Beer is flowing in San Antonio brewery taprooms. It's also heading out to bars, restaurants and store shelves.
Clearly, the city's craft-beer producers have moved beyond the days of pandemic shutdowns, supply chain nightmares and pleas for customers to keep drinking their products via curbside pickup.
What isn't behind San Antonio and Texas breweries, however, is uncertainty.
The past year seemed to bring weekly news of a new closure somewhere in the state or warnings that one of its breweries is on the brink of permanently closing up shop.
People are drinking less and moving to other alcoholic beverages. At the same time, inflationary pressures are pinching consumers and brewery budgets. Together, those factors make for a shaky outlook.
Taxes on the east-of-downtown property of San Antonio's largest brewery, Alamo Beer Co., recently doubled. The business also experienced a 50% increase in the cost of ingredients over the past two years.
Also complicating life for Alamo Beer, the adjustable interest rate on a small business loan to the brewery shot up to 10% from 4%.
"You add all this up and it is making it very, very difficult for craft brewers," Alamo owner and founder Eugene Simor said.
San Antonio shuffle
One thing Alamo has in its favor is excess capacity to make more beer or manufacture and package other beverages. Besides its own brews, from Alamo Golden Ale to Hayz Street IPA, it now produces and sells VIVA Beer thanks to a deal it struck in September.
Alamo also took over the ShotGun Seltzer brand, which produces a variety of fizzy drinks including its take on ranch water, a ubiquitous Texas refresher. Founded in Austin, ShotGun merged with AquaBrew in San Marcos in early 2022 for the capacity to produce its seltzers in-house. That operation has since closed, and Alamo took over the ShotGun brands last fall.
To keep revenue flowing, Alamo also does contract manufacturing and packaging for three local, non-alcoholic beverage companies that include a canned coffee, an iced tea made with olive leaves and a drink made with kava root.
"It was not part of my business plan, but the capacity was there," Simor said.
Excess capacity at San Antonio breweries is a harbinger of more consolidation. Industry watchers have long predicted a slate of craft brewery mergers, and Simor said the current market forces may make that finally bring that to fruition.
Freetail Brewing Co., the Alamo City's second-largest brewing operation, could be part of that trend as investors in the 15-year-old enterprise explore selling the company.
With two brewpub and pizza kitchen locations — one of which also serves as a large-scale production brewery and canning line — Freetail had a banner revenue year, according to its recent sales listing by a business broker at BizQuest.com. Management also expects double-digit growth in 2024 and a first-time profit, the listing notes.
Freetail has deep distribution of its canned beer in San Antonio and some other Texas markets. It also recently started distributing in Colorado.
For its part, Weathered Souls, a well-known San Antonio brewery with national recognition, has struggled in the wake of its 2022 expansion into the Charlotte, North Carolina, market.
Mike Holt, Weathered Souls' majority owner, has told other news outlets that he's searching for someone to buy out his share in a partnership with brewer and co-owner Marcus Baskerville. Because of Baskerville's minority ownership, Weathered Souls is one of just a handful of Black-owned U.S. brewing companies.
Without a new investor, it appeared the Charlotte location may have faced closure, but Holt wanted to sell his share to an owner who would make it a majority Black-owned business, according to North Carolina outlet QCitymetro.com.
However, at press time, QCitymetro reported that Holt had secured an investor to ensure Weathered Souls' future.
Stalled demand
After years of brisk growth, craft beer demand has finally stalled out.
In 2023, the percentage of people who said they were drinking more craft beer and those who purported to drink less were equal at 25%, according to a Harris Poll. In 2015, the same poll found that 45% said they drank more craft beer, while 11% said they were drinking less from small and independent breweries.
For the craft beer drinkers who said they're consuming less, the most prevalent reason was that they turned to wine, spirits, flavored malt beverages and hard seltzers and sodas, according to the poll. Fewer cited health or economic reasons. Only about 15% said they were drinking less because they started consuming or increased their use of cannabis, a fear that's been the boogeyman of the alcohol industry for at least a decade.
The number of brewery closings in the 12 months leading up to last November hit roughly 400, while brewery openings declined to about the same number, according to Bart Watson, chief economist for the Brewers Association, the trade group representing independent breweries. That compares to 1,200 openings and 250 closings in 2018.
In a recent presentation to association members, Watson said the number of breweries in the U.S. likely won't increase in 2024, but that doesn't mean a bursting craft beer bubble. He predicts normal market dynamics and a geographic reshuffling of where the breweries are located will keep the industry strong overall.
To that point, it isn't all doom and gloom for San Antonio-area brewers.
Longtab Brewing Co. in Leon Valley appears to have found a secret sauce in catering to a fiercely loyal customer base of military members and veterans. The business produces military-themed beers, including several Belgian-ale styles, and its décor celebrates the American armed forces.
Longtab also serves up a chef-driven menu to go with its brews and has managed to keep expenses in check, said co-owner David Holland, an architect who served as a U.S. Army Green Beret. Since its 2020 launch, the venture has expanded its brewery space three times and its seating space once, he added.
"I hear nothing but bad news about other breweries struggling," Holland said. "I get spooked, but we are still paying the bills and making payroll."
Local loyalty
Even in January, a slow month for most bars and taprooms, Holland's brewery posted revenue on par with its busy December. He credits that to a two-day anniversary party that brought out crowds ready to spend.
"We also started BelgianFest two years ago and did great. We did it again and it was an absolute frickin' blowout," Holland added.
Holland had looked at moving the brewery, but rents elsewhere and finish-out costs made it prohibitive. Instead, the brewery just took on more space at its location just off Bandera Road.
"Our parking sucks, our layout is very fragmented, but people don't seem to care," Holland said. "We have a different clientele with veterans. They're pretty loyal, so every time we have an event we have a big turnout."
Many of those customers are coming from far North Central San Antonio locales such as Stone Oak.
Holland said he's "actively looking" for a satellite Longtab location that could operate under a different license allowing it to also serve cocktails. He's surveying spaces in the Stone Oak area that once held restaurants and hoping for a quick turnaround.
Even so, not all brewers have been able to command loyalty which transcends consumer whims. Like many small businesses, their fortunes are tied to support from local customers, Alamo's Simor said.
"The 'support local' concept really needs to continue to grow in order for the industry to survive," he said.
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