Stone Brewing lays off about 5% of its workers

Stone Brewing Co. announced this week that it has cut “approximately 5%” — about 60 — of its 1,200 employees, a sign of the growing pressures on craft beer.

Dominic Engels, who in August succeeded co-founder Greg Koch as chief executive of the Escondido, Calif., company, was not available for comment Thursday. But in a statement he said that despite these layoffs, “Stone remains one of the largest — if not the largest — employers in the craft brewing segment.”

Yet Stone is caught between global conglomerates and small independent operations. There are now 4,800 breweries in the country, including 130 in San Diego County, both historic highs.

Consolidation is also rattling the industry.  Last year, New York-based Constellation Brands bought San Diego’s Ballast Point for $1 billion, and MillerCoors acquired another San Diego brewery, Saint Archer, for an undisclosed sum.

Meanwhile, SABMiller and Anheuser-Busch InBev, the world’s largest beer companies, are combining into an even bigger giant.

“With business and the market now less predictable,” Engels wrote, “we must restructure to preserve a healthy future for our company.”

Until recently, Stone’s business seemed to be booming. Founded in 1996 by Koch and Steve Wagner, it entered 2016 as the nation’s 10th-largest craft brewery and California’s third-largest, trailing Sierra Nevada (third in the nation) and Lagunitas (sixth). Last year, it produced about 326,000 barrels of beer, or more than 10 million gallons.

Stone celebrated its 20th anniversary in August with a festival on the Cal State San Marcos campus. Earlier in the year, it opened a new facility in Richmond, Va.; in September, it became the first U.S. brewery to own a European operation, launching Stone Berlin.

But on Wednesday, about 60 employees were notified that their jobs had been eliminated. Those affected included community relations director Chris Cochran and veteran “brewceptionist” Denise Ratfield.

Stone had been one of the great success stories of craft beer, regularly boasting year-over-year growth of 50% or more. In an interview this month, though, Koch said “commodity breweries” were undercutting Stone and others by offering kegs to retail accounts at below-market “predatory” prices.

Growth projections for 2016 had been revised downward several times this year, Koch said.

Although craft beer is an international phenomenon, the global brands have built-in advantages, said Bart Watson, chief economist of the Brewers Assn., a Colorado-based industry group.

“No matter what Stone does, they won’t be able to match the ability to get stadium accounts,” Watson said. “Those pressures from above are going to be significant.”

The company also suffered a rare self-inflicted wound last year when it reformulated its original beer, Stone Pale Ale. Stone Pale 2.0 “didn’t quite get the wind in its sails,” Koch said; it has been discontinued.

The company recently introduced a new hop-forward pale ale, Ripper.

Although Watson was unaware of layoffs at other American craft breweries, he said that Stone’s situation has national implications.

“Given the strength of Stone’s brands and how successful they’ve been,” he said, “it shows there are challenges that every craft brewery faces.”

Rowe writes for the San Diego Union-Tribune.

peter.rowe@sduniontribune.com

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