Lagunitas Brewing Co. said Tuesday that it would cut 12 percent of its workforce, citing a retrenchment of the American craft beer market.
The Petaluma company, which rode a surging wave of consumer interest in full-flavored, hoppy ales to become the largest beermaker in Sonoma County, now finds itself on the growing list of brewers to contract as sales growth slows and competition increases.
The workforce reduction will affect every department in the company, which operates a production plant in Chicago and a taproom in Seattle, CEO Maria Stipp said in a prepared statement. Lagunitas employs about 900 people at its Petaluma headquarters, which will take the brunt of the more than 100 layoffs.
“The craft beer market is rapidly evolving and, in many ways, more challenging. More breweries, more choices ... very much like the late ‘90s when the craft beer segment had similar pressure,” Stipp said.
The decision to downsize comes 17 months after Dutch brewing giant Heineken International acquired full ownership of the homegrown brewery company, which has long been a supporter of local nonprofits through beer donations and fundraisers at its Petaluma taproom.
The layoffs were not wholly unexpected given cutbacks at other craft brewers with growth slowing in the estimated $26 billion-a-year U.S. craft sector. The sector had incredible growth in recent years, with production rising as much as 20 percent annually as recently as 2014. But in recent years the increases have been in the low single digits.
“I certainly wouldn’t be surprised of actions along these same lines for other companies going forward,” said Tom McCormick, executive director of the California Craft Brewers Association.
Green Flash Brewing Co. of San Diego scaled back this spring — closing a Virginia brewery — as it ran out of money in its bid to compete nationally. Earlier this month, Anheuser-Busch InBev’s craft beer division dismissed hundreds of employees.
Stipp said in her statement it took almost seven years for Lagunitas to rebound from the late 1990s downturn and the company had to take “difficult but necessary actions” to ensure it could compete nationally as well as in the burgeoning global market for craft beer.
As part of its turnaround, Stipp said the company will take “steps to drive our flagship IPA.” Together with Sierra Nevada Brewing Co. of Chico and Stone Brewing Co. of Escondido, Lagunitas IPA played a key role in making the hoppy India pale ale the go-to beer for many craft beer consumers.
In fact, Lagunitas IPA was the top-selling IPA in restaurant and taproom businesses last year, with 8 percent growth. according to Beer Board, a brewery data management system,
The company was started in 1993 by Tony Magee, who began by brewing batches of beer on his kitchen stove, and was noted for its extra hoppy beers and stoner-friendly vibe. It experienced rapid growth in the last 10 years and was aggressive by building plants in Chicago and later in Azusa, though the latter brewery is no longer operating given the slowdown in growth. “Fortunately, they didn’t get too far along with that,” McCormick said of the Azusa project.
Magee in 2015 brought in Stipp, who previously served as an executive of an automated kiosk business and a video game manufacturer, to help manage the brewer’s growth.
Magee and his partners sold a 50 percent stake to Heineken International three years ago in a deal that valued the brewery at $1 billion. The Dutch brewer bought the remaining 50 percent in May 2017, leaving Lagunitas to operate as an independent company reporting to Heineken’s Americas region. After the sale, Magee took on a new role as Heineken’s director of global craft.