WHY IT MATTERS

As larger craft breweries prepare for more heated competition and start-ups struggle to create business plans that can adapt at the speed of the market, the investment environment is getting diverse. And, in some cases, impatient.

With acquisitions, private equity, crowdfunding, and myriad alternative models of financing a brewery, it's not easy for most operators and investors to see the environment the same way. Craft beer is rapidly adjusting to norms set by other comparable drinks industries. But at smaller levels, it remains a unique beast, driven by culture as much as sales. And no one can claim to have a complete picture of a likely scenario. Adaptability and patience remain key.

Penrose went through two recalls in it's first two years due to re-fermentation issues, buying back large amounts of bottles from retailer's shelves in Chicago before deciding to return to keg-only as they explored the option of a canning line. In the meantime, they got their brewery-only wild and sour program off the ground to much fanfare. While cans are now being produced, most notably their dry-hopped kettle sour, they're only made available in the taproom for purchase due to the high costs of packaging with shrink wrap, since manufacturers put a hold on taking new customers in recent months.

In a recent GBH podcast (recorded in April), Hobbs and Korder spoke reflectively on their early challenges, and the rationale for their decisions to pull back, re-group, and then patiently return to off-premise retail. And while anticipation was high for their latest moves, the market presence apparently wasn't enough to sate investors or create alignment. In the end, the investors didn't see the upside of Hobbs' strategy, choosing instead to pursue a different approach to market.

Increasingly, investor and partner relations may determine the health of many small breweries as tensions over growth and competition put pressure on performance. For investors, the window to see a quick return may seem to be shrinking, and the opportunities to make bigger moves more necessary than ever, especially if the goal is to create defensible markets for sub-regional production breweries.

On a personal note, I'm super bummed.

It pains me to see this scenario play out. Hobbs has worked as hard as anyone I've seen in the industry on a plan he had outlined for Penrose years before he even had a brewing partner. And he's long held the respect of Chicago's brewing community as a sales lead at Berghoff and Goose Island prior to starting Penrose. I hope he gets a long-overdue vacation and his next opportunity emerges as beautifully as Penrose did. He leaves behind many friends and colleagues at Penrose who know doubt hope for the best for him, and vice versa.

We'll update this story with any follow-up statements from Penrose or Hobbs.

— Michael Kiser