Do the Layoffs at Lagunitas Brewing Co. Signal Trouble for Big Craft Beer?
The California-based brewery, famous for its IPA, is cutting 12 percent of its workforce.
In January of this year, The Atlantic dubbed craft beer the "Strangest, Happiest Economic Story in America." Even though beer consumption in America was down between 2008 and 2016, business was booming. In that time, the number of breweries had grown sixfold, and the number of brewery employees had more than doubled.
But now, there are signs that the boom is slowing, and it looks like the bubble might be ready to burst with news that craft brew juggernaut Lagunitas is laying off 12 percent of its workforce.
The cuts, totaling over 100 jobs from across all the departments, will come from the Petaluma, California headquarters as well as the production plant in Chicago and a taproom in Seattle. "The craft beer market is rapidly evolving and, in many ways, more challenging. More breweries, more choices..." CEO Maria Stipp wrote in a statement released on the site. The announcement does not sound optimistic despite the fact that the company's IPA was the top-selling IPA in American restaurants and taprooms last year and that CEO Maria Stipp told Brewbound just a few months ago that Laguintas's sales were up through the first half of 2018. She detailed a plan for growth that included expanding beyond beer into cannabis-infused beverages and building more breweries.
It's virtually impossible to extrapolate a single overarching trend about the overall popularity of craft beer among consumers from these layoffs—or even if we consider them in conjunction with the 350 layoffs at MillerCoors just last month—but it might be indicative of how businesses are faring in the increasingly crowded industry.
The same Atlantic piece which extolled the health of the industry wrote that smaller breweries were thriving despite the fact that "the best-selling beers in the country are all in steep decline, as are their producers. Between 2007 and 2016, shipments from five major brewers—Anheuser-Busch, MillerCoors, Heineken, Pabst, and Diageo, which owns Guinness—fell by 14 percent."
For the tail end of that window, that "major brewer" bracket would have included Lagunitas. In 2015, Heineken bought a 50 percent stake in the brewery in a deal that valued Lagunitas at $1 billion. The deal knocked Lagunitas off the Brewers Association’s annual top 50 list, which requires brewers to be less than 25 percent owned by one of the big companies to be considered "craft." Two years later, Heineken bought up the rest of Lagunitas, keeping on both founder Tony Magee and Stipp in management positions.
This is not to say that anything Heineken did is to blame for the Lagunitas layoffs—the smaller brand has operated largely independently of the Dutch behemoth, and consumers likely still associate the brand more with hoppy IPAs than pale ales in green bottles—but this seems more in line with the trend that larger beer companies are struggling.
Mid-year 2018 data from the Brewer's Association say that it's "harder than ever to tie up craft trends into anything resembling a coherent picture." However, one thing is clear: The bigger brands are suffering. Breweries producing one million BBLs of beer saw the sharpest decline in sales at around 2.5 percent. Granted, this is not specific to Lagunitas, but the incredible growth the smaller company was seeing at the time of the acquisition—the Brewer's Association reported a year-to-year growth rate of 32 percent in 2015—was likely not scalable. In fact, plans for Lagunitas to open a third location in Azusa, California appear to be on indefinite hold.
The landing page for the planned expansion now says, "We will no longer be opening in the Fall as expected. We are looking to make a decision soon."