There’s no doubt about one thing: New Hampshire residents sure like their craft beer, so much so that the state ranks ninth in the nation in terms of the number of breweries per capita. 

According to market research firm C&R Research, there are now 5.6 breweries for every 100,000 people in the Granite State, generating $356 in annual economic activity per person. In New England, only Vermont and Maine rank higher than New Hampshire when it comes to loving craft suds, with the Green Mountain State ranking first at 11.5 breweries per 100,000 people and Maine ranking third (9.6), according to C&R. 

In the last three years alone, New Hampshire’s craft beer industry grew by 33 percent, according to C&R data. 

But Paul St. Onge, the head brewer at Manchester’s Backyard Brewery & Kitchen and treasurer of the New Hampshire Brewers Association, said that not even the C&R data captures the full scope of the growth of breweries in New Hampshire. Today there are about 73 breweries in New Hampshire, up from just 10 a decade ago, he said, citing his own association’s data. 

With such explosive growth, is there still room to grow – and is it worth it to banks to lend out the hundreds of thousands of dollars, or even well over $1 million, it sometimes costs to open a modern craft brewery? 

Breweries Face Financing Challenges 

There are indeed signs that New Hampshire is approaching the peak of its brewery growth – or at least sub-sections of the industry appear to be approaching their peak. Industry officials note some recent closures of breweries – and how that’s making investors cautious. 

“I actually think it is getting harder to get financing,” said Nicole Carrier, owner and co-founder of Throwback Brewery in Northampton and president of the New Hampshire Brewers Association. 

“When the industry was growing at double digits and there were less players in the markets, I think that some banks and private investors were willing to place well calculated bets on promising businesses,” she said. “Now, with some breweries around us recently closing, and more and more breweries competing for shelf space, it is going to be harder for new breweries to make their case for funding.” 

Jerry Bazata, senior vice president and senior commercial lender at Optimate Bank & Trust, and others agree that there are increasing questions about how many more breweries the state can handle.  

On one hand, the markets in Vermont and Maine, with their much higher ratio of breweries per capita, suggests the demand is there for more locally brewed beer in New Hampshire. 

Then again Bazata, whose bank has financed 12 brewery deals since 2003, wonders how some brewers will withstand a possible recession that many see coming sooner or later.  

“The 2008 recession showed that, when the economy falters, people go back to their Budweisers and cheaper beers, and it hurts craft brewers,” he said. 

High Startup Costs and a Crowded Market 

Bazata said he’s still bullish on craft brewing, and insists craft brewing is not a fad.  

But it’s also a business that’s quite expensive to start, ramp up and then remain competitive with an increasingly crowded sector – and changes are already under way as a result, he said. 

In the early years of the craft industry, most craft brewers were content with starting brewing operations and distributing their products directly to retail outlets and bars.  

“But shelf and tap space have become very crowded and expensive,” he said. “There weren’t enough distribution [channels].” 

The next wave of breweries now sells their product on–site at tasting rooms and in brewer-owned restaurants/pubs. Many brewers have also started selling canned beer to go via on-site canning, storage and refrigeration operations, Bazata noted. 

While breweries’ earlier distribution problems have been theoretically solved, that’s led to higher capital startup costs. 

Opening a brewery with a restaurant/pub can run anywhere from $1 million to $1.5 million, Bazata said.  

First, there’s the brewing equipment – the stainless-steel tanks, the pumping systems, canning equipment, refrigeration and storage facilities. Then, for the pub/restaurants, there are the taps, sinks, stoves, ovens, dishwashers, tables, chairs, cooking and dining ware – and the list goes on. 

“You’re talking about a real capital investment,” Bazata said of opening a brewery with a pub and/or restaurant feature. 

In addition, breweries can’t open just anywhere. They generally need to be in industrial-like properties with high ceilings and concrete floors to contain the brewing equipment and withstand its weight. 

Lenders Look for Experience 

Ron Magoon, president and CEO of Franklin Savings Bank in Franklin, stressed he’s not an expert on breweries, though his bank has done a few brewery financing deals.  

Still, he said his bank looks at brewery deals the same way it looks at other commercial financing opportunities: It’s all about the bottom line. Franklin Saving doesn’t just look at the estimated costs and cash flows of breweries, but also whether the proposed operators own, or have owned, other businesses that establish whether they’re a good loan risk. 

“You’re concerned about their ability to repay the loan,” he said. 

Franklin Savings recently agreed to partially finance a new brewery in town, Vulgar Brewing, but it was part of a larger downtown redevelopment project involving other businesses and government-supported funding sources, he noted. 

Throwback Brewery’s Carrier agreed that future brewery expansion in New Hampshire will probably come at the breweries that sell their products at their own restaurant/pubs. 

“I do think there is more room for growth, but not in every segment of the market,” she said. “In many towns and cities, breweries have become hubs of their community – a place where folks can gather and talk over a pint.”