Oregon brewers hit hard by falling draft beer sales, more closures

Oregon’s storied craft brewing industry suffered one of its worst years in 2023, with depressed draft beer sales and rising costs creating more pressure than some of the state’s businesses could bear. According to the Oregon Brewers Guild, the state is home to about 400 breweries, brewpubs and taprooms, with 50,000 jobs and generates nearly $9 billion in economic output. But the state lost around 30 of those businesses last year and even more have contracted or are seriously struggling. We’re joined by Sonia Marie Leikam, the co-owner of Leikam Brewing and vice president of the Oregon Brewers Guild, and Laurelwood Brewing Company owner Mike De Kalb, who closed down his last retail location last year.

Note: This transcript was computer generated and edited by a volunteer.

Dave Miller:  This is Think Out Loud on OPB. I’m Dave Miller. Oregon’s craft brewing industry just suffered one of its worst years in decades. A drop in sales and rising costs led 30 breweries to close in 2023. Others have contracted or are seriously struggling. We’re gonna hear more about the state of the industry right now from two Portland brewers. Sonia Marie Leikam is the co-owner of Leikam Brewing and the vice president of the Oregon Brewers Guild. Mike De Kalb is the owner of the Laurelwood Brewing Company which recently closed its last retail location. It’s great to have both of you on the show.

Sonia Marie Leikam:  Thank you, Dave.

Mike De Kalb:  Thanks, Dave.

Miller:  Sonia first. Can you just give us a sense for the numbers? I mean, how big a decline are we looking at in terms of the craft brewing industry broadly in Oregon?

Leikam:  Oregon is home to nearly 400 breweries and brewpubs. And we are definitely seeing a decline. The biggest thing for us is that draft beer sales are nearly 30% down on a national level. And we’re definitely seeing that here in Oregon. Those draft beer sales are what really sustain the taprooms and breweries.

Miller:  Draft beer sales nationwide, but that drop is more or less mirrored in the craft industry in Portland?

Leikam:  In Oregon in general, yes, it’s definitely mirrored. We’re seeing very similar trends here in Oregon, despite Oregon beer being such an important part of our culture. And we take so much pride in it.

Miller:  I’m not sure if it’s possible to dig into the numbers with this level of detail, but are people drinking… is there the same drop in, say Pabst or Miller Lite on draft as there is for craft beer?

Leikam:  You know, that’s an interesting question. We are seeing national trends towards canned cocktails, seltzers and more non-alcoholic beer options. So depending on who’s producing the beer, you may see a change in those draft sales. But definitely at the craft level, we are seeing that decline.

Miller:  Mike, I wanna go back a few decades, because you’ve seen some things in this industry. What was the craft beer scene like in Oregon when you started?

De Kalb:  Oh, it was definitely on the rise. You know, we opened our first pub in 2002 and it was the new thing. People love pubs, people love going out. At Laurelwood specifically, we tried to be family and kid friendly, and people were just hungry for that. They were looking for an outlet for something other than mass produced, yellow, fizzy water.

Miller:  How many ups and downs did you weather over those years? My memory of that time economically was that, I mean, you started in a kind of national down and that was post 9/11, a lot of economic anxiety before the great recession. But what did you see just in the business in terms of overall ups and downs?

De Kalb:  We did start right before 9/11. And then post-91/1, we were able to expand during that time. The economy was different back then. People’s habits were different. You know, Sonia Marie was talking about draft sales. People wanted to go out. They wanted to get out of the house and go frequent tap rooms. But things have changed over the last few years with technology and competing beverages.

Miller:  How big was your operation at its peak? Operation in terms of whether it’s barrels produced or retail venues or restaurants or tap rooms that you were operating?

De Kalb:  Probably in 2011-2012, we had three on-the-street locations. One of them was the Laurelwood Pizza Company. We had three locations at the Moda Center and two locations at the Portland International Airport. Plus our distribution business, which was Oregon, Washington, into southern California, and Idaho.

Miller:  And then in various ways came closures or contractions. What was the pandemic like for Laurelwood?

De Kalb:  I think our slowdown started a little bit before the pandemic. Again, people’s habits changed. Netflix, all the streaming services, DoorDash, UberEats ‒ people could order things in. They could go to the store and pick up a six-pack. And the tap room, our pub businesses just slowed down right before the pandemic. And then, of course, the pandemic hit with all the different openings and closures, people didn’t know when they could go out, when they couldn’t go out. If they did go out, they wanted to be safe. We had outdoor dining, even in the middle of winter. We had people up on our upper deck in tents with heaters. So there was still a segment that wanted to go out.

But then the pandemic came to a close and people’s habits had been ingrained over two years of ordering, online services, grocery stores, those sort of things. And when we opened up again, we had an initial rush, but then they went back to their old habits.

Miller:  Old new habits, I guess, as you said?

De Kalb:  Old new habits. Yeah. There you go.

Miller:  Sonia Marie, how would you describe the niche that you have been going for, the piece of the craft beer market that you’ve wanted to stake for your own at Leikam Brewing?

Leikam:  At Leikamc, we really consider ourselves to be a neighborhood community hub. We have worked really hard to be family friendly, to be open, to have folks come visit. We also happen to be a kosher craft brewery which, for those that know Oregon, is a minimal asset. But that is something that we have carved out as a spot also for folks who happen to need kosher beer to access it.

Miller:  Am I right that that means you have to have a rabbi or somebody who is authorized to, in a sense, give a blessing so that the ingredients are kosher?

Leikam:  Well, kosher certification is just like any other certification process, whether it be organic or a B-corp certification. It’s a series of tracking of our ingredients. We don’t actually have a rabbi come and bless, but we are under rabbinic supervision to make sure all the ingredients we use are sourced and are kosher.

Miller:  How many times has your business had to pivot in terms of product offerings or just the business model, in the last four years?

Leikam:  Pivot has been the word. We definitely have had to do so many different things from closures, to opening, to delivery in our minivan with our kids in the back of the car during the pandemic. We’ve had to pivot to adding cocktails and non-alcoholic beer options to our menu as well. Those make up, now, about a third of our sales. They are lower profit margins for us. That impacts our bottom line. But we are offering them now. And then we also are spending just a ton more time and energy creating events. So we now have crafting classes and a book club and comedy nights. Really anything that the community wants, we offer our space for those activities to drive folks into the tap room.

Miller:  Is it working, all those efforts?

Leikam:  Well, we’re still here, so yes and no. It’s working in that we are not in the red anymore, post-pandemic. This is our first year that we’ve really moved out of that. Our family is not able to live off of our income from the brewery. I do work another job like many small craft brewers do, outside of the brewery. And we are getting sales up slowly but surely. It’s about, for us, being in the neighborhood and building those relationships with neighborhood folks.

Miller: Sonia Marie, we heard from Mike about these broad societal changes. As he was noting, a lot of them were sort of driven by technology, and some of which predated the pandemic, in terms of people’s expectations about how they get what they get, and whether they want to be in public or not, or just be at home. How much of what you’re both experiencing, what this whole… and broadly, what the food and drink industry is experiencing? How much do you think this is a cyclical dip as opposed to a permanent change?

Leikam:  That’s an interesting question, Dave. I think some of it is cyclical. A lot of folks are wanting to be healthier. And they see the decrease of consumption of alcohol beverages as part of that lifestyle shift. And that’s something that we’ve certainly seen before. I think some of it is, unfortunately, going to be permanent. As we’re losing these small craft beverage producers, it’s hard to start them back up again. And the market is becoming very much the little guys and the big, big guys. There’s no longer a feeling like there’s the space for a good regional brewery or even a local brewery with multiple locations to really survive and sustain themselves.

Miller:  Mike De Kalb, as Sonia Marie was talking about, some people wanting to drink less are thinking a little bit more critically about their level of consumption. I can’t help but think about dry January, a phrase that’s become a lot more common in recent years. What goes through your mind when you hear the words “dry January”?

De Kalb:  It’s something that you still go out, you still push your beer, you still do all the sales and in our business now that we’re doing distribution, you get the distributor to, or hope the distributor will order beer toward the end of the month to stock up for February.

Miller:  Do you see a dip now directly tied to January?

De Kalb:  Now that we’ve pivoted to the distribution model, I’m not seeing any dip, no. When we had tap rooms and restaurants for 20 years, we did see a dip in the consumption in January. People still came out, but they just didn’t consume as much alcohol at that time.

Miller:  Sonia Marie, what about you? How do you reckon with, whether it’s dry January as just one focused month, or more broadly? Even at the state level, conversations from the Oregon Health Authority try to get people to, as they say, rethink the drink. How do you reckon with that messaging and the desire among an increasingly vocal portion of the population who are talking about drinking less?

Leikam:  I think legal and moderate consumption of alcohol is absolutely reasonable and should be supported. Beer, wine, cider, spirits ‒ these are all huge parts of the Oregon economic machine. The third largest source of revenue for the state is this sector. It’s interesting that you mention this balancing act. What we’re finding is that there is a need, definitely, for mental health and drug addiction recovery and treatment services. But there is not the infrastructure in place for that, despite a dramatic amount of funding going into that space.

Miller:  Mike De Kalb, I wanna go back to business models. Because there are a lot of different aspects of the businesses that the two of you run, and many others ‒ 400 other businesses in Oregon ‒ that can be lumped together, but can also be separate. I mean, brewing and selling beer and distributing it, as you were talking about, is different from running a restaurant or running your own brew pub. What do you think holds the most promise for brewers right now, the most likely path to sustainability and success?

De Kalb:  That’s a tough question, Dave. I think that it needs to be a combination of both, to be honest with you. Well, let me take that back. I think that you either need to be a smaller community-centered location similar to what Sonia Marie’s got with Leikam Brewing, or you need to be a little bit bigger and have a distribution model so that people can consume your beer in other places besides the tap room.

We’ve been marketing our building and our restaurant and we’ve got a great brewery that’s all set up and ready to go for a minimal investment, if anybody’s interested in coming in and taking it. But people are wanting smaller spaces. People are coming in and saying it’s just too big. They want 2,000 square feet and a tap room and a little place they can brew beer.

Miller:  Sonia Marie, what do you think would be lost in Oregon if these closures were to continue?

Leikam:  First off, just such a big piece of our culture here in Oregon is centered around craft beer. We also are huge supporters of the Oregon agricultural space. We buy hops. We get malt. We also have 50,000 plus jobs in the state that are generated by the craft beer industry. That’s huge. And we have seen a decline in being able to sustain those jobs because of this loss of sales.

Miller:  What’s your pitch to people who have gotten out of the habit of going out or do it much less and I guess are, right now I assume I hope, happy with their choice. What’s your message to them? And we have about 45 seconds left.

Leikam:  Listen, make that extra stop. If you’re gonna buy beer, buy it directly from a brewery tap room or a bottle shop. Schedule a get together with friends, hold a PTA night at your local brewery. We offer non-alcoholic beverages too. We have community gathering spaces. We have philanthropy nights. Reach out to us. Talk to your local brewery. We’re here for you.

Miller:  Sonia Marie Leikam and Mike De Kalb, thanks very much.

Leikam:  Thank you, Dave. Have a good day.

De Kalb:  Thanks, Dave.

Miller:  You too. Mike De Kalb is founder and owner of Laurelwood Brewing Company. Sonia Marie Leikam is the vice president of the Oregon Brewers Guild and the co-founder of Leikam Brewing.

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