Dogfish Head thrives in new era of craft brewery competition

It should come as no surprise that Dogfish Head is one of the top 50 U.S. brewing companies of 2017. 

The Brewers Association released its annual lists in mid-March, ranking both craft and overall brewing companies by sales volume. Dogfish Head made both, at no. 12 and no. 22, respectively. 

Those numbers haven't faltered or fallen: They've hovered. Since 2009, Dogfish has neither gone over 16th place nor made it to the Top 10. 

The Delaware-based, nationally distributed company's rank isn't an insult, because Dogfish Head remains a master of steady ascents. 

"We believe in a business model of prioritizing strong growth over fast growth," founder Sam Calagione said. 

Sure, the craft beer industry grew tenfold in the last decade, with over 6,000 breweries operating nationwide.

But small and independent brewers like Dogfish represent about 98 percent of the country's breweries that only account for about 12 percent of the beer produced and sold, according to Brewers Association's most recent statistics. 

Within that small and independent market, the Milton brewery is a giant compared to other Delmarva breweries. 

"It's essentially participating in a different market," said Bart Watson, chief economist at Brewers Association.

Using third-party distributors and selling in multiple states, Dogfish Head's economics is a different animal. Most craft breweries focus on direct-to-consumer sales and self-distribution. It's a different competitive dynamic, Watson said. 

"You really have to innovate and find ways to differentiate your products," Watson said. "Dogfish is one of the best at this."

"We are known for innovation," Calagione said, mirroring Watson's words. "You're looking at best-selling beers that didn't even exist three years ago." 

Calagione is talking about SeaQuench Ale and Flesh & Blood IPA, both of which launched in 2016 and hopped way over sales expectations and smaller distribution plans. 

Brewbound, a website that follows the craft beer industry, named SeaQuench Ale “Beer Product of the Year” for 2017 because it so well differentiated itself in a crowded field of emerging beer styles.

The balance of truly "off-centered" (like the hyper-local Beer for Breakfast Stout, with scrapple mashed right into the batch) and approachable (SeaQuench) has helped maintain the Dogfish brand. 

Dogfish also employs well more than 300 people (or "co-workers," a nod to the company's non-corporate, non-hierarchical culture).

"We owe it to our co-workers to stay strong in the marketplace," Calagione said. "It's a very trying time to be a coast-to-coast distributing company."

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Calagione keeps his eye on bankrupt or sold companies like New Hampshire-based Smuttynose Brewing Company, which went for $8 million at a foreclosure auction in March. 

Dogfish Head is far from such an outcome.

"They aren't resting on the laurels of beers they’ve produced in the past," Watson said. "They're producing beers for the drinker of today."

Last year, Dogfish Head experienced 18 percent in growth in what Calagione calls a flat industry. 

American beer consumption was down by 1 percent in 2017 (evidence of a difference in generational tastes: younger people are drinking less beer), but craft beer sales are still up, Watson said.

The disparity has to do with fewer people drinking “Big Beer” products like Budweiser and Blue Moon and gravitating instead toward craft beer, industry experts say. The fact that it continues to show gains in a flat market indicates a switch not only in public tastes, but also public consciousness about independent craft beer.  

"I do think we are entering a more mature era, but the fundamental demand doesn’t appear to be going anywhere," Watson said of the industry. 

Craft beer drinkers continue to demand fuller flavor, more variety and local products from independent businesses, Watson said. 

"We believe we need to grow," Calagione said, "and attract talented people to move to Delaware."

Calagione said the craft brewing industry is on the precipice of a "shakeout moment," but Watson would be surprised if brewery numbers were to fall. 

"I think breweries are going to rise, even in this competitive era," he said.