Council Brewing: Learning from Closure | Brewing Industry Guide

Council Brewing: Learning from Closure

Sarah Howat examines one Southern California brewery’s closing and what it could mean for the larger craft-beer industry.

Sarah Howat 2 months ago

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Many years ago I read an article from a woman who had been married and divorced a handful of times. I distinctly remember her saying something like, “When you’ve been married once and never divorced, you’re lucky. When you’ve been married and divorced, you’re an expert.”

This stuck with me—this idea of failure leading to expertise. This was long before I had even dreamed of owning my own brewery, before I understood what it felt like to risk everything, live fearlessly (while worrying about every detail), fail, and pick myself back up, only to try again. I didn’t really even understand vulnerability, courage, or resilience.

Success is revered in our society. It is a benchmark that we often aspire to, no matter the subject. Entrepreneurship, music, art, athletics—we all look to those who have succeeded. And rightly so. Of course, we want to model our own lives after those who have come before us and now have success (however you define it). But how many of us have stopped to consider someone who has failed?

Most successful people will tell you that failure is not only guaranteed, it is imperative. And of course, it is part of the human condition. But while most of us feel profound grief, resentment, anger, embarrassment, or even shame when thinking about our own shortcomings, these are the times when we have the most to learn, if we’re paying attention.

In December 2018, the news of Council Brewing Co.’s closing hit the craft-beer community hard.

“We announced on the fifth that we were closing, and we had a solid line, every single day, from when we opened to when we closed, day in and day out, for 10 days straight,” says Liz Chism, president and head brewer of the San Diego brewery. “It was like attending our own funeral.”

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When the news spread, I, like many others in the beer industry, was shocked and saddened. Council had opened on May 9, 2014, and their reputation for making deliciously balanced mixed-culture saisons—their Beatitude Series, among others—had quickly spread. They won RateBeer Best’s awards in both 2016 and 2017 and were awarded multiple medals and Best in Show at both the Los Angeles International Beer Competition and the San Diego International Beer Competition.

Clearly a quality product wasn’t the issue.

So what happened? Some have said that Council grew too fast, but their growth, just like their quality, was taken very seriously.

“Everything seemed to align perfectly,” says Curtis Chism, the brewery’s CEO. “We got kicked out of our alternating proprietorship on Wednesday, the Santee location popped up on that Friday, and we bought it on Saturday. All signs were pointing to this being the right move.”

Anyone who has owned a business understands this experience. It is a continuous, sometimes rigid sometimes fluid, dance among hard work and experience, luck, and happenstance.

In the case of Council, there was a lot of momentum in the beginning, followed by a series of bad luck that seemed to snowball them out of business over the course of 6 months. An abbreviated timeline looks like this:

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  • May 2014—Council Brewing Co. opens in Kearny Mesa, San Diego
  • Summer 2017—The brewery decides to pursue canned IPAs as sour sales decline both in local and national markets; uses existing distribution channels to sell IPAs
  • March 2018—Purchases Santee brewery and tasting-room location
  • May 2018—Opens Santee taproom
  • May 2018—The brewery’s Arizona distributor drops three of five pallets from regular/monthly orders
  • June 2018—Sales at the Kearny Mesa location drop 25 percent
  • July 2018—Sales at the Santee location drop 30 percent
  • July 2018—Pennsylvania distributor drops three pallets from regular/monthly orders
  • Sept 2018—China distributor drops monthly pickup due to tariffs
  • Nov 2018—Maryland distributor drops monthly pallet pickup due to slowing sales
  • Dec 2018—Council announces it is closing both taprooms

“If I had to describe what happened in one word, it would be burnout,” says Liz. “It was just one thing after the other. We had to dump batches that our distributors skipped. Our chiller went out, then the van. It was just never-ending.” Curtis expands, saying that these “are to be expected and normally wouldn’t be an issue but became a large burden on top of having reduced sales.”

What most shocked me when speaking with the Chisms was how quickly it all unfolded. Curtis explains, “We did try many, many things to turn the ship around and regain profitability, but when you’re in it, it’s like you don’t even realize it’s happening.”

In thinking about their story, it seems that their decline is simply—and tragically—a “canary in a coal mine” scenario. And it is nothing that we haven’t heard. Novelty- chasing, “ticking” culture, line culture, it all contributes. It is a cultural and societal phenomenon that has no indication of changing so long as Instagram exists. Everyone wants new, novel, never before seen/touched/experienced. That puts undue pressure on companies to either guess at what the consumer wants next, chase what they know the consumer already wants, or stick to what they already know and hope that the consumer recognizes the value in the classics.

Curtis puts it this way: “Even though we were making rotating IPAs with different recipes and names every time, I think people just moved on to other brands. Plus, we were now competing in a very crowded marketplace of IPAs vs. sours, with much lower margins, and the local breweries in these far-flung markets could make IPAs that were comparable to our hazy IPAs and fresher and cheaper since they weren’t being shipped across the country.”

While the Brewers Association and state brewer’s guilds continue to claim that craft-beer sales are rising, the numbers alone can’t speak to the nuance of business, of who will succeed and who will fail. In recent months in both Southern California and in Colorado, a handful of quality breweries have closed. And that trend will continue. Sure, when looking purely at numbers, the craft-beer segment is growing. However, that alone should not necessarily be a green light that one should open a brewery in such saturated markets as California or Colorado, where my brewery, Black Project, is located.

“Anyone should go for it, if they want to. Hire the right people who are experts in their field, people who can help you think clearly through challenging times,” says Liz. “And find an area that is less saturated to establish a foothold,” continues Curtis when asked about what they would say to any prospective brewery owner. So what do we take away from all this?

  • First and foremost, and something the Chisms have demonstrated so well, is the need to keep hubris at bay. Let’s face it, ego and pride affect every industry, and beer is no different. Understand that while things may be good now, you could be out of business in 6 months. Operate with this in mind at all times.

  • Second, be overly prepared for anything. What is your Plan B, C, D, E … X, Y, Z? When making moves, you should always have worked out the worst-case scenario. Be optimistic but balance that with a healthy dose of pessimism.

  • Always know your numbers. If you don’t know what a single bottle or can costs to make, you won’t know how to price it. You should additionally consider time, (missed) opportunity cost, and space constraints in your margins.

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  • Keep overhead low to ensure that your facility can support at the very minimum yourself, your staff, your rent/mortgage, and any fixed monthly expenses. As an example, if you rely on distribution to pay your taproom staff, then your taproom is not self-sustaining.

  • Diversify by offering multiple products at varying price points. One customer might only come in for the occasional $5 pint, one will only buy your 4-packs at the liquor store, one might purchase your beer at their local restaurant, and one will be willing to spend $20 on a bottle directly from your taproom on release day.

  • Innovate! But remain consistent. The tendency for many small breweries is to give in to the temptation to be all things to all people. In many cases, this continuous trend-chasing not only confuses the customer about your brand but may even cannibalize or completely destroy any demand for your original product.

  • Finally, find your niche (location). Location is the easiest way to differentiate yourself in the marketplace. As Council has shown, a quality product is not a guarantee for success. And in a crowded marketplace, nor is branding. If you want to stand out, pick a location where you are the only player.

In my time as a business owner, especially in such a public and personal industry as craft beer, I have realized how much courage it takes to start a business. It takes even more courage to fail, and I have been knocked down more than a handful of times. So often it’s easier to pretend like it didn’t happen, to silently move on in shame, or worse, react by blaming something else.

Yet in this time, the Chisms have demonstrated a sort of open-heartedness that is overwhelmingly contagious and infinitely inspiring. Remember that showing up, entering the arena, and giving it 100 percent is just as important as acknowledging the failure and finding the beauty in starting over.

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That is where true success resides.

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