As we at DC Beer Media noted last month, beverage industry analysts have charted beer sales falling flat. But within the spritzy sales leaving the proverbial glass, there appear to be peaks and valleys. The bubbles and off-gassing of about 10,000 breweries, taprooms, and brewpubs nationally is certainly not all up or all down.
In his virtual press conference in April, Brewers Association economist Bart Watson noted “We see a contrast… between distributing breweries which saw volumes decline in 2022 and onsite, brewpubs and taprooms who make up the vast majority of breweries which collectively grew in 2022.” He notes the market becoming much more competitive: “we’re seeing challenges in distribution and there’s still opportunities in that hospitality focus.” Reflecting on these words, we consider both what large and small breweries are doing.
It’s been seven weeks since the Maryland Department of Labor listed their Work Adjustment and Retraining Notification (WARN) citing the “Plant Closure” of Diageo North America, Inc. with an effective date of June 9, 2023. As the dust settles from this announcement which left people surprised, including employees at the Diageo-owned Guinness Open Gate Brewery in Baltimore County, we examine the state of growth, loss, Guinness, and labor. DC Beer Media also spoke with the smallest breweries in the District.
At the risk of oversimplification, the data largely reads like the tale of two brewery models. If you’re a brewery selling beer onsite, be you a brewpub or taproom, you’re charting a growth pattern. If you’re a distributing brewery, be you small, medium, or large, your sales projection is likely in decline. So what’s a distributing brewery to do?
DC Beer Media noted that Devils Backbone is opening a brewpub in Charlottesville in a high visibility and high foot traffic area. “Our goal is to be a gathering spot for students, locals, and visitors, alike – whether they’re catching a game on TV, grabbing a drink with friends, or enjoying a happy hour with coworkers. By serving up our own Virginia-made beverages, plus some new innovations that will be brewed on-site, Devils Backbone Backyard will bring a fresh selection of tastes and experiences to the hometown of the University of Virginia & the heart of Central VA,” says Kim Oakley, Director of Marketing at the brewery. In a beer market that needs a shot in the arm, university students are potentially one of the younger demographics that beer sales need.
The trend of a bigger brewery (Devils Backbone is owned by the world’s largest brewing company, Anheuser Busch InBev) setting up a smaller shop, a brewpub or taproom-with-food model, seems to be continuing. Guinness has announced plans to open a Chicago outpost. A West Loop brewpub is reportedly going to open this summer with a 10 barrel brewhouse.
According to the Baltimore Business Journal, Guinness brewed 45,790 barrels in 2020 and their best-selling beer by volume was Baltimore Blonde. We know that the Open Gate Brewery has a 10 barrel and a 100 hectoliter system. Guinness’s Chicago outpost contributes to the trend that the growth patterns of new breweries favor smaller systems.
Julia Strasdauskas, Managing Director at Collins + Co., the PR Firm representing Guinness Open Gate Brewery, wrote to DC Beer Media: “One thing I do want to note is that the Guinness Open Gate Brewery is unaffected– the plant closing and layoffs are by Diageo North America. I’ve seen inaccurate reports Guinness is closing the plant.”
She also mentioned that the Work Adjustment and Retraining Notification (WARN) Notice provided by the Maryland Department of Labor was perhaps inaccurate in the listing of jobs affected; “to clarify the 108 employee layoffs reported on the WARN log, we anticipate that around 97 roles will be impacted.” The Guinness Open Gate Brewery and their 10 barrel system may remain unaffected, but what of the 97 people impacted at the 100 hectoliter system, attributed to Diageo instead of Guinness? And what of Guinness Baltimore Blonde?
Until I read this article, I hadn’t considered that Guinness Baltimore Blonde wouldn’t always be around. Which prompted me to ask, what would I do if Guinness Baltimore Blonde was not around? Would I care if it was made by Heavy Seas, which offered to make it? In the blistering news cycle of today’s 21st century, did I already read this and forget it or was it news that somehow dodged my radar?
My guess on the reason for Diageo laying off nearly 100 people is the sales (or lack thereof) of Baltimore Blonde. There’s nothing wrong with the product in my humble opinion, it’s more there’s something wrong with the market. What is exactly wrong with the market? Talk to 10 people and you can get 10 answers but largely variations of, “booze is up, beer is down,” or “ready to drink canned cocktails are the new canned beer,” or “hop water and hoppy seltzer are eating into beer’s sales,” or “people are more health-conscious in 2023 and as a result sales of beer are falling,” or “younger drinkers don’t drink beer,” or wine, or cider, or insert-other-beverage-taking-from-beer here are the problem. One thing that is not speculation is the decline of Baltimore Blonde sales according to NielsenIQ scan data, or NIQ. In 2019 Baltimore Blonde sold over $6 million at off-premise retailers. Last year, that number of off-premise dollar sales was between $1-2 million.
From the beginning the Open Gate Brewery made clear that Baltimore County would not manufacture Guinness Draught, Extra Stout, or Foreign Extra Stout. But what if they did? We may never know how the production of the Irish beers would fare in Baltimore and if the production of these storied brands would’ve kept jobs in the county.
Having a workforce of hundreds of people may seem mind-boggling to many small brewers. Certainly in a town the size of DC, breweries with 100 jobs are hard to come by. Other Half employs around 200 people. Not in DC proper, but in all of the facilities the company operates.
On the other end of the spectrum, consider Soul Mega Beer, with 1 employee. Talking to Soul Mega founder/owner Elliott Johnson, we asked one of the smallest breweries in the District if their concerns were different from an Other Half, Aslin, or Atlas? “I think we probably share similar concerns from a production and supply chain standpoint but these companies are larger than ours and I imagine our concerns differ more on the operations side,” he wrote. We asked Johnson the following question about distribution: do you see concern as a largely distributing brewery or do you find hope in the collective growth (through events) with brewpubs and taprooms who are accounting for growth in 2022? “No, I don’t see concern from that perspective. I still consider us in the infant stage of business and are still on track to meet the goals of our business model, he responded”
We also asked Eamoni Collier, founder of Urban Garden Brewing LLC, if she’s concerned as a largely distributing brewery or does she find hope in the collective growth (through events) with brewpubs and taprooms who are accounting for growth in 2022? “As a small and minority-owned contract brewery, distribution is currently posing a significant challenge for us. Nonetheless, we are hopeful about the collective growth through events with brewpubs and taprooms, which we believe will continue to help drive growth,” she replied.
DC Beer Media asked her if she thinks her challenges are different from larger breweries like Other Half, Aslin, or Atlas? “In any business, there will always be challenges and concerns. Our primary focus at present is on distribution, but we remain optimistic and committed to finding solutions. We are staying adaptable and open to change as needed to ensure our success.”
Success certainly looks different for different breweries and we’re seeing this mix of wins and losses. Aslin has a lot of beer in distribution. Do they have $5 million reporting in NIQ scan data? Could they take a multimillion dollar hit and continue operating? I’m guessing the number of breweries who can lose millions in off-premise sales is a small list.
Certainly The Public Option is not one of them, and so we asked owner Bill Perry what he made of the divergent trends of distributing breweries taking hits and the smaller pubs or taprooms accounting for growth. “Because given the size of The Public Option, we are probably not representative of either group” Perry says. “We don’t distribute and never have. So although I feel for my comrades in that space, I don’t know it myself…. I would agree, from an anecdotal perspective, that demand has not fallen off. Our ‘pico’ size exacerbates the well-documented challenges of operating a business in the hospitality sector post-Covid.”
Whether a brewery is making hundreds of thousands of barrels a year or dozens of barrels a year, the challenges faced are multifaceted and not simply rising costs. But those costs are of course mitigated by the age-old capitalistic maxim: the more you buy, the more you save! But very few breweries, if any, have the buying power of Diageo or ABInBev.
The opening of Devils Backbone brewpub in Charlottesville, and a similar model for Guinness’ forthcoming Chicago pub, may demonstrate the shift from a distribution or off-premise model to an on-premise model. To simplify a headline: Big Brewery Opens Tiny Brewery.
There is of course more nuance than this; one key distinction between a new Guinness 10 barrel facility and another new brewery opening is the access to capital. Guinness and Diageo likely have that capital, whereas a smaller brewery will need to loan it or raise it.
Beyond access to capital, could Guinness Open Gate meet market demand and keep jobs in Baltimore County? In an ideal world, both would be done at the same time. But I wonder, is the potential loss of Guinness Baltimore Blonde worth shouting about? Or is it, paraphrasing one Baltimore brewer, a knee jerk reaction that a multinational company made a beer that said Baltimore on the can so it must stay?
Relevant to Baltimore County, and more so the land of pleasant living, is the claim ex-governor Larry Hogan made in the brewery’s opening press release: “In addition to more than 200 new jobs, this new facility’s full-time brewing and hospitality operations will bring a new source of tourism to Baltimore County and to Maryland. We remain committed to supporting companies that invest in our communities and our citizens, and Guinness opening its doors today is yet another example that Maryland is open for business.”
Even if only 97 jobs are affected, that’s still about half of the originally promised 200 that are gone. I imagine it’s hard not to feel hoodwinked if you’re the state of Maryland and you were promised 200 jobs and wound up with 103 jobs five years later. But if the jobs that exist are staying above minimum wage and these roles have better benefits than the majority of breweries in the state of Maryland, can Guinness and Diageo be seen as a leader in labor?
I feel obliged to say anecdotally that my friends who work or have worked for the Open Gate Brewery have largely been thrilled with their employment there. I know it’s just a few people sharing their experiences with me, but it means something that their employer offers pay and benefits most of them found better than those in their previous jobs in the DC and Baltimore metro areas. I can only imagine how they feel having these layoffs come about. Nobody wanted to speak with me on the record, or even on anonymity, so I leave you with this: job loss is never good. Sometimes it is catastrophic.
Please support your local brewers and small businesses. As Julie Verratti, chief brand officer of Denizens Brewing Company told us:
“We’re in 2023 now and since 2018 I did a stint at the Biden Administration, working at the Small Business Administration and I was there for most of 2021 and helped implement a lot of the COVID recovery policies and programs that were part of the American Rescue Plan and I gotta be honest, the kids are not alright. There’s not a single small business in this country that lives and works in the main street economy, hospitality businesses, the businesses where you walk down the street, you walk into them, that is doing OK right now. People that are around right now, I’m just gonna go ahead and speak for everybody here whether they give me their permission or not, I just know this from my time at the SBA, and being in touch with people that own businesses, nobody is doing really well right now. People survived. Nobody thrived… It’s hard to send that message into the world when you’re trying to get people excited about your brand… I say all of this in a generalized way, because I do think it’s important that folks are still out there supporting local, supporting their businesses, making the choice everyday to maybe be a little inconvenienced… I am proactively making that choice that I want to support local businesses.”
