Breweries Need a Stiff Drink

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Decreased sales and increased costs are threatening the survival of San Francisco’s breweries. On Second Street, 21st Amendment’s recorded message indicates that the brewpub is temporarily closed. On Howard Street, ThirstyBear Organic Brewing’s website states, “ThirstyBear has gone back into Hibernation. Hopefully just a short winter nap!?” 

Last year, Ferment Drink Repeat closed its doors in Portola; in Dogpatch Triple Voodoo Brewery & Tap Room permanently shuttered.

“That was a heartbreaker,” Joanne Marino, executive director of the Bay Area Brewers Guild, said of Triple Voodoo’s closure.

Brian Reccow, chief executive officer for Magnolia Brewing, agreed that it was “a sad day” when Triple Voodoo “had all its beer tanks on trucks driving down the street.”

San Francisco had an explosion of independent craft breweries in the past decade. Magnolia expanded from its Haight Ashbury location to Dogpatch in 2013, near where Triple Voodoo opened the following year on Third Street. Harmonic Brewing launched a year later on 26th Street. Gathering places to drink beer brewed onsite added to neighborhood character, supplied bars and restaurants with libations, and helped fuel the City’s celebrated hospitality industry.

More than a year into San Francisco’s public health order to mitigate COVID-19 transmission, bars and restaurants have been hobbled by recurrent easing and retightening of operating restrictions. These establishments aren’t buying kegs like they did when social interaction wasn’t linked to a potentially fatal virus. 

Breweries with tap rooms have invested in outside seating, only to be subjected to what Reccow referred to as “finger on the dial” reopening and reclosing in response to the City’s latest fluctuation of COVID infections. 

Sales to grocery stores and directly to customers through curbside pickup or delivery have replaced some lost revenue, but at a steep cost increase. Instead of distributing beer in kegs, breweries pay more for packaging liquid product into aluminum cans. Greater demand for aluminum for canning has resulted in a 27 percent cost rise since COVID struck, according to the Bay Area Brewers Guild. Smaller breweries that don’t have canning equipment rely on Can Van, a mobile canning company, to drive up and perform this service. 

Magnolia invested $200,000 in its own canning line. Reccow remarked that the installation conjures the American Can Company, which in the last century built and occupied the American Industrial Center building that houses the Dogpatch brewery.

Local Brewing Company, on Bluxome Street, was co-founded by Regan Long and Sarah Fenson in 2010. “Predominantly our customers were neighborhood people who live in Mission Bay, the Giants crowd, tech workers, and beer tourists from out of town,” Long said. 

Now, office employment has shifted to working from home. Long suspects that many desk jockeys that enjoyed Local’s proximity to Caltrain’s terminus aren’t coming back. 

“At the height, probably one to two years ago, it would have been over 30 breweries,” Marino said, of San Francisco’s beer renaissance. “It’s hard to pin down the number now. They’ve been waiting for things to improve or change and we’re not sure what their status is going to be.”

Last fall the Guild indicated that COVID shutdowns resulted in an 85 percent drop in revenue for beer manufacturers. 

“Brewing is a capital-intensive business,” Marino said.

As manufacturers with large equipment – a keg holds 15.5 gallons – breweries have considerably bigger footprints than the average bar.

“The tough thing is our rent doesn’t change,” said Jon Verna, who founded Harmonic with partners Eric Tisch and Ed Gobbo. “We’ve worked out something with our landlord, but we’re not coming close to utilizing the space we’re renting. We’re not justifying that rent. We really pride ourselves with working with local bars and restaurants. Dogpatch Saloon, The Ramp, Gilberth’s, Three Parkside. They were either completely shut down or severely impacted by this so there was no demand. In that local ecosystem, everybody’s hurting and can’t support each other.” 

Harmonic’s brew can be purchased at Gus’s Community Market in Mission Bay, The Good Life Grocery’s Bernal Heights store, and by takeout or delivery. The company invested in software to create an attractive online ordering platform, a labeling design for its cans, and $10,000 for a patio. Wedding parties, happy hours, corporate offsites and other private events, which it hosted two to three times a month pre-COVID, are not yet allowed. 

“Smoke from the wildfires over the summer was devastating for business,” Verna said.

Breweries were allowed to reopen in January for outside dining with six feet space between tables under San Francisco Department of Public Health ordinances

“The shining light through all this is local customers have really supported us. We’ve always been a community-focused company,” Verna said. “We’ve built support, local customers and craft beer fans and people who’ve realized they want to support local businesses. People have continued to buy our beer through this whole thing.”

But even when the patio is full, as it generally has been over the past month, “all that does is allow us to stay afloat,” Verna said. “Operating costs are hundreds to a thousand dollars above what it used to be in any single month.” 

Compostable cups for outdoor service and hand sanitizer add costs. Local Brewing invested $10,000 to build an open-air space, including permit expenses. 

“Literally two days after we got the roof on it in December, the City shut us down,” Long said. 

Long served on the City’s Economic Recovery Task Force, which met for six months last year. “It became not just a COVID response team but took on tackling all of the City’s issues; homelessness, mental illness, inequity…Small business relief didn’t end up on the top of the priority list.” 

The Task Force recommended a Shared Spaces Equity Grant to reimburse businesses up to $5,000 for outdoor spaces. “We submitted receipts. The City hasn’t delivered. It doesn’t seem like it’s being executed.”

Harmonic and Local Brewing obtained Payroll Protection Program funding. Local Brewing maintained their nine employees until December, then furloughed a few until the City allowed them to open outdoors again. The delivery driver, formerly a fulltime job, is now part-time. Harmonic and Magnolia both reduced their workforce.  

“That’s probably the area that’s most concerning to all of us,” Reccow said. “We have a fraction of the employees we had. We’re only doing a fraction of the business we used to do. Many of our previous co-workers have relocated. There’s been a grand relocation out of San Francisco. It’s significant how many people have requested W2s sent all over the country.”

“I’m not going to take on debt to get through this because I don’t have any line of sight how I’m going to pay back that debt,” Long said of federal disaster relief loans. 

“Every member is making their own decision on what to apply for,” Marino noted. “Most applied for PPP.”

Magnolia spent money rebranding packaging and “invested in redesigning our canning look to take it to the next level,” Reccow said, enthusing about “the Haight Ashbury trippy energy aesthetic.”

Magnolia partnered with the Golden State Warriors during its inaugural season in the Chase Center to introduce the co-branded Dubs Golden Ale, for sale at the arena’s concession stands and Bay Area grocery stores. When the shelter-in-place order was issued, the company closed its Dogpatch brewery for a few weeks. 

“We shifted our business into the grand parklets,” Reccow said of the roofed curbside areas on Third Street at 22nd Street, and along 22nd Street. He credited the City’s Shared Spaces Program as “the saving grace” for Magnolia and neighboring Mainstay Market, Mr. & Mrs. Miscellaneous, and Daily Driver.

A revamped Cal-Mexican menu has allowed Magnolia “to create better value, at a better price, when more people need us to be doing that,” Reccow said. 

According to Verna, Harmonic’s takeout price for beer is less than what patrons pay in Harmonic’s Mothership Taproom. Local Brewing hasn’t raised prices; four-packs begin at $13.50.

“People can’t absorb the cost that it’s costing us,” Long said. 

Local is using Can Van more frequently and at much higher volume than it did pre-COVID.  “It’s a means of temporary survival,” Long said. “There’s no profit for a brewery of our size. It’s a way to stay alive, break even at best. We’re producing about 60 percent of what we were producing a year ago. The catch is, that’s all going into cans. Our cost of production is almost double. If we didn’t have do it in cans, we could probably limp through this. I have a pyramid of kegs in my indoor seating area, returned from bars and restaurants, that are just sitting here.” 

For breweries that’ve remained open, getting through the next year will be tough, Reccow said. “It’s a matter of the wherewithal fiscally and mentally to be able to make this continued long journey.” 

Yet, he’s cautiously optimistic. Five months before last year’s shutdown, New Belgium Brewing Company, Magnolia’s parent company based in Fort Collins, Colorado, opened Little Creatures Mission Bay on Third Street, across from the Mission Rock construction site. The brewpub closed early in the City’s shelter-in-place. The ample space in sight of Oracle Park and future China Basin Park will reopen as New Belgium Brewing – San Francisco later this month, to coincide with the San Francisco Giants’ 2021 baseball season.

Harmonic is eager to open a second location at the Chase Center this spring. The Thrive City Taproom will be situated on an outdoor plaza overlooking the Bay, initially scheduled to open last April. 

“Everything’s been on pause for a year,” Verna said. “We’ll have a small food program there, craft beer and bites. We remain positive. As difficult as this has been, our local customers have been very supportive.”

“We’re trying to help everybody remember their local breweries are there and benefit the community,” Marino said. “They vitalize neighborhoods and will help revitalize communities again.”

“Tartine Manufactory has been an account of ours since we opened,” Long said. “Every year we do a pairing with a teacake.” This year’s in-person event required limited attendance but it sold out. “It’s nice to see there are still people in the neighborhood who see this as an annual tradition.” 

“We still see regulars from the neighborhood that come in,” Long said. “There’s an authentic San Francisco vibe here. People who are still here now want to be here. It’s pride, and it’s hope that the City will come back at some point.”