At Stone Brewing’s bistros in Escondido and Liberty Station, there’s a mystery beer on tap. It is identified on the menu only as “experimental lager.”
That beer is Stone’s initial batch of Sapporo — the first produced at the local craft brewery since it was acquired by Japan’s Sapporo last August for $165 million.
A second batch is currently fermenting, which foreshadows the multi-million-dollar makeover that’s on tap for Stone’s production breweries in Escondido and Richmond, VA, driven by the Sapporo buyout.
Both locations are expanding to add capacity so they can brew Sapporo beers for the American market.
“The underlying theme is to take all the Sapporo beer that is sold in the U.S. and produce it in the U.S.,” said Sean Monahan, Stone’s chief operating officer. “That is the core driver.”
Layering in Sapporo beer production means roughly doubling Stone’s annual output of its own craft beers, such as Arrogant Bastard IPA and Buenaveza. It brewed more than 376,000 barrels last year — ranking seventh among the nation’s craft breweries by volume. One barrel is equivalent to 31.5 gallons.
Sapporo USA’s beer is currently produced at facilities located mostly outside the U.S., said Monahan.
“The logistics costs and such make that a very expensive proposition,” he said. “I always use the analogy that it’s mostly water, and you don’t want to ship water far, so you produce it as close to the market as you can.”
The Escondido facility will brew Sapporo sold west of the Rockies, while the Richmond facility will handle production for the Midwest and East Coast. Along with Sapporo , Stone’s Richmond facility also is slated to brew Sapporo Black and Sapporo Reserve.
Stone also will expand its canning, bottling and keg lines in both Escondido and Richmond to handle the increased volume.
Sapporo’s investment in the U.S. beer market comes as the industry struggles to find its footing amid growing competition — not only from other breweries but also from canned cocktails and other alternative adult beverages.
The overall beer market shrank 3 percent in volume in 2022 — driven mostly by declines in big beer brands, according to the Brewers Association, a trade group representing mostly small, independent brewers.
“In this maturing and competitive market, collective growth for the category is hard to come by,” said Bart Watson, chief economist for the Brewers Association.
While craft and import brewers fared better than the giant brands, they still faced rising operating costs and changing consumer tastes. Sapporo hasn’t been immune. Earlier this month, it announced the closure of the 127-year-old Anchor Brewing Co. in San Francisco, which makes Anchor Steam. Six years ago, Sapporo acquired Anchor Brewing, which produced about 35,000 barrels last year.
Despite that setback, Sapporo is forecast to invest up to $20 million expanding capacity in Escondido and around $40 million to boost production in Richmond, said Monahan.
“As much as I say we are going to making the same (Sapporo) beer that people are familiar with, I think it is actually better because it is produced in the U.S. and it is so much fresher,” he said. “You’re getting a fresh Sapporo versus one that has been on a boat coming across the ocean for weeks.”
While work is already underway to get Sapporo’s beer flavors right in experimental batches, volume production is not expected until January 2024.
Still, new equipment has been ordered, with installation expected to begin this fall. Eight new fermentation tanks will be added in Escondido, and another eight tanks will be installed in Richmond.
A new keg line is also planned in Escondido, as well as expanded bottling and canning capabilities. Richmond also will be getting upgrades to its packaging lines.
Stone expects to add another day to its work week, going from 24 hours, five days per week to 24 hours, six days per week. The additional workload is forecast to add 40 to 50 jobs locally.
Two of Sapporo’s brewers from Japan moved to Escondido to help produce the beer. Brewing the experimental batches was a learning experience, said Nicole Williams, senior director of operations at the Escondido brewery.
“One feature of brewing a beer like Sapporo — a light, clean lager — is there is nowhere to hide,” she said. “You really need to get it right every step of the way, every time.
“That is why we are doing these trials — to make sure we make the freshest, best Sapporo anybody has ever tasted,” she continued. “Making it here in the U.S. and getting it straight to market, I think, is going to be a noticeable difference.”
