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Steamworks cuts back
Brewer to shut Bayfield plant, restaurant in phases
Herald Staff Writer
Photo by STEVE LEWIS/Herald
Nanette Yocum, general manager for Steamworks Brewing Co., poses in front of the brewer’s restaurant and plant Thursday afternoon in Bayfield. Steamworks executives announced the brewpub will close its Bayfield operations in phases. Until then, “It’s business as usual,” Yocum said.
Costs cut into brewers' profits
By Dale Rodebaugh
Herald Staff Writer
Steamworks Brewing Co., which paradoxically is closing its production plant in Bayfield even as sales are increasing, is not the only Durango brewer feeling the effects of a flat economy.
“We’re doing really, really well,” Dave Thibodeau, co-founder of Ska Brewing Co., said Thursday. “Our January-through-November sales will be up 50 percent over last year, same period.”
But the costs of production and expansion are eating him alive, Thibodeau said. The cost of some varieties of hops has increased 300 percent in the last year, and barley is much more expensive, too, he said.
“Our cost of raw materials is up exorbitantly,” Thibodeau said. “Our growth – new products – has caught us off guard, but it’s hard to manage because our margins are skin tight. We can’t raise the price of products to cover the price increases.”
Scott Bickert, the managing brewer at Durango Brewing Co., said he won’t know until year’s end what sales did in 2009. But Bickert estimated sales increased at least 20 percent.
The cost of production is definitely up, Bickert said.
Steamworks, where production will be 5,600 barrels this year, is seeing month-to-month sales increase 30 to 40 percent over the corresponding period last year, co-founder and CEO Kris Oyler said. But the cost of raw materials is becoming prohibitive, he said.
"Our intent is to retrench in Durango, which will be done in phases," co-founder and CEO Kris Oyler said Thursday. "We'll bring most of our operations here."
Sales are not the problem, Oyler said. Month-in, month-out sales this year are up 30 to 40 percent, Oyler said. Myriad cost pressures, including transportation and the price of hops, which has tripled in the preceding 18 months, are the culprit, Oyler said.
"We're set to do more than $1 million in sales this year," Oyler said.
A news release sent Thursday said the brewery will stay open in "coming months" as inventory gets depleted. It also said the restaurant will remain open for now, but with limited operation.
"We tried to run a restaurant in Bayfield, but our business model didn't work as we had planned," Oyler said. "On the other side, our wholesale beer business has grown. ... But it hasn't been enough to counter the additional challenges that have essentially been out of our control."
The eventual closure of the Bayfield brewery and adjoining restaurant will have a staggering effect on the town, said Town Manager Justin Clifton on Thursday.
"It's a big loss to a small community that is trying to chart its way into a sustainable and diverse economy," Clifton said. "It's a huge disappointment because the brewery is a direct-based business, which means it brings in new money, from New York, for example. It's not the local dollar that circles and circles and circles until it's tattered."
The departure literally snatches money from the town, Clifton said. Bayfield is within weeks of receiving $300,000 from a Community Development Block Grant obtained by Steamworks to offset its impact on the town sanitation system.
"We don't have the grant in hand, but if the brewery leaves, we'll have to return the money," Clifton said. "The grant was based on keeping the employees on the job."
Steamworks invested a lot of money when Bayfield's wastewater treatment facility outgrew capacity, over time contributing significant and unanticipated resources to help Bayfield build a new water treatment plant, the release stated.
Steamworks has laid off three of eight brewery-related employees, Oyler said. Management and restaurant employees were not affected.
Steamworks will be sorely missed, said Russ Szlag, a Vallecito resident who for three years has stopped by frequently to grab a brew and something to eat.
"They have a regular crowd and a decent menu, although it's changed a lot," Szlag said. "There's live music and a raffle on Friday nights where you can win a 7½-gallon keg, a six-pack or a T-shirt."
Szlag is not quite sure what his next hangout will be - maybe a place in Vallecito.
Brewing and packaging will continue for the time being in Bayfield, where the brewery and restaurant are known as the Bayfield Beer Factory to differentiate them from the Durango outlet. Liquidation of equipment in Bayfield will be done in phases, with the final date up in the air, Oyler said.
Steamworks also will have to divest itself of about 2 acres in Bayfield, which includes a vacant lot adjoining the brewery. The La Plata County Assessor's Office lists the 2009 total actual value of the property at $723,510.
Steamworks opened at East Second Avenue and Eighth Street in 1996 and the Bayfield facility opened in 2004 at 442 Wolverine Drive. Production - 3,000 barrels in 2006 and 4,000 in 2007 - is scheduled to reach 5,600 barrels this year.
"It's not that we're not selling beer," Oyler said. "It's the cost of production."
The Steamworks flagship brew is Steam Engine Lager. The brewery's market includes Texas, New York, Minnesota, Virginia and Wisconsin in addition to neighboring New Mexico and Arizona and, of course, Colorado.
Oyler said Steamworks now will focus its attention on Colorado, where 55 percent of sales occur.
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