Though its flagship IPA is the best-selling draft brand of the style in the U.S. and also a top-5 IPA in chain retail, Lagunitas Brewing’s last three years have seen the pioneering craft brewery struggle to find its way. Since 2021, the Petaluma, California-based company has seen declining sales, layoffs, vacant sales leadership roles, and two packaging rebrands.
Lagunitas is using 2024 as a pivotal year to try and recapture some of its glory of the 2010s, but it also means dealing with stark contrasts. It will try to inject the fun of a once-irreverent company culture that has become more buttoned-up, and hopes to reverse ongoing sales declines in grocery, convenience, liquor, and other stores.
Former employees say this reality is a result of cultural friction between corporate parent Heineken International, which wholly acquired Lagunitas for reportedly close to $1 billion in 2017, and the existing organization. Prior to the sale, Lagunitas was led by founder Tony Magee, who Chicago Magazine once labeled “a stoner savant.” Under his guidance, the brewery grew into one of the most successful craft brands in the country while embracing a countercultural spirit—and plenty of cannabis references.
Today, Lagunitas executives say they want to regain the Magee-led ideals that once defined the brand, but that attitude was a direct reflection of the company’s founder. Today, it’s longtime Heineken employees who are calling the shots, not a “dropout pothead.”
On the sales side, the company’s focus is on stabilizing its flagship brands: Lagunitas IPA was down about -11% in chain retail dollars last year, and Little Sumpin’ Sumpin’ wheat IPA declined about -15%. Following the brewery’s annual distributors meeting this month, chief marketing officer Hannah Dray says Lagunitas is committed to “bringing back the confidence and boldness to own the IPA category.”
There’s considerable space between that goal and reality, however. In 2023, it took every Lagunitas IPA tracked in chain retail—14 in all—to sell roughly the same volume as New Belgium Voodoo Ranger Imperial IPA, the top-selling IPA in the country.
WHY IT MATTERS
A new head of sales, Peter Green, will step into his role March 1 after 14 years with Heineken in the U.S. and Europe. Green and his sales team will need to reverse prevailing downward trends that are worse than the craft beer category overall:
Lagunitas’ production volumes have dropped from 1.07 million barrels in 2019 to 860,000 barrels in 2022 (-20%), according to the most recently available Brewers Association data.
Chain retail sales have also lagged: Since selling a high of 5.7 million case equivalents in 2019 (then seeing a 2020 sales boost, as many large breweries did thanks to pandemic-related shopping changes), Lagunitas’ volumes have fallen each year.
Lagunitas’ chain retail volumes fell below 4 million case equivalents, down about -8% in 2023 and a fall of almost -33% from their 2020 high.
Draft beer, however, is a bright spot: Lagunitas IPA remains the best-selling IPA on draft in the U.S., according to NielsenIQ data covering January through November 2023.
With the financial backing of Heineken and a strong association with craft beer’s best-selling style, IPA, there may still be a potential route to success for Lagunitas. But getting back the charm that made Lagunitas the force it was before the sale to Heineken will be an uphill battle. To return to its pre-2020 production levels would require a rebound unprecedented in the today’s beer market.
Lagunitas is not alone in facing declines, but its identity as the only U.S. craft brewery outright owned by Heineken makes it unique—and seems to have contributed to some of its current struggles.
Heineken veterans are well represented in Lagunitas’ most important roles. This includes Green, Dray, as well as CEO Dennis Peek, who has been with Heineken since 2001, most recently as head of Heineken Canada. This type of shift isn't uncommon after acquisitions: Thirty years ago, Heineken replaced executives at its U.S. importer after it bought the company. And following Constellation Brands' purchase of Ballast Point in 2015, much of the California brewery's leadership team departed en masse and Constellation executive Marty Birkel took over as president.
At Lagunitas, the leadership change has been palpable. Two former Lagunitas sales employees who spoke with Good Beer Hunting echo what several posts on workplace review website Glassdoor state: Heineken is firmly in the driver’s seat at Lagunitas, not just financially but culturally.
Tony Dziura, a former head of national on-premise accounts who left Lagunitas in September 2022 after a decade at the company, says the Heineken has taken a hands-on, decision-making role at its acquired brewery.
“Where it goes now and where the brewery is now, that is what Heineken wants to do. … The direction that they want to go, and the rebranding they want to do, that’s them,” Dziura says. He adds that during his tenure, Lagunitas was a well-run organization where employees could thrive, and he describes the existing brewery culture before the sale to Heineken as lightning in a bottle.
“They just hired a new sales director and if that sales leader can get across why [Lagunitas] looked so attractive to Heineken to buy—it was the culture and the family feel of working for something like Lagunitas—then in no way, shape, or form will they not bounce back [to sales growth],” Dziura says.
Some say Heineken’s corporate ownership has been to the brand’s detriment. Another longtime former sales employee—who still works in the industry and asked not to be named so as not to hinder future job prospects—says Heineken didn’t seem to respect the experience that existing Lagunitas employees had in building the brand. This former employee, who left last year, says Heineken thought longtime Lagunitas staff were “a liability and not an asset and that they should get rid of them.”
This former employee says that last year, the company laid off roughly 20% of sales staff, including longtime employees who they say didn’t have performance issues or structural reasons to be eliminated. Lagunitas confirmed sales layoffs but declined to quantify them or provide more context, saying they were “part of our effort to create a more effective team to better serve our distributor and retail partners.”
The former employee says the way the company had operated under founder Tony Magee—a corporate atmosphere of personal relationships and authenticity, sometimes thumbing its nose at authority—didn’t sit well with its new corporate owners.
“There’s a uniqueness to American craft and there wasn’t a curiosity there [from Heineken leadership],” they say.
This led to what the former employee describes as “unforced errors”: Those include leaving positions like regional sales managers unfilled for six months, burning bridges with retailers and distributors, and launching unsuccessful products. (Lagunitas’ lead launch for 2022 was the Disorderly TeaHouse hard tea brand, which received a reported $4 million in marketing spend. It has since been pulled back to “limited distribution,” though Lagunitas did not respond to a request to quantify this by publication time.) This former employee says that unfilled sales positions in particular made it hard for the team to be successful; it felt like “working with half a deck of cards.”
In response to a question about the perceived cultural disconnect between Heineken leadership and long-tenured Lagunitas staff, a spokesperson for Lagnuitas was vague, writing in part: “We are incredibly proud and confident with our current dynamic, including our energetic and diverse teams in all areas of our business. We have a strong aligned strategy focused on efficiency and incrementality and the plans we have in place will continue our growth journey for another 30 years and beyond.”
Part of that strategy involves a brand refresh—the second since 2022—unveiled at the distributors’ meeting earlier this year. Dray says new packaging puts the Lagunitas name and dog logo front and center, reminding drinkers of the quality assurance associated with the brand. The brand refresh will begin with flagship IPA packaging in April, followed by the rest of Lagunitas’ portfolio. Peek refers to the Lagunitas name as a “100% satisfaction guarantee” which can set its beers apart among a sea of IPAs of varying quality and consistency.
He adds that Lagunitas has the highest display conversion of any craft beer brand, which its sales team can leverage to encourage retailers to create end caps and other displays for its beers. (Good Beer Hunting could not independently verify this.) He also adds that the brewery’s hop water, Hoppy Refresher, is the hop water category leader and provides incremental sales to its distributors and retailers. Chain retail data shows Hoppy Refresher had 43% market share of an increasingly crowded hop water segment last year.
While Peek admits Lagunitas may have lost some “share of mind” among its distributors in recent years, the recent wholesaler meeting has convinced him that they’re back on board. (These meetings are designed to rally employees and supporters, so this type of enthusiasm is characteristic of most breweries’ wholesaler events.)
“We believe the tailwinds are with us,” Peek says.
“They’ve got to buck the trend, but you don’t talk to people who are saying the product sucks nowadays,” says Scott Newman-Bale, CEO at Michigan-based Short’s Brewing, in which Heineken owns a 20% stake. He says he has “pretty minimal” contact with Heineken and Lagunitas, but he believes Lagunitas can return to growth this year if it reminds drinkers of its legacy of quality and irreverence.
“It’s literally, ‘I like that beer, haven’t had it in a while,’” he adds. “It’s a problem of lost consumers rather than a damaged product.”
It’s hard to regain lost attention, however. This is true of drinkers, who are spoiled for choice in the IPA category, and of retailers. Gene Fielden, the longtime manager and beer buyer at the North Park location of San Diego beer store BottleCraft, says his shoppers’ interest in Lagunitas has waned in recent years, with the notable exception of Hoppy Refresher hop water. Fielden says he doesn’t carry any of Lagunitas’ beer products because those are “omnipresent” at grocery chains and Costco, and BottleCraft can’t compete with chains’ prices. As for the last time he personally drank a Lagunitas IPA, Fielden says the answer would be measured in “years, not months.”
Finding the “Lagunitas mojo” is a phrase company leadership uses repeatedly. Dray calls Lagunitas “a feeling and an attitude.” When asked which single word the company would most want drinkers to associate with the brand, Dray chooses “irreverent.” Peek chooses “IP-fucking-A.” Both words have strong ties to the history of Lagunitas and the culture that got the company to the height of its growth. (Newman-Bale calls Lagunitas under Magee a “reverse mullet”: Party up front, savvy business in the back.)
Brewery leadership seem to understand that returning Lagunitas to growth means a return to its fundamentals: a countercultural attitude, best-in-class IPAs, and strong sales across draft and package. The open question remains, though, whether the team can execute on those goals—and whether wholesalers, retailers, and drinkers are still willing to give them a shot at it.
Words by Kate Bernot