Sierra Nevada Founder Ken Grossman on the Closing of Anchor Brewing

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Vito Delucchi

So let's talk about anchor a little and kind of the state of the beer industry with with what happened with that. Do you have any insight or thoughts on that and kind of the, you know, what's happening in the beer.

 

Ken Grossman

Industry in general? Yeah. So, I mean, those who follow the beer industry, you know, certainly have seen its ups and downs over well over my history. It's over 45 years or so. I've seen, you know, some real tough times and I've seen some good times. And, you know, we've had, you know, sort of zero growth before in the nineties.

 

And, you know, we're at a place now where the drinkers definitely changed and, you know, I think some of the trends were happening pre-COVID, but COVID probably accelerated things a bit across, you know, the full spectrum of life in America, really. And, you know, the the I guess the health craze to some degree might have prompted some of those changes.

 

People going to what they might perceive as a healthier alcohol, something that doesn't have as many calories and carbs as beer. And so, you know, the advent of seltzers and, you know, alcoholic tonics and those sorts of things certainly took some of the craft beer drinkers in a different direction and said, you know, during the pandemic, brewers who had a on premise focus and some of them only had on premise they were really hurt and many of them, you know, ceased to be in existence.

 

But it certainly changed consuming habits as well. You know, on premise, sales have not recovered from the post-pandemic. They're, you know, down ten or 15% below where they were going into it. And, you know, that was the lifeblood of many craft breweries, anchor included. You know, if you've got I think they were probably in the 30 or 40% on premise, certainly in Northern California, probably very high on premise volumes.

 

And so when that shut down that that certainly put the hurt on the company overall. But, you know, Anchor’s a unique company. I mean, they're in San Francisco in a really expensive place to do business. They're in a brewery that is romantic as hell and beautiful, but not real efficient. And, you know, they have you know, they're landlocked and had, you know, some older infrastructure in there.

 

You know, they're not unique. There's, you know, a lot of breweries in America that I think, you know, went through the pandemic and came out not very healthy. And, you know, that's that's a case where, you know, sad to see what happened, but sort of the handwriting was on the wall. You know, it's harder to be a small regional or small, small brewer that tries to go national.

 

If you're a small regional brewer that focuses on your home market and you've been able to establish yourself there and you can survive off those kinds of volumes, you know, whether you're in Portland or Seattle or Denver or wherever, you know, some breweries, business models have been able to survive and prosper with the changing consumer. But the industry in general is not super healthy.

 

I mean, if you look at the largest brewers to the smallest, nobody's very few are growing much. A lot of people are flat. And, you know, flat is considered good in a lot of people's minds these days where we get back to robust growth again. I don't know. It'll be robust. Hopefully we'll get back to some growth as the industry goes.

 

The other factor that's impacted many of us is is input costs have gone through the roof, you know, with what's happened in Ukraine that really put a big focus on small grains. And so wheat and barley and oats and grains that brewers use, they've all gone up significantly in cost.

 

Yeah, a lot of those. That's a growing region, a lot of those multi-user over there. And then also the shipping costs have gone.

 

Ken Grossman

Yeah, just everything going across in a way. Energy was up so bottles and cans cost more. You know, the all the inputs went up well above inflation. And so, you know, a lot of brewers have tried to recoup some of that by raising prices. So now beer is also considered to be a little bit priced out of the competitive set with spirits and wine and in some cases, spirits certainly are cheaper for a drink than a beer is if you're buying a bottle, not not if you go to a bar necessarily, But so that's, I think, impacted a lot of breweries as well as that.

 

You know, they're no longer as competitive. And if you're, you know, price sensitive shopper and you see a, you know, $10 six pack and you see you know, a bottle of booze for, you know, 20 bucks, that is equivalent to, you know, five, six packs or whatever, you know. So people are making those choices.

 

If that's the choice. Yeah. If you're looking at it strictly.

 

From an alcohol. Yeah. Alcohol delivery standpoint. So, you know, I think there's a variety of things that, you know, have all sort of aligned, unfortunately to make it much more difficult to do business, certainly in California. I mean, that's the other thing we've got, you know, very expensive everything powers much more costly here than just about every other state in the country.

 

You know, we got a lot of, you know, minimum wage things. And so a lot of brewers that have restaurants and pubs are are struggling with just a lot of those costs that are, you know, present in doing business in California.