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No Bubble for Craft Beer: Industry Pioneer

Craft beer sales continue to grow at a breakneck pace, but homebrewing pioneer Charlie Papazian said there isn't a bubble in the making.

Forty years ago this week, Papazian, who serves as the Brewers Association president, first arrived in Boulder, Colo. So it’s fitting that this week, 49,000 beer aficionados will convene in Denver at the Great American Beer Festival, the event he founded, to sample more than 2,700 beers offered by 578 breweries.

While there won’t be a Papazian-brewed beer at the festival and his name isn’t on any of the more than 2,000 breweries that now dot the U.S. landscape, few have done more to further the cause of American home brewing, and in turn, the U.S. craft beer industry.

Papazian is the founder of both the American Home Brewers Association and the Association of Brewers, which merged with the Brewers Association of America in 2005 to become the Brewers Association. He’s also the author of multiple books on brewing including the "The Complete Joy of Home Brewing," which has sold more than 1.1 million copies since its release in 1984.

Papazian began making his own beer in 1970 as an engineering student at the University of Virginia in Charlottesville. Homebrewing wouldn’t be legal for another nine years, but after tasting a friend’s homebrew he was hooked. In the decades that followed, he’s managed to hook countless consumers along with him.

Papazian shared his thoughts with CNBC on the current state of homebrewing and the craft beer industry.

THE STATE OF CRAFT BEER: “These days a lot of people take craft beer and craft brewing for granted. There’s a whole generation of beer drinkers now that when they were born there was craft beer. But it has been a 30-plus year progression of slow development. It hasn’t been an overnight success, and for some people who discover it, it seems like it just happened yesterday and ‘wow and something new has happened,’ but it has been a slow process.”

THE NEED FOR A BREWERS ASSOCIATION: “There is a friend of mine who says it’s the pioneers who get all the bows and arrows and the settlers get all the land. (laughs) It’s true but a lot of the [craft beer] pioneers have survived. They managed to maneuver through all the hassles and the struggles. In the late 1970s when the first microbrewers emerged, there were many tens of thousands of homebrewers scattered around the country. This was before the Internet, before faxes, (people used) a telephone or the U.S. Postal Service. So there was not a sense of community like there is today. That’s partly why we formed the American Homebrewers Association in 1978, which evolved to the [Brewers] Association that we have now. [We were] trying to bring together a sense of community for all these people who had an interest and passion and a respect for beer and beer making.”

THE RECORD NUMBER OF BREWERIES IN OPERATION TODAY: “The interesting thing about the ‘opening’ and ‘closing’ statistics, they are just indicators of what is really happening, that’s what I tell people. It’s just numbers. Everybody looks at the numbers and interprets them any which way that feels good or is an advantage. But there’s a lot of mental and physical sweat equity that has been put into those numbers by the brewers. They struggled, they persevered, they educated themselves, they learned how to make good beer, they learned how to communicate, they educated the distribution system, they educated the retailers and most importantly [they educated] the beer drinkers.” (Read More:Craft Industry Continue to Surge)

THE GROWTH OF SOME EARLY CRAFT PIONEERS: “We’re at a stage where a lot of our pioneers are growing beyond our [original] definition [of craft brewer], yet they have contributed so much and are still alive and they are still the founding fathers of [craft beer]. We had to think a lot about what is really important to craft brewers and this community. Keep them under our tent, so to speak, or just cast them out on an iceberg? (laughing) I have to say that those larger craft brewers, when we have our board of directors meetings, we talk about the smallest of brewers the majority of the time. We understand that the future of craft brewing is the startups of today, just like they were startups of yesterday.”

HOW LARGE THE CRAFT SEGMENT CAN GROW: “It’s an interesting question. There are a lot of people that think we’re in a bubble and it’s going to burst but we’re not in a bubble. We are knee-deep in foam (laughing) and it’s rising all around us. By 2017, [the Brewers Association] anticipates pretty confidently that we'll have 10 percent of the volume, and at that point, the momentum will take us pass that.”

THE EARLY CRAFT BEER “BOOM AND BUST”: “The late 90’s, that was a bubble. There were a lot of micro-breweries, and interest in the beers was taking off and a lot of investment people got involved and people were getting into the business for the wrong reasons. They figured they could make some money off of it in the short term. But when you get into the beer business, it’s a long-term proposition. Everyone [said] craft beer had hit the wall and it was the end. But we gathered ourselves and kept pounding at our message. People that stayed in the business were serious about it, serious about quality, serious about the beer drinkers, serious about the beers they were producing, their employees and developing their dream business. I think it was about 2005-2006 when we began to see that things were beginning to be on a roll. We went up to 8 or 9 percent growth and then we broke double-digits in 2007, or thereabouts, and we’ve been in double-digit growth ever since.”

LIFE AS A HOMEBREWER & ADVOCATE VS. PROFESSIONAL BREWING: “I brewed my first batch in 1970, and [my most recent] batch was last week. So I’m still brewing five gallons at a time. I’ve thought about what it would have been like if I started my own brewery, but I was a school teacher for eight years. I taught kindergarten through third grade. During that time, I was also teaching beermaking classes in the evening to thousands of people in the Denver-Boulder, Colo., area. I love teaching. I love communicating. I love putting communities together. Forming the American Homebrewers Association in 1978, which evolved into the Association of Brewers and this current Brewers Association, is what I’ve enjoyed and continue to enjoy doing. I enjoy the fact that there are people from so many walks of life that are involved in this beer business. It’s pretty rewarding for me. Being a homebrewer [versus] being a professional brewer, it’s another world.”

-By Tom Rotunno, CNBC Senior Editor

Don't Forget: Consumer Nation is looking for the most-loved beer label of 2012. Submit your favorites to BoozeNews@nbcuni.com.

Beer, wine and spirits stocks to watch:

Anheuser-Busch Inbev

Diageo

Constellation Brands

Molson Coors Brewing

Boston Beer

Craft Brew Alliance

Beam

Vina Concha & Toro

Questions? Comments? Email us at consumernation@cnbc.com. Follow Tom Rotunno on Twitter @tomrotunno.

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