Sonoma County craft brewers scramble to survive coronavirus pandemic

In five years, small Santa Rosa craft brewer Plow Brewing was able to withstand two wildfires and carve a niche by offering a flagship pilsner and a friendly taproom near the Coffey Park neighborhood.

But the coronavirus pandemic forced an ownership change to better position the brewer to survive.

“I was able to shoulder all of those,” Plow owner Kevin Robinson said of the infernos. “They all took some of a hit, but with this, it was too much. It’s adapt or die.”

Robinson previously honed his beer trade at Lagunitas Brewing and Russian River Brewing of Windsor, before pouring his life savings into the neighborhood craft brewery.

Recently he sold his majority stake to his sales manager, Vince Ferracuti, and other outside investors in order to bring in fresh capital to navigate these turbulent times. The new ownership group changed the name earlier this month to Iron Ox Brewing and has focused on a strategy of more canned beers. The switch was necessary since up to 80% of Plow’s beer sales were kegs sold to taprooms and restaurants. But those customers have been largely closed since early March and there’s no telling how much of that business will come back.

“We wanted to go in a different direction, so that’s why we changed the name,” Robinson said. “We are now a new brewery going in a new direction.”

The Plow-Iron Ox example is the most severe virus-related damage so far in the North Coast brewing sector - including the estimated 30 breweries in Sonoma County - as it attempts to survive and transition in a world where on-site drinking mostly disappeared when COVID-19 arrived nearly three months ago. Area breweries have been forced to survive on online and curbside to-go sales. Last weekend, county health officials allowed them a limited reopening for outdoor drinking if they serve food, too. The sector has begun a slow resumption of taproom business.

An April U.S. survey by the Brewer’s Association, a trade group representing independent craft breweries, showed a majority of them didn’t think they could last three more months under current conditions, raising the possibility of thousands of taps running dry. There were 8,386 breweries in the country at the end of 2019.

“It’s going to be brutal for bars and restaurants. It’s going to be brutal for breweries, too,” said Brian Hunt, founder of Moonlight Brewing Co. in Santa Rosa and a craft beer pioneer who started his brewery in 1992 and has lived through many booms and busts in the business.

With people largely staying home, breweries here have pivoted to delivery of cases and kegs and curbside sales of four-packs and crowlers. The larger craft players in the market are also ramping up retail beer sales.

The Nielsen research firm reported beer sales over the past year at supermarkets, liquor stores and large warehouse clubs through May 16 are up 16%.

Some of that has been driven by consumers buying large packs. For example, Nielsen found sales of 30 packs of beer were up 33.1% annually through May and 24-packs increased by 32.5%, while sales of traditional six-packs grew at 13.1% year-over-year clip.

“People are doing bigger shops. They are not lingering in store aisles,” said Bart Watson, economist for the Brewers Association. “That has been beneficial in general for more established regional craft breweries.”

One of them is Bear Republic Brewing of Cloverdale, the 49th-largest craft brewer in the country, which has seen its off-site sales led by flagship Racer 5 IPA jump by 18%, CEO Richard G. Norgrove said.

That bump has not been enough though to make up for the loss of Bear Republic’s sales - mostly in kegs - to taprooms and restaurants. Overall revenue has fallen 15% to 20% since mid-March, Norgrove said. Its brewpub in Rohnert Park that includes a large outdoor section remains closed but he hopes to reopen for patio service in June.

“I got my distributors telling me that they think they are going to lose close to 40% of their draft business,” Norgrove said. “There is going to be a fight for those who are getting those customers.”

That was the plight Moonlight faced with 80% of its business sold from the tap, much of it flagship Death and Taxes black lager. Its saving grace was that Moonlight bought and installed a canning line in December and it has been ramping up production for retail accounts.

While its canned beer sold to supermarkets has kept the lights on, Moonlight also has gotten a bounce through curbside pickup orders and is now shipping overnight to drinkers throughout the state of California - much like their brethren in the wine business.

“That has been our lifesaver. That has been our biggest source of income by far,” Hunt said of overnight beer shipping, which he estimated now represents about half of Moonlight’s income. Moonlight uses a specialty shipper to ensure beer deliveries are made only to those 21 or older.

The craft beer delivery trend is perhaps the only positive for the industry during the pandemic. Sales via the brewer itself delivering or using a third-?party shipper has substantially increased. Another Brewers Association survey released on Friday showed only 3% percent of craft brewers were doing delivery before the new coronavirus arrived, but that percentage has exploded to 33% of brewers nationwide, Watson said.

Consumers in Sonoma County have a plethora of local craft beer options that can be delivered to their homes, including Woodfour Brewing, HenHouse Brewing, Cooperage Brewing and Russian River Brewing.

When it comes to third-party overnight shipping, that represented 7% of annual sales for brewers before the pandemic, and that number has grown to 12% of annual sales. “In the long run, we will see if this sticks around, but some percentage of people are going to like this and some percentage of breweries are going to like this,” Watson said.

Even venerable Russian River Brewing, which has one of the most stable beer businesses in the county with crowds regularly packing its Santa Rosa and Windsor brewpubs for well-known IPAs and other styles, has tapped a new revenue stream with shipping. And it’s generating enough revenue along with to-go sales of beer and food that the brewery has no immediate plans to resume outdoor dining and beer drinking at either of its locations. The reason is the hassles involved, since the outdoor sections at both pubs are primarily for drinking rather than dining, co-owner Natalie Cilurzo said.

Last week, Russian River kicked off an election-theme version of flagship Pliny the Elder called Pliny for President. Sales of the red, white and blue cans of the special double dry-hopped beer have been brisk online and to go at the taprooms. Overall, the brewery sold out of 2,040 four-pack cans at $23 a pop. The brewery is planning another campaign run of Pliny for President in about three weeks, said Cilurzo, who co-owns the business with her brewmaster husband, Vinnie.

“We all are getting really creative,” Cilurzo said of area craft brewers in the age of the coronavirus.

Meanwhile, a new brewer plans to enter the playing field at this most challenging time. Wolf House Brewing, which last October took over the old brewpub at Cloverdale Ale intends to open outdoor seating on June 12, said co-owner Dwayne Moran. Virus-related complications delayed a planned mid-March opening.

The brewery’s debut comes with additional costs that Moran didn’t envision before the pandemic, such as serving at less than half capacity at the beginning and Gov. Gavin Newsom making it easier for workers infected with COVID-19 on the job to get workers compensation benefits. Still, with fixed costs from $15,000 to $20,000 a month, there is an onus to open as soon as possible.

“We are going to blitz through forward as fast as we can and as safely as we can,” Moran said.

The Plow brewing sale kept the company afloat and gave Iron Ox a fresh start, albeit a challenging one. Sales of 16-ounce cans Iron Ox is offering curbside in Santa Rosa have made up for lost business at its small taproom. But that hasn’t offset the 200 off-site accounts Plow lost around the Bay Area, such as the Olympic Club in San Francisco. Plow made about $500,000 annually in revenue before the mid-March shutdown of most area businesses, except those deemed essential.

Some accounts are coming back, such as John Ash & Co. restaurant in Santa Rosa. But Robinson worries that up to 50% of restaurant and other retail accounts may not return.

“It has hit us exceptionally hard,” he said, noting he’s trying to get Iron Ox canned beers into Whole Foods and other grocers. “This is devastating.”

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