Lagunitas opening brewery in Southern California

Petaluma-based Lagunitas Brewing Co., which opened its second brewery in Chicago only a year ago, now plans to open a third production facility near Los Angeles as it looks to expand its coverage in the Southwest and possibly into Mexico.

Lagunitas, the nation’s sixth-largest producer in the fast-growing craft beer market, disclosed plans this week to build a brewery in Azusa with about 420,000 barrels of capacity initially and the potential to produce as much as 1 million barrels a year. The Chicago facility can produce about 1.2 million barrels, while the Petaluma flagship brewery is undergoing a $30 million expansion from 450,000 barrels to 750,000 barrels.

Founder and owner Tony Magee said in a blog post that the company needs a new brewery to support its growth in the southwestern United States. The Petaluma brewery will be at 85  percent capacity in about 18  months and the company does not want to ship beer west from its Chicago facility, which was designed to serve the East Coast market, Magee said.

“Secondly, we are doing well with beer lovers in the Southland and the Southwest in general and we want to be closer and more involved with them all in that landscape,” wrote Magee. He added that the new facility even could serve as far as the Gulf Coast, if needed.

Magee then cryptically wrote that “Mexico is nearby and the future will not be like the past, right?”

Production at the Azusa brewery is expected to begin in early 2017, and the facility will include a taproom. Magee said in his Twitter account that no city or state grants were promised for the development, as was the case in Chicago.

The location of the new brewery is notable given that Lagunitas and its other craft-beer competitors have previously looked outside the Golden State to expand. For example, Chico’s Sierra Nevada Brewing Co., the nation’s third-largest craft brewer, located its facility near Asheville, N.C., while Escondido’s Stone Brewing Co., the ninth-largest craft brewer, decided on Richmond, Va., for its next U.S. plant, while also planning another one in Berlin.

“I need more brewing capacity on the West Coast and building one in the Southland just makes sense given the proximity to so many of our new opportunities,” Magee said in an email interview.

He suggested the company will need another brewery to serve the East Coast when the Chicago facility reaches capacity in “a few years.”

“I doubt it’ll be our last brewery east of the Rockies,” Magee said.

Many craft brewers are racing to capture more of the U.S. market as the industry continues to grow, now representing 11 percent of the overall U.S. beer market. They have been fueled by investors, most notably private equity groups, who are looking at returns on the industry’s rapid growth - craft beer had an 18 percent increase in volume in 2014. For example, Boston-based Fireman Capital owns the Squatters and Wasatch craft breweries in Salt Lake City and has an unspecified business arrangement with Oskar Blues Brewery in Longmont, Colo.

Lagunitas is funding the Azusa brewery itself after completing a five-year financing deal last fall with Wells Fargo and Chase that included the Southern California project in its scope, Magee said.

Magee has said that he wants to be well-positioned when the craft-beer boom eventually levels off. He has noted that the satellite facilities can save tremendous money in trucking costs as well as create a local buzz in a new community through their taprooms. Lagunitas’ Chicago facility, for example, is located in an old warehouse in a redevelopment area and includes a popular taproom.

The unconventional Magee made the announcement in a series of ungrammatically correct tweets on Tuesday, noting the company’s growth is because “you’re digging us” and “demanding better” beer. He added that “I earned my living in” the Los Angeles market when he first started Lagunitas in 1993.

Noting the drought, Magee said the new plant will source water from a mountain stream from the San Gabriel Mountains, and the city of Azusa is less reliant on imported water from Northern California or the Colorado River.

“The Azusa water supply also matches up nicely with our other water supplies in Petaluma and Chicago enabling us to brew our beers without having to significantly adjust the water,” Magee wrote in his blog post.

At its Petaluma plant, Lagunitas is completing a new recycled water plant so it will not have to truck its wastewater to the East Bay for processing. The new system will be able to re-use water for everything with the exception of beermaking, and it will reduce the plant’s overall water usage by 40 percent. A similar system likely will be designed at the Azusa plant, and that could have a water usage ratio of 2 gallons of water for every gallon of finished beer. “Going that route will hedge our water risks,” he wrote.

Petaluma currently has a water usage rate of 4 gallons of water to 1 gallon of finished beer.

As for further expansion plans, Magee noted “the future is promised to no one, but we can all dream.”

You can reach Staff Writer Bill Swindell at 521-5223 or bill.swindell@pressdemocrat.com. ?On Twitter @BillSwindell.