From the January 2006 issue of Entrepreneur

For some beer drinkers of the Pilsner ilk, the thought of cracking open a Raison D'Etre or an Unfiltered Wheat... well, it just doesn't occur. Venture out to the fringe, however, and it's different.

"The most heartening trend is that, while the beer industry is essentially flat overall, there's rekindled growth in hundreds of small, local breweries," says Sam Calagione, founder and owner of Dogfish Head Craft Brewery in Milton, Delaware, as well as Dogfish Head Brewings & Eats in nearby Rehoboth Beach. "Unique brand identities and product lines are really thriving."

Indeed, the nearly 1,400 U.S. craft brewers--which include brewpubs, microbreweries (those that sell less than 15,000 barrels per year) and specialty brewers--sold 7 percent more beer in 2004 than in 2003, according to the Brewers Association, a trade association for U.S. craft brewers. Craft beer is the fastest-growing segment of the U.S. alcoholic beverage industry.

Innovative product is key to success in today's craft beer industry. "The beer business has changed a great deal in the past 15 years," says John McDonald, 52, founder and owner of Boulevard Brewing Co. in Kansas City, Missouri. "Craft breweries really struggled in the mid-'90s because there were so many. The past five to seven years, the breweries that have survived are the ones investing in quality and good product."

And when it comes to selling these unusual brews, standard marketing tactics don't cut it. Boulevard, which sells in 11 states in the Midwest, gets 55 percent of its business through on-site sales of draft beer in bars and restaurants, and the rest through sales of bottled beer. The company does little marketing or advertising, relying instead on its brewery's visibility in Kansas City--and plain, old word-of-mouth. "We don't market just a brand beer. We really sell the brewery," says McDonald, who brought in more than $14.2 million in 2004 and expects to end 2005 up nearly 17 percent over 2004.

Like McDonald, Calagione, who founded Dogfish in 1995 and expects 2005 sales to top $10 million, wouldn't think of entreating a mass market to drink his beer. Says Calagione, 36, "We make our beer for the minority who care more about what's happening inside the bottle than all the marketing bullshit happening outside the bottle."