Citing a “challenging” craft beer market, California’s Lagunitas Brewing said Tuesday that it would slash 12 percent of its workforce in a move that will impact at least 100 employees.
The announcement comes about 17 months after Heineken International completed its purchase of the Petaluma-headquartered craft brewery.
In a “letter” posted on the company’s website, Lagunitas CEO Maria Stipp called the job cuts — which were made across all departments — a “difficult but necessary” step.
“We do not take this lightly and are making every effort to do it in the right way, as these actions impact our valued co-workers, friends and community who have contributed to our tribe story,” Stipp wrote of the cuts.
The bulk of the more than 100 layoffs affected those working out of the company’s Petaluma headquarters, the Santa Rosa Press-Democrat reported. The company, which employs about 900 workers, also operates a production facility in Chicago and a taproom in Seattle, but it has yet to begin operations at a third brewery in Azusa, Calif, which was originally slated to open in 2017.
“We believe these changes put us in a position to meet the future head-on, with a team that is well-suited to get us there,” she added.
Lagunitas, which was wholly acquired by Heineken International in May 2017, joins a growing list of beer companies — including MillerCoors, Constellation Brands, Ninkasi, Avery Brewing, Green Flash, New Belgium, and Pabst Brewing Company, among others — to announce layoffs in 2018 as growth within the craft segment has slowed and as the number of U.S. craft beer companies has swelled to nearly 7,000.
In her note, Stipp compared the current competitive landscape to the 1990s, when the first craft beer shakeout occurred. She noted that it took Lagunitas seven years to recover even though the company “weathered that storm very well.”
“Here we are again a few years into it, history repeating itself,” she wrote. “We are dedicated to weathering the storm, to continue to be successful both in the U.S. and globally.”
Scott Whitley, a brewery consultant with Whitley Strategic Consulting who retired from Molson Coors a year ago, said the move illustrates a “changing of the guard” from Magee to Heineken.
“This is the piece I call the unseen hand of the corporation,” he told Brewbound. “I imagine some rationalization will start taking place, even if the business itself, the Lagunitas brands, are relatively healthy compared to the slowing of the craft segment overall. This may be nothing more complicated than a bit of an efficiency play as Heineken, over time, embeds itself more deeply in the Lagunitas business.”
For his part, Tony Magee, who founded Lagunitas in 1993, sent a text message to the Press-Democrat saying, “today was a rough day as were the last week of considerations.”
As news of the job cuts spread, at least one former Lagunitas employee shared support for the terminated workers on social media.
In a Twitter post, Jeremy Grenert, who left his post as Lagunitas’ head of field marketing in late September, wrote: “Personally a heartbreaking day. I cannot express the importance of local and independent enough today.”
Moving forward, Stipp said the company would focus on its flagship IPA, which remains the top-selling IPA off-premise.
“Despite over 7,000 breweries in the U.S., all of which make 3-4 IPA’s, maintaining this spot isn’t easy,” she wrote.
Indeed, year-to-date off-premise dollar sales of Lagunitas IPA are down 1.5 percent through September 9, according to market research firm IRI. Meanwhile, dollar sales of Lagunitas’ second best selling beer in the off-premise, A Little Sumpin’ Sumpin’ Ale, are down 3.4 percent year-to-date.
Still, portfolio-wide dollar sales of Lagunitas products are up 1.4 percent year-to-date, according to IRI.
In an interview with Brewbound in August, Stipp told Brewbound that Lagunitas was the only top five U.S. craft beer brand gaining dollar share at the halfway point of 2018. Citing Nielsen off-premise scan data, she said Lagunitas ranked fourth in dollar share (up 4 percent) and sixth in volume (up 5 percent) through July 14.
At the time, Stipp said the company’s off-premise dollar share growth was being driven by new package formats for its 12th of Never and Sumpin’ Easy ales, including 12-pack and 19.2 oz. single-serve cans. She added that the company would look to release more 6-pack cans in the future while also working to expand distribution of its two flagship brands.
As Lagunitas contends with slower growth trends, It’s unclear whether the company still plans to open its third brewery in Azusa. A message posted to the company’s website states that the location will “no longer open in the Fall.”
“We are looking to make a decision soon,” the note reads. “However, we will do further due diligence first, so are not setting a specific timeframe.”
Lagunitas executives declined an opportunity to be interviewed for this story, and requests for additional clarification regarding the status of the Azusa brewery were not returned as of press time.
Beyond the layoffs, a number of recent moves suggest a potential shift in focus as Lagunitas, like many other breweries, looks to reach consumers with new offerings for different drinking occasions.
The company has rebranded and reformulated its DayTime IPA, which now checks in at 100 calories and 4 percent ABV. It also recently unveiled Hop Water, a non-alcoholic, zero-calorie, zero-carb water made with Citra, Equinox and Centennial hops. And earlier this year, it partnered with CannaCraft, a nearby cannabis company, to produce Hi-Fi Hops, a pair of zero-calorie, zero-carbohydrate, IPA-inspired non-alcoholic beverages that are infused with THC and CBD.