Friday, December 16, 2016
THE BREWSPAPER / SAN DIEGO AREA CRAFT BREWERY FOR SALE
THE INS AND OUTS: WHO WANTS TO BE A CRAFT BEER BREWER?
Editor’s note: The article posted here was originally appeared in www.westcoastersd.com, the website of print magazine West Coaster magazine.
In 2006, when Jim Crute transitioned from a long career as a biochemist to become a brewery owner, the landscape in San Diego County was very different. For one thing, the story of a starry-eyed homebrewing enthusiast turning his back on a lucrative career to follow his fermentation passions was not an old and much-duplicated tale.
There were only around 20 operating brew houses in San Diego County when Crute opened the doors to Lightning Brewery in the north-inland community of Poway. Most prominent among them were Stone, Karl Strauss, Ballast Point, AleSmith, and the family of Pizza Port businesses that included Port Brewing and The Lost Abbey. That last dual-personality operation also opened in 2006 as a production-brewery venture for Pizza Port.
Looking at the much smaller sudscape in the county at the time, it made sense that Pizza Port, a highly successful brewpub chain with three locations would want to start producing and distributing beer in larger quantities, in both kegs and bottles. After all, that’s how the biggest brewing companies in the county were doing it. It was the only way to gain visibility, as tasting rooms were hardly the lucrative revenue-centers they are now. Few were the folks who spent weekends shuttling from one brewery to the next like so many do now.
About the only chance a brewery had of getting their logo and brand-identity to the consumer in a meaningful way and look like a legitimate business versus some fly-by-night, oh-isn’t-that-cute “microbrewery” was to get bottles out to grocery stores. That’s where most people first saw the likes of Stone, Ballast Point, AleSmith and even the young Green Flash, which at that point had just bounced back from a shaky start that nearly saw it close.
So Crute opened with the notion that 10-20% of his beer would be sold out of his tasting room—which was then just a small pad in front of the cold-box right on the brewery floor—while the rest would be wholesale. So, he started bottling nearly from the start, and self-distributing before catching on with Stone Distributing several years ago.
By his own admission, his perception, method and timing were off, and, as a result, the business suffered from a financial standpoint. As today’s brewery owners will tell you, brewing companies make the best margins on their beer by selling it in their tasting rooms where they can charge more, avoid the cost of doing business with distributors and take all of the profit for themselves. Fittingly, brewery owners make a point of constructing tasting rooms that will at very least get people in the door and, in the best cases, lure drinkers from appealing bars and restaurants, not to mention their own homes, to drink their beer at the source.
Crute recalls a conversation with Ballast Point’s Jack White around 2009, wherein the founder of the brewery that eventually grew itself into a behemoth that sold for a whopping $1 billion told his Lightning contemporary that, to his amazement, the only thing making BP any money was the tasting room at its Scripps Ranch brewery.
White went on to expand that space multiple times until there was nowhere left to expand. He eventually did the same with the company’s original Home Brew Mart location, while simultaneously constructing new facilities in Little Italy and Miramar that both included not tasting rooms, but full-on restaurants with attached bars.
Meanwhile, it wasn’t until 2014 that Crute, who by then was no longer with Stone Distribution, constructed a tasting room and an outdoor beer-garden. But by then, it was too late. Were he opening Lightning today, he says he would adhere to a reversed business plan where he’d look to sell 80% of his beer out of his brewery, and distribute the remainder.
But in the real-life present, Crute has made the decision to sell his business. He put up a craigslist ad titled “Turnkey Brewery and Tasting Room for Sale” on December 7, and hopes to be able to hand his decade-old labor of love to someone who is looking to get into the industry, just as he did. Purchasing Lightning would be advantageous in that it is currently in operation and would be ready for someone to take over and get straight to work. The 5,500-square-foot facility has a 30-barrel brewhouse, a combined cellar capacity of 490 barrels (350-barrels’ worth of fermenters with 140-barrels’ of brite tanks), a bottling line capable of filling 12- and 22-ounce glass, and the aforementioned tasting room and beer garden.
Crute says he is also open to existing companies purchasing Lightning for use as a secondary brand, wherein the company name and, possibly its beer-brands would remain active, but under a new owner. But the bottom-line is that he says he has enjoyed pursuing his dream and feels he gave it his all for 10 years. He feels it’s important to be reasonable and turn the page, but in doing so, hopes another entrepreneur can realize their aspirations in the place where he realized a good many of his.