It’s the 1 million barrel question:

As beer sales slacken and competition tightens, how can San Diego County’s breweries — 136 at last count — survive?

On paper, the local craft beer scene is bright and bubbly, rolling out more than 1 million barrels last year. Escondido-based Stone Brewing ranks among the 10 largest craft breweries in the United States. Ballast Point, while not considered “craft” because it is not independent — New York’s Constellation Brands owns the Miramar-based brewery — is even larger.

Yet bubbles are bursting in the local and national beer industry.


This month, Carlsbad’s On-The-Tracks closed after a five-year run. Poway’s Lightning may be next. Owner Jim Crute said if he can’t sell his brewery soon, Lightning will be gone in a flash.

Even more casualties are coming, predicted Monique Medley, a commercial real estate broker who works with breweries.

“Some of these guys go in — as they should — with this wonderful vision: ‘This is a passion I’ve had my whole life and I’m going to go for it,’” she said. “But if they don’t have the right synergy, it just doesn’t work.”

Even large breweries are scrambling to cope with the new realities.


“Accidental success? Those days are behind us,” said Dominic Engels, who was hired as Stone Brewing’s CEO in September. “Purposeful success? Those days are before us.”

Beer remains the nation’s best-selling libation with sales rising 2.2 percent last year, the Nielsen Co. reported. Still, it is losing ground to wine (sales up 4.4 percent last year) and spirits (4.9 percent). Young drinkers, in particular, are turning away from ales and lagers.

“A lot of that is people going to wine,” said Danelle Kosmal, Nielsen’s vice president for beverage alcohol practice.

Another warning flag for brewers: The number of taverns geared toward beer drinkers is falling, while bars that specialize in mixed drinks and extensive wine lists are increasing.


“In the venues that are closing, beer is the preference of 56 percent of the customers,” said Jon Collins, president of the consulting firm Nielsen CGA. “In the venues that are opening, beer is the preference of 39 percent of customers.”

To meet these challenges, breweries have adopted a range of strategies. Five approaches:

1. Get out of town

San Diego beer isn’t always made in San Diego. Stone is now bottling and canning aggressively hopped ales in Europe (Berlin) and on the East Coast (Richmond, Va.).

Ballast Point is scheduled to open its Daleville, Va., brewery this summer. Mira Mesa’s Green Flash has a satellite in Virginia Beach, Va., while Vista’s Mother Earth has one in Nampa, Idaho.


Karl Strauss’ chain of brewpubs extends from La Jolla to Anaheim and Universal City. Modern Times is opening brewpubs in Los Angeles and Anaheim.

It’s often noted that satellites cut shipping expenses and ensure fresh beer in far-off locales. Often ignored, though, is that by going on the road, older breweries are able to refresh their images.

“There are so many new breweries, the 15 or 20 brands that have been here the whole time are suffering locally,” said Tom Nickel, owner of Julian’s Nickel Beer and two local beer bars, O’Brien’s and West Coast Barbecue & Brew.

By establishing a presence in another city, state or nation, old beers recover some new-beer-in-town freshness.


2. Tapped into taprooms

When Stone debuted in 1996, it had to battle big multinational brewers for shelf space in markets and liquor stores. Today’s rookie breweries have to scrap with the multinationals — and large craft brewers.

“Stone dominates the shelf space,” Medley said. “These bigger guys are squeezing out shelf space for the smaller brewers.”

One solution: Brewers create “shelf space” by opening taprooms, selling their beers a pint at a time to customers.

Heavyweights like Ballast Point (400,000-plus barrels last year) and Stone (345,000 barrels last year) have taprooms, and smaller operations have followed suit. Vista’s Iron Fist has one in Barrio Logan; Vista’s Belching Beaver in North Park; Coronado’s tasting rooms are in Bay Park and Imperial Beach.


When a pint is sold in a tasting room, none of the money is shared with distributors, retailers, bars or restaurants.

“Your highest margins are in your tasting room,” said Raúl Dejú, owner of Guadalupe Brewery, a Carlsbad company that is planning a Vista taproom. “You make about 3½ times what you make selling elsewhere.”

Still, some wonder if this movement has peaked. “There are so many tasting rooms, they are so prolific, that having a tasting room alone is no longer the answer,” said Nickel, the brewer and pub owner.

“How many are you realistically going to visit? Eight, 10?”


3. Clubbing

Eager to maximize profits, breweries are also selling beers direct to consumers via membership clubs or online sites.

Last week, Modern Times alerted fans to a sale of four beers on the Brown Paper Tickets site. They commanded premium prices — for instance, Nautilus Harbour, a sour saison aged in white wine barrels with heirloom plums, was $29.99 per 750-ml bottle.

These are limited edition beers, available to the select few, and that’s part of the appeal.

“This beer will not be distributed,” Modern Times’ email noted, “so the only way to get your hands on some is via the BPT sale. If there’s anything left over after BPT, it’ll be available in our tasting rooms.”


Whether sold online or in a tasting room, these exclusive offerings eliminate revenue-reducing middle parties.

4. Filling niches

Despite an abundance of breweries, San Diego County hasn’t run out of would-be brewers.

“There are still people looking,” said Medley, the commercial real estate agent. “I’ve got someone I’m working with looking in Rancho Bernardo, someone looking in Oceanside.”

Newcomers need an edge to rise above this already crowded field. A celebrity brewer (Mikkel Borg Bjergsø of Mikkeller San Diego), say, or a buzzworthy beer (Bear Cookie from Bear Roots Brewing), or branding that targets a certain community.


Rawley Macias aimed for the latter when he named his soon-to-open Carlsbad brewery, Rouleur.

A mechanical engineer and avid cyclist, Macias explained that this French term describes an all-around cyclist who is accomplished at sprints, distance, climbing, the whole range of cycling skills.

“That’s really what I want my brewing to be,” he said.

To save money, Macias is leasing half of a “brewery igniter,” side-by-side spaces supplied with brewhouses. (His neighbor, Wiseguy Brewing, is scheduled to open this spring.) By leasing space and equipment, Macias cut his start-up costs from $1 million-plus to under $300,000.


To further economize, Macias plans to personally deliver kegs to restaurants and taverns, while pouring pints for locals at the brewery.

“My plan doesn’t require me to be the next Stone, Ballast Point or Green Flash,” he said. “There’s always room for a neighborhood brewery.”

5. Course corrections

Last year, Stone laid off about 60 people, 5 percent of its workforce. For the Escondido brewery, this was a first — and should be a last, the new CEO said.

“We had never done something like that before, nor do we intend to do it again,” Engels said. “It was a one-time correction we needed to make.”


These course corrections take various forms. For Lightning’s Crute, it means leaving the beer industry after a decade of running his Poway brewery.

“I got my CV together and applied for a few jobs,” said Crute, who has a doctorate in biochemistry.

Crute credits Lightning’s sagging sales to Stone’s 2015 decision to stop distributing his German-style beers and a remote location that limited his drive-by business.

“You can be a small brewery nowadays,” he said, “but you have to be really focused on sales that go directly to the public.”


If Lightning is sold, it will follow in the footsteps of Stumblefoot. Bill Randolph recently sold his San Marcos brewery to entrepreneurs Cameron Rentch and Cory Schmelzer.

“We love the San Diego beer community and to be part of it is a dream come true,” Rentch said. “We want to take the brewery to the next level.”

This is a seductive dream, Medley noted, but in reality winning breweries need a tight, focused team.

“The ones that succeed seem to have at least three key staffers,” the commercial real estate agent said, “a people person, a good brewer and a good business person.


“The ones I have seen closing haven’t really hit the nail on those and they have to, because there’s more competition now.”

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