The Reset — Beervana

Item one: Fourpure, one of those sleek, midtier breweries characteristic of the peak of the craft era, is shutting down its expensive, glossy London taproom (via Will Hawkes’ newsletter—no link, but you can subscribe here). Item two: Anderson Valley, one of the oldest surviving breweries from the craft era, is available for $7.9 million, a deal that includes nearly 50,000 square feet of production space and 29 acres of land.

The particulars of each story have almost nothing in common, and yet they point to a phenomenon that will reshape the beer industry over the next decade. Call it the reset, when the perceived value of breweries comes in line with their actual sales. For a brewery like Fourpure, this seems almost inevitable. As Will details, it never had a compelling reason to exist—it was just buoyed by a growing market and competent products and leadership. For a brewery like Anderson Valley, it’s closer to tragedy. It’s a company out of step with the times at a moment when customer interest has waned across the board.

A brewery in two eras can tell you so much about the times. Fourpure grew quickly in the mid-teens as Londoners went crazy for new breweries, looking like the poster child for the new American-style craft boom. But the growth wasn’t driven by any innate interest in Fourpure’s beer; it was just a well-funded venture in the middle of a boom. Will Hawkes details this dynamic:

“Founded in 2013, Fourpure was never the sexiest brewery in town - but it carved out a key place for itself in London's brewing firmament based on quality and reliability. It was a well-run business… That’s why the sale to Lion wasn’t a surprise. [Founder] Dan Lowe was, apparently, a homebrewer, but he and his brother were never exactly uber-craft: they were amongst the first of the new breed to sell to supermarkets.”

The vast Forepure London taproom opened the same year I visited and even then wasn't very busy.

In 2019, I visited Fourpure with Mark Dredge, who echoed Will’s assessment. The brewery was very professional and well run. But the beer? Well, it was fine, if memory serves. More than the beer, the taproom, which was huge and clearly very expensive, was burned into my memory. We’d seen a bunch of very scrappy, tiny railway arch breweries on Bermondsey, and Fourpure was conspicuous for its industrial chic. “How much did that cost?” I wondered. A huge, expensive taproom devoted to selling a low-margin product made sense in 2019 solely because the owners had priced in a bunch of growth they assumed was coming.

Five years later, no one would make such a calculation. It’s hard to put butts in the seats, sales are going to be flat for years—best case—and breweries that merely make competent and reliable beer just aren’t a great bet. We would radically reset our valuation for that brewery today—which is no doubt why parent-company Lion [correction; Lion sold it to new owners a couple years ago] has decided not to throw good money after bad and are shutting down the taproom and contracting out production of the beer.

Anderson Valley’s is a sadder tale. Fourpure failed because it was always generic. At the end of the day, no one was around to fight for it. By contrast, Anderson Valley is a really cool brewery that once had a big and loyal following. Now it’s apparently selling for a bargain price, even if you just consider the land it occupies:

“The company expanded to its present location which now includes a brewhouse with separate 100-barrel and 85-barrel boil kettles as well a 9-barrel pilot system. Annual capacity is listed as 100,000 barrels. The property has a “beer park” that includes a 10,000 square foot lounge lawn, an outdoor music stage and an 18-hole disc golf course.”

In 2010, the owners sold AVBC to an investment group that boosted sales to 50,000 barrels before experiencing a collapse that by 2020 had reduced production to 20,000 barrels. In 2021, the investment group sold it to a couple who are now retiring. No doubt tired of the struggle, they just want to get some money out.

It is one of those breweries that built a reputation for quality and quirkiness, but it was definitely an 80s-era brewery. Four of their five “legends”-line beers date back decades, and the brewery is most associated with an amber ale. A decade ago they got heavily into goses, and more recently have tried to reboot with IPAs.

Nostalgia can only take you so far, however, and breweries like Anderson Valley are in a tough place. The legacy of the brewery is impossible to escape, and tends to make it hard to reposition a brand as something new and current—even if the brewery can manage to produce beer that competes with the best of the cutting-edge products out there (most can’t). There are just so many choices that customers are going to gravitate to those known for making great IPAs, not a funny old legacy brewery that makes a great amber ale (and it is great).

As a market flattens or contracts, weaker members of the herd are the first to go. They make inferior products, are saddled with debt, are poorly-run, or some combination of the three. Strong breweries are doing fine. Their margins are down, and they’ve had to cut costs and be smart about how they spend their money, but they’re healthy businesses. Then there’s a group in the middle composed of breweries like Forepure and Anderson Valley. They’re not bad and they haven’t necessarily made obvious mistakes. But there are just so many breweries, so much slack in national capacity, that no one can see much potential in them going forward. Ten years ago, people saw future piles of money in every brewery. This is the reset, where breweries haven’t changed, just people’s expectations about their futures.

I’ve mentioned it before, but this happened a quarter-century ago, too. After a period of growth in the 1990s and a speculative bubble, small breweries had to retrench for the better part of a decade. The industry didn’t collapse, but interest had moved on to other things. This reset is a lagging indicator of the beer industry’s health, and things will start to improve for breweries well before people start seeing big dollars in them. I hope it’s sooner rather than later, but in any case, we’re going to lose some of our heritage when breweries like Anderson Valley close. We’ll also lose rando places like Forepure. In the end things will be healthier, but we’re not there yet.