crowded market has included expanding into craft spirits, opening additional tap rooms, and signing a recent contract to partner with White Castle Hamburgers, a fast-food restaurant chain headquartered in Columbus, Ohio.

Weyerbacher beer will be served in certain White Castle restaurants, and marketed alongside the hamburgers in stores.

“We are really excited about it,” said Lampe, adding: “We’ve survived because we’ve stayed agile. If there’s a bubble, I don’t think it’s gonna pop, but expand and contract. Those who are doing it smartly will remain.”

Patience and a positive attitude

Back at the soon-to-be home of Seven Sirens Brewing, co-owners Jordan Serulneck and Josh Divers are counting on a crowded craft brewery market to help their business.

“The Lehigh Valley is exploding in craft beers because of the ease of accessibility,” said Serulneck. “All the major highways connect here. We are so close to New York and Philly.”

Serulneck echoes the notion that before prohibition, it was common to see multiple breweries in one area.

“Prohibition really set our area back as far as beer culture,” he said. “The rest of the planet is used to these small breweries and pubs on every corner. It can be like that here. The population in the Valley is skyrocketing and we are here to serve it.”

For Serulneck and Divers, the biggest challenge has not been the competition, but the amount of time it takes to open the business. Still, they aren’t letting the red tape and construction delays get them down. They plan to stick around for the long haul.

“We’ve been working on this for two and a half years and still can’t legally sell beer yet,” said Divers. “It’s difficult but by no means impossible. We are doing it. It takes patience and a positive attitude.”

To keep their future customers engaged and excited, the pair will release limited edition barrel-aged tequila and rum, in-house wines, seasonal beers and even experimental beers.

“We are really excited to try out our shiny new toys and show off what they can do,” said Divers.

Seven Sirens will also be open later than most craft breweries, and will stop serving at midnight, rather than 8 p.m. or 10 p.m.

What they are most looking forward to sharing with the Lehigh Valley beer enthusiasts, however, is the Seven Sirens rooftop beer garden, modeled after the European beer gardens that Serulneck enjoyed while traveling in the Navy from 2009 through 2015.

“For us, we are in the perfect location for something like this,” he said. “People want an experience and they also want the closer-to-home feel. And if another brewery moved in across the street? We would welcome that. The more the better. There is room for everyone if you do it right.”

 

 

 

 

Dawn Ouellette Nixon
Dawn Ouellette Nixon is a career journalist who believes that good journalism can change the world. As the health care reporter, she covers everything from small town medicine to big pharma. You can also find her chasing a good business story in Berks County. She can be reached at dnixon@lvb.com or 610-807-9619, extension 4118.

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