Finding a Niche in Gourmet Suds Market : Tiny Breweries Go for the Gusto

The decor at Allan Paul’s pub at the edge of the old Barbary Coast includes a mahogany plank bar trimmed in shiny brass, revolving paddle-wheel fans and a 200-gallon copper kettle.

The kettle isn’t merely for show. It’s the source of the beer served with pride at the San Francisco Brewing Co., one of America’s newest “micro-breweries” going for a share of the gourmet suds market.

“We make beautiful beer,” said Paul, brewmaster and principal partner in what he calls the first brew pub in San Francisco. Production is 60 gallons a day. Budweiser, which makes about 6 million gallons a day, is not yet raising an eyebrow.

Storefront Operation

The San Francisco Brewing Co. is a storefront operation. With the brewing kettle in the bar proper, customers can take in almost the entire process at a glance. Out of sight in the cellar, a small cooler ages the beer before it’s pumped to the bar.

The pub serves two old-style lagers, at $2.50 for a pint and $1.75 for a half-pint. They’re called Albatross, after the saloon that last occupied the premises, and Emperor Norton, after an addled but lovable old fellow adopted by the city in the last century.

“We’re definitely going to make money,” said Paul. “San Francisco has a sophisticated beer market . . . their per-capita consumption of beer is No. 1 in the country.”

Although the nation’s beer consumption has been stalled for years at about 25 gallons per person per year, imported and U.S. specialty brews are increasingly popular with affluent drinkers.

On the domestic side of the gourmet suds trade are about 60 micro-breweries, producers of less than 10,000 barrels a year, according to William O’Shea, spokesman for Chicago-based Brewers Assn. of America.

Instead of the rice and corn used in most high-production domestics, these heavier, headier super-premium brews use barley, wheat or more exotic ingredients to make the drinks distinctive.

But that doesn’t always make them competitive.

“They have a lot of problems,” O’Shea said. “Anybody can start a brewery in any area and sell some beer. If he gets a big enough price, he’s in business. The trouble with these micro-breweries is when they leave their home territory, they don’t sell.”

There are exceptions.

Market Watch, a publication that keeps tabs on alcoholic beverages, says Massachusetts-brewed Samuel Adams Boston Lager is so faithful to the German brewing standard that it is the only American beer available in West Germany.

Another success story is San Francisco’s Anchor Brewing Co., rescued in 1965 by washing-machine heir Fritz Maytag. At the time, it was producing about 600 barrels of draft a year. Maytag’s friends thought he was crazy.

“No one ever heard of us,” said Maytag. “We had a zero reputation. I was the only one thinking Anchor Steam was the greatest beer going.”

One of Best Markets

By 1985, Anchor was producing 8,000 barrels of beer, porter, ale and barleywine, led by its popular Anchor Steam Beer. Maytag agrees with Paul that San Francisco, along with Seattle, is one of the best markets in the country for gourmet and specialty beers.

“It’s easy for us to go in one place and find eight or 10 completely different beers,” Maytag said. “Not only Miller, Oly or Budweiser. I mean, Anchor Porter or Wheat, Guinness Stout or San Francisco Brewing Co. lager. “Beer is the kind of thing where rational people can get together and enjoy themselves and remain rational.”