Brewscape: The Latest Craft Beer Brand News

Maui Brewing Transitions Some Production to Mainland

Hawaii’s largest craft brewery, Maui Brewing, has transitioned production of some of its products to Denver, Colorado, following multiple supply chain constraints.

Maui products for mainland distribution — which covers 23 states — will be produced at Denver-based Sleeping Giant Brewing, while Maui explores options for its own facility. The first batches of Maui’s hard seltzer brand produced at Sleeping Giant started November 1, while production of the brewery’s other beer offerings will begin in the first quarter of 2022.

“We have to now think about the supply chain of not only getting our items, but now once we’ve created beer, getting a booking for a boat, getting a container for that boat, and getting it onto that boat in time and having no issues at the ports,” Garrett Marrero, Maui co-founder and CEO, told Brewbound. “It is quite emotional for those of us who’ve been around Maui Brewing since inception, but as the world changes around us, we have to respond to those changes.”

Sales from the mainland of the United States and internationally make up about 18% of the Kihei, Hawaii-based craft brewery’s total sales. Because of this, Marrero said the company hasn’t focused too heavily on growing outside of Hawaii. But supply chain issues — including two separate weeks in October in which the brewery shut down due to no carbon dioxide (CO2) in its bulk tank, and up to 26-week lead times for malt container shipments — have forced it to reevaluate.

“The handling of COVID, and the supply chain breakdown post-COVID is kind of forcing our hand to look at how do we continue to grow as a company and do our job to make sure that our team has pay and benefits and the bank notes paid, and all of those wonderful things that are very important to us to make sure our family is taken care of,” Marrero said. “It’s not to say we won’t have challenges producing in the mainland, because some of the same challenges exist there. However, on a far, far lighter level than they do in Hawaii, and response time is a lot quicker once situations are rectified.”

With the transition to mainland production, Maui is increasinging its overall growth plan. In 2021, the brewery is on track to produce around 65,000 barrels of beer and hard seltzer, up from 43,000 barrels in 2020 — in which 12,000 barrels were just the newly launched hard seltzer — and 59,000 barrels in 2019, according to Marrero. In 2022, he said the company is targeting 100,000 barrels.

“We’re not planning on opening any new markets as of right now. It’s just merely meeting the demand that we already have in the current markets we’re in, which is probably a three-fold increase over what we sell there already, if we could just get them their beer fast enough,” Marrero said.

Prior to the transition, increased sales from the mainland “gutted” the brewery’s margins due to increased shipping costs. Now, the brewery will absorb the costs and will be able to “give that right back to [its] fans.”

“We’ll be able to deliver more beer and seltzer faster, and at a better price point,” Marrero continued. “And overall, at a much, much fresher code date and with a lower carbon footprint. So it checks all the boxes that I think our fans want.”

Additionally, the brewery is exploring direct-to-consumer shipping, which is prohibited in Hawaii.

“We believe that all small craft brewers should have the right to reach their customers, especially in a world of distributor consolidation,” Marrero said. “If you look at the SKU proliferation of even the big brands, these small brands that are sub-5,000 barrels are tough to find a distributor who’s willing to give them the time of day. And in some cases, it doesn’t make sense due to the ridiculous franchise laws to distribute through a wholesaler who then you’re beholden to for the rest of your life. So being able to reach a small customer base of fans, through the mail, I would think is a smart business decision.

“And for us, we’d be able to reach those markets that we don’t have the desire right now to invest in heavily by putting sales reps and full marketing forces behind them. So I think it’s a win-win for beer and for beer lovers,” he continued.

Marrero acknowledged previous criticism he’s expressed of breweries claiming to be “island brands” but producing on the mainland. Because of this, Marsha Hansen, Maui director of marketing, told Brewbound the brewery is making a large investment in new packaging for its mainland products. The “Island Brew” label will be removed from offerings produced outside of Hawaii, and it will be “very clear if you’re drinking it here, this is where it’s been made.”

“One thing that will set us apart though is making sure that we are abundantly clear and transparent about where that beverage you were drinking is coming from,” Marrero said. “We would never try to hide where our beer is coming from, because we believe it’s our fans’ right to know and right to vote with their purchase where that beer comes from.

“If it’s really important to them that it comes from Hawaii, well, we welcome them to come to Hawaii to drink. But if it’s just that they love Big Swell IPA, or Bikini Blonde Lager, or Sunshine Girl, etc. and they want to get it more readily available and at a lower price point, then I think they’re gonna win overall.”

Over the past several months, Maui has appointed new members to its leadership team, including 26-year industry veteran Chris McJunkin as its new chief sales officer, and former Wormtown Brewery GM Scott Metzger as its chief operating officer.

Stone Shutters Napa Brewpub Amid Legal Dispute With Landlord

Stone Brewing abruptly shuttered its taproom in Napa, California, following a legal battle with its landlord over rent payments during the pandemic.

“We’re incredibly disappointed to leave Napa,” Stone wrote in a statement. “We poured so much passion into the renovation of the beautiful 1877 Borreo Building. We’d hoped to be a part of Napa’s vibrant downtown for many more years.”

The location’s 40 employees are now out of work, but Stone “will be offering the opportunity for some team members to relocate to Southern California and will do all we can to support those we leave behind in Napa, including providing severance and benefits coverage,” the company said.

The Escondido, California-headquartered craft brewery and its Napa landlord, West Pueblo Partners, have been embroiled in a legal dispute over non-payment of its $40,000 monthly rent bill for much of 2021, according to the Napa Valley Register.

California enacted some of the most stringent and longest lasting restrictions on breweries, bars and restaurants during the COVID-19 pandemic. Onsite service was restricted and at times prohibited from March 2020 through the end of last year.

Court documents show that Stone did not pay rent in December 2020 and January-March 2021, and West Pueblo Partners served its tenant with a “5 Day Pay or Surrender Possession” notice on March 23. The brewery countered with a civil action against its landlord arguing that the force majeure provision in its lease “excused its failure to pay.”

“The dispute is about rent we deferred during the hardest months of COVID, but which we always intended to pay over the remainder of the lease,” a Stone spokesperson told Brewbound. “We paid full rent during the pandemic through November 2020 based on West Pueblo’s promise to help with rent relief.

“Beginning in December 2020, when COVID cases surged and government restrictions shut-down our Napa restaurant and brewery, we began deferring rent payments,” the spokesperson continued. “Beginning in May 2021, as restrictions eased, we started paying the deferred rent and have timely paid full rent since June 15. West Pueblo Partners refused to cash any of these payments and insisted on terminating our lease even though we have always told them we would and always intended to pay the full amount of rent over the life of what was supposed to be a 20 year lease.”

Stone and West Pueblo Partners’ lease agreement contains the following force majeure provision:

“If either party is delayed, interrupted or prevented from performing any of its obligations under this lease, and such delay, interruption or prevention is due to fire, act of god, governmental act or failure to act, labor dispute, unavailability of materials or any cause outside the reasonable control of that party, then the time for performance of the affected obligations of the party shall be extended for a period equivalent to the period of such delay, interruption or prevention.”

However, in her tentative ruling granting West Pueblo Partners’ motion for summary judgement, Judge Victoria Wood explained that the force majeure did not preclude Stone from paying rent, citing prior case law that the provision “does not contain language that excuses performance on the basis of poor economic conditions, lower than expected attendance.”

Although Stone pointed to its use of the force majeure provision to not pay rent for eight days in 2018 when construction of the Napa taproom was halted due to smoky conditions from the Camp Fire, Wood noted that the situations are different.

“While [West Pueblo Partners] was unable to fulfill its obligation due to the fire, i.e., the [force majeure] event, it was relieved of that obligation, which relieved Stone of its obligation to pay rent during that period,” she wrote. “Conversely, there is no evidence showing that Stone ever lost the ability, temporarily or otherwise, to fulfill its obligation to pay rent due to COVID.”

In court documents, Stone detailed that the Napa location accounted for one-third of its hospitality division’s losses. The Napa location losses were “so substantial they jeopardized the brewpub operations,” according to court filings. Wood noted that Stone’s operating income in the first quarter of 2021 increased 53% over the same period in 2020, and the company had $9 million in credit in 2020 and secured a $2 million letter of credit in January 2021 for a lease for a new headquarters and an expansion to its distribution center.

In a statement to Brewbound, West Pueblo Partners argued that “Stone Brewing, one of the top 10 largest craft brewing companies, chose to stop making its rent payments even though it had the money to pay rent.”

“It makes us incredibly sad that Stone Brewing chose to spend money on litigation rather than on making rent payments and supporting its Napa workforce,” co-owner Kevin Teague told Brewbound.

Before it was renovated into Stone’s Napa brewpub, the Borreo building was vacant for 15 years, according to Stone’s press release announcing the outpost in May 2016. The 10-barrel brewhouse and 9,500 sq. ft. taproom and restaurant opened its doors under the Stone flag in May 2018.

Bell’s Brewery to Sell to New Belgium Parent Co. Lion; Larry Bell to Retire

Two craft beer pioneers are joining forces in a blockbuster deal.

Kirin-owned Lion Little World Beverages has struck a deal to acquire Bell’s Brewery, the second largest craft brewery in Michigan and the seventh largest Brewers Association-defined craft brewery by volume in 2020.

Bell’s will join New Belgium as the second piece in the international beer manufacturer’s U.S. craft brewery platform, following the 2019 acquisition of Fort Collins, Colorado-based New Belgium. Once complete, the deal will create the fifth-largest craft brewery control group, trailing Anheuser-Busch’s Brewers Collective, D.G. Yuengling & Son, Molson Coors’ Tenth & Blake, and Boston Beer Company.

“The Lion team was really clear that part of the relationship with New Belgium was about building out a larger platform in the U.S.,” New Belgium CEO Steve Fechheimer told Brewbound. “As we’ve thought about that over the past two years, most of which was during the pandemic, it was pretty clear to us that there’s not really a better cultural fit, brand fit, legacy story than there is with Larry Bell and the wonderful company he’s built here.

“This is a significant step in terms of bringing that platform together,” he continued. “I’m super excited about where this takes us as companies.”

Financial terms of the transaction were not disclosed, although Lion will acquire 100% of the Michigan-based craft brewery, which operates in Kalamazoo and Comstock. Founder Larry Bell will retire. The deal is expected to close within the next couple of months, pending regulatory consents and other customary closing conditions.

“This isn’t a money grab. It’s not a hostile takeover. This is a rational, mature adult decision that I feel is the best thing for the company and my employees,” Bell told Brewbound.

With Bell’s, Lion adds one of the first craft breweries, a workforce of 550 and around 500,000 barrels of capacity in the Midwest.

For its part, New Belgium is on pace to cross the 1-million barrel-threshold this year behind the IPA heavy Voodoo Ranger franchise, which makes up about 65% of the brewery’s business.

Year-to-date through October 3, New Belgium has posted nearly $273.2 million in off-premise dollar sales (+19.9%), while Bell’s has recorded $88.2 million in sales (-4%) in multi-outlet and convenience stores tracked by market research firm IRI. Combined, New Belgium and Bell’s hold a little more than 1% share of beer category dollar sales, according to the firm.

Bell’s portfolio will give Lion iconic craft beer brands, including flagship offerings Two Hearted Ale, Oberon wheat ale and seasonal Hopslam IPA, in addition to New Belgium’s Fat Tire amber ale. The combination of two decades-old craft breweries results in an “unrivaled portfolio, which we think allows us to better serve customers, better serve partners,” Fechheimer said.

In making the announcement of the deal to sell the brewery he created, Bell cited two factors.

“First, the folks at New Belgium share our ironclad commitment to the craft of brewing and the community-first way we’ve built our business,” he said. “Second, this was the right time. I’ve been doing this for more than 36 years and recently battled some serious health issues. I want everyone who loves this company like I do to know we have found a partner that truly values our incredible beer, our culture, and the importance of our roots here in Michigan.”

Speaking to Brewbound, Bell said he recently beat a second bout with cancer.

“There comes a time where you realize you need to make some important decisions in life. And for me that time is now,” Bell said. “I’ve been CEO of Bell’s for over 38 years. I founded it in 1983 at age 25. That’s a long time to be CEO.”

Bell explained that Bell’s board of directors approved plans to explore a potential sale process in January.

“I really wanted to make sure that Bell’s would get transitioned to a good company to carry on the legacy of brewing and community commitment and valued employees,” he said. “I’m really fortunate to have this agreement with Lion, who’s going to have us join forces with New Belgium. I’d rather be around and help in that transition for everybody that I care about at Bell’s. It’s not fair to have some trustee of mine to take care of my personal business.”

In mid-January, Bell’s named long-time employee Carrie Yunker to the newly created role of EVP, as part of the company’s succession plan. Once the transaction closes, Yunker will continue in her role guiding the Michigan craft brewery’s daily operations. Yunker will report to Fechheimer and also join the combined entity’s leadership team. Also joining the leadership team will be Bell’s VP of operations, John Mallett, who will be focused on integrating the two organizations.

“As a shareholder and board member, I am excited to support the sale of Bell’s to Lion and to join forces with New Belgium,” Laura Bell, Larry’s Bell’s daughter and the company’s former CEO, said in a press release. “Our job as owners is to ensure the best future for Bell’s and I believe this step is an important and critical part of our journey to continue the Bell’s legacy long into the future.”

Asked about wholesaler alignment, Fechheimer said adjusting those relationships is not a Day One priority. Bell has been vocal about his refusal to accept successor wholesalers that are owned by Anheuser-Busch InBev, Molson Coors or the Reyes Beer Division. The Bell’s portfolio was notably excluded from Reyes’ acquisition of Indianapolis-based Monarch Beverages in October 2020. However, New Belgium has actively sought out partnerships with Reyes in California and the Chicago area.

New Belgium has gained distribution in all 50 states, but Bell’s has not yet filled out the entire U.S. footprint. The brand is distributed in 43 states, Washington, D.C., and Puerto Rico, excluding northern and central California, Oregon, Washington, Idaho, Montana, Utah, Alaska and Hawaii. Similar to the companies’ wholesaler alignment, expanding Bell’s reach is not an immediate goal.

“As we think about the entire strategy and entire opportunity, we’ll obviously look at those seven states,” Fechheimer said. “There’s benefits when you’re that close to being national to becoming national, how do you service some other large national customers, and I’m sure we’ll get there. But that’s not a Day One priority that we’re going after.”

Bell’s, however, will align with New Belgium’s business practices, including seeking B Corporation certification, 100% carbon neutrality by 2030, $1 per barrel philanthropy, and 100% score on the Human Rights Campaign Corporate Equality Index.

The acquisition will place Bell’s outside of national trade group the Brewers Association’s definition of a craft brewery, notably “less than 25% of the craft brewery is owned or controlled (or equivalent economic interest) by a beverage alcohol industry member that is not itself a craft brewer.” Bell’s volume will no longer be counted among the BA’s craft brewer data set and will have to cease use of the BA’s independence seal on its packaging and marketing materials. However, Bell isn’t fretting over the brewery losing its craft designation.

“Both of these companies were forged in the early fires of craft beer, and may not have BA certification, but certainly — certainly — these two companies have the spirit of craft beer from when the movement started,” Bell said. “So I don’t think anybody’s gonna worry about that. I’m not going to lose sleep over it. And I’m guessing Steve isn’t either.”

Bell first ventured into the world of beer while working at a bakery in 1976 following his graduation from Kalamazoo College, according to the brewery’s website. Working with yeast sparked his interest in fermentation and he began homebrewing, eventually opening a homebrew shop, the Kalamazoo Brewing Supply Co., in 1983. Bell sold his first batch of beer commercially in 1985 and self-distributed locally until signing on with Ann Arbor-based Rave Associates in 1989 to expand its footprint within Michigan. The brand expanded to Wisconsin and Indiana in 1990.

In 1992, Bell’s expanded to Illinois and launched its iconic summer seasonal Oberon wheat ale, which was originally titled Solsun but renamed four years later due to trademark concerns.

“Larry picked the name because he played Oberon, King of the Fairies, in his sixth grade production of Shakespeare’s A Midsummer Night’s Dream,” the brewery website reads.

Bell’s crossed the 100,000-barrel mark in 2008 and doubled its volume in four years when it shipped 200,000 barrels in 2012. Upper Hand Brewery, a sister company based in Escanaba on Michigan’s Upper Peninsula, opened in 2014. The brewery, which produced 4,958 barrels of beer in 2020 according to the BA, is included in the Lion transaction.

The BA honored Bell with its Recognition Award in 2010 as a leader “whose inspiration, enthusiasm and support have contributed to the brewpub and microbrewery movement.” In September, the trade group gave the same award to Mallett, who also serves as president of the Master Brewers Association of the Americas and chairperson of the American Malting Barley Association in addition to his long career at Bell’s. Mallett received the BA’s Russell Schehrer Award for Innovation in Craft Brewing in 2002.

In retirement, Bell said he will be focused on the Larry J. Bell Foundation.

“I intend to be rooting around the stacks for a while,” he said.

And maybe a few more Chicago Cubs games?

“Well, let’s get some pitching,” Bell, a long-time Cubs fan, said.

“And some hitting, as well,” added Fechheimer, who Bell said also roots for the Cubbies.