Heineken shutters Lagunitas taproom and brewery in Chicago

USA | How times are changing for the craft brewing industry. A decade after Lagunitas’ founder Tony McGee opened the Chicago brewery and taproom, all production will return to Lagunitas’ original brewery in Petaluma, California, on 1 August.

Back in 2014, the future of craft beer looked decidedly bright. Forecasting big sales increases, major craft brewers like Sierra Nevada, Stone, and New Belgium opened second locations in the east to service that part of the country. Sierra Nevada and New Belgium spent big money – reportedly between USD 100 million and USD 170 million each – to set up shop in Asheville, North Carolina, while Stone chose Richmond, Virginia, for its USD 75 million brewery investment.

Did these heady investments live up to expectations? Observers are not so sure. Only Stone announced a USD 40 million expansion programme for Richmond in 2023 – but that is due to its having been bought by Japan’s brewer Sapporo in 2022 for USD 165 million with the intention to make Sapporo beers at the Stone breweries.

Lagunitas’ volumes decline

Heineken’s announcement on 23 May that it will close the Chicago facility is the latest sign that all is not well for the craft brewer founded in 1993. According to the website Good Beer Hunting, Lagunitas saw volumes decline by 20 percent between 2019 and 2022, from 1.07 million barrels to 860,000 barrels. In 2023, the company laid off roughly 20 percent of sales staff, including longtime employees.

That was not what founder Tony McGee had envisioned in 2014. In those days, more than half of Lagunitas sales came from “east of Denver” and the second location would allow for rapid expansion in chain retail, while providing significant savings on transportation costs. The Chicago brewhouse could produce more than 500 000 barrels of beer per year, and had a capacity to brew and ship 1 million barrels a year. In 2015, Heineken purchased a 50 percent stake in the company for an estimated USD 500 million, and in 2017, it acquired the remaining shares of Lagunitas.

Whither Newcastle Brown Ale?

The Chicago closure impacts 86 employees, some of whom will retain their remote roles or have the opportunity to relocate to Petaluma. The remaining employees will “receive retention incentives to work through the transition as well as departure packages, including support services and job-placement assistance,” it was reported.

It is still unknown what will become of Heineken’s Newcastle Brown Ale, which was mostly made in Chicago. Per Good Beer Hunting, sales have fallen dramatically since 2018, from almost 1 million cases sold in chain retail to around 80 000 (about 7 000 hl) in 2023.

Observers think it likely that, in the following months, the Chicago plant will be dismantled and kit transferred to other breweries owned by Heineken.