The Mugs Runneth Over

     It's just after 2 p.m. and already the taps
are flowing at the Free State Brewery.  Patrons walk throughout
the restaurant with mugs filled with beer that's brewed within
yards.  On the second floor of the, owner Chuck Magerl recalls how
it all began twenty years ago. He talks of how he lobbied the state
legislature to change the laws that made it illegal to brew beer in
Kansas, how he triumphed, allowing him to start the first legal brewpub
in the state since prohibition.
     "We've been on our toes, running ever since," he said.
    
Once again, the business is changing.  In the next 6 months, Free
State will open a satellite brewing location equipped with a bottling
line that will allow the company to expand its market base throughout
the Midwest.
     Free State's new plant, at
1927 Moodie Road, is projected to expand the business's brewing
capacity from 2,500 barrels to 4,300 barrels of beer in the first year
alone.  Magerl said he hopes one day to produce as many as 70,000

barrels annually.
     "We're not going to hit our limits with this one for a long, long time," he said.
    
Approximately 40 miles to the northeast, the Boulevard Brewing Company
of Kansas City is expanding in its own right. About the same time Free
State throws the switch on its new production facility, Boulevard's
packaging line will go completely automated.  John McDonald,
Boulevard's founder and president, said the mechanical developments
have allowed him to relocate his workforce to other facets of his
company.
     "We want to make beer very
efficiently," McDonald said. "It doesn't make your beer better to have
a guy there stacking cases."
     For McDonald, this why beer is an affordable luxury.
    
"A guy might not but a new car or a new TV set or a house," he
said.  "But you know what?  At least occasionally, he's going
to get out his pocketbook and buy a good six-pack or beer."
Beyond
the new $6 million bottling line, the brewery expanded its base of
operations into a 70,000 square foot, $25 million building in the fall
of 2006.  In doing so, the brewery that began in McDonald's old
apartment and cabinet workshop in 1989 produced 138,000 barrels of
product this year.  Boulevard's market base now stretches from
Texas to Minnesota, Kansas to Tennessee.
    
"We're really filling up the Midwest from north to south," he said. "I
believe the beer business should be local and regional."
    
The growth experienced by Free State and Boulevard is part of an
overarching trend.  According to the Brewer's Association, the
craft segment of the American brewing industry

grew
by 12 percent during 2007.  This compared to the 1.4 percent of
growth seen by the imported and non-domestic craft beers.  But
still, craft brewers are the underdog; they account for $5 billion of
the $97 billion Americans spent on beer last year.
    
This shift has also been noticed in Lawrence.  Larry Johnson,
manager of Cork and Barrel Wine and Spirits, 901 Mississippi, said his
retail location doubled the amount of craft beers it stocks over the
past year.
     "The craft beer niche is really expanding," he said.
    
Johnson also said if he keeps receiving new beers at the present rate,
he will be forced to store the overflow stock on the non-refrigerated
sales floor.
     "I'm running out of shelf space," he said.
    
However, even with this development, recent economic changes are
pressuring brewers to cut production costs, especially with regards to
raw goods.  The price of steel for tank and keg production, copper
for piping, and the dry ingredients for beer itself have all been on
the rise.
     "What's gone on in the economy
with costs of materials in all components has just been the craziest
inflation and price pressure I've ever seen in 30 years of being in
business," Magerl said.
     In the face of such
changes, McDonald said Boulevard was forced to pass some of the cost
off on customers.
     "Our malt bill has
doubled in a year," he said.  "We've been able to take a price
increase, but not much."
     Free State has
also been greatly affected.  As of right now, Magerl is unaware
how much the new expansion will cost him.  Prices of goods have
spiked so much over the past months that he can only estimate as to
final cost.
     "The final bills aren't in yet," he said. "It's certainly well beyond $500,000."
    
Within another economic challenge, McDonald sees an opportunity for
regional breweries to gain advantage over the larger contract brewing
companies that operate internationally.
    
"That model is going to be broken because of the price of fuel going
forward," he said.  "When gas is $5 a gallon, it doesn't make
sense to ship stuff all over."
     Looking over
his restaurant, Magerl sees it another way.  At a time in a time
when Americans have less disposable income, he said they are much more
likely to purchase packaged alcohol for home entertainment.
     "I think we're seeing it already," Magerl said.