Now a top-performing craft player with a global presence, Lagunitas Brewing Co. had a modest beginning, not unlike most beer startups. The company got its start in 1993 when founder Tony Magee started making beer in his kitchen in Lagunitas, California. He loved his first batch, and it paved the way for Lagunitas’ mainstays like the flagship IPA, Little Sumpin’ Sumpin’ ale, and Hop Stoopid ale. Magee’s second batch, however, was, by his own account, awful. But the poor results from his follow-up brew only strengthened Magee’s resolve to delve further into brewing. A quarter century after those first steps, Lagunitas is now a major force to be reckoned with. The company operates two large breweries and three taprooms nationwide, with another taproom opening this year. These produce a full roster of offerings, including 12 year-round labels, multiple limited-release seasonals, and small-production specialty beers. Recently acquired in full by Heineken International, Lagunitas now has worldwide reach and the backing to continue its rapid expansion.
Lagunitas is one of the fastest-growing small breweries in the country. Though the company produced just 27,000 barrels in 2004, by 2010 production had increased to 106,000 barrels and in 2015 Lagunitas topped 600,000 barrels. Its flagship brewery in Petaluma, California has a 680,000-barrel brewing capacity, and Lagunitas’ second facility, which opened in Chicago in 2014, has a capacity of 1.2 million barrels. A third production facility in Azusa, California is slated to open this spring with a two-story rooftop taproom and an experimental brewing area that will house stainless steel tanks and French oak foeders. Heineken International acquired a 50% stake in Lagunitas in 2015 and purchased the remaining 50% last year, giving it full ownership of the brand. Heineken’s backing has allowed Lagunitas to expand globally, and Magee now works for the parent company as an executive, helping to oversee the Lagunitas portfolio and Heineken’s craft beer strategies.
The transition from scrappy craft brewery to standout international player has gone smoothly thus far. “Our flagship IPA is growing and still makes up more than 60% of our sales,” says Lagunitas CEO Maria Stipp. “We’ve completed many important capital projects recently, as well as additional global expansion, and we’ve had a healthy and successful transition working with Heineken.” Stipp adds that the brewery’s brand awareness and market share have grown faster than its competitors’, while maintaining strong market pricing.
The Heineken buyout and massive increase in production and distribution have changed how Lagunitas can be classified. According to the Brewers Association, Lagunitas is no longer a craft brewer. But its executives feel they still compete in the craft beer space and have a loyal following among craft beer drinkers. The flagship Lagunitas IPA grew 3.6% to 7.2 million (2.25-gallon) cases in 2017, according to Impact Databank, and portfoliomate Little Sumpin’ Sumpin’ ale rose 5% to 1.9 million cases.
“Quality and consistency of our product is king,” Stipp says. “We may not be seen as a craft beer to some people these days, but from what I see makes a beer ‘craft,’ we’re still very much exactly that. Our brewers are artists and we’ve created our own brewing systems from the school of hard knocks. We learn from our mistakes and continue to improve. Size or ownership doesn’t change that.”
The addition of a second brewing facility for Lagunitas was a game changer. The Windy City facility manages the brand’s global expansion and currently supplies beer to 15 countries. With Heineken’s backing, Lagunitas has entered France, Mexico, Italy, and Spain and has broadened its availability in the United Kingdom, Canada, the Netherlands, Sweden, and Japan. After it opens this year, the Azusa facility will become a social hub in Southern California, much like the Chicago and Petaluma sites are now. Lagunitas also operates a taproom in Seattle and produces specialty beers for the Pacific Northwest market there.
Even with its aggressive expansion, the company is careful not to overextend itself. “With growth, there are always growing pains,” Stipp explains. “We have to make sure we hire the right people, develop our tribe while we continue to scale, and invest wisely so that we remain a healthy business. We don’t get ahead of ourselves, and we do our best to stay clear on the ever-changing dynamics of the beer industry.”
Lagunitas’ most popular product, Lagunitas IPA, is the top-selling IPA in the country, according to the company. It’s available in 12-ounce and 22-ounce bottles nationwide, and has become a draft darling at bars and restaurants. Lagunitas IPA is a top-10 beer brand and required draft pour at the restaurant chain Buffalo Wild Wings, which has more than 1,200 locations nationwide. On average, Buffalo Wild Wings units boast 30 beer taps, and Lagunitas IPA averages $6.36 for a 22-ounce pour.
“The Lagunitas brand stands out in a crowded craft beer space by being true to who they are,” says Buffalo Wild Wings beverage director Andrea Schwenk. “Lagunitas is a little quirky and irreverent, and they have a really unique brand voice that comes through in everything they do, from the products they develop to the marketing they deploy to the people they hire and the corporate culture they instill. They’ve carved out a unique position in the marketplace.” Schwenk adds that Lagunitas particularly appeals to Buffalo Wild Wings consumers under 35 years old, who tend to be exploratory beer drinkers interested in new flavors. The chain also carries other Lagunitas labels in select markets. Little Sumpin’ Sumpin does well on draft, and periodic limited-time releases like Lagunitas Fandom hoppy pale wheat beer have been popular.
Lagunitas IPA also does well on draft at the barbecue concept Brother Jimmy’s, which has locations in both New York City and New Jersey. The restaurant in Manhattan’s Murray Hill neighborhood pours the IPA on draft ($9.80) and offers Little Sumpin’ Sumpin’ in bottles ($9.25). “Lagunitas is a dependable and trusted option for craft beer enthusiasts and mainstream beer consumers,” says Andrew Blair, the head bartender at Brother Jimmy’s Murray Hill. “The large print ‘IPA’ on the tap handle is one of their best marketing assets. I notice a lot of impulsive or undecided customers quickly look at the taps and make a decision, and the large block ‘IPA’ stands out.”
The growth of Lagunitas’ beer lineup has kept pace with the company’s rapid acceleration. Lagunitas Brewing Co. produces more than 25 labels. Along with the flagship IPA and popular Little Sumpin’ Sumpin’ are additional ales like Sumpin’ Easy and 12th of Never—both of which recently became available in cans—as well as Hop Stoopid, Dogtown pale ale, and Aunt Sally sour mash ale. Beyond those styles, Lagunitas also regularly produces Imperial stout and the Czech-style pilsner Lagunitas Pils. Meanwhile, seasonal standouts range from Cappuccino stout and the barleywine ale Gnarlywine to the popular Brown Shugga’ and Lucky 13 Red ale.
The company’s taprooms offer additional limited-quantity beers. In Chicago, Lagunitas sells Born Yesterday pale ale, an unfiltered brew made with un-kilned hops, and Sakitumi, a double IPA made with sake yeast and rice (beers at the Chicago taproom average $6). The venue hosts local live music acts and also serves light fare, including nachos,
pretzels, salads, and sandwiches.
The Lagunitas Taproom and Beer Sanctuary in the Seattle suburb of Ballard, Washington, pours a gin barrel-aged version of Aunt Sally ale, as well as Willettized Coffee stout, which is aged in rye whiskey barrels from Willett Distillery (beers average $6). The Seattle venue also houses live music acts, part of a broad push to make music an important part of the Lagunitas experience. The company’s Petaluma taproom and brewery has an attached amphitheater that hosts concerts, and the brand has had a presence at several prominent music festivals around the country.
The company has also been an outspoken supporter of cannabis legalization and created a limited-release brew last year that contained cannabis oil, though it had no THC. Called Supercritical IPA, the beer drew a lot of attention, even though it was only available in California and sold out quickly. “I don’t believe we take an irreverent approach to craft brewing so much as we are nonconformist and nontraditional,” Stipp says. “We don’t shy away from trying new things, and we have fun doing it. We don’t do things for shock value. Rather, we stay true to our voice that’s been created over the years.”
Though it’s been a heavy-hitter in the on-premise, Lagunitas also has a solid off-premise sales base. The company’s brews have a presence in national retail accounts and local beer stores. Cassie Finley, global category manager for beer and spirits at Whole Foods, says the upscale grocer sells Lagunitas labels chain-wide and has had a great partnership with the company for many years. The flagship Whole Foods in Austin, Texas offers Lagunitas IPA, Maximus ale, Pils, and Undercover Investigation Shut-Down ale in bottles ($10-$11 a 6-pack of 12-ounce bottles) while offering 12th of Never and Sumpin’ Easy ale in cans ($19 a 12-pack of 12-ounce cans). “Lagunitas is well represented in our sets,” Finley says, though she adds that selections vary greatly by market and store. “The brand has local and national relevance and the quality speaks for itself. It’s popular with a range of consumers. We expect to see continued growth for the brand in our stores.”
Boulder, Colorado-based retailer Hazel’s Beverage World devotes three shelves to Lagunitas, stocking six to eight of their brews by the bottle, can and case. Beer department manager Derek Ridge says the Lagunitas seasonals often garner excitement and adds that year-round labels like the flagship IPA, 12th of Never and Hop Stoopid also move well in the store ($10-$14 a 6-pack of 12-ounce bottles; $5-$10 a 22-ounce bottle).
Meanwhile, in San Francisco, the craft beer and wine taproom and bottle shop Liquid Gold has seen heavy interest in Lagunitas High West-ified Imperial Coffee stout ($4 a 5-ounce pour; $7 a 9-ounce pour; $3 a 12-ounce bottle). Aged in High West whiskey barrels, the limited-release stout is popular with consumers who enjoy stronger beers, says owner Tim Lee. He adds that the overall Lagunitas brand seems to do well in his venue, especially with newer craft beer consumers.
While Heineken’s purchase of Lagunitas did affect consumer perception of the brand, executives from both companies have been happy with the transition and say the beers continue to sell as well as they always have. According to Heineken International, Lagunitas continues to outperform the U.S. beer market and is the leader in the IPA segment, which has recently been the fastest-growing craft beer subcategory.
Upon finalizing the acquisition, Heineken International chairman and CEO Jean-François van Boxmeer said the Lagunitas partnership has been “a great success” and that the full acquisition of the brewer allows Heineken to accelerate its rollout of the beer around the world. Stipp echoes that sentiment. “Heineken has been a great partner,” she says. “We’re learning and growing and using their insight to become stronger, wiser, and better prepared for global markets. We’ve embedded our own ambassadors into many global markets to learn and grow together as a team. Our people are out in front, and this makes us very protective of our culture and our way of brewing, marketing, and selling our beer.”