Pandemic-driven declines and an inability to convert the space to include brewing capacity, food service and outdoor seating factored into Deschutes Brewery’s decision to shutter its Roanoke, Virginia-based tasting room later this year, executives explained yesterday.
“Were the space different, it might have been possible for us to come up with a business model that worked,” chief financial officer Peter Skrbek said. “But with what we saw in the reduction of demand and customers during the pandemic, combined with the fact that we couldn’t really get food service in the space, along with brewing, it wouldn’t work. The business model just didn’t work any longer.”
Bend, Oregon-headquartered Deschutes opened the taproom in August 2017 as a way to engage with the local community while it prepared to build its proposed $90 million, 55-acre production facility in the city, which never materialized.
With plans for a larger brewery shelved, the temporary exemption that allowed Deschutes to operate a taproom that doesn’t fulfill the state’s requirement that 20% of all beer sold at the tasting room be produced onsite no longer applies. To continue operating, Deschutes would need to add brewing equipment to the Roanoke facility, or convert to a full-service restaurant.
“Both of those are significant capital investments, and it’s complicated because of the space that it’s in,” Deschutes CEO Michael LaLonde said. “So that would probably be a hurdle that it would be difficult to overcome.”
During the COVID-19 pandemic, the Roanoke tasting room could not turn to two business pivots that kept other craft breweries afloat — sales of packaged beer to-go and outdoor seating. The tasting room offered growler sales to-go, but not cans or bottles.
Although Virginia did not enact the strict pandemic restrictions that Deschutes’ Oregon-based pubs faced, traffic and visitation declined to about 30% of pre-pandemic levels, Skrbek said. On-premise establishments in the area haven’t completely rebounded yet.
“What we’re hearing from distributors in Virginia is that they’re seeing about 70% of the traffic in pubs and restaurants, pre-COVID,” LaLonde said.
The eight employees of the Roanoke taproom will be considered for other roles within the Deschutes organization if they are interested in remaining with the company.
Both LaLonde and Skrbek stressed that Deschutes will not be selling the land it owns that had been designated for the company’s East Coast brewery. The company’s Bend, Oregon facility is operating at 70% capacity, and until that brewery reaches its production ceiling, plans for another facility will be on hold.
“We’re not saying never, we’re just saying we want to hold on to it, because we think it’s a great opportunity in the future,” LaLonde said. “It makes a whole lot of sense at some point.”
In Oregon, Deschutes operates pubs in Bend and Portland and licenses its name to a location in the Portland International Airport. The pubs endured on-site service shutdowns and capacity restrictions, but are now “starting to return to some normalcy, whatever that is,” LaLonde said.
The company has no plans to shutter any of the Oregon locations.
“We’re at least part owners in the real estate for both those operations, which changes the financial dynamics of the business quite a bit,” Skrbek said.