Stone Brewing Announces Restructuring & Layoffs

The Richmond brewery was a good decision but i'm not convinced the Germany brewery was. I've watched enough brewery videos to see the Europeans are dedicated to their beers. I also blame this on those damm home brewers. : }

 

While I certainly feel for those affected, a +/- 5% change seems pretty normal for a business to fine tune their efficiency.
I don't expect this will affect my healthy intake of their beers

 

Might be.

But, alternatively, it also sounds like budgetary futures projection was based on some assumptions about growth that turned out to be incorrect.

They both look a lot alike from the outside.

 

I agree but would add that the greatest problem that SN,SA ect face could be debt. I would not be shocked at all if the root of Stone's troubles was debt.

 

How bout instead of laying off top brass take a pay cut. They have made more money this year than any. But they have to cut costs? Bet they sell next year.

 

I used to really love Stone, but their recent new beers have been disappointing. Stone Pale Ale 2.0 was a disaster. I see most of their big bomber beers just sit and collect dust. In the old days, something like Woot Stout would fly off the shelves. No more.

 

I wouldn't be either, if that was a large part of it. But between the mention of competitive pressures in the press release, and people here on BA confirming that price and freshness have become issues with regard to Stone beers, market presence is not a minor issue going forward for them.

 

I'm not business person, but I am quite logical (or so I think). I wonder why breweries of this size are so hungry for growth? Why did Stone NEED two new breweries? Likely they didn't, or at least I don't understand why you would.

Why not just sustain the size you are and just keep innovating, improving QC, etc...? If you can't distro to all 50 states, who cares? Is it really worth all the risk and debt just to be able to offer beer in all those states? I don’t know, all I see is money hungry greed coming from the top for the growth (sure, that is the point of a business, usually… However, I am sure those at the top are making plenty of coin without all the growth).

Either way, not saying this was Stone's issue specifically... Just thinking out loud. A lot of companies have been restructuring this year (the one I work at included) due to the economy being lackluster. 5% doesn't seem to be all that big of a deal in the scope of things. Sucks for those who had lost their jobs, but thankfully it was not worse.

It is only going to get worse in the US for those mid and large sized breweries... With dozens of breweries opening weekly, it seems, I think those breweries depending on distribution sales to make their money are going to start hurting. I believe the market really is going to shift toward small, local taproom focus for their beer fix, leaving those shelves to collect even more dust. That is why I cringe when I hear young, local breweries pushing for huge expansions so quickly to be able to can/bottle in a market that is clearly changing. In Cleveland alone, with one equipment manufacture alone, FOUR new breweries in Cleveland next year.

Then you have a mid/large brewery like Fat Head’s also planning a big expansion with a new location in the works. Just makes me wonder if it really is needed and/or worth it. Supposedly that is near double the capacity, as well.

 

At its core, I don't feel there is anything wrong with striving for continual realistic growth. I'm just not sure the current trends in craft support one large global footprint. Time will tell, but it seems the smarter play is to grow by investing in the smaller, local footprints while helping to improve the quality of their product, similar to the recent Lagunitas deals. As many have posted, the quality gap between hyperlocal and larger, national craft is already closed in some areas and only a matter of time before it shortens in every market.

 

The comments about prepping for a sale are interesting. Brooklyn sold a 25% stake and Constellation just reported a massive quarter with Ballast Point integrated into its business line. Gotta think Diageo or someone of that ilk would be interested in copying the Ballast Point/Consteation playbook.

 

I think that in retrospect, the Berlin move may have involved a "touch" of collective corporate hubris. Anyone that faults local beer for any problems in beer marketing strategies for themselves or anyone else is completely missing a great deal of this modern beer boom. They should have known. That one arrogant bastard (not any one person) may be humbled a bit should not necessarily be a signal, a canary in the coal mine, etc. that presages an overall and permanent decline in the so called craft beer market.

 

I do think we will eventually see a shakeout in the industry. But from what i've witnessed in my area, it almost doesn't matter if you produce high quality or low quality beer, you will be successful. I think it's because in my area there are still so many new craft beer customers. Most of them are still figuring out what they like and dislike but X new brewery in their hometown is all they know right now. That's why I see small/local breweries succeeding and mid-to-large breweries struggling. It may open the door to Stone/New Belgium/Sierra Nevada later on, but I think those breweries are having a harder time getting in front of new faces.

 

seems unfair that we all get to play Monday am QB on a Friday. Between CBA... and now Stone... in the large tier brewery... if the use of private and public equity monies have been used to drive overextended growth... the ripple effect of "choices" in the craft market for the consumer... is creating some supreme challenges that are wildly complex to which the brewery is not in full control. Some recent # from 2015 showed that out of almost 5,000 breweries, only ~ 80 (2%) are in the tier of CBA and Stone... and at 175 million BBL produced... only 14% in volume is left for these large tier folks to compete for. To say this brewery sector is a tough place to be... would be a vast understatement.

 

I'd agree, the root problem would probably be debt.

But I'd also bet dollars to donuts that a few years ago when those expansion plans were being laid and committed to, the debt looked managable given projections for their market growth and income from both the original and the new facilities.

I'm suspecting that the rapid expansion in the number of breweries over the last few years has caught many folks by surprise with the speed of both it's growth and it's contribution to over-saturation of the marketplace. Then there's the relatively recent consolidation/expansion of some already established competitors making flavorful beer, as well as the rather rapid expansion of the ABInBev portfolio of flavorful beer brands, most of which has taken place since a number of those financial commitments would have had to be made....

I can remember quite vividly when an organization I was working with, and that had no debt at all, based their income projections on a continued increase in a market segment that had shown stready rapid growth for some years. Several financial commitments had been made in advance but then that segment of their market simply disappeared at push-to-shove time. Until that expected inflow of cash did not materialize nobody had even thought that that particular segment of the market would cool off or fade so rapidly. Unfortunately, by that time the financial commitments already made offered little flexibility for change.

 

I have found myself buying significantly less Stone beers over the past couple years for a few reasons.
- lots of old beer on the shelf, seems like the only fresh stuff is their IPA and seasonals, I will say they do bottle/can dating better than anyone else so it's easy to spot the old stuff
- increasing prices
- the recipe changes to IPA, Ruination and Pale Ale (reminds me of Green Flash)

 

I'm sure you're right about most everything you've said regarding Stone's projections. And yet the fears of a market correction/slowdown have been very well documented and expected by many people (even laypeople on here) for a long long time. Would seem that Stone (and others) chose to ignore those fears.

EDIT: Honestly, though, I think the Berlin project and projections/miscalculations have probably played a big role here...not just the boom here in the U.S. cutting into their sales.

 

Possibly. What would also be critical to know is when were those fears very well documented as being realistic, relative to when the expansion plans were laid.

 

Do you buy bad beer twice? Nobody does that. With so many choices out there now, you think a low quality brewer will survive? Not in the long run.

 

Re your edit. Well from the public statement by Stone we are pretty much told it is either Richmond or Berlin, so I'd think there's a good chance you are spot on in picking Berlin. That's also the riskier of the two ventures for more than one reason.

 

As long as there is the extreme greed we keep seeing time and time again at the top of companies we will always see this nonsense. Cut cut cut the mid-low level jobs is always the answer yet strangely enough the top dogs always seem to still walk away with big payouts during these oh so lean times. I will never swallow the pill until I see CEOs, etc., salaries/bonuses being slashed also when "times are tough."