San Diego Union-Tribune (Sunday)
SHUTDOWN HANGOVER
Constantly changing rules make success tough for beermakers
All of the changing rules resulting from the pandemic make success tough for local beermakers.
Six months ago, San Diego County had roughly 160 breweries open to the public. Then the pandemic struck, forcing brewers to pivot again and again to a roller-coaster ride of county restrictions aimed at reducing the spread of the coronavirus.
Now, a growing number of beermakers are quietly wondering if they’ll be able to survive the pandemic, which has twice shuttered their tasting rooms, ramped up their distribution costs and cut off a major revenue source with the re-closure of bars last month.
Since mid-march, three local breweries have closed for good: Iron Fist in Vista, Escondido Brewing and Thunderhawk Alements off Miramar Road.
But they may be just the first of many, according to local craft beer expert Brandon Hernández. He has written about San Diego’s beer industry for more than a dozen years, published two editions of the guidebook “San Diego Beer News: Complete Guide to San Diego Breweries” and will launch the news and industry resource website sandiegobeer.news later this month.
“I can’t imagine there not being more businesses going out, especially with the re-closures.” Hernández said. “It’s so hard for them to focus on making any kind of money. Really, it’s a matter of how long they can hold on under these conditions.”
San Diego County beermakers have faced stiff competition in recent years, not just from each other but also from the fast-growing industry of hard seltzer, hard kombucha and other alternative alcoholic beverages. So the rapid-fire pandemic-related changes over the past few months have only made a
tough situation tougher, said Brad Nadal, president of Saint Archer Brewing Co., one of the county's largest beer producers.
“This is a challenging business under normal circumstances, let alone a pandemic. It's all new to us,” Nadal said. “It's been a pretty wild yo-yo up and down.”
To stay on track, Nadal said the company has devised several future business scenarios and has adopted a “speedboat mentality” for shifting gears quickly whenever a new market strategy is needed.
Founded in 2013 by Josh Landon, Saint Archer was sold in 2015 to Millercoors. Today, the company operates a brewery/tasting room in the Miramar area and a second tasting room in Leucadia. Pre-pandemic, 40 percent of company sales were in bars, restaurants and tap rooms and 60 percent were in retail stores. Now that balance, Nadal said, has “flipped on its head.”
Saint Archer's beer production for 2020 has declined with the closure of so many bars and restaurant dining rooms. Nadal said he understands the need for the health orders but the impact has been significant.
“We're seeing a drop in volume for sure because we relied on our bars and restaurant
venues so much. It's too big of a hurdle for us to fully overcome,” Nadal said.
Hernández said the breweries that will be most successful at emerging from the pandemic are those that can adapt quickly and stay constantly connected with their customers. One of those success stories, he said, is The Lost Abbey brewery in San Marcos, a midsize brewer that quickly set up its own delivery service when its tasting rooms closed in March. Then the company developed a series of online sales of its rarest beers.
In April, Lost Abbey announced it would host an online Easter sale of its Duck Duck Gooze, a barrel-aged sour ale that's only produced every three years. All 22 cases of the Duck Duck Gooze inventory, priced at $45 a bottle, sold out in just 40 seconds, according to Adam Martinez, Lost Abbey's director of marketing.
“We're fortunate in that we do make a lot more high-end beers that are hard to get so we dug into our cellar to find some of these beers and make them available to the public and our beer club,” Martinez said. “We were getting the feeling from people that they were home and bored, so why not buy some beer? And it worked.”
Because Lost Abbey — and its onsite sister operations Port Brewing, The Hop Concept and Tiny Bubbles — serve food and have outdoor seating, they've been allowed
to remain open for limited service this month. Martinez said the company has brought back all of its furloughed staff and is considering relaunching its delivery service. But Martinez said there's still a long road ahead. Sales overall are down 40 percent and production is down about 25 percent.
“We're trying to stay nimble,” he said. “We don't know what the future holds so we're trying to keep our options open.”
Two small, 4-year-old brewers that Hernández said have also adapted well to the pandemic are Burgeon Beer Company in Carlsbad and Pure Project Brewing in the Miramar area. Burgeon set up a delivery route that served different sections of the county on different days of the week. And Pure Project, which opened its third location in Carlsbad Village on July 3, has held regular weekend releases of new beers to keep customers in the loop.
Hernández said this sort of constant innovation has been a key factor in the explosion and success of small breweries in San Diego County. Large beermaking companies simply can't introduce new brews at the same pace and they have higher production and distribution costs.
“There's a lot of success to be had if you're a small neighborhood brewery serving a finite demographic area, making
money in a tasting room selling at the highest margin rather than having to pay to distribute your beer,” Hernández said. “Larger ones were suffering and they were attributing it to the rise of small boutique breweries that had the ability to have so much variety. Being a regional or national brewer was suddenly very difficult and almost seemed uncool in the eyes of the public.”
But that dynamic changed in March when local brewery tasting rooms closed, leaving them with no other way to distribute their beer. Hernández said it's been “a painful process” for many small brewers who were forced this spring to set up expensive canning and packaging operations to get their beer into supermarkets and Costco outlets. Suddenly, it's the larger brewers with existing distribution systems who are in a better position to generate sales.
Nadal with Saint Archer Brewing said one positive outgrowth of the pandemic is that local brewers have banded together to share information and ideas to ensure that San Diego's prominence as a craft beer mecca survives.
“It's a daily process for us,” Nadal said. “Whatever decision is made, we're going to be a better community coming out of this thing because we're helping one another.”