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Tomme Arthur, COO of Lost Abbey Brewing, gave the keynote address at Brewbound Live in Santa Monica last week. Photo by Bill Vanderburgh
ColumnsCraft Beer in North County

Craft Beer in North County: Breweries innovate to meet business challenges

Brewing legend Tomme Arthur, COO of Lost Abbey Brewing, gave the keynote address at Brewbound Live in Santa Monica on Wednesday, Dec. 4.

Brewbound is an online publication devoted to the business of beer; their Live event is an opportunity for breweries to exchange information about business trends.

Arthur’s keynote address had two themes. One was that competition and diversification across the beverage alcohol market as a whole, not to mention the fact that there are now almost 9,000 breweries in the US, have made it more difficult than ever for independent breweries to thrive. The second was that the craft beer movement “has entered a seriously awkward phase” that he likened to the era of hair metal in rock music. While it is charting new paths, craft beer needs to look in the mirror to remember where it came from.

A key, he argued, is to figure out who the enemy is, so that craft can define itself as “not that.” Arthur listed several possible enemies: marijuana, hard seltzer, social media, the industry being too collegial/not cutthroat enough, ubiquity now that there are almost 9,000 breweries, and “innovating the craft drinker into constipation.”

“We are running out of middle-aged white dudes with beards to sell our beer to,” Arthur quipped as he encouraged craft brewers to think about what craft beer would look like if it had gotten started now rather than 30 years ago.

Craft brewers are making the best liquid they’ve ever made, but the headwinds are strong. To combat them, Arthur recommended brewers ask themselves what their “authentic alternative” is to current practices.

The timing of the conference was fortuitous: The previous day, the biggest brewery sale news of the year was announced. That’s saying something, since as the editor of Brewbound, Justin Kendal, remarked in his welcome announcement, twenty million barrels of brewing capacity changed hands in 2019. As reported in this paper, the stunning news was that Constellation Brands, owners of San Diego’s Ballast Point Brewing since 2015, agreed to sell Ballast Point to Kings & Convicts Brewing of Illinois. This was shocking not just because Constellation clearly took a huge loss on the $1 billion they had paid for Ballast Point, not just because Ballast Point is an iconic brand fallen on hard times, but also because while Ballast Point is going to produce more than 200,000 barrels of beer in 2019, King’s & Convicts will produce barely 600 barrels.

On that last point, the original press release and early reporting turned out to be somewhat misleading. In fact, an investor group of six individuals, including the two principals of Kings & Convicts, used that company as the vehicle through which to purchase Ballast Point. Details have since emerged that Kings & Convicts CEO, Brendan Watters, has a good deal of private wealth thanks to developing and selling off the Boomerang chain of hotels. They have been reluctant to share the names of the other investors, but it has come to light that one is Richard Mahoney, chairman of the board of The Wine Group, which owns over sixty brands including Beziger and Franzia.

Even with these details filled in, as the Chicago Union-Tribune’s beer reporter, Josh Noel, put it on his blog, Kings & Convicts’ acquisition of Ballast Point isn’t just the most surprising beer news this year, it is the most surprising thing that has ever happened in brewery acquisitions.

For one thing, this sale represents something almost entirely new. We have seen big beer conglomerates buy craft breweries before: Anheuser-Busch got Goose Island and 10 Barrel Brewing, Miller-Coors grabbed Saint Archer, Heineken bought Lagunitas Brewing, etc.. Just last month, in what would have been the biggest beer news of the year, craft beer darling New Belgium Brewing sold to a subsidiary of Japan’s Kirin beer brand. We have seen craft breweries working together, as in the seven craft breweries that teamed up in the CANarchy craft brewing collective. We have even seen “craft on craft” acquisitions, as when earlier this year—in what would have been the biggest news before New Belgium’s sale—Dogfish Head sold to Boston Brewing. What we haven’t seen till now is a small, independent brewery acquiring a brewery from big beer. (The only slightly similar case I’ve been able to find is Maine’s Shipyard Brewing, which sold a 50% share Miller in 1995 and bought it back in 2000.)

When the challenge is keeping the lights on—or keeping loyal workers employed and their families fed—it is difficult to find fault with any business moves that help. Many people who identify with “craft” as an ethos lament when craft breweries are sold to international conglomerates, who seem to exist to make money rather than to make good beer.

Arthur said that he begrudges no one any of their business decisions, since he hasn’t walked in their shoes. Creative solutions are a necessity.

In Lost Abbey’s case, Arthur announced at Brewbound Live, their latest innovation is a new brand, Tiny Bubbles, a gose-style beer finished with Brettanomyces. This slightly sour, crisp and bubbly canned libation is aimed at consumers interested in hard kombucha and hard seltzer, while staying true to Lost Abbey’s roots in producing excellent Belgian-inspired beers.

Other North County breweries are innovating, too.

Vista’s Latitude 33 Brewing Company last week announced the sale of all their brewing equipment to Local Roots, a hard kombucha manufacturer. Latitude 33 will keep their Vista tasting room, and they have entered into an alternating proprietorship arrangement with Green Flash Brewing to brew there.

Latitude 33 had been leasing cold storage to Carlsbad’s Burgeon Beer Co., who have the nice problem of struggling to keep up with demand. Burgeon just acquired two new 60-barrel fermenters and an extra 7,500 square feet of space in a unit that came available in their building.

In a welcome surprise, Vista’s Barrel Harbor Brewing is back from the dead. They were shut down for unpaid taxes and were toiling under heavy debts. They have found a solution in selling some of their equipment and leasing enough of it back to continue operating, with a re-opening celebration on Dec. 12.

The National Beer Wholesalers Beer Purchasers Index indicates that the craft beer segment grew slightly in 2019, despite beer sales overall being down considerably.

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