— The sale of San Diego-based Green Flash Brewing Co. may have come as a surprise to local craft beer consumers, but industry experts say it holds lessons for other brewers in understanding market forces and the complexities of expansion.

Following multiple years of 30 percent growth, Green Flash was sold to an investor group in early April after it discontinued East Coast distribution and closed its Virginia Beach facility. The sale also included its sister company, Alpine Beer Co.. In a statement, Green Flash indicated it was downsizing due to complications in bicoastal operations.

The region’s craft beer industry growth is still robust despite increased competition in the market. San Diego based breweries and brewpubs generated sales of $726.6 million, $734.7 million and $851 million in 2014, 2015 and 2016 respectively, according to the National University System Institute for Policy Research’s (NUSIPR) San Diego Craft Brewing Industry 2016 update.

Recipe for Success

Vince Vasquez, an independent industry analyst affiliated with National University, said the sale shows the industry what can and can’t work in terms of expansion. For some San Diego breweries, the key for expansion success is knowing your audience, finding a way to make product fresh, and not making more than what is demanded.

Vasquez said the Green Flash sale is not indicative of a larger trend but he believes that because of the increased competitiveness of the industry, breweries need to adopt more calculated strategies for expansion.

For example, introducing beers relevant to consumers is important for those breweries wishing to expand. The West Coast style and hazy IPAs that Green Flash championed didn’t sit well with East Coast audiences, Vasquez said.

“Really the relevance of that kind of style of beer, for what it’s worth, is relegated to Southern California,” said Vasquez.

He also believes the price point of Green Flash beers and the fact there is less consumption of craft beer in other states might have also contributed to the company’s consolidation and sale.

Green Flash did not name the investor group in a news release. However, according to a California Department of Alcoholic Beverage Control filing, WC IPA LLC is named as the owner of Alpine Beer’s license. Green Flash founder Mike Hinkley is named vice president of WC IPA LLC on this license. Richard Alan Lobo is named as president.

Act Locally

With 40 percent to 45 percent of San Diego’s beer market dominated by craft, the demand remains great but still crowded, according to Vasquez. In order to succeed, he suggests brewers focus on tasting room experiences that are close by to where people live.

Societe Brewing is a company that focused its growth within San Diego. Societe opened its doors in 2012. Eighty-five percent of its sales are wholesale and 15 percent comes from its tasting room at 8262 Clairemont Mesa Blvd.

“The main thing we focused on regarding expansion is … to not grow more than what the demand is out there for your product as opposed to making more beer to increase revenue and then either opening new markets or just trying to sell it,” said co-founder and CEO Douglas Constantiner.

Societe has thought of itself as a production facility first with the tasting room as an added bonus, he said.

Brand Recogniton

Coronado Brewing Co. has expanded more than Societe but has focused its sales in mostly Southwestern states. Coronado started in 1996 and expanded its brewpub in 1998. CEO Brandon Richards said their real growth came when they opened their tasting room at 1205 Knoxville St. After that, the company opened a restaurant in Imperial Beach. It was distributing to 19 states, but scaled back to 13.

Richards said Coronado decided to stay closer to home because there’s more brand recognition.

“I think as you get farther away from home, whether its 500 miles or a thousand miles, it’s more difficult to tell the story of the brewery and to remain relevant,” said Richards.

Matt Rattner, co-founder of Karl Strauss Brewing Co., focused his brewery’s expansion specifically in California for a few reasons. He didn’t think the San Diego style beers he was making would be as well received elsewhere. In addition, Rattner believed craft didn’t taste as good if it had to be shipped far away.

“Because it’s a non-pasteurized product, you’re dealing with the potential for temperature variations, dealing with potential for distributors not rotating the beers properly, not getting to market fast enough — all these things that would give people a bad experience with our beer,” said Rattner.

Karl Strauss started in 1989 and is credited with jump-starting the craft beer industry in San Diego. The company slowly grew within California, expanding to Northern California five years ago, and only distributes within the state.

A New More Difficult Day

Stone Brewing Co. managed to expand outside of San Diego, opening locations in Richmond, Virginia, and Berlin, Germany. The company, founded in 1996, was listed as number 18 on the Brewers Association’s top 50 brewing companies list, a report determined by beer volume produced.

Stone CEO Dominic Engels thinks breweries getting to a national level is much harder nowadays. He credits Stone’s success to hard work, consumers’ emotional connection to the brand, and being able to grow in a less competitive market.

“Stone is lucky to enjoy relevance in all 50 states whereas today if you started a brewery that wanted to be relevant in all 50 states, but I’m starting in Vista, California, for example, that is very hard to accomplish,” said Engels. “The battle lines have been drawn.”

Vasquez, the industry analyst, said there’s still room in the craft beer market because demand for it is high in San Diego.

“I think there’s still room to run in the county for the industry if only because we are still a growing region,” said Vasquez. “There’s people who are moving to San Diego County every year.”