Amid declining production at its Redhook brewery in Woodinville, Wash., Craft Brew Alliance has laid off at least a dozen of the production employees who worked at the facility, Brewbound has learned.
Reached for comment, CBA chief operating officer Scott Mennen confirmed the cutbacks, but declined to say exactly how many employees were let go, saying only that it was “about half” of the brewery’s production, packaging, warehousing, maintenance and brewery operations workers.
In an interview with Brewbound earlier this year, CBA chief executive Andy Thomas said the company had about 40 brewery employees at the Woodinville location, excluding those who work in an adjacent pub.
Yesterday’s layoffs were limited to brewery production workers, Mennen said.
The company attributed the downsizing to softer-than-anticipated contract volumes coming from Pabst Brewing Company, which earlier this year inked a deal with CBA to produce some brands from its Rainier Brewing Company subsidiary at the Woodinville facility.
“The Pabst volumes have not materialized,” he said. “We had to make the difficult choice to right size the brewery operations. It’s not what we want to do in our business, but we have obligations to all of our employees and our shareholders to make these kinds of decisions.”
As part of that arrangement, which began on Jan. 8, Pabst has an option to purchase the Woodinville brewery and adjacent pub at any time during the next three years.
According to the agreement, “the purchase price will be $25.0 million if Rainier exercises the option during the first year of the agreement, $26.0 million if exercise occurs during the second year, and $28.0 million if exercises occurs during the third year and on or before the close of business on December 31, 2018.”
Should Pabst decide not to purchase the brewery, however, it would be forced to pay an undisclosed termination fee.
The Woodinville facility — which in recent years has been used by CBA as a hub for various contract brewing arrangements as well as for production of a variety of the company’s Redhook, Widmer and Kona brands — is currently operating at just 30 percent of its total capacity, Mennen said. CBA had expected Pabst to utilize more of the brewery’s capacity, he added.
The location is currently able to produce 220,000 barrels of beer and is capable of being scaled to about 280,000, according a recent CBA filing with the SEC.
If Pabst decides not to purchase the brewery by 2018, Mennen said CBA could eventually look to close the plant.
“We want to grow volumes, we want the brewery to operate as efficiently as possible and we hope to transfer the brewery over to Pabst,” he said. “But it (closing) is a possibility. It is a possibility anywhere.”
Mennen also stressed that CBA has no plans to immediately shutter the brewery or alter its brewing relationship with Pabst.
CBA currently employs 210 production workers at its breweries in Washington, Oregon, New Hampshire and Hawaii. Yesterday’s round of layoffs represents about a 10 percent reduction in its total production workforce.
Employees who were let go received severance packages based on tenure, Mennen said, and will be offered “outplacement services” aimed at helping them reorient themselves in the job market.