Focus Tiny bubbles? San Diego's beer industry hits a slow patch
By Peter Rowe

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: