Two years after Massachusetts’ Lord Hobo Brewing Company gave assurances that staff layoffs weren’t cause for concern and the brewery was “growing for its best year yet,” sales figures and continued employee turnover paint a less rosy picture. According to Brewers Association data, Lord Hobo’s beer production fell -36% last year, to 30,075 barrels, while overall craft fell -9%. Trends haven’t reversed course this year, either. Despite a record year for overall in-store beer sales in 2020, Lord Hobo’s dollar sales declined 2019-2020. The brewery is on pace to make about two-thirds of the chain retail beer sales that it did in 2020, as tracked by market research company IRI.
Lord Hobo has faced struggles on several fronts since summer 2019 that include:
Allegations of harassment and sexual intimidation against the brewery’s founder and former CEO Daniel Lanigan.
Lanigan was replaced as CEO in June, but retains a position on Lord Hobo’s board.
Since January of this year, Lord Hobo has posted 14 open positions on Brewbound, a trade publication and industry job board, including for high-level positions such as vice president of marketing, brewmaster, communications specialist, regional sales manager, and supply chain analyst.
In the most recent 52-week period ending Sept. 5, the Lord Hobo portfolio declined -22.6% in IRI-tracked dollar sales compared to -0.4% for craft as a whole.
Lord Hobo spent millions betting on its growth, including $8 million to open an 18,000-square-foot brewery and restaurant at the Boston Seaport in 2020. It had some cash to burn: Lord Hobo launched with $4.5 million in startup capital, and then sold an undisclosed minority stake for $12 million to private investment firm Valterra Partners in 2017. But as early as the layoffs in 2019, the budget appeared to be tightening.
With sales declining at home and in distribution markets, the next year could prove sink-or-swim for Lord Hobo, a brewery that just five years ago was poised to test the limits of how far a craft brewery could grow.
Lord Hobo declined Good Beer Hunting’s requests to comment on this story.
The staff turnover and sales declines mark a steep tumble for a brewery that was named the fastest-growing regional brewery by the BA in 2016, a year when Lord Hobo posted a 413% increase in beer production. It grew from 3,000 BBLs in 2015 to 15,400, making it about as large as DC Brau Brewing and Independence Brewing Co. were that same year. Retailers in the brewery’s home market and in its farther-flung distribution territories say its beers simply aren’t selling like they once were. They point to increased competition in the category of hazy, New England-style IPAs on which Lord Hobo built its business, and the fact that the brewery may simply be overextended.
“It sounds like what you’re stumbling into is classic expansion overreach, because the liquid is really good,” Tim Costello, owner of 8 Degrees Plato, a bar and bottle shop in Detroit, says of Lord Hobo. “If you’re not going to be local, then you’ve really got to have the marketing behind it.”
Lord Hobo opened distribution in Michigan in 2019, touting its New England-style IPAs as key to its success in a market 700 miles away from its Woburn, Massachusetts base.
Following a period of rapid distribution expansion from 2017-2019, which saw the brewery open seven new states in 2017 alone, Lord Hobo finds itself spread thin. And that’s started to impact sales at home, too: As of Sept. 5, Lord Hobo earned half as much in dollar sales in Massachusetts liquor stores as it did in 2020, despite 2021’s calendar being 75% over.
“I do hear and see people pull [Lord Hobo beers], weekly, for certain, but it’s not what it once was,” says Suzanne Schalow, CEO of Massachusetts-based bottle shop chain Craft Beer Cellar. “This is truly the case of a small, yet growing regional brewery that may have lost its allure in the local market.”
Much about the craft beer market has changed since 2016, when BA-defined craft breweries collectively grew production by +6%. Last year, BA-defined craft breweries saw a -9% decline in production, much of which was due to closures of bars and restaurants because of the COVID-19 pandemic. (Overall U.S. beer production fell -3% during the same period.) Meanwhile, shelves have only become more crowded as the number of U.S. breweries swelled from roughly 5,300 five years ago to about 8,700 today.
As competition increased, Lord Hobo continued to bet that drinkers nationwide would be eager to buy New England-style IPAs brewed in New England. (A slogan on its cans reads: “New England born and brewed.”) That assumption proved to be overconfident.
“You’ve got people now who might have in the past been trading for Lord Hobo or seeking it out; now they have something equally as good or better in their home market,” says Costello.
Not only did Hazy IPAs proliferate around the country as Lord Hobo was expanding its distribution, but as the brewery opened markets farther from its East Coast home base, the beer also wasn’t as fresh as locally brewed options available to 8 Degrees Plato.
“I can get Lord Hobo, which is a really good beer, that just because of logistics, through nobody’s fault, might be 60-90 days old by the time it gets to my shelf. Or I could have a fresh Michigan beer that’s 10-20 days old in a similar style,” says Costello.
He cites Michigan’s Old Nation Brewing Company, which produces M-43. Costello calls that “the number-one Hazy IPA in Michigan.”
He adds that when it comes to out-of-state brands, distributors—with fuller portfolios than ever before—can’t be counted on to do all the sales work for a brewery with a wide lineup of beers. This was especially true during COVID, when Costello notes that Lord Hobo’s distributor in Michigan was short-staffed. Given how many markets Lord Hobo opened over the last few years, he suspects it just wasn’t able to give all those territories the on-the-ground sales support they needed.
The potential pitfalls of spreading a brewery’s beer too wide and too thin are on the minds of many regional breweries’ sales teams. Durango, Colorado’s Ska Brewing Company pulled out of some of its farther-flung distribution territories in recent years, and Cincinnati, Ohio’s Rhinegeist Brewery has become increasingly cautious about which new markets it enters. Matt Steinke, vice president of sales for Rhinegeist, says the brewery now looks at opening individual territories within states, rather than entire states or clusters of states. It’s also “humbled its volume plans” in terms of how much beer it can sell in new territories.
“The major metropolitan areas are saturated and the assumption that the consumer is going to find you on a crowded shelf is naive,” Steinke says. “You have to work a little smarter. … For us, it’s really important that we have bodies in the market. If we can’t do enough volume to put a body there, we’re not going to do it.”
At a time when distributors are busy with large portfolios, it’s not clear that Lord Hobo put enough sales representatives and market managers behind these distribution expansions. Despite the cash infusion the brewery received in 2017, retailers don’t appear to feel it translated to necessary sales support in some markets.
At a time when top positions have been vacated, Lord Hobo is selling beer far and wide without the structural support and leadership that would seem to be necessary to continue growth.
Some people close to the company foresaw this: Former employees of Lord Hobo told Good Beer Hunting in 2019 that even as the brewery touted ambitious sales goals, “pieces [were] already crumbling” in the form of staff turnover. At the time, Lanigan cited a goal to produce 50,000 BBLs of beer, and told entrepreneur, author, and speaker Tony Robbins that Lord Hobo hoped to become “a billion-dollar company in 10 years.” (Brands taking in $1 billion in annual IRI-tracked retail sales last year included huge names like Truly Hard Seltzer, Heineken, and Molson Coors Beverage Company’s entire craft and import portfolio.)
Confidence is necessary for start-up small businesses, of course. Rob J. Day, Lord Hobo’s former director of new markets (later the director of product development), was laid off from the company in 2019 and describes a level of confidence that blinded Lord Hobo to changing realities in the marketplace, such as increased competition. Other breweries would likely celebrate reaching more than 40,0000 BBLs, but Lanigan’s ambitions were grander.
“If decisions are made that set your plateau much higher than you’re able to achieve, you start to make decisions to try to get there,” Day says. “If you make the decision to be a 100,000-barrel brewery, and you put the money in to do it, and you don’t get there, then it feels like a disappointment, and financially it will be.”
One source who spoke to Good Beer Hunting on the condition of anonymity due to the sensitive nature of the topic suggested Lord Hobo might have been a company built and scaled to be sold to a larger company. That would explain the aggressive territorial expansion and the desire to demonstrate triple-digit sales increases over long-term stability.
Four years after Valterra Partners’ $12 million infusion, investors are likely beginning to look for a payoff. A four-to-five-year time frame is customary in the industry, which means the firm is potentially expecting Lord Hobo to begin paying off their investment this year or next. Current sales trends for the brewery will make that difficult.
Lord Hobo wouldn’t be the only brewery to cast around for a buyer in recent years. Like many expanding breweries in the wake of the craft acquisitions spree, it kept an eye open for a potential sale of its own. It had reason to think this was a possibility: As late as last year, Anheuser-Busch InBev (ABI) and Molson Coors were still buying craft breweries. In 2019, Ohio’s Platform Beer Co. became the 13th brewery in ABI’s Craft Brewers Collective, while Molson Coors purchased Michigan’s Atwater Brewery in 2020 for an undisclosed sum.
But that acquisitive activity has slowed from its 2015 peak amidst a declining craft beer market. Meanwhile, Lord Hobo’s underlying business model and sales support didn’t line up with long-term needs. In the absence of a buyer, what once seemed like questions Lord Hobo would have to answer in some far-off future have become a pressing reality.
Words by Kate Bernot