E-Malt.com News article: USA, CA: Danish brewer Mikkeller to close its only US brewing facility in San Diego

Copenhagen-based global beer company Mikkeller has announced it will close its only U.S. brewing facility in San Diego, citing “two years of COVID and the difficult current rising cost environment”, the Good Beer Hunting reported on August 22.

The closure does not include Mikkeller’s Little Italy taproom or its taproom in San Francisco. Mikkeller says it has 50 employees in the U.S., about half of whom will be laid off. Mikkeller San Diego has been open since 2016, and according to the Brewers Association (BA), produced 10,418 barrels of beer in 2021, down from a high of 11,750 in 2019.

Mikkeller has been candid about its recent business struggles. While announcing the departure of its CEO earlier this month, the company promised a reorientation away from expansion to focus on greater profitability for its 52 breweries and restaurants, located in 18 countries. In a statement posted on the company’s website, founder and creative director Mikkel Borg Bjergsø called this “a very challenging time for production companies — and especially in light of the current market situation — it is necessary for us to look at the whole business and ensure that it is sustainable.”

A recent job posting indicates Mikkeller San Diego sells beer in 13 U.S. markets and imports internationally brewed Mikkeller beer for sale and distribution stateside. Mikkeller will continue to sell its beer in the U.S. through a contract brewing arrangement with San Diego-based AleSmith Brewing Company. In a press release, Mikkeller says contract brewing “has always been one of the keys to Mikkeller ́s global success.” It is seeking an immediate sale of its San Diego brewery and warehouse.

While the craft beer segment overall has struggled this year in groceries, pharmacies, and big-box stores, Mikkeller’s declines have been steeper than most of its peers. Its chain retail sales for the 52-week period ending Aug. 7 fell -29% compared to the year prior, according to data from market research company IRI. Overall, craft beer’s dollar sales declined -5.5% during that same period. Given these losses and competition from companies based stateside, it appears Mikkeller can no longer justify operating its U.S. brewery.

Mikkeller San Diego’s closure caps a fraught seven years of U.S. operations for a company synonymous with global expansion. During this time, the ambitions and attitudes of leadership clashed with employees and business partners, all while Mikkeller faced increasing financial woes.

Beginning in 2017, Mikkeller San Diego was the focal point of numerous complaints from employees about unsafe working conditions, harassment, and bullying—problems that Mikkeller employees in other countries echoed. In 2021, three former Mikkeller San Diego employees shared these complaints with Good Beer Hunting. Seven months later, Mikkeller established a reconciliation plan to make amends with employees who experienced mistreatment.

The company’s East Coast location had its own problems. In October 2020, Mikkeller closed its New York City brewery and taproom just two-and-a-half years after it debuted. The facility, located in the New York Mets’ Citi Field, was a high-profile location for a brewery with an international reputation. But, like San Diego, it ultimately proved unworkable, and further revealed the convoluted and varied ownership structures that govern Mikkeller outposts around the world.

Another of Mikkeller’s U.S. ties unraveled in November 2021, when the company’s partnership with Indiana-based 3 Floyds Brewing dissolved. The brand, known as WarPigs, launched in 2015 with a brewpub in Copenhagen and also included WarPigs USA, a line of contract-brewed beer sold in the U.S. since 2017. WarPigs produced 11,000 BBLs of beer in 2020, making it the 235th largest BA-defined craft brewery in the country out of almost 8,900. But WarPigs was—according to a former employee—marked by tension between its two components, Mikkeller and 3 Floyds, mostly over disparate business priorities. (WarPigs Copenhagen and WarPigs USA still operate, separately, with WarPigs USA’s website noting that the brand is “no longer a collaboration project.”)

By the end of 2021, Mikkeller needed cash. In December, New York-based private equity fund Orkila Capital LLC injected $6.1 million into Mikkeller, which then-CEO Kenneth Madsen called “a basic move to secure funding for 2022.” That’s in addition to $15.2 million Orkilla had invested the year prior, increasing the fund’s ownership stake to between one-third and one-half of the business. At the time, Mikkeller said the money was necessary to offset pandemic-related losses. According to a company audit, Mikkeller had a total income loss of about $4 million between 2019 and 2020, which it attributed mostly to the pandemic’s blow to on-premise hospitality as well as “a temporary slowdown in revenue from wholesale overall.”

In the U.S. at least, those slowdowns have not been temporary. In describing the company’s less expansionist focus, Bjergsø stated the need for Mikkeller to redirect toward “focus markets.” He did not elaborate on what those markets are, but it appears the U.S. is not at the top of the list. Ultimately, closing the San Diego brewery represents an admission on Mikkeller’s part that the challenges that have hampered its U.S. operations for years are too great to continue fighting.


23 August, 2022