Brew Local, Export Global: U.S. microbreweries test the waters in international markets

Evan Sallee of Fair State in Yokohama Japan // Photo via Antenna America Facebook

International exports might seem at odds with American craft brewing. We think of U.S. craft brewers as focused on breaking into neighboring states, not neighboring countries. But in 2017, nearly half a million barrels of U.S. craft beer was exported by land or by sea.

While it’s routinely positioned as a “local” product in a locavore climate, increasing international demand for U.S. craft beer could help brands survive. Americans are not drinking more year over year, beer is losing ground to wine and spirits in the overall domestic market, and competition among U.S. alcohol brands is at an all-time high.

But it’s a different story overseas. Beer volume sales in the U.S. were down 1% in 2018, but African countries overall have shown a 4.3% growth over the past five years. Central and South America grew by 1.3%. And the largest beer market in the world, China, which consumes 22.4% of beer globally, shows no signs of slowing down. Could shipping brands to emerging markets like Italy or Malaysia offer a novel revenue stream?

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Until 1994, small breweries were illegal in Japan. No volume less than 20,000 hectoliters was allowed—roughly equal to that of Duluth’s Bent Paddle Brewing Company. This meant the Japanese were relegated to drinking months-old imports or Japanese light lagers as the United States was launching what would become an unprecedented beer boom.

When the restriction was overturned, Japanese interest in craft beer was on the rise, particularly in the American West Coast styles. But Japan’s new small breweries were making poor imitations of mostly German styles of beer. By and large, the local clientele was not impressed, and this market gap posed an opportunity—and it wasn’t being filled with the trendy American craft imports.

Steady shipments of U.S. craft beer arrived in major Japanese metropolitan areas in the mid-1990s, typically by boat. Brands like Boston Beer arrived hot and beat up from transit, and the end product suffered. To a culture that largely appreciates quality, American beer could only be of minimal interest.

California native and ex-pat Andrew Balmuth, a business-minded beer lover, was interested in the shifting Japanese domestic craft market. He watched it go from nonexistent, to a growing boom, to a lull in the span of about 10 years. He also knew that American craft beer in Japan hardly resembled the stateside product, and was confident that it could be better.

Balmuth educated himself about Japanese beer culture and moved to Japan in 2004 to begin work in importing U.S. beer to a parched market. By 2006, Balmuth founded Nagano Trading, Inc. outside of Tokyo. Nagano, a licensed importer and national distributor, quickly became a pioneer in a changing beer landscape.

Nagano Trading prioritized cold-chain shipping since beer is more perishable than wine, sake, or spirits. The critical reduction in both time (by reducing door-to-door shipment timeline) and temperature made for unadulterated beer in the hands of local drinkers. Stone Brewing Co. was an early partner, with Sierra Nevada Brewing Company and North Coast Brewing Company close behind. The improvement in import quality led Nagano to expand into multiple accounts in and around Tokyo and Osaka.

Balmuth recognized that the demand for U.S. beer could not only be met through distribution but also by getting beer directly into the hands of consumers. In 2012, he launched a second company, Antenna America, to act as a tasting room for the same beers acquired by Nagano. Liquor store owners, restaurateurs, and the general public could visit one of three locations with 180 unique American beers for order or purchase.

Antenna America serves a curated selection that capitalizes on the Japanese obsession with all things United States, according to Balmuth. And it focused on craft beer in a way that no grocery or corner store in Japan was doing. “There is no such thing as Whole Foods with an aisle full of beer,” he explains.

Today, Nagano imports brands from beyond the West Coast, including Minnesota. One such example is Fair State Brewing Cooperative. CEO Evan Sallee explains that Nagano approached Fair State via a mutual industry connection. Balmuth expressed interest in bringing more Midwest brands to Japan.

“We weren’t looking for exportation opportunities, but we were open to the idea,” Sallee says. Fair State had previously sent a limited amount of beer to Québec but had no other experience with international supply chains.

An array of Anntena America’s American beer selection // Photo via Antenna America Facebook

“There really are no drawbacks,” he says. Except that they can’t keep up with the quantities that Nagano sometimes requests. Sallee and Balmuth correspond by email, discussing available brands and timelines. Despite having bigger orders than they can fulfill, Fair State provides the amount that they can and will continue to do so. Legally speaking, it’s not difficult. Nagano arranges the shipping from Minnesota to California, and then across the Pacific.

Similarly, Indeed Brewing Company didn’t include international distribution in its business plan, either. Owners Nathan Berndt and Tom Whisenand met Balmuth when he was in Minnesota visiting breweries. They hit it off and agreed to dabble in exportation. “We are cautious about where we send our beer,” explains marketing director Kelly Moritz. Though Indeed ranks, impressively, at 158 among craft breweries in the U.S. by volume, about 70% of their product remains in the Twin Cities metro. Outside of Minnesota, they’re found primarily in North Dakota and Wisconsin (as Whisenand puts it, their focus has been narrow and deep.) “But the way Andrew [Balmuth] runs his business shows us that he cares about the product,” Mortiz says.

The motivation for exporting beer varies between breweries of significant size and smaller brands without vacant capacity. Location may also influence a brand’s reason for global market share. Larger, coastal brands expand into foreign markets with eyes to generate new revenue streams. Astoundingly, almost half of Brooklyn Brewery’s revenue comes from overseas sales. Land-locked New Belgium Brewing Company exported to seven countries in 2018 but only 5% of their sales income came from outside the U.S.

In recent years there has been a surprising groundswell of smaller craft breweries, including Indeed and Fair State, whose bottles and cans are popping up on store shelves in Spain, Québec, and Japan. Exportation for the small entrants is more about marketing and professional growth than sales volume; Indeed does not expect to ever export a large volume of beer. “Rather,” says Whisenand, “we are looking to make connections with a new group of customers that are excited about American craft beer.

“We can’t keep doing the same thing over and over. We need to be challenged,” he continues. “The experience has been an enjoyable way to get to know another drinking culture, seek inspiration, and get feedback from a diverse and distant crowd.

At Sociable Cider Werks, founder and managing director Jim Watkins reports similar pros and cons. Sociable has expanded their territory into Manitoba, where accounts requested their product specifically. He sees another major advantage: the relatively low risk.

Rather than sign on with a Minnesota distributor for the life of the brand, export relationships can be temporary. Sociable was working with a potential distributor in China before recent tariffs made it cost-prohibitive. Still, they hope to get there someday and are also in talks with possible partners in Mexico City, which is experiencing a beer boom.

Despite the low risk, exporting isn’t without its challenges. Japan requires that the origin of all ingredients be reported. For self-distributing breweries, the process can be a strain on time and resources. Pricing can be tricky, among all the other factors that determine exactly where and when to send product.

But the barriers to exporting are minor and the feedback (and social media mentions) is fun.

Fair State in Japan // Photo by Tom Whisenand

International distribution increases brand awareness and can even drive beer tourism. People who are living abroad make a point to taste beers from their roots as a way to console their homesickness, while locals discover U.S. brands for the first time. Whisenand recalls with a smile the first time he saw an Indeed can tagged in an Instagram post from Japan.

Shannon Long is an international distribution expert in Michigan. Her business, Brew Export, has partnered with almost 150 craft breweries to bring their beer to over 20 foreign markets including the UK, the Netherlands, Belgium, and Canada. “It’s not that these destinations don’t make good beer, she explains. “There are breweries in places like Taiwan, Spain, […] and Scotland making world-class craft beer.”

Why do they seek out American imports? In short: IPA. “IPAs have absolutely been the most popular craft beer style globally in my experience,” she reports. “The New England-style IPAs and fruit-loaded kettle sours are popular in other countries, as well.” About half of her brewery clients have approached her directly with the express purpose of international distribution, in contrast to Balmuth’s Japanese experience. The beer that Brew Export provides ends up in both on- and off-premise settings. The majority of liquor store sales overseas are in the form of single bottles or cans, rather than a six-pack.

Though the average neighborhood brewery may never be impacted by the international demand for U.S. craft beer, it might be wise to consider the possibilities beyond the American market. Emerging beverage markets in countries such as Vietnam, India, and Spain, are interested in drinking more beer than their local markets can provide, and distributors are taking notice. The risks of spoiled beer and the threat of red tape are receding, while interest climbs.

For most small breweries, shipping beer far and wide is a marketing line item rather than a source of income, but when entrusted to the right hands, American beer can safely pack up and ship out.

 

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