Petaluma's Lagunitas Brewing Co. goes global to compete as US craft beer market flattens
Lagunitas Brewing Co. of Petaluma has grown into a craft beer behemoth across the United States over the past 25 years through its simple formula of producing extra-hoppy beers paired with an irreverent marketing vibe.
But 2019 is shaping up to be a difficult year for the domestic beer industry, offering many challenges: slowing sales, cramped retail shelf space, fewer distributors and a crowded marketplace with about 7,000 breweries nationwide at the end of last year.
Lagunitas has not been immune from having to adjust for those hurdles and remain competitive. In October, Chief Executive Officer Maria Stipp made the tough decision to cut 12 percent of the company’s workforce - more than 100 people - given the bleak forecast.
At the same time, the formidable brewer, which has been fully owned by Heineken International since 2017, is preparing for its next act: growing on the world stage. Lagunitas is now in 30 countries, but its ambitions are grander as competition emerges among the American craft beer sector to establish market share around the globe, where consumer acceptance of beers lags at least 10 years behind the United States.
“The craft explosion is everywhere. We saw it when we went to Milan. We saw it in Barcelona. We saw it in Rio. We saw it in São Paulo. It’s not just a U.S. phenomenon,” Stipp said in an interview. “It (the growth) is happening in a really truncated period of time.”
To that end, Lagunitas will open its first international taproom on Feb. 7 in Amsterdam - the headquarters city of its parent company that’s also famous for its cannabis coffeehouses - with plans for more in Europe. Lagunitas also is brewing beers overseas for the first time, starting in Wijlre, Netherlands, at a facility that produces the Brand label for Heineken.
“Fresh IPA (India pale ale) for the very first time born in the country. It’s going to make a difference,” said Stipp, who is targeting Brazil for the company’s next foreign brewery. “At any brewery, from what I have learned, there is a house taste where you brew. We really had to dial in the IPA to make it really represent the Petaluma IPA.”
Today, the international market is about 10 percent of annual business for Lagunitas, Stipp said, but is expected to comprise the majority of its growth in the next couple of years.
Working with Heineken
The job falls to Stipp to work with Heineken executives to navigate the foreign market where the corporation has almost 150 years of experience and to grow the Lagunitas brand in the United States through innovative products. The new brews include DayTime IPA, which has only 98 calories and 4 percent alcohol content. That beer is a major departure from the Lagunitas portfolio that has some of the booziest brews in the sector. It follows another new twist the company unveiled last year: its cannabis-infused HiFi Hops drink produced in conjunction with Cannacraft Inc. of Santa Rosa.
Stipp, a 51-year-old former executive at the major video game publisher Activision, has so far successfully taken the reins from beloved hands-on Lagunitas founder Tony Magee. She has managed to keep the DNA of the local craft brewing company in place - dogs still roam the office - while figuring out how to leverage the “added muscle” from Dutch giant Heineken to better compete against other major global brewers such as Anheuser-Busch InBev and Constellation Brands Inc. that have acquired their own craft brands in recent years.
“She is a phenomenal business leader,” said Bill Silver, CEO of Cannacraft, which is taking the HiFi Hops product into a half dozen states this year. “What Maria has done is honoring Tony’s legacy while working with this European business conglomerate. She is in the middle.”
Stipp credited Magee with helping her learn the culture of Lagunitas when he hired her in June 2015, a few months before he sold Heineken a 50 percent stake in the company.
“I went through a pretty good MBA (business training) on Lagunitas before I had more of my hands on the steering wheel,” said Stipp, who earlier in her career worked at Miller Brewing Co. in the sales department.
She still seeks Magee’s input, though. “The good thing about Tony is that he’s got a real strong point of view. There are times when I might be faced with a decision and I certainly appreciate his perspective,” she said. “We don’t always have to agree, but 99 percent of the time we do. That’s been the good news.”
Brewers take the lead
One key decision for Stipp has been to trust her brewing team, led by brewmaster Jeremy Marshall, to help navigate the trends that are coming to the forefront in the beer marketplace. That is one of the areas where Lagunitas hasn’t changed much under the Heineken ownership, she said.