San Diego Union-Tribune (Sunday)
CEO SEES FUTURE BEYOND HOPPY IPAS
Maria Stipp, former head of Lagunitas, looks to lead Stone back to growth as pandemic restrictions ease
San Diego’s Stone Brewing grew into the nation’s ninth-largest craft brewery over the past 25 years by being a top flag-bearer for strong, hoppy ales. Its Arrogant Bastard, Double Bastard and Ruination beers helped pioneer the popularity of brawny West Coast IPAS.
Today, though, the top beer pouring out of Stone’s limited capacity bistros is a citrusy, Mexican-style light — Buenaveza Salt & Lime Lager —as consumer tastes shift toward less bitter, lower carb and better-for-you beverages.
This sea change highlights one of several challenges facing Stone’s new Chief Executive Maria Stipp, who joined the company six months ago after five years at the helm of another IPA powerhouse — Lagunitas Brewing Co. of Petaluma.
At Lagunitas, Stipp oversaw a period of rapid growth and overseas expansion into more than 30 countries, as well as a two-phase acquisition by Heineken International completed in 2017.
At Stone Brewing, Stipp is trying to figure out how to return the San Diego region’s largest and most iconic craft brewery to growth after COVID-19 restrictions wreaked havoc on the entire U.S. craft beer industry.
The differing landscapes between Lagunitas and Stone have led Stipp to pursue polar-opposite strategies. She focused heavily on international growth at Lagunitas, tapping Amsterdam-based Heineken’s expertise to open brewpubs in Europe and beyond.
But in her six months at Stone, Stipp has emphasized defending its home turf.
“Stone used to be the number one craft beer in Southern California, and Firestone took over the flag,” said Stipp. “They deserve it. They did a great job. But that is where we need to set a tar
get, focus, and go for that. We have the team to do it. We have the brands to do it.”
Though she wasn’t here at the time, Stipp said she’s willing to bet that Stone was “doing a lot of things during that time and probably were not focused on our backyard as much as we should have been.
“I would say that is a lesson,” she continued. “We probably ought to make sure we defend our backyard and then take on attack markets where we feel we have the resources to fight and get market share.”
Part of that defense strategy involves pricing. Over the past couple of years, Stone’s flagship IPAS have been more expensive than competitors at retail in Southern California, said Stipp.
“One of the things we decided to do right away was bring it down to compete toe-to-toe,” she said. “Not go lower, but just go toe to toe and see if we can make it up on volume. It is working well for us.”
Stipp also closed a small Stone-operated distribution business near San Jose in January. Meanwhile, she doubled down on Stone’s much larger self-distribution arm in Southern California.
Last month, Stone leased a 110,000-square-foot warehouse in San Marcos to boost its distribution capacity from Imperial Beach to Santa Barbara, Santa Monica to Palm Springs.
Stone Distributing also coaxed some well-known craft brands into the fold recently, including San Diego’s Societe and Los Angeles hard kombucha maker Jiant. It now distributes beverages for 44 craft outfits in the Southern California region and has 30 percent craft market share in San Diego and 15 percent share in Los Angeles.
A former executive at video game publisher Activision and Outerwall, where she ran its ecoatm recycling kiosk division in San Diego, Stipp took a leap of faith to join Lagunitas in 2015.
At the time, founder Tony Mcgee was looking for someone with technology and beer industry experience to better understand how to reach customers digitally. Stipp fit the bill. Prior to her tech jobs, she worked at Miller Brewing Co.
Stipp left Lagunitas in early 2020 as Heineken asserted greater control over the operation. She joined Stone in September, one month after Dominic Engels abruptly left after a fouryear tenure.
“Maria is the right person not just because of the sheer power of her smarts, she is also a very connected person who in a very short period of time is actively engaged in all facets of the business, the people and the team,” said Stone co-founder Greg Koch. “We’re lucky to have her.”
Founded by Koch and Steve Wagner in 1996, Stone once pledged that it would never brew a light beer.
“There was a time when I wouldn’t even say the word,” said Koch. “I would call it the “L” word.”
But earlier this month, Stone rolled out a pilot beer called Dayfall Belgian White, a slightly tart golden brewed with orange peel and coriander.
Shortly before that, it debuted a low-alcohol, 95-calorie, reduced gluten beer called Features & Benefits — an IPA for the fast-growing health-conscious crowd.
“Can we make a beer that is low in alcohol and low in calories and carbs, and can we make it taste great?” said Koch. “I was extraordinarily skeptical. To my shock and surprise, our brewing team did just that.”
To date, Dayfall and Features & Benefits remain in Stone’s pilot beer program, meaning they are available on a limited basis.
But Buenaveza Salt & Lime has joined Stone’s year-round beer lineup — bringing a craft-brewed lager to the Mexican-style beer category dominated by big import brands.
“Buenaveza is our number one priority right now,” said Stipp. “That is our new item. We want to be the number one new item in craft this year. So, that means putting our marketing dollars toward driving it. It’s a great beer in a great package at a great price.”
As for IPAS, they remain a growing segment in craft beer overall, and bold IPAS clearly will continue to be important, flagship beers for Stone.
But craft brewers also are increasingly trying to figure out ways to court hard seltzer and flavored malt beverage drinkers over to their beers by offering lighter fare.
“Four out of every 10 craft beer drinkers are drinking IPAS,” said Bump Williams, the head of industry consulting firm BWC Co. “So, if you’re IPA only, you’re missing six of them.”
Even for consumers who say they’re IPA drinkers, their preferences have shifted toward smoother beers. “If I’m not making an easier-to-drink IPA, a lessbitter IPA, a lower-alcohol IPA, I am missing a boatload” of consumers, he said.
Williams called Stipp “the right person in the right spot at the right time” to lead Stone.
“I think she is going to access where they are broken and where their opportunities are,” he said. “She has that charisma, that intelligence and that drive to have a plan, execute that plan and then reap the benefit.”
It won’t be easy. For many of the nation’s 8,275 craft brewers, the fallout from pandemic stay-at-home orders that largely wiped out their draft sales in 2020 is still being reckoned with.
Official numbers are not available yet, but Bart Watson, chief economist with the Brewers Association, estimates craft production fell 8 percent to 10 percent last year — ending a multiyear run of growth.
“We, as a country, drank a lot less beer in bars and restaurants, and we drank a lot more beer in packaged form,” said Watson. “And that is tough for craft brewers because they rely much more heavily on draft than the overall beer market. That’s true up to and including companies the size of Stone.”
Stipp declined to disclose last year’s revenue. But the company did cut jobs. Stone now employs 750 workers, down from 1,100 employees in 2019. Many of its bistros continue to operate on a limited basis.
To survive, some craft brewers pivoted to packaging — ramping up bottling and canning lines. Demand soared at groceries during lockdowns and people loaded their pantries.
Craft packaged volume was up 10 percent to 15 percent last year, said Watson. But packaged beer makes up only about 60 percent of overall craft production.
The other 40 percent is draft sold in brewpubs and taprooms, or goes out in kegs to local restaurants, bars, sports venues, airports, convention centers and so on. That business suffered significantly from pandemic restrictions. And it remains unclear how quickly it will snap back.
That’s led several local IPA craft brewers to begin diversifying the beer portfolios, said local brewer Tom Nickel, owner of Nickel Beer Co. in Julian and O’brien’s Pub in Kearny Mesa.
“It used to be that craft beer was a little monolithic,” said Nickel. “It was all about ‘What’s your IPA?’ I feel that people in the founding generation of brewing in the late ’90s and early 2000s, as we have aged, that idea has aged with us.
“So, craft brewers today are not about what is your biggest, heavy IPA,” he continued. “They’re adjusting to what the marketplace realities are as craft gets hit from a number of angles — the low-calorie angle, the gluten angle and the flavored seltzers.”
In consumer research, Stone is known for quality IPAS and being innovative,” said Stipp. That provides a bridge for Stone’s brewers to try new things.
“If they can come up with a high-quality Mexican lager, why not?” she said. “It broadens us. It helps attract new consumers to the brand who might not have ever thought about Stone.”
“Steve and Greg were part of the revolution,” she continued. “We are part of the evolution. That is how I would describe it.”