Sonoma County hard cider companies chase juicy market

At first glance, the growth the hard cider industry is experiencing now seems similar and poised to mirror the craft beer movement’s explosive expansion over the past 20 years.

After all, it is a highly concentrated industry controlled by major corporate producers. And just like in the craft beer market, there is a growing base of cider consumers craving a more artisanal and authentic drink.

Sonoma County producers stand to benefit, especially as they can source local apples such as the Gravenstein and tap into the area’s craft ethos that has made national and international names of breweries such as Lagunitas, Bear Republic and Russian River.

The trend has continued into 2015. Sonoma Cider in Healdsburg expects to more than double its production this year from its first year of operation of 65,000 cases and will open up its cider pub later this summer. Devoto Orchard Cider in Sebastopol has introduced a new sister brand, Golden State Cider, which is expected to triple from the 10,000 gallons it did since August. Tilted Shed Ciderworks opened up its tasting room in Windsor this fall for more people to experience its unique ciders, which have included those aged in bourbon barrels or apples smoked over wood flames.

And as the popularity of fermented apple juice continues to swell, Sebastopol cider maker Jeffrey House plans to ride it out even though he is unsure how the market - estimated at more than $500 million - will eventually segment and mature. Most analysts also are uncertain if the cider industry, and the craft segment in particular, can gain the same foothold similar to the craft beer movement, which has become a $14.3 billion industry with an estimated 10 percent of the national beer market and growing rapidly.

“The growth of craft beer has taken place over a long time. It’s taken craft beer over 30 years,” said Tom Wark, author of the CiderJournal.com blog and a public relations consultant for wineries. “It’s impossible to say for cider.”

As the owner of California Cider Co. in Sebastopol, which produces the Ace Cider brand, House is in a unique position in the marketplace after 21 years in business.

“What my goal would be is to be like the Sierra Nevada or Lagunitas of cider,” said House, a 64-year-old British native with unruly mop of blond hair and wry sense of humor that would be at home in a Monty Python skit.

With nearly $10 million in annual sales and distribution in 46 states, Ace cider is not comparable to its much smaller local competitors, some of whom pride themselves on using only locally sourced apples and a processing technique where they press their own fruit.

But Ace also is not in the same league as the national and global brands that dominate the market. For example, the Angry Orchard brand, manufactured by Boston Beer Co., had a mouth-dropping 57 percent of the retail markets surveyed in the last year, according to IRI, a Chicago-based market research firm. The remaining companies that had at least 1 percent of the market represented major brewing companies such as C&C Group, Anheuser-Busch InBev, MillerCoors and Heineken USA Inc., with Ace having 0.6 percent of the market. House estimates that Ace’s overall share is 3 percent of the market when considering all retail establishments, such as Whole Foods Market, where Ace’s brands are prominently placed, and pubs and restaurants.

“You are going to get a tremendous amount of sorting out,” said House, who is predicting a major fight for market share in the craft market.

Ace is ramping up to maintain its 30 percent growth rate by expanding its sparse production facilities just off Highway 116. It will add five tanks, at a cost of $500,000, that will increase capacity from 1.2 million gallons to 1.7 million gallons and switch to bulk glass and packaging in its bottling room. Within four years, Ace should be able to produce 1 million cases, doubling its current output, House said.

“You got to keep up,” House said as he sat in his Ace-in-the-Hole pub, which is open on Friday afternoons serving seven different flavors that typically range in alcohol content from 5 to 7 percent. The pear-flavored cider is the biggest hit, comprising 60 percent of the sales. The pub has more of a feel of a ramshackle English pub than the nice modern wine tasting rooms of The Barlow just a mile away.

Cidermakers and analysts noted that as the industry’s profile continues to rise - most notably by the major outreach, advertising and distribution efforts by Angry Orchard - it will encourage consumers to venture into the craft cider market, which unlike the beer market is still relatively undefined. Regional producers can tout they source their apples locally, which resonates with the crucial millennial market.

“That whole ‘go-local’ thing is resonating,” said Danny Brager, senior vice president of alcoholic beverages for Nielsen. “It resonates with young consumers.”

In a nod to the local apple-growing tradition that has been embraced by the smaller producers, Ace released its specialty Blackjack 21 brand last fall, featuring 100 percent Gravenstein apples aged in oak barrels. A 750 ml bottle retails for $15. It contains 9 percent alcohol and tastes more like champagne than many of the mass market products, which can have a sweet aftertaste like a Jolly Rancher candy.

But while House enjoyed the release, he notes it was rather limited at 3,000 cases. The reason: “There are not enough apples around here,” he said.

Brian Rosen, a Chicago-based adult-beverage consultant who counts Anheuser-Busch as a client, said he sees the cider market eventually being dominated by hyper-local players and the big brewers. But he also acknowledged that the small players will be limited by apple supply.

“It’s like growing grapes,” Rosen said. “You got a growing season and a limited supply.”

House said he doesn’t mind the competition in the local marketplace (Sonoma Cider founder and CEO David Cordtz used to work for him), even specifically mentioning that he likes some of the Devoto products. But he is insistent that the growth in the industry cannot come from local apples, even though the jump in the cider marketplace has spurred talk that apples growing in west Sonoma County can be as profitable as that for wine grapes.

Ace sources its apple juice from other states such as Washington and Michigan and uses concentrate. (House also goes against the English notion that bitter apples make for the best cider, having a greater preference for dessert apples like Fuji, Gala and Jonathan.)

“It’s impossible to get all your juice locally. It’s impossible to make cider year round without using some concentrate. Anybody who says it is lying,” said House, who during interviews can sprinkle in a few expletives for effect.

“You can’t get apples in the winter time,” he said. “Are they getting it from cold storage? Who cares! It’s the question if the product is good or isn’t it?”

As a top independent cider company, House is sensitive to any perception that his brand is too big to be part of the craft cider movement. In a sense, he wants to avoid the fate of Jim Koch, co-founder and chairman of the Boston Beer Co., which brews the Samuel Adams line that helped popularize the craft brewer craze. Sam Adams then exploded to be the nation’s biggest American-headquartered brewery, in large part due to Koch’s marketing smarts, but provoked backlash when the Brewer’s Association changed its definition of a craft brewer from 2 million barrels a year to 6 million to keep his beer in the club.

And in a further irony, Koch is now the king of the American cider market, though in a recent Boston magazine article Koch acknowledges that he wasn’t a fan of his company’s tea and cider ventures.

“There is a difference in being commercial, which those other guys are, and us being craft,” House said. “We aren’t trying to be Angry Orchard. We are trying to be America’s craft cider.”

The industry is still emerging. For example, a main trade group, the United States Association of Cider Makers, was formed less than two years ago, and will host a major conference next month in Chicago, where House will speak.

Besides the local sourcing angle, the hard cider market also has some benefits over both wine and beer to help in its marketing. The best ciders are all under $25 a bottle, vastly cheaper than the top wines. Meanwhile, cider does not contain gluten, a benefit to the 6 percent of the population that is gluten sensitive. It also skews greater toward female customers than beer. According to Nielsen, the beer consumer is closer to 70 percent male and 30 percent female, while hard cider is close to a 50-50 match.

The industry is not expected to be able to keep up with its pace of growth. Brager of Nielsen said he anticipates double-digit growth in the future even though it may not keep pace with the 69 percent increase in retail sales over the past 12 months. “I still think it’s got a lot of room to grow,” he said.

House said he will reevaluate his company’s place in marketplace in five years when he will nearly be 70 years of age and looking more toward retirement. He didn’t rule out an eventual sale if the price was right, but noted he has three sons who could help carry out the family business: Jason, the East Coast divisional manager, based out of Manhattan; Simon, who handles the West Coast and Midwest and is based out of Brentwood; and Jeremy, who will become a salesman in San Francisco and the Peninsula after he finishes his last trimester at Cal Poly studying economics.

House predicts the industry will do $2 billion retail by 2020 and probably $8 billion by 2050.

“Cider’s future is very bright,” he said.

You can reach Staff Writer Bill Swindell at 521-5223 or bill.swindell@pressdemocrat.com. On Twitter @BillSwindell.