Two Sacramento-based breweries, Rubicon Brewing Company and American River Brewing Company, closed down this summer after nearly 30 years and five years in business, respectively. And according to one craft brewing expert, it’s a trend that surprisingly did not start earlier.

“In California we’re continuing to see an average of two new breweries every week, so that’s 100-plus new breweries every year, and we’ve been on that pace for about five years with essentially zero closings — maybe one or two a year — so we can’t really sustain this pace forever,” said Tom McCormick, executive director of the California Craft Brewers Association.

California’s craft brewing industry continues to grow exponentially, including on the shores of Lake Tahoe, where more than seven breweries operate.

However, as McCormick noted, some breweries in the Golden State have overestimated their own ability to expand, resulting in a departure from the beer scene.

“I don’t think it’s over-saturation because we’re not there yet. It really is twofold: One is those companies that haven’t put a business model in place or don’t have adequate business skills and abilities; secondly are the breweries that have borrowed a lot of money and have not seen the growth that they expected,” McCormick continued.

He notes the importance of running start-ups wisely in order to avoid encountering the same problems of previous breweries.

“You have to be on your game in terms of running a smart, efficient business. We’re entering a new era where not just anything works — you can’t just open doors and brew beer and succeed.

“We’re entering a time now where brewers have to run very prudent, careful businesses and if they do that, and if they make good beer, there are lots of opportunities for success and growth,” McCormick explained.

Adaptability is crucial

Despite the concern McCormick showed for new businesses trying to break into the industry, business owners in South Lake Tahoe don’t see this as an issue for the foreseeable future.

Two establishments that most recently made appearances in the craft beer scene, Lake Tahoe AleWorX and South Lake Brewing Company (SLBC), believe their business models allow them to adapt to the changing environment of the industry.

“The craft beer scene is extremely localized,” said SLBC brewer Ethan Lennox. “[In Sacramento] they have overwhelming competition, so they either need to re-innovate or have an outstanding product — that’s why Rubicon didn’t succeed. They were sticking to their guns, and if you’re not rebranding, you’re not succeeding.”

SLBC co-founder Nicole Smith agrees.

“[Rubicon was] trying to grow too fast with the beer they always had. We’re hesitant to keep even the favorites on tap; we constantly need something new,” she stated.

The two note the concept of “Rotation Nation” being at the forefront of the business, emphasizing variety and a constantly changing list of what’s on tap. In addition to SLBC’s ability to produce a mix of libations new to South Shore, the brewery’s drinks are also featured on roughly 15 taps around town.

Another unique aspect of SLBC is the team’s decision to avoid selling food at the taproom. Customers are encouraged to bring in their own meals, or purchase them from food trucks that are on-site each weekend.

“Trying to start this business anywhere else would be nuts. Relying on distribution is not smart except here because no one else is doing it,” said Lennox. “The market is saturated, but it’s unique. We’re doing something that’s done everywhere, but no one is doing it here.”

Changing plans

Lake Tahoe AleWorX is taking a different approach, and finding success, with its restaurant-plus-taproom — but it’s something owner Luca Genasci didn’t originally see in the business model.

“Originally I wrote the AleWorX business plan to create the Lake Tahoe brand of craft beer — more or less what SLBC has started with — a production facility focusing on producing a number of styles of beer under a Lake Tahoe brand, packaging that, distributing it and trying to grow that as far and wide as possible.

“We hit a crossroads midway through the approximate three years we’ve been at this now, where funding wasn’t going to be as lush as we’d hoped, i.e. a little tough to build out a high-end taproom and large-scale production facility straight out of the gate,” Genasci said.

After chatting with head brewer Josh Watterson (also head brewer of Reno’s Brasserie Saint James), Genasci and the AleWorX team decided to pursue a taproom model complete with food.

“[Watterson] said, ‘I feel like we should start with a taproom and make that more about the craft beer industry as a whole, rather than just about Lake Tahoe AleWorX.’ We decided to do that by having 30 taps — our taproom is about all kinds of beer and breweries under the Lake Tahoe AleWorX name, rather than just riding on our own coattails and brand,” Genasci said.

Like the SLBC team, Genasci notes the importance of being flexible within the ever-changing beer scene.

“The bottom line comes down to the craft brew industry becoming very crowded. Those that have a quality product, firm brand and good marketing strategy are going to thin out those that aren’t doing everything at a premium level, so the competition gets more fierce as it gets more crowded,” he said.

He notes that apart from his business model changing halfway through its development process, he and his team are confident in their ability to be flexible as a result of the industry’s demands.

“We specifically decided to put a lot of tap handles and not have it focused on our brand for the reason that trends roll. If sours are super hot, there’s no reason why we can’t put a bunch of sours on tap. If IPAs are fading out, we’ll stop featuring IPAs. These are theoretical, but because our selection is about craft beer as a whole and not just Lake Tahoe AleWorx, we’re really about to ebb and flow with the craft beer world,” said Genasci.