Santa Fe Brewing Company’s focus on its home state of New Mexico and a smaller distribution footprint paid off in 2018. The 31-year-old craft brewery’s sales grew 47 percent in its home state last year — and 37 percent across its eight-state territory — according to vice president of sales and marketing Jarrett Babincsak.
Santa Fe produced about 32,000 barrels of beer in 2018, up from 23,430 barrels the previous year. Babincsak said outside of New Mexico, Santa Fe’s sales grew in Texas, Oklahoma, Arizona and Missouri. He credited the release of 12-pack cans featuring the company’s core offerings — 7K IPA, Happy Camper IPA and Freestyle Pilsner — with helping to drive growth in chain grocery stores.
“We got really strong buy-in from our supermarket partners on the 12-packs right out of the gate,” he said, adding that 12-packs now make up 15 percent of the company’s business. “And now we’re looking at other opportunities with convenience stores and the drug channel to really get onboard with that 12-pack format because it’s been a big driver.”
Part of the company’s success can be attributed to 7K IPA, a West Coast-style IPA, Babincsak said. Last year, 7K surpassed Happy Camper IPA as Santa Fe’s lead brand. According to Babincsak, 7K now accounts for 37 percent of the company’s sales, while Happy Camper accounts for 29 percent of the business.
This year, Babincsak said Santa Fe is projecting sales of 38,000 barrels. In order to hit that target, Santa Fe is betting big on a pair of new brands. Six weeks ago, the company launched Social Hour, a 7 percent ABV wit-inspired ale brewed with pineapple and guava. That offering replaced State Pen Porter in its year-round lineup.
“We replaced it with something that we feel is much more compelling, much more contemporary and has a lot more upside at retail,” he said.
Indeed, Social Hour is already exceeding expectations. Babincsak said sales during the brand’s launch in New Mexico have already surpassed State Pen Porter’s total sales in all of 2018. The goal now is to make Social Hour the company’s No. 3 brand, with a rollout in other markets slated for late March.=
Also launching next month is Pepe Loco, a Mexican-style lager only available in New Mexico. Pepe Loco is being packaged in 6- and 15-packs, the latter of which Babincsak said is being priced in line with the company’s 12-packs at around $16.99.
“We feel like we’re asking that consumer to pay a realistic price for that value,” he said.
Purging Santa Fe’s portfolio of underperforming brands will remain the strategy going forward, Babincsak added. He noted that the company would not be “emotionally married” to any brands and that consumer feedback, market research and sales data would help inform its portfolio decisions moving forward. According to Babincsak, that feedback may take Santa Fe outside of the traditional beer space, as the company is currently exploring adding cider to its portfolio. Babincsak also wouldn’t rule out introducing other beverages, such as hard seltzer or functional drinks, as long as they’re “additive to the brand.”
“We’re going to be really thoughtful about what we get involved in and what we attach our name to or what projects we decide to pursue because so much of that stuff has a short shelf life,” he said. “If you just become that brewery that is chasing that next fad, I think over the course of time, that has the potential to erode your brand in the mind of consumers.”
Nevertheless, Santa Fe is planning for additional growth in the next three-to-five years, Babincsak said. Part of the preparation is adding to the company’s production capabilities and staff.
Santa Fe is in the process of upgrading its 30-barrel brewing system at its main production facility to a new 70-barrel Steinecker brewhouse with the capability to scale up to 200,000-barrels annually. Babincsak expects the new system to be online by the end of June and alleviate “bottlenecks” that have hampered the company in the past.
However, brewmaster Bert Boyce won’t be guiding Santa Fe’s growth beyond this summer. Boyce, who is helping to oversee the brewhouse transition, will depart the company after four years to open his own brewery and taproom. Supplanting Boyce will be Brian Shaeffer, the current production manager at Oskar Blues’ Longmont, Colorado, production facility, who will depart that company in April.
“His experience with Oskar Blues and then Canarchy is unbelievably relevant to what we’re getting ready to do,” Babincsak said. “He’s seen and helped manage the growth at Oskar Blues from a small regional brewery of 10,000 barrels, which we were just a few years ago, to what they are now as part of that Canarchy model.”
Santa Fe is also bolstering its staff, promoting field sales manager Pat Thomsen to chain sales manager, and hiring Ray Romero, a former senior graphic designer for Tesla, as its new marketing manager.
Meanwhile, construction to transform Santa Fe’s main production facility into a destination brewery — featuring a three-story beer hall, beer garden and on-site concert venue — continues. That project is expected to wrap up in July.
Santa Fe also plans to open a second taproom in Albuquerque — its fourth in New Mexico — as part of the “Tin Can Alley” development later this year. Taproom sales are still a small part of the company’s overall business, accounting for just 10 percent of its volume, Babincsak said.
“We’ve always been more of a wholesale retail-driven brand,” he added. “So we still have opportunity on the taproom side because we haven’t been as aggressive with our taproom strategy.”