Update, July 12, 2023: The U.S.’s oldest craft brewery is closing. Anchor Brewing, owned by Sapporo USA since 2017, announced today that it will cease operations and liquidate the business. In a press release, the company said it gave its employees their 60-day notice today and intends to provide them with separation packages “in line with company practices and policies.” Dave Infante first reported the news of a potential closure for VinePair.
In its announcement, Anchor cites “challenging economic factors and declining sales since 2016.” The sales picture had become dire recently: In the last 4 weeks of national chain retail sales tracked by market research company Circana, Anchor Steam sold the equivalent of 563 barrels worth of beer. That volume is equal to what Night Shift Whirlpool Hazy Pale Ale and Lawson’s Little Sip IPA, both of which have only limited regional distribution, sold in the same period.
In June, Sapporo USA announced that Anchor would pull back distribution to California only, a market that represents 80% of the brewery’s chain retail volume. However, the company now says that wasn’t enough to right-size the business: “In the end, expenses simply continued to outstrip revenues, leaving the company with no other viable choice.”
THE GIST
Effective June 15, Anchor Brewing’s beers will no longer be available outside its home state of California. It’s a move that speaks to the increasingly challenging market for distributed craft beer, as well as the efficiency-driven approach that parent company Sapporo USA takes to its U.S. beer brands. Rather than a massive shift in strategy, however, the change is reflective of what’s been true for years: Anchor is a California brand. Since 2018, the year after Sapporo acquired the brewery, Anchor has never sold more than 23% of its packaged beer volume outside its home state—in 2022, eight of every 10 Anchor beers tracked in chain retail were sold in California.
Sapporo USA president Mike Minami announced the distribution cuts on June 9 in an email to retailers that carry Anchor products. A copy of the email shared with Good Beer Hunting reads, in part: “Given the challenges that many breweries are facing in this competitive and inflationary marketplace, we are scaling back to a home-market approach.” It’s not clear whether the move will result in layoffs; Anchor’s unionized employees are reportedly scheduled to vote June 13 on a collective bargaining agreement.
Additionally, a company representative says that Anchor will not produce its iconic Christmas ale this year “due to its time-intensive and costly brewing and packaging requirements.” News was first reported by journalist Dave Infante.
Cutting brands and focusing distribution on California indicates that Sapporo has more modest goals for Anchor, considered a pioneer of U.S. craft beer. It’s not a romantic view, but Sapporo didn’t buy the company or Stone Brewing out of nostalgia. In announcing its purchase of Stone last year, Sapporo namechecked only one beer, Stone IPA, and indicated that it plans to brew Sapporo products for the U.S. market at Stone facilities. Downsizing Anchor to a single-state brand and likely using its brewing capacity for contract brewing may be what keeps the 127-year-old Anchor brand alive under Sapporo ownership.
WHY IT MATTERS
What critics might call ruthless, Sapporo no doubt sees as merely realistic. (Sapporo USA leadership declined to make anyone available for an interview for this story.) With Anchor’s chain retail volumes declining an average of -15% per year since 2015, Sapporo needed to make changes to reduce costs associated with national sales for the brand. Anchor sold 82% of its packaged beer volume in California last year, according to data from market research company Circana; the company says 70% of the brewery’s overall volume—including draft—comes from its home state.
Anchor has proven itself a survivor throughout its storied history, however its future will depend on its continued cultural connection to its home state. That’s because Anchor has effectively been selling most of its packaged beers only in California even before Sapporo’s June 9 announcement:
Last year, 93% of Anchor’s variety pack volume was sold in the Golden State.
89% of Tropical Hazy IPA and virtually all of its Crisp Pilsner volume was sold in California.
Christmas Ale was the outlier, with 67% of its packaged volume coming from other states. A recent Sightlines+ analysis of seasonal beer trends shows that California is among the more difficult states in which to have a successful late fall or wintertime seasonal brand.
When taking sales data to account, Anchor was presumably investing money and human resources in maintaining distributor and retailer relationships across 49 other states to chase relatively low returns. Since 2018, Anchor has sold an average of about 21% its annual packaged beer volume outside of its home state; the zenith of 23% came in 2020 when the pandemic shifted drinkers’ shopping habits and put a premium on packed and nationally distributed craft beer.
Anchor’s total production volume overall has been in decline for years.
In 2018, the brewery produced 89,612 barrels, according to California Bureau of Equalization (BOE) data cited by the trade group Brewers Association (BA).
Last year, BA chief economist Bart Watson estimates Anchor produced 65,000 BBLs (the BA doesn’t have accurate BOE data from last year, so this is Watson’s estimate based on a formula taking into account the brewery’s ratio of draft to packaged beer and its sales in chain retail).
When times were easier for nationally distributed craft, Anchor’s out-of-state sales perhaps required less effort to achieve. In scaling back Anchor, Sapporo can reduce expenditures and focus on its own beer brands.
In its first quarter earnings call, Sapporo stated that sales volumes of Sapporo beer were +111% of the previous first quarter’s level.
From 2018-2022, the Sapporo family of brands increased their chain retail sales by about 24,000 barrels worth of beer, the size of a regional brewery.
Last year, Sapporo beers combined to sell almost five times as much as Anchor beers in chain retail.
After buying Stone’s facilities to, in part, brew Sapporo, the company in February leased nearly 150,000-square feet of office and warehouse space in Richmond, Virginia to improve its U.S. logistics. While Stone was mentioned twice in that earning call, no mention was made of Anchor.
Anchor has found it challenging to command its parent company’s attention as drinkers’ interest strayed from the brand. Going forward, Anchor hopes a more narrow market focus can keep the iconic brewery in sight of both.
Words by Kate Bernot