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Stone Packs Its Stein and Heads to Berlin

Years ago, some people told Stone Brewing Co.’s co-founder that he’d be crazy to take on the established players in beer-making’s European homeland, particularly Germany.

But after 18 years of steady growth — to its place as the 10th-largest craft brewer by volume in the United States — CEO Greg Koch said the Escondido-based company is ready to make its mark overseas, with plans to invest more than $25 million in new brewery and restaurant operations in Berlin.

“It is daunting, and yes, it’s a challenge,” Koch said. “But I couldn’t imagine coming into this as anything but an underdog.”

Following more than four years of planning and scouting for the right European site, Koch said that before year’s end Stone Brewing will begin converting a historic former gasworks facility in Berlin, consisting of three buildings spanning more than 2 acres. The plan is to operating at the site by late 2015 or early 2016.

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The complex will serve as Stone’s international hub, “promoting goodwill and quality craft beer spanning the globe,” said Stone President Steve Wagner, who founded the company with Koch in 1996.

Company officials noted that the venture in Germany will be the first of its kind for an American craft brewer, as Stone for the first time brews and sells its products throughout Europe. Those will include its popular Stone IPA, Stone Pale Ale and Arrogant Bastard Ale, among others.

Koch said there is a growing international demand but limited European availability for U.S.-made craft brews, particularly what has become a San Diego style made popular amid rapid local growth in commercial brewing.

“Customers in Europe have been very receptive to West Coast-style IPAs,” Koch said.

Exporting a Format

The Berlin operations will include elements of popular Stone venue formats now found in several San Diego County locations, including Escondido, Point Loma and downtown San Diego, the CEO said. In addition to a brewery and packaging hall, there will be a Stone Brewing World Bistro & Gardens restaurant and a Stone Company Store selling Stone beers and company-themed merchandise.

The Berlin location includes an historic red-brick main hall, dating back to 1901 with a vaulted ceiling and spanning more than 43,000 square feet. That particular space will house a stainless steel brewhouse, a farm-to-table restaurant and a retail store.

A 20,775-square-foot building will have brewing, fermenting and packaging operations, and a 1,300-square-foot facility is in what will become gardens and an event space.

The World Bistro & Gardens at the site will highlight locally grown and organic food, and Stone will serve an array of craft and specialty beers from German, European and other global brewers on tap and in bottles, as well as its own products. The Berlin operations will initially employ about 70 people, Koch said.

The buildings are in a development known as Marienpark Berlin, about a 30-minute drive from the Brandenberg Gate at the city’s center. Stone officials said the facility was originally owned by Imperial Continental Gas Association, a British company that converted coal into gas.

$29.8 Billion Market

Stone’s international expansion comes as U.S. craft beer makers continue to take market share from what are now multinational, mass-distribution brewers, currently capturing about 12 percent of all domestic beer sales. U.S. revenue in the craft and premium beer segments are projected to grow 1.4 percent annually in the next five years, reaching $29.8 billion in 2019, according to market research company IBISWorld Inc.

The U.S. imports 13.7 percent of its beer while exporting just 5.6 percent, but the export figure is expected to reach 11 percent by year’s end, thanks in part to a weakened dollar and improved international distribution channels, IBISWorld reported.

Stone employs more than 700 and had revenue of $135 million in 2013, as it brewed 213,000 barrels. The company in the past two years has significantly expanded its local distribution and retail operations, and it is also scouting Eastern U.S. sites for new brewing facilities. Meanwhile, Koch said a previously announced plan to develop a hotel near its Escondido headquarters is on hold.

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