It is a curious thing walking into Council Brewing Co. in 2019. Despite shuttering a month ago, very little has changed. There’s still beer in the barrels and a neat row of barstools ready to be filled. It feels like all it would take is illuminating the “OPEN” sign to draw passerby in for a pint of Bully Pulpit IPA and the world would spin on for this brewery. Of course, things are more complicated than that.
December 15th, 2018 officially marked the cessation of Council Brewing Co. It seemed to come out of nowhere, but per the Facebook post announcing the same, it was a decision that had weighed on co-owners Liz and Curtis Chism for quite some time. I don’t think it’s hyperbole to say the statement sent a considerable tremor through the local beer scene. Most reacted with an outpouring of support and by sharing fond memories with the brand, but I found myself more vexed than anything. What undid this Kearny Mesa brewing institution?
Perhaps the armchair CPAs of the world were correct in quipping that the business had expanded too fast, but the dearth of nuance in such statements gnawed at me. I wagered the arc of Council Brewing Co. had something more to teach, or at least a more personal story to tell. If nothing else, I wanted to properly memorialize the efforts that had enriched San Diego’s beerosphere for half a decade.
As is the story for the opening of so many San Diego breweries, the Council Brewing Co. endeavor began with a passion for homebrewing and the spark of entrepreneurship. Their burgeoning talent found recognition in awards through local club QUAFF, the San Diego County Fair’s homebrew competition, and the National Homebrew Competition, which is to say nothing of the appreciation dispensed by those called upon to drink down the Chism’s supply. All it took was a friend approaching Curtis with the idea to partner up on starting a brewery back in 2012 for the dream to finally take shape.
Those keen on arithmetic will note the two-year gap between this event and the opening of Council Brewing Co. in mid-2014. This expanse was marked by exploring myriad possible locales (with a couple of false starts), dissolution of the original partnership, selling their home to provide additional funds for build out, and the onboarding of a new investor/partner. Despite the chaotic road to Kearny Mesa, they were operating loan-free and ready to serve a surprisingly eager public with their three-barrel brewhouse. “We opened up and, to our shock, people showed up and packed out the place,” said Curtis.
While early sales were meeting expectations, the waters were far from calm for the Chisms. In their first month they were already addressing flaws in their brewing process, as well as tending to the complexities of a mixed fermentation sour program. All of that would have been chaotic enough without their new partner opting to “quit unexpectedly,” leading to a buyout and the cessation of the second financial relationship for the brewery.
Though the Chisms could not have known it at the time, the happenings of those first six weeks would prove to define the trajectory of their business. The most immediate was the arrival of the tart saisons that would later be known as the Beatitude series. It proved all too apt a name, as it blessed the business with a surge of recognition and an unexpectedly rabid fanbase. “We wouldn’t even announce [releases] on social media…within two hours, boom, 60 cases would go,” said Curtis.
After establishing the “magic slurry” feeding Beatitude produced consistent, flavorful (and coveted) beer, the Chisms decided to scale up production and extend its reach out of the tasting room. One micro-loan later, the Magic Factory facility was born. It proved so successful that by January of 2016 they were already refinancing that loan to upgrade their brewing setup, vastly augment cellar needs, and acquire bottling equipment to help boost the reach of the program.
On the whole, life was good for Council Brewing Co. in 2016. The business was in the black as it had been in the previous year, even on the back of loan payments and the Chisms striving to pay themselves a salary. Beatitude had proven a successful way to enter new markets as their distribution grew. However, midway through that year, there was a notable downturn in its sales throughout Southern California. This could have had multiple causes, but they saw a surge in popularity of kettle sours as a likely culprit. Beatitude, a mixed fermentation brew, had trouble competing in a marketplace where there wasn’t sufficient consumer understanding of how much more time- and labor-intensive it was to produce than its new stylistic rival. It made Beatitude’s price point feel inflated, especially among those that actually mistook it for kettle soured.
While this was an undeniable setback, it was by no means a crisis. Their tasting room sales had grown 10% year over year since opening, which represented the majority of their revenue and somewhat buffered them from distribution fluctuations. Eventually they found eager national and even international markets to make use of the supply they had already generated. But as the sour category continued to slow into 2017, the Chisms knew their business had to further evolve.
Council Brewing Co.’s new strategy for 2018 was to try their hand at the bustling market for large batch IPAs, a seemingly timely decision relative to the ongoing hype surrounding hazy IPAs. This shift in approach required brewing capacity beyond their existing setup, which they addressed by contracting brews through another local brewery. This initially proved a prudent approach, with cans of their In The Blind hazy IPA selling quickly at the tasting room and receiving ravenous demand from their distribution network. It would have been an unequivocal success, were it not for one small wrinkle. “Once the IPAs hit, [distributors] pretty much stopped ordering the sours,” lamented Curtis.
This was something of a double whammy; it was one thing to have half of the business potentially ebb and flow, but quite another to upend that pipeline with a product whose margins — particularly after the added overhead cost of contract brewing — were far leaner. Still, they appeared to have another hit on their hands, so business proceeded with an increased urgency around bolstering their presence in the local market.
It must have seemed a bit of serendipity when the Finest Made Ales facility in Santee came up for sale, because the Chisms had already been exploring East County for possible satellite tasting room sites. Further, this was essentially a turnkey brewing operation, removing the contract brewing variable from the equation (and at a price that barely edged past their established tasting room budget). Taking possession of the facility in March of 2018 allowed them to address the backlog of orders for their clean beers and fortify their direct sales. Unfortunately, this victory would prove to be offset by an uncanny volume of setbacks.
Beginning in May, one distributor after another wreaked havoc on both their financials and their production. Some suddenly slashed their standing orders in half. Others indicated they would pass on a shipment, but fully intended to reorder the following month. In many cases, those assurances were as empty as the previous month’s order. This was particularly troublesome, since logistics demanded cans be ordered and beers get brewed well in advance of these orders to fulfill them. While some of that packaged beer could be offloaded through local sales, much of it was effectively drain-bound due to an IPA’s narrow lifespan for quality.
Complications beyond those of capricious distributors compounded the Chism’s headaches. The opening of the Santee tasting room was followed by a dramatic downturn in traffic to their Kearny Mesa location. They had anticipated some cannibalization of their business as existing patrons opted to visit the new location, but they encountered nearly double the percentage hit that their industry peers had projected. Clearly, something more was afoot, because even signature events such as Talk Like A Pirate Day were down 40% from the previous year. To add insult to injury, a healthy sales channel through China ultimately dropped to zero when the country announced a 25% tariff on American beer in retaliation for U.S. tariffs. Even if they could ignore how “demoralizing” it all was, the cumulative financial impact of losing tens of thousands of dollars month over month was catastrophic. “It happened so fast that we just couldn’t recover from it,” said Curtis.
The looming close of the year brought everything into sharp focus. Courtesy of New Year’s Resolutions, they knew they could bank on the usual slump in January sales. They couldn’t reasonably assume February would be much better either, given the recent track record of diminishing returns on their marketing efforts. While many would look to an investor to stay afloat in similar circumstances, that option no longer interested them, especially at a juncture where the devalued business would likely not produce the most equitable terms. Add to that the realization that in five years of business they had paid themselves less than 50% of the time, and in some months, that pay wasn’t even sufficient to cover rent on their home. But the real line in the sand was their firm commitment to paying their employees. Once that was in jeopardy, the decision essentially made itself.
There’s an understandable compulsion to review the myriad decisions that led Council Brewing Co. to its terminus with the wisdom of hindsight, but that sort of analysis lacks the context of the moments that forged them. For example, it’s trivial to observe that a more conservative expansion of the Magic Factory would have decreased their reliance on the distribution channels that ultimately injured the business. However, it was the success of that endeavor that allowed Council Brewing Co. to do things like hire brewing staff. That only sounds like an indulgence until you discover it still wasn’t help enough to prevent Liz from needing to return to work the same day she gave birth to their daughter. All that can really be said is they saw opportunities to do more than keep the business afloat and pursued them to mixed outcomes.
Whether their brand lost its cachet in a world rife with newer, shinier options, or the ever-ominous market saturation came a-calling, the Chisms prefer to focus on what they managed to accomplish. “We tried to build a place that’s like a town council where people come together, deliberate, debate, have conversations, [and] forge new friendships,” said Curtis.
“Curtis and I did our jobs,” added Liz.