Thriller beer on faucet at Stone Brewing’s San Diego bistros foreshadows multi-million-dollar enlargement

Stone Brewing’s bistros in Escondido and Liberty Station have a mystery beer on tap. The menu just describes it as an “experimental lager.”

This beer is Stone’s first batch of Sapporo Premium — the first to be made at the local craft brewery since it was acquired by Japanese brewer Sapporo for $165 million last August.

A second batch is currently fermenting, foreshadowing the multi-million dollar transformation that Stone’s Escondido and Richmond, VA production breweries will face as a result of the Sapporo acquisition.

Both locations are expanding their capacities to be able to brew Sapporo beers for the American market.

“The underlying theme is to produce all of the Sapporo beer sold in the United States in the United States,” said Sean Monahan, Stone’s chief operating officer. “That’s the core driver.”

Incorporating Sapporo beer production will roughly double Stone’s annual production of its own craft beers, such as Arrogant Bastard IPA and Buenaveza. Last year, more than 376,000 kegs were brewed – ranking seventh among the country’s craft breweries by volume. A barrel equals 31.5 gallons.

Sapporo USA beer is currently made in facilities mostly located outside the United States, Monahan said.

“The logistics costs, etc. make it a very expensive undertaking,” he said. “I always use the analogy that it’s mostly water and you don’t want to transport water far, so you produce it as close to the market as possible.”

The Escondido facility will brew premium Sapporo that will be sold west of the Rocky Mountains, while the Richmond facility will handle production for the Midwest and East Coast. In addition to Sapporo Premium, Sapporo Black and Sapporo Reserve will also be brewed at the Stone facility in Richmond.

Nicole Williams, senior operations manager at Stone Brewing Escondido

(Mike Freeman)

Stone will also be expanding its canning, bottling and keg lines at both Escondido and Richmond to handle the increased volume.

Sapporo’s investment in the U.S. beer market comes at a time when the industry is struggling to keep up with growing competition — not just from other breweries, but also from canned cocktails and other alternative adult beverages.

The overall beer market shrank 3 percent in volume in 2022 — mostly driven by declines in big beer brands, according to the Brewers Association, a trade group that mostly represents small, independent breweries.

“Combined growth for this category is difficult to achieve in this more mature and competitive market,” said Bart Watson, chief economist at the Brewers Association.

While craft and import breweries have fared better than the big brands, they have still faced rising operating costs and changing consumer preferences. Sapporo wasn’t immune. Earlier this month it announced the closure of 127-year-old San Francisco-based Anchor Brewing Co., which makes Anchor Steam. Six years ago, Sapporo acquired Anchor Brewing, which produced about 35,000 barrels last year.

Despite this setback, Sapporo is expected to invest up to $20 million to expand capacity at Escondido and about $40 million to increase production at Richmond, Monahan said.

“Even though I’m saying we’re going to make the same (Sapporo) beer that people are familiar with, I think it’s actually better because it’s made in the US and it’s so much fresher,” he said. “You get a fresh Sapporo compared to one that’s been on a boat across the ocean for weeks.”

While work is already underway to get Sapporo beer flavors right in experimental batches, mass production is not expected until January 2024.

Nevertheless, new devices have been ordered, the installation of which is expected to begin in the autumn of this year. Eight new fermentation tanks will be added at Escondido and another eight tanks will be installed at Richmond.

Stone Brewing employees clean tanks at the Escondido facility

(Mike Freeman)

A new keg line and expanded filling and canning capacities are also planned in Escondido. Richmond will also modernize its packaging lines.

Stone expects to add another day to his work week, from 24 hours five days a week to 24 hours six days a week. The additional workload is expected to create 40 to 50 jobs on site.

Two Japanese brewers from Sapporo moved to Escondido to help make the beer. Brewing the trial batches was a learning experience, said Nicole Williams, senior operations manager at Escondido Brewery.

“One thing about brewing a beer like Sapporo — a light, clean lager — is that you have nowhere to hide,” she said. “You really have to get every step right every time.

“That’s why we’re conducting these trials — to make sure we’re making the freshest, best sapporo anyone’s ever tasted,” she continued. “Creating it here in the US and getting it straight to market is going to make a noticeable difference, I think.”