Times change.
For example, let’s turn the clock back to 2014 and explore the craft beer scene. That year, U.S. craft brewers experienced an 18% increase in volume, a 22% increase in retail dollars and, for the first time, reached a double-digit (11%) volume share of the beer market. There were 3,464 breweries operating across the country.
Seeing those figures — craft volume also increased 18% in 2013 — many breweries decided to bet big on the future and add production capacity. One of those was Weyerbacher Brewing Co. Inc., the Easton business founded in 1995. Late in 2014, Weyerbacher welcomed a brewhouse — equipment that was shipped across the country from Oregon aboard three tractor-trailers — capable of producing 40 barrels of beer at once, essentially allowing the brewery to make twice the suds in half the time.
The project cost: about $2 million.
Returning to 2019, Weyerbacher on Monday filed for Chapter 11 bankruptcy protection, looking to rein in $2.1 million in debt — pretty much all from the brewhouse expansion — and usher in a Philadelphia private investment firm that will take a 55% ownership stake in the brewery and try to jump-start profitability.
While the brewhouse expansion gave Weyerbacher capacity to make those big Belgian-style brews, it also burdened the company with debt at a time when sales were slowing slightly amid an explosion in craft breweries, even as growth in the industry matured. With the debt load, Weyerbacher was unable to push forward with projects to compete in a saturated market.
“We’ve been shifting and changing the business, but we need to be properly capitalized,” said Weyerbacher Chief Operating Officer Josh Lampe, who will become president as part of the turnaround.
The numbers in the craft beer industry today are quite a bit different than 2014. In 2018, U.S. craft brewers realized 4% volume growth, pushing craft’s market share to 13.2%, the Brewers Association reported this month. But even with a lower, more stable growth rate, craft breweries continued to open at a breakneck pace. At the end of 2018, there were 7,346 craft breweries operating in the United States, which includes 354 across Pennsylvania, according to the Brewers Association.
All those openings can be tough for a brewery the size of Weyerbacher.
Paul Gatza, senior vice president of the Brewers Association’s Professional Brewing Division, told The Morning Call on Monday that regional breweries such as Weyerbacher are getting hit by larger, more efficient breweries that have strong ties to chain retailers, while also getting pressured by the small operators opening up and capturing the buzz.
Susquehanna Brewing Co. in Pittston, Luzerne County, is familiar with those challenges, though the business has made changes and diversified to continue to grow.
Fred Maier, co-founder and vice president of 7-year-old Susquehanna Brewing, noted the pressure from the top, with breweries such as his fighting for attention from wholesalers and competing for shelf space at grocery stores, some of which have scaled back room for craft beer to fit in wine offerings. In addition, smaller craft breweries continue to pop up, many of them nimble operations with less overhead selling by the glass or by four-packs.
Maier said Susquehanna Brewing saw the writing on the wall about four years ago, noting how his business would see four or five brewery representatives standing in line to make an appearance at the Wegmans in Allentown. So, he said, Susquehanna decided to focus on its home market, though its beer can still be found in Virginia and Maryland.
Susquehanna Brewing makes 7,000 barrels annually of its own products, output that surges to 23,000 barrels a year when looping in the contract brewing the operation does.
“We’ve got pretty good diversification to make it through the bumps in the road,” Maier said.
Weyerbacher plans something similar before long.
For one, the company plans to open additional taprooms — locations could be announced in a couple months, Lampe said — and grow its lineup of spirits via its partnership with Triple Sun Spirits in Emmaus.
In addition, Weyerbacher plans to do some contract brewing to maximize its Easton facility’s production capacity. Last year, the brewery produced 11,000 barrels in Easton, far below the facility’s 30,000-barrel capacity. Lampe said Weyerbacher expects to boost production to 20,000 barrels this year and already has plans to do some brewing for Funk Brewing Co. of Emmaus.
Production and revenue, Lampe said, were down in 2018 because Weyerbacher was behind on payments to its suppliers and couldn’t get the necessary raw materials. This year, Lampe said, the brewery is projecting revenue of about $6.5 million to $7 million.
Lampe also stressed that, despite the restructuring, Weyerbacher remains open for business, with a crab boil this Sunday and its 24th anniversary celebration June 15.
And while the Philadelphia investment firm, 1518 Holdings LLC, will become majority owner of Weyerbacher, Lampe said the plan is for the investors to eventually cash out.
“Eventually, we would like to go back to an employee-owned company,” he said.
Morning Call reporter Jon Harris can be reached at 610-820-6779 or at jon.harris@mcall.com
