The Atlanta Journal-Constitution

What will it take to get Germans to like American craft beer?

Stone Brewing tries to get a foothold in European market.

- By Shan Li Los Angeles Times

ESCONDIDO, CALIF. — When Stone Brewing released in 1997 its well-known Arrogant Bastard Ale, it was a hoppy revolt against an American beer market defined by bland corporate lagers. Now, thanks to craft brewers like Stone, it’s easy to find once obscure beers, from India pale ales to smoked porters, in dive bars and supermarke­t shelves alike.

So the fast-growing Southern California craft brewer is eyeing a new market to upend with its unorthodox brews — a place with a beer culture so deeply rooted in tradition that it’s governed by 500-year-old purity laws that restrict ingredient­s to only hops, barley, water and yeast.

In June, Stone opened a brewery in Berlin, becoming the first American craft brewery to operate in Germany. Its arrival could prove a test not just for Stone but for a cohort of innovative American brewers that fueled the rise of the U.S. craft brewing scene but have not yet developed large global customer bases.

The move comes as craft breweries are facing slowing growth in the U.S. After years of rapid expansion, establishe­d craft brewers are bumping up against thick competitio­n from an explosion of small breweries they inspired and behemoth brands that have refreshed their offerings to compete. Some independen­t brewers have sold off to beverage conglomera­tes or are taking a page from their book by setting their sights on global markets.

“2015 seemed to be the first year that growth may be reaching a plateau,” said Nick Petrillo, senior analyst at IBISWorld. “Craft beer isn’t stalling, but it’s going to reach a point of maturity in the sense its growth isn’t going to be as massive.”

Stone, which raked in more than $200 million in sales last year, isn’t immune to those pressures. In October, the company laid off about 60 employees, or roughly 5 percent of its 1,200-employee workforce. Dominic Engels, who took over as chief executive in September, called the cuts “the simple evolution of a business.”

“Restructur­ing was a necessary course correction we needed to do to match our growth trajectory and spending trajectory,” he said. “Pressures from Big Beer are a reality in the craft industry and will continue to impact the industry’s growth.”

This year, Stone has come a long way toward diversifyi­ng its business. In July, the company opened a brewery in Richmond, Va., with a restaurant slated to launch in 2018. Across from its main production facility outside San Diego, plans are underway for a Stone-branded hotel that will focus on beer (although Stone is licensing its name, not building it). It will also venture into wine country by opening a pilot brewery and tap room in Napa Valley next year.

Such moves are intended to help separate the 20-yearold Stone from the hundreds of craft breweries that have popped up across the country. In San Diego County alone, there are 131 breweries, according to West Coaster magazine.

Stone’s move to Europe is part of a big bet on its future as a global beer player. In addition to the brewery, the beer maker also opened up a restaurant and beer garden there in September.

Engels said staking a claim in Berlin is part of Stone’s long-term plans to “shape” the overseas market. The 10th-largest U.S. craft brewery wanted to get a foothold early in Europe, which is chock full of regional influences and countries in different stages of appreciati­ng craft beer.

“It’s something we need to start now so it can be of substance later,” he said. “There is no such thing as a homogeneou­s European approach that makes sense. It’s going to have to be done market by market.”

Some analysts say that Stone’s success overseas is no guarantee. Few Germans have familiarit­y with American beers, and those who have an opinion about them generally consider American beers mild and tasteless compared with local brews, said Rodger Wegner, managing director of the Associatio­n of Export Brewers of Northern, Western and Southweste­rn Germany.

“The import markets are quite limited still,” Wegner said.

Last year only about 132,000 gallons of beer from the U.S. were imported to Europe, he said, out of 172 million gallons imported in total. In 2015, imports accounted for about 6.8 percent of total domestic consumptio­n, according to the German Brewers’ Federation. By comparison, imports to America made up nearly 16 percent of total domestic consumptio­n last year, according to the Brewers Associatio­n.

Imports into Germany — which mostly come from other European countries such as Belgium — have dropped in recent years. Overall sale of German beers, along with domestic consumptio­n, have steadily slipped as well.

Some Germans have complained that the traditiona­l nature of their nation’s beer — including the laws restrictin­g ingredient­s — has stifled innovation and contribute­d to the drop in beer consumptio­n. Those limitation­s, some have argued, have also hindered young Germans from starting their own craft breweries. Still, most Germans who have tried craft beer have tasted locally produced beers from those local German breweries, Wegner said.

Wegner said Stone was smart in choosing Berlin, which is a cosmopolit­an city more open to outside influences than places like Munich, which is famous for its annual leiderhose­n-and-beer-soaked Oktoberfes­t festival.

“In Munich the people are very proud of their own beer, and the cultural inheritanc­e is much stronger in Bavaria,” he said. “It may be harder to convince them.”

As Stone has grown, co-founder Greg Koch said he realized the company needed new leadership to usher it into its next stage. He still serves as chairman, but ceded the CEO job to Engels — who has never worked in beer but instead has experience leading the internatio­nal divisions of Wonderful Co., the Los Angeles snack and juice maker with annual sales of $4.8 billion.

“When we opened our doors 20 years ago, it was the largest company I had ever worked for,” said Koch, who describes himself as “a classic entreprene­ur type.” “Having some additional ability for heavy lifting is a very important thing now.”

Engels, for his part, views his role as bringing new processes and organizati­on that the company hasn’t needed until its expansion into the East Coast and Europe.

 ?? GINA FERAZZI PHOTOS / LOS ANGELES TIMES ?? Stone Brewery, of Escondido, Calif., opened a brewery in Berlin in June, becoming the first American craft brewery to operate in Germany.
GINA FERAZZI PHOTOS / LOS ANGELES TIMES Stone Brewery, of Escondido, Calif., opened a brewery in Berlin in June, becoming the first American craft brewery to operate in Germany.
 ??  ?? As the competitio­n increases at home, Stone’s move to Europe is a big bet on its future as a global beer player.
As the competitio­n increases at home, Stone’s move to Europe is a big bet on its future as a global beer player.

Newspapers in English

Newspapers from United States