Stone Brewing Announces Restructuring & Layoffs

The vast majority of your 225 beers are IPAs (and stouts)? Damn man, better get going on those IPAs!

 

Really, not even close. Surprising opinion coming from someone in Mass with access to two of the best breweries in world, Tree House and Trilllium. Where I live, Other Half, Singlecut, LIC Beer Project, Sand City blow away any beer I can get from Sierra Nevada.

 

FWIW restructuring is usually a sign of mismanagement not a decline in sales.

 

Exactly! 3 years ago all my IPAs were bought off the shelf. Now 99% of the IPAs I buy are directly from the local brewery. I don't buy Ruination any more, Sculpin any more, Lagunitas any more. Similar behavior from other buyers obviously having a negative impact.

 

Again, I think there's a difference between actual beer quality and personal preference. Moot point to some, but even guys like Shaun Hill and Tod Mott consider Sierra Nevada Pale Ale and Celebration to be among the best in the world.

 

My personal preference is to drink the highest quality beer I can find such as the aforementioned beer, not to mention beers from Trillium. I do like Sierra Nevada Pale Ale, but I would choose my local beer over it every time.

 

I can't speak for Ohio (where the person you were replying to is from), but Wisconsin absolutely suffers from a ton of average or worse beers on the shelves that still inexplicably sell just fine.

It's my opinion, but I can almost count on thumbs how many truly great breweries there are in Wisconsin: New Glarus, Central Waters, and Lazy Monk.

Black Husky, Karben4, MKE, Lakefront, and Tyranena are probably the next best breweries, and they're just good. In many other states, including our neighboring states of Michigan, Minnesota, and Illinois, those breweries would be average at best.

Then there is a plethora of average breweries with places like Potosi, Capital, O'so, Oliphant, Barley John's (technically MN), and Door County. This is where most Wisconsin breweries lie.

Then there are the bad breweries like Next Door, One Barrel, Ale Asylum, Wisconsin Brewing Co., MobCraft (all five of which are in the Madison area), Lucette, Grumpy Troll, Hinterland, Titletown, Hop Garden, and plenty more.

I did not include the amazing Funk Factory because those beers will never see a shelf.

Many of the breweries I consider average or worse are big brands. They are, ostensibly, at no risk of going under any time soon. I worked in the industry in Wisconsin, and I know that they sell just fine (especially Ale Asylum, Wisconsin, MobCraft, Capital, and O'so).

Thankfully Wisconsin has quite good distribution, so it is not much of an issue, but let's not forget that both Stone and Dogfish Head pulled out of WI in the past because of how competitive the market is, largely due to people buying unremarkable beer , and the reason, in my opinion, is because it is local. Those two breweries have since come back, despite it being more competitive than ever.

I don't want to see people out of work or for the industry to suffer, but I honestly do want these average or worse breweries to go under so the really good ones can succeed and stop being crowded out by idiots who just want to support the brewery down the street because it is there. This culling will be better for the industry as a whole.

As a side note, none of the breweries in WI make a fantastic IPA (save for NG Moon Man and Scream), which leaves a huge gap in the market. The best hoppy stuff not those NG offerings comes from outside the state.

Slightly more on topic, I was very sad to see this news from Stone. It does seem like they overestimated how successful their expansions would be (particularly the Berlin one, I wager). It is also interesting in light of the recent investment deal and new management. Further, I really don't think Big Beer had much to do with it, outside of the pressure that is always present from them; Stone and Big Beer do not have much overlap in consumer base. I strongly suspect their biggest challenge is from hyper local beers, not least because of the anecdotal evidence posted above regarding the market in WI, but also because of the focus on freshness and the extreme proliferation of East Coast IPAs, a market which Stone does not have any share of despite Enjoy By Unfiltered. The fact is that better local IPAs than Stone's can be found in many markets (notably not Wisconsin), fresher and with the benefit of having that local sheen, and Stone's portfolio is obviously heavy on IPAs, putting them at special risk. It will be interesting to see if any other similar brewers take a hit like this. We already know based on their admittance that SNPA sales are down, but SN is much more diverse than Stone. Anchor, Deschutes, Sam Adams, and Brooklyn are very diverse as well. Breweries like Lagunitas, Green Flash, Rogue, and Ballast Point are more one-note and mediocre, so they are ones I'll be watching intently.

 

Not sure exactly what big beer is thats been mentioned.

I like Enjoy By well enough, but to be honest I've never had a Stone that wasn't an IPA. Stone IPA here is rarely fresh. I'm not an economist obviously, but aggressive expansion has its warts, I would suppose cash flow warts. It's a very competative market place, I'm surprised Sam Adams can afford to turn out crap and not pull back a bit as well. SN turns out first rate stiff that's fresh across the board at a friendly price. Sorry to see this, but expansion comes with severe risks. So is the risk to expand operations all that much a risk if there's a buyer to bail out a failed effort?

 

Just wondering why you've never had a non IPA Stone beer? They have been making plenty of non IPA beers too, especially in recent years.

Eric

 

I don't like sours or funk, my beer likes are quite narrow. If I want a stout I've got a decent collection of BC and Kbs stashed, if I want a non Ba stout I'll buy Founders Breakfast. I drink a fair amount of Pils and lagers too, and to be honest the local stuff is very good and always fresh. The IPAs follow, the local stuff is really good most often only a few days old. Not a knock on Stone, but it's rarely fresh, but most CA hoppy beers are in the same boat, Knee Deep, Ballast Point, Alpine etc. The larger breweries IMO are at a disadvantage to a large degree, they are nationally distributed, and it's hard to be fresh anywhere. The explosion of new breweries which are purely local guarentees the fresh part, some are great some are mediocre, but it's available locally in styles across the board.

 

I would be willing to bet the reason for the new brewery is to help with distribution of fresher beer east of the Mississippi. I would bet distribution from the brewery in California is a logistical nightmare trying to get the freshest beer out...Then you have to count on the distributors....Having another brewery to distribute from that is closer to the east coast and mid west, north east eventually will see better freshness dates.

 

Very nice and thoughtful response. Could there be more to folks buying local beers than simply being local? Does price- say compared to Stone, DFH, Ballast Point, etc.- have any bearing.? Have people moved "up" to these "inferior" craft options instead of BMC choices?
Anyway, if drinkers are buying less than top quality craft beer, might that not be better than the BMC domination of not so many years ago? The truth is simply that most people drink what they want to drink. I love great wine and beer, know how to find great quality at fair pricing, but I begrudge no one their preferences. I really wonder if many (or any) brewers think that their beer isn't so good..... On a side note, I like the idea of a story about a devious crappy brewer who succeeds despite his lack of skill.

 

That is secondary to savings on shipping costs. Beer is expensive to ship. Beer from CA to the Eastern US competes with produce for refrigerated truck space. East to West it is cheaper, as the truckers are looking for loads.

 

You raise an issue often neglected in these discussions, that of, "Compared to what?"

I see lots of beers on the shelves around here, now that we have some viable bottle shops in SE PA, that I think are pretty average compared to the best the world has to offer. But on the other hand, most all of them I've tried are pretty good compared to the AALs I've had since I started reviewing the new beers I try.

Similarly I recognize that in general my standards for beer, wine, whisky, and fine dining have also changed a lot since I've had the opportunity to try some of the best the world has to offer. So, I'm really quite certain that my standards for what I think is a good or a great beer have definitely changed a lot since the days when I drank only my preferred AALs.

 

To be fair, we've been in Europe for more than a decade. We primarily began exporting so that we could secure our brand and trademarks under EU law (it was being counterfeited and bootlegged extensively) and even now, our export is only a tiny fraction of our total business. We sell more beer in the UK than anywhere else, for now, but even that is very small for us.

 

Dale, FWIW my read of the competition that Stone experiences from "Big Beer" relates to the newly purchased craft breweries like Goose Island, Elysian, etc.

Cheers!

 

Thought I read within the last year or so that you were looking to expand that footprint. Can't recall source right now....

 

I'd rather not, it's been privately suggested by some people whose opinions I care about that I'm better off not discussing what beer I think sucks outside of vague and broad terms. Catch me in person some time and after a few drinks, I have a list as long as my arm ;-)

I'm not saying that all "local beer" is bad, that's a silly statement on it's face. If you're in Escondido, Stone is local. If you live in Kalamazoo, Bell's is as local as it gets. In most large cities, there are some breweries who make some stuff which will absolutely stand up to anything available nationally and are available at reasonable prices, with good distribution. That being said, think about the city you live in (or the closest major city), if you look at a list of all the taprooms in your area, which ones do you patronize and which ones don't you patronize because of the quality of beer available? Another way to think about it, let's say you are having a private event with all your buddies and I offer to pick up 3 kegs of what you like from 3 local breweries. 3 kegs, that's it, my treat! Make a mental list of all the local breweries and I suspect you could quickly narrow it down to many of them which you wouldn't even consider for my generous offer. Those are the breweries I'm talking about. Obviously, somebody is patronizing them, given that they are still open, yet you wouldn't even consider their products for my generous offer to supply beer for this hypothetical event.

You're right! Think about how much better the world would be if everybody just listened to me. This whole presidential election mess would have been avoided, beer would be better and it would be sunshine and rainbows every day!

On everything else though, we're going to have to disagree. You're comparing a single, rather limited (both in production and distribution) beer that people trade their firstborn for a four pack of with the rest of the much larger beer industry. If we were discussing cars, you're looking at a Ferrari and wondering to yourself "gee, why does anybody drive a Kia? I don't get it!" If you're fortunate enough to daily drive a Ferrari and you shotgun Sip of Sunshine every weekend with your buddies, I'm happy for you, but it ignores the reality that most of us live in. 99.99% of us don't have access to a beer the quality of Sip of Sunshine with any frequency.

I can only think of one IPA in my local market (sold in a brewpub which doesn't package it) called Gavel Banger which compares to Sierra Nevada Hop Hunter (IMO, the best widely available IPA in the country). Among around 30 local breweries, one could compete. This same brewery has had their last two barrel aged bottle releases end up infected.

In terms of people getting more beer "from their local source"...it's a pipe dream and not realistic in any real volume. While you or I might hang out at a brewpub on the weekends, we're not a good sample of normal customer behavior. Don't believe me? Look up TTB taxes paid which breaks out taproom sales from total beer brewed, it isn't that much liquid in the grand scheme of things. As for the statement that "beer sold through the distribution channel will shrink"...I'm not sure I disagree with that statement in absolute terms, but having been to Sierra Nevada Asheville, they didn't build it as a tourist attraction for the locals, they built it to supply beer to half the country (the gift shop and fantastic food is just a nice bonus).

Further, I disagree that the "national guys are going to contract". The ABI and MillerCoors craft brands are ratcheting up for huge national expansions of their craft portfolio, the opposite of what you're suggesting is actually happening. But, there's a bigger problem with what you're suggesting, as more "local" brewers become "regional", there is an incredible amount of capital being tied up in large brewery expansions. As Stone's layoffs show, unfortunately if you hit a speed-bump when you're over-leveraged, you have to make a cut somewhere and brewery property plant and equipment are very illiquid. As I understand it, that's why Breckenridge sold to ABI, they got in too deep with brewery expansions and couldn't pay the piper. Will Stone do the same thing? I doubt it, I'm guessing they'd rather go into bankruptcy and yell "damn the man, save the empire!" before they sold to big beer.

 

There truly isn't a brewery here in Greensboro that I would say was not good. In fact, they are generally very good. We are fortunate.

 

@mwa423, do you have insight into how Stone is utilizing the $90 Million VMG Investment?

http://www.brewbound.com/news/2016/sec-filing-indicates-90-million-vmg-investment-stone-brewing

Is Stone using this investment directly for their brewery business? Or is this investment dedicated as ‘seed money' to “fund “True Craft,” an investment platform aimed at purchasing minority stakes in food and beverage companies that Stone Brewing co-founder Greg Koch unveiled at the end of April.”?

Cheers!