The Ominous Lesson Behind The Old Dominion Pub Closure…

Posted on Posted in Anheuser-Busch, Odds and Ends, Old Dominion

I know that things have been pretty quiet, what with no posts this almost finished month. I’ve been traveling quite a bit, including several weeks in Seattle and Alaska (including interviews with Geoff Larson and Dick Cantwell). And my return has been filled with legal catch-up. And so it was the news today that Old Dominion Brewing has closed its on-site pub that punctures the silence.

I’ve written quite a bit about Old Dominion and its pub over the years as I’ve long enjoyed the place. I had one of my first tripels here about a decade ago and can remember the experience. I’ve returned many times since then and have shared the trepidation felt by other Old Dominion fans over the brewery’s roller coaster last year-and-a-half. In the beginning, the changes experienced after the sale by Jerry Bailey and investors to Coastal Brewing (51/49 split of Fordham Brewing and Anheuser-Busch) were actually smaller than expected. The pub closed for a while and underwent some needed cosmetic changes. Staff were required to wear uniforms, loud live music was added, and Anheuser-Busch’s product line appeared in the bar. I was even impressed during a visit this summer to see how the brewing staff, which is made up of many new faces, exuded a sense of excitement over future projects (including special weekday releases, small batch offerings, and perhaps the longest lagered Octoberfest in the world).

Long time regulars, however, never really got over the changes, however small they might have been. Attendance at the pub slowed to a crawl and the writing was on the wall. The departure in July of Scott Zetterstrom, Coastal’s vice-president of Brewing Operations who had a long history with Old Dominion, was a sign portending recent events that many of us missed.

So it was with mild surprise but not shock that I learned of the closing this morning. I think at this point the real question for Old Dominion fans is what will become of the brands and the brewery in the future. As Coastal runs another brewery in Dover, Delaware*–one that is large enough with expansion to cover all the company’s brands–the inefficiencies of running two small facilities will inevitably lead to a consolidation of production. As the company’s corporate parents are located in Annapolis, and the pub is now closed, it’s not difficult to see where things are headed. I don’t know how long Old Dominion’s lease on the property runs (a sufficiently long time I would venture from Coastal’s attempt to salvage the pub) but I wouldn’t expect Old Dominion’s Ashburn brewery to remain open any longer than Coastal can control.

Beyond the physical brewery, the future of the Old Dominion brands is another questionable issue. Reports on the availability of the brewery’s products following the Coastal acquisition have been mixed. Old Dominion has always had distribution problems and a real inability to grow, despite substantial, industry-wide success in the craft segment. According to statistics provided by the Brewers Association, Old Dominion produced 24,306 barrels in 2003, 26,827 in 2004, 27,517 in 2005, 22,421 in 2006, and an anemic 19,000 in 2007, a 34-percentage drop in the last two years of production despite double-digit growth among its craft competitors.

Coastal itself may have some issues to deal with as well. As I write about in the next issue of BeerAdvocate Magazine and elsewhere on this site, craft beer partners of Anheuser-Busch have to be concerned about the effect the merger with InBev will have on their operations and place in the corporate pecking order. In a business sphere where the corporate parent is producing several hundred million barrels of beer per year, how much interest do you think the company, especially one with InBev’s track record towards small breweries, will have for a measly 19,000 barrels? Or even for one with 88,000 barrels (Goose Island), 253,000 barrels (Widmer), or 206,000 barrels (Redhook)?

We now live in an era where craft consolidations, either within the niche or outside of it, will become the rule rather than the exception. From the biggest breweries to the smallest nano-outfits, corporate and estate transitions will require greater discussion and consideration in the near future. Change is coming; Old Dominion is just an early warning.

*Correction: The article originally referenced Annapolis, Maryland, instead of the Dover, Delaware brewery.

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