Eyeing a Return to Growth, Sierra Nevada Refocuses on Pale Ale

After two consecutive years of single-digit sales declines, Sierra Nevada Brewing is refocusing its efforts on selling its flagship Pale Ale while also telling its story to consumers.

Speaking to Brewbound, Sierra Nevada chief commercial officer Joe Whitney said the company’s sales were down more than 7 percent last year following declines of more than 6 percent in 2016.

“We’ve had two tough years in a row, which is really kind of a bummer,” he said. “Ever since Ken [Grossman] founded this in ’80, this grew 35 years in a row, and then we have two back-to-back years of above mid-single digit declines. That’s hard to take.”

Some of those declines are due to lagging sales of the company’s products at on-premise bars and restaurants, which Whitney said has been “really hard for us for a number of years.” And it’s only gotten tougher, he said, as thousands of breweries have opened their doors since Sierra Nevada launched, driving a shift in consumer demand for local products.

“Every year we’ve seen people chipping away at us,” he said.

Whitney said another issue for the 38-year-old California-headquartered brewery, which also operates a production facility in North Carolina, has been an ever-rotating suite of new craft beer offerings at bars and restaurants.

“Where we were the one craft beer that they had — or one of two craft beers — now we’re one of 20 or 30 or 100,” he said. “Pale Ale is still there, but when there’s 50 handles and there used to be two or three, your velocity just goes down.”

Whitney added that some on-premise wounds have come as decades-old Pale Ale draft placements were swapped out for special release offerings that only lasted until the kegs ran dry. And once they did, competing breweries could more easily commandeer the draft lines.

“[When] you see some of our distributors switch out Pale Ale for a special beer that they think is really exciting, that only stays on tap for a month, it’s like, ‘Wow, you gave up a 20-year-old handle in an account for a feature for the month, and then we lost a 20-year-old account? How can you do that?’” he said. “I think there’s so much emphasis on new that it’s kind of gotten irrational.”

So this year, Sierra Nevada is scaling back its focus on innovation in an effort to refocus on Pale Ale, which accounts for half of the company’s volume, Whitney said. In the process, the company hopes to win back some of those surrendered tap handles and re-engage with consumers on “a deeper, louder level.”

“With our sales force, we don’t want them to focus on all shiny toys,” he said. “We have a nice assortment of them, but we really want to focus on Pale Ale and making sure that’s available where it should be.”

Whitney added that he sees opportunity to grow distribution for Pale Ale, which he said is the No. 1 selling brand family in terms of rate of sale, however, the brand only ranks third in terms of marketplace penetration.

“Sam [Adams] and Blue Moon do a much better job, and we need to attack that,” he said of the Pale Ale’s availability. “We have a lot of the same wholesalers. They’re going to a lot of those accounts anyway. There’s just distribution gaps for Sierra Nevada products. Our display support — when we get ads in chains — is not as strong as it should be either. There’s some areas where we can really focus and be better.”

Last year, dollar sales of Sierra Nevada Pale Ale declined 8.1 percent (more than $10 million), according to IRI Worldwide, which tracks category-wide sales trends at off-premise retailers. And those trends have yet to bounce back in 2018. Through January 28, dollar sales of Pale Ale were down 5.3 percent in IRI’s multi-outlet and convenience (MULC) universe of stores (grocery, drug, club, dollar, mass-merchandiser and military).

Nevertheless, Sierra Nevada has or will introduce several new products this year, including a year-round New England-style IPA called Hazy Little Thing, a reformulated Otra Vez with lime and agave, Hop Bullet Double IPA and Sidecar Orange IPA.

To help improve Sierra Nevada’s lagging sales, the company is in the process of hiring brand managers to support offerings such as Pale Ale, Whitney said.

“We’ve had no brand management here ever, which is a big miss for us,” he said.

Additionally, Whitney said the company needs to do a better job of telling its story to consumers. To bolster those efforts, the company is currently in the process of hiring an ad agency after doing everything in-house.

“We’re in need of some creative minds to help us get there and tell that story in a more compelling way,” he said.

Part of telling that story, Whitney said, is emphasizing Sierra Nevada’s independence to consumers who may believe that the company — at more than 1 million barrels — is owned by a global brewing conglomerate.

“We need to do a better job of communicating who we are and what we stand for and what we’re about,” he said. “It’s a family business, so we’re not thinking about shareholders and returns and not thinking about investors or venture fund guys who want some kind of payout. We’re thinking about what’s right for the next 50 years. It’s what’s right for the next generation.”

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