After experiencing the first sales decline in its 30-year history in 2017, Deschutes Brewery is looking to gain some flexibility in its East Coast expansion plans, CEO Michael LaLonde said Monday.
Deschutes is reworking its agreement with the city of Roanoke, Virginia, where it plans to build a second brewery with capacity to produce 190,000 barrels a year, LaLonde said. Deschutes still plans to break ground in June 2019, he said, but the company won’t take an incentives package that would have forgiven the cost of land and required producing beer by June 1, 2021.
Instead, Deschutes plans to buy the land for its brewery for $3.2 million by May 31, LaLonde said. “We just want to control our own destiny; we did have to give up some incentives,” he said.
U.S. volume sales of all beer were down 1 percent in 2017, according to the Brewers Association, based in Colorado, though craft brewer sales grew by 5 percent.
Within the craft beer industry, microbreweries, defined as producing fewer than 15,000 barrels a year, grew the most, while regional brewers such as Deschutes got squeezed, according to the association.
Deschutes produced about 335,000 barrels last year and distributes in 29 states and Washington, D.C., LaLonde said. The company saw volume sales drop by more than 9 percent last year, he said, and that seems to have come about suddenly.
In 2016, Deschutes was growing so fast, it had to let go of a couple of beers, Chainbreaker and Deschutes River Ale, LaLonde said. Then in 2017, the industry’s growth slowed, and Deschutes was not available in cans, which became popular with craft beer drinkers.
LaLonde said Deschutes has taken steps to preserve its market position. The brewery decided to add a canning line in May and had it operating by January, he said. Deschutes also added a pilot brewery, which will allow it to run 20 test brews a month, compared with 20 a year, he said.
“And the beers are amazing,” LaLonde added.
Deschutes has more than 550 employees among the Bend brewery, pubs in Bend and Portland, and sales divisions across the country.
“We still have a real positive outlook on the craft beer market,” LaLonde said. “It’s still a very good industry. It is crowded.”
Jamie Danek, CEO of Humm Kombucha, said the company’s own plan to open a plant in Roanoke is on track. Humm will break ground in the next few months and expects to be open in July 2019, she said.
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