There’s no shortage of local craft beers in Ohio. The state is home to more than 430 breweries, from big to small.
But according to the Brewers Association, an organization representing craft brewers nationwide, craft beer sales are down for the first time in years.
In Ohio, some midsize breweries are struggling. R. Shea Brewing, an Akron-based craft brewery, is one of them.
Owner Ron Shea opened his original location in Akron’s Merriman Valley neighborhood in 2015. As sales took off, he invested in a Downtown taproom located in Canal Place, which used to house the B.F. Goodrich tire factory.
That location opened in late 2019. Then, COVID hit.
“Nobody saw this dramatic change,” Shea said. “We pressed the button in 2018 to start our buildout, and then, things went completely different.”
Since then, interest rates on the small business loans Shea took out to finance the project have spiked. Inflation and supply chain issues made the situation even worse.
Shea launched a $2.3 million GoFundMe campaign last year that fell far short.
Meanwhile, craft beer sales have been on the decline.
“We’re down, personally, 30%, but across the board nationally, craft beer brands are down anywhere from 1 to 10%, even the big brands,” Shea said.
Craft beer is competing for shelf space with other alcoholic beverages, like canned cocktails and seltzers, which have greatly increased in popularity, according to consumer market research group Nielsen IQ.
New drinkers are skipping the full-bodied beers Shea drank in his 20s and heading straight to the sweet cocktails, he said.
“It takes a lot to get used to. So now, that group of drinkers is bypassing that … and going to these yummy, ready-to-drink cocktails,” Shea added. “Whether they’re going to come back, who knows. We may catch them when they’re in their 40s.”
Store shelves are saturated
Other midsize breweries, like Royal Docks Brewing Co. in Jackson Township, have experienced challenges when it comes to distributing its beers in stores.
Brewmaster Dave Sutula has had a passion for beer for years. His idea for the brewery’s popular beer, a lime lager called ‘Backyard Crusher,’ has been brewing since he was a young adult
.
“When we went on vacation with my parents … I’d order a Corona with lime, and it was terrible. But I always thought that if I could make a beer like Corona with a lime, except it was good, then I would win,” Sutula said.
‘Backyard Crusher’ is popular in stores, too, he added. Like most midsize craft brewers, Royal Docks contracts with a distribution company to sell its beers in groceries, he said.
For a while, the sales in stores were just as good as the sales in their pubs, Sutula said.
“There was a time when those two things went hand in hand. One was gravy on the potatoes and you didn’t know which was which. Now, it’s clear that the potatoes are the pubs and distribution is the gravy, at best,” Sutula said. “The way things are right now, those are pretty dry potatoes.”
The market is saturated with beer, wine and cocktails, and some distributors aren’t buying and selling as much beer, he said.
If brewers aren’t satisfied with their distributor, it’s not easy to renegotiate, he said. A decades-old state law prohibits brewers from breaking their contracts with a distribution company unless they go to court and prove “just cause” - or go bankrupt.
That essentially keeps brewers trapped in their contracts, Sutula said.
“There’s some circumstances that we can show cause that they’re not living up to their end of the bargain, but if we were to do that … at that point, the distributor has no incentive to sell our product,” he said.
Ohio lawmakers are considering legislation which would update the state’s current distribution laws, which were meant to check the power of large corporations, said Mary MacDonald, president of the Ohio Craft Brewers Association.
The law passed in 1974, she said.
“It made sense at the time because they were protecting small, independent businesses from big, multinational breweries. And now, 50 years later, we have the small, independent businesses that need protection,” MacDonald said.
Not only can the law hurt midsize brewers, but it’s keeping small breweries, like Lockport Brewing Company in Tuscarawas County, from venturing into the distribution market, said owner Andrew Marburger.
Under the current climate, there’s no incentive to get into distribution, he said.
“For a brewery like me, the real risk is that there’s no recourse once you enter those contracts. They stick around for a really long time, basically indefinitely,” Marburger said. “Should that change, put a little power back into our hands, then it becomes suddenly a lot more attractive.”
Instead, Marburger focuses solely on brewing beers and the experience in the taproom – and his business is booming, he said.
Going forward, that’s Royal Docks’ strategy too, Sutula said.
They plan to focus on their taprooms, rather than distribution, and they’re planning to open additional locations.
As for Ron Shea in Akron, he said he’s also focusing the taproom itself as an event space.
Long-term, he’ll have to either sell the R. Shea brand or the Downtown location, Shea added.
“The big macro craft breweries, they’re going to be fine. The small nanobreweries that just have a taproom without distribution are going to be fine, because that’s good margin. But the breweries like myself that got a loan before the pandemic, thinking that this craft beer would at least maintain… we’re going to struggle,” Shea said.
Editor's note: One month after this story published, Ron Shea announced the company could not recover from the financial challenges. He will cease operations at both R. Shea Brewing locations on March 3, 2024.
