Given the utter state the American craft beer industry is in these days, and its capital-intensive nature, it’s no surprise we’re seeing new inhabitants setting up shop in brewhouses that used to house another outfit. It’s part of the lifecycle for this maturing industry, as breweries with big plans that didn’t pan out downsize or shutter and try to recoup their real-estate investments (or leave their commercial landlord to find another lessee).
Longtime Brew York editor and international taproom connoisseur Chris O’Leary refers to these movers-in as “hermit crab breweries.” Despite the quirky term, the process isn’t always newsworthy in itself. Athletic Brewing Co.’s recently announced acquisition of Ballast Point’s gigantic San Diego plant, though, is a head-turner. Out with the old tenant, a proud brand that’s become synonymous with catastrophic corporate folly in the frothiest days of craft brewing’s bygone boom-times. In with the new tenant, a pioneer of the fast-growing, still-niche non-alcoholic craft beer market with tailwinds at its back.
Squint, and you can see a faintly foreboding symmetry in the deal. Ballast Point’s infamous woes — and specifically what the new crab in its 107,000-square-foot shell in Miramar can learn from them — were on my mind when Connecticut’s NA juggernaut finally confirmed its purchase last week, more than a month after it’d become a bit of an open secret in the industry. If they’re on Athletic co-founder and chief executive Bill Shufelt’s mind, though, he’s too tactful to say so on the record.
“[I]t’s just not our place to comment on other industry participants,” he tells Hop Take in response to emailed questions. (Athletic declined to make him available for a phone interview earlier this week; he was prepping for a quarterly board meeting Thursday, at which this acquisition was presumably a hot topic.) “As the Athletic Brewing team takes over the assets at the former Ballast Point brewery on Carroll Way, we will look to honor and build upon its history.”
It may not be Shufelt’s place to comment, but it is mine. So let’s! Ballast Point Brewing Co. began selling beer in 1996, for years after its owners opened a homebrew mart called — you guessed it — Home Brew Mart. Its Sculpin India Pale Ale, released for the first time in 2005, was an absolute banger of a beer for the era; your humble Hop Take columnist recalls Grapefruit Sculpin being a particularly hot beer in New York City upon its arrival there last decade. In 2014, with demand soaring, Ballast Point opened the doors on its gleaming new brewhouse in SD’s Miramar neighborhood. In the five years prior, the firm’s volume had skyrocketed from 11,293 barrels to 123,435 barrels, reported Mike Sardinia for Good Beer Hunting in February of the following year. “[A]lmost no one has expanded independently with the fervor and speed of Ballast Point.”
That steep growth curve, at a time when craft beer’s growth writ large was the most exciting story in the beer business, turned out to be irresistible to Constellation Brands. In 2015, just two years after the mid-major wine-and-spirits firm received the U.S. rights to Corona, Modelo, and other Grupo Modelo brands as part of Anheuser-Busch InBev’s Department of Justice-mandated divestiture, it bought the San Diego’s House of Sculpin for a cool $1 billion, amid craft-brewery buy-ups by other macrobrewers (notably ABI.) Things went poorly, as we’ve discussed, and in 2019 Constellation sold Ballast Point for less than a dime on the dollar to an upstart buyer from Chicago named Kings & Convicts Brewing — the outgoing hermit crab that just sold the decade-old Miramar plant to Athletic for an undisclosed sum.
Over-forecasting demand during the salad days wasn’t unique to Ballast Point. Plenty of other brewers did likewise. Hell, even Constellation itself followed apace, announcing plans to take the brand’s production bicoastal with a $48-million Virginia expansion in 2016. (New Belgium Brewery was the beneficiary crab on that one; it took the Roanoke-area plant off the macrobrewer’s hands in 2023.)
“When you’re growing rapidly, excess capacity is a good thing so you can keep up with that growth,” Brewers Association chief economist Bart Watson told Jeff Alworth last week for a Beervana post tracking the historic excess capacity-to-growth ratio in the craft brewing industry. The upshot: It ain’t pretty.
“Athletic has a lot of excess capacity right now with the purchase of that former Ballast Point facility, but no one thinks that’s an issue,” added Watson. “So the ratio in the mid-2010s was different because brewers were rapidly growing into it.” Now, not so much.
Back to Athletic. The firm has been on a rocket ship nearly from its 2017 soft launch. (Listen to Shufelt and his cofounder, brewer, and chief product officer John Walker discuss those early days with me in detail on this episode of VinePair’s Taplines podcast.) Even having just watched alcoholic craft beer ride the lightning, the NA breakthrough brand’s neck-snapping growth has been pretty astonishing to yours truly.
“Right now, we’re up over 500 percent tracking where we were last year, but a lot of last year was dictated by really tight capacity, unfortunately,” Shufelt told Brewbound in 2020, after purchasing Ballast Point’s other former Miramar brewhouse, across the street from the more recently acquired plant. In 2021, it climbed to the 27th-largest craft brewery by volume, per BA estimates; in 2023 it grew another 51 percent volume growth to become 10th largest. Last week’s deal creates a runway to more than double the company’s overall capacity across its three breweries, according to Brewbound: 400,000 barrels at Carroll Way (the Ballast Point brewery it just acquired, to which it plans to add another 350,000 barrels by late 2025), 150,000 barrels at Trade Street (the one it bought in 2020), and 450,000 barrels at its brewery in Milford, Conn.
It’s a tremendous amount of capacity, and fast, particularly given Athletic’s branding and the flavor profiles of its products take cues from an alcoholic craft brewing segment for which even 5 percent growth in 2024 would feel like a miracle. Shufelt says he thinks Athletic is “still in the early innings” of the NA craft beer boom because “the modern U.S. craft beer industry is nearly 50 years old.” His brand — which wasn’t the first NA craft beer, but was definitely the first to break through to the mainstream — is six years young. This is roughly true, in that most people date craft brewing’s birth to Fritz Maytag’s 1965 rescue of Anchor Brewing Co., but it rings weird in my ear. To wit: Anchor didn’t double its capacity to 1,000,000 barrels in 1971, nor did any other craft brewer. Craft brewing exploded in the late aughts, and to my mind if not Shufelt’s, that’s when the more relevant comparisons in both sales growth and marketing positioning emerged.
Even by the standards of those early days, though, Athletic’s growth is staggering. The segment leader Boston Beer Company (BBC) was founded in 1984 and took around a decade and a half to reach a million barrels, per data compiled by Victor J. and Carol Horton Tremblay in their seminal 2005 reference, “The U.S. Brewing Industry.” Famously, BBC co-founder Jim Koch’s firm rose to its present-day perch atop the BA’s craft brewery charts by contract-brewing Samuel Adams Boston Lager (et al.), something Shufelt says Athletic didn’t even consider before buying the Miramar plant, even despite all the slack capacity in the national aggregate.
“Our commitment to quality and consistency sets us apart from others,” he explains, touting the company’s rigorous quality-control standards and value of investing in its 250-strong workforce. “Furthermore, most of the available contract capacity does not feature the equipment or food safety capabilities we need.” Fair enough.
Shufelt is entitled to his hard-earned optimism, and he’s bang-on that Athletic’s products are finding distinct “occasions” (in the jargon) from alcoholic craft beer. “Most alcohol innovation over the last 25 years has been a 1:1 substitution for another alcoholic occasion,” he says. Athletic has been instrumental in transforming drinker expectations for both NA beer and alcoholic craft beer — and maybe even soft drinks more generally, too. That’s a paradigm shift with more dimension than, say, the comparison between Grapefruit Sculpin and other West Coast IPAs of its day. Another factor in Athletic’s favor: NA beer is around 2 percent of total beer sold in the off-premise in dollars, and the craft brand is alone atop less interesting macrobrews in the top five. There’s still room to roam.
Maybe these factors, coupled with flagging public sentiment toward drinking alcohol will keep NA craft beer’s demand curve from following its alcoholic brethren. Shufelt, Walker, and co. have proven skeptics wrong before. I don’t doubt they’ve done their homework, especially as they can’t afford to be wrong the way so many macrobrewers were on their various craft-brewing expansions. Constellation’s billion-dollar gamble — and near-total crap out — on Ballast Point is a cautionary tale about going big at a bad time. What will the lesson of Athletic’s tenure in the erstwhile San Diego stalwart’s old space be, another decade on? Place your bets.
🤯 Hop-ocalypse Now
Just over one year removed from the cartoonishly inept launch of ULTRA RIGHT 100% Woke Free American Beer, and nearly three out from the viral turns of conservative pander-brands We The People Wines and Armed Forces Brewing Co., and reactionary opportunists are still trying to crack the code on contract-brewed conservative booze. The newest brain-genius to enter the ring is washed-up pro wrestler and Peter Thiel tool Terry “Hulk Hogan” Bollea, who last week announced the impending release of Real American Beer. He told Fox News he came up with the lazy gimmick to remind drinkers that despite the nation’s “divisive” political landscape, “we all want the same things,” including “the borders closed” and “god back in our schools.” The only “Real American” thing about that beer pitch is the obvious bid to inflame boomer grievances to sell swill. A long and storied national tradition, that.
📈 Ups…
JuneShine’s ambitious Brooklyn outpost is gone, but a path to hard kombucha’s mainstream national adoption (might) still remain… Northern California’s stalwart Anderson Valley Brewing Co. beat Reyes’ Golden Brands in a dragged-out franchise-law suit the judge ruled “absurd”…
📉 …and downs
Urban Chestnut Brewing, a fixture in St. Louis’ craft-brewing scene for 13 years, is facing a pair of lawsuits over unpaid bills… Rest in peace to 21st Amendment Brewery president and Crux Fermentation Project co-founder Dave Wilson… Now-shuttered Cascade Brewing may have still belonged to Oregon craft beer elder statesman Art Larrance at the time of his recent passing, despite an (apparently never-closed) April 2020 sale…
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