One of the most successful brewery startups of the past several years cut jobs last week, spawning competing narratives about whether it’s growing too fast or evolving at just the right time.
Daniel Lanigan, founder and CEO of Massachusetts’ Lord Hobo Brewing Company, confirmed to Good Beer Hunting that eight staff members from multiple departments, including sales, marketing, and production, were no longer with the company. “It sounds like we’re laying people off, but we’re getting better and more efficient,” he says. The company will look to hire even more people while it’s “growing for our best year yet.”
Lanigan says the brewery is “restructuring some of the team,” and that staffing changes are partly a result of holding employees to a "high standard of performance," one to which he also holds himself. These changes come at a key time, as Lord Hobo’s current goal is to produce 50,000 barrels of beer in 2019. That’s a challenging target for a company that started just four years ago, though the brewery has received a total of $16.5 million in investments between its launch and first three years of operation.
50,000 BBLs would be a 32.5% increase from last year’s production, a difficult (but not impossible) feat. Only two Brewers Association-defined craft breweries made more than 30,000 BBLs in 2017 and reached 30% growth or higher in 2018: Georgetown Brewing Company and Modern Times Beer. When including breweries owned by multinational companies, the total expands by just three, with Anheuser-Busch InBev's Elysian Brewing Company, Golden Road Brewing, and Wicked Weed Brewing matching that size and growth.
Former employees are questioning the brewery’s ability to meet that target, as well as the official tally of lost jobs. Rob Day, who served as the director of product marketing until last week, says that he believes 11 positions were eliminated. The figure was repeated by another former employee who asked to remain anonymous due to the sensitivity of the situation.
The job losses, depending on the exact figure, would represent 7–9% of the company’s current 120-person staff, although Lanigan says he’s added many more jobs in the last year. Still, for a business looking to grow by 13,000 BBLs of volume this year, the loss of key positions—including tenured roles across multiple departments—has left former employees in the dark.
Taylor Howes, who served as sales manager for about 300 accounts across New Jersey, says he had assumed everything was going well until last week’s termination. However, Howes and other former employees say they were told that layoffs took place for financial reasons.
“We were up, things were looking good, and it was only positive emails back-and-forth,” says Howes, who worked with Lord Hobo for one-and-a-half years. “But all of a sudden it comes that apparently we’re not doing well and costs were too high. The plan was to let go any extra fat they had to make up for cost loss.”
Lanigan says that all the positions will be replaced, although it isn’t clear when. He notes that last week’s staffing changes were simply part of an evolving business strategy. As Lord Hobo ramps up production and expands distribution, it’s also increasingly aware of how it needs to mature and grow, he says.
"We're kind of crushing it right now," he says, noting that his company has been driven mostly by organic growth in current markets. After opening in 2015 with 3,000 BBLs of beer—roughly the same production as established businesses like Colorado's Funkwerks and Oregon's Ecliptic Brewing—Lord Hobo grew fast. The company made 15,400 BBLs in 2016, then 32,400 in 2017, and a touch over 37,700 in 2018.
The business began with $4.5 million in startup capital, and then another influx of cash: it sold an undisclosed minority stake for $12 million to a private investment firm in 2017. There were 55 staff members at that point; the total grew to 103 employees by the end of last year.
Lanigan says Lord Hobo has also increased its benefit package, which now includes multiple weeks of paid vacation (depending on years of service), 11 paid holiday days, 401(k) matching, maternity/paternity leave, and some of "the best health insurance" in the industry.
"These are things we couldn't have done financially in year one or two, but we're able to do now because we're a more robust company," he says. There’s an $8-million taproom and restaurant at the Boston Seaport in the works, plus another future taproom in New York City. Both projects would bring in a significant number of new hires once complete, including an estimated 100 for the Seaport location, Lanigan says.
Lord Hobo’s ambition has been noticed beyond the beer world, too: a profile on Lanigan was published on the website of famed entrepreneur, author, and speaker Tony Robbins early this year.
Last week’s job cuts were unfortunate, Lanigan says, but not out of the ordinary. People have come and gone throughout Lord Hobo’s history—including some who were removed from positions—but the optics this time around may seem odd, as the terminations all occurred on the same day, he adds.
“Ultimately, it’s my responsibility for anybody we hire, so any time it doesn’t work out for whatever reason, it’s on me,” he says. “I take this very seriously.”
Separately, a former employee tells GBH that this isn't the first time staff cuts have been made due to overly-optimistic sales forecasts that didn't pan out. The employee, who asked to remain anonymous, says that staff were let go in cost-cutting measures following Lord Hobo's poor sales performance. Additionally, there have been voluntary departures in protest, which have included multiple leadership positions on the production side of the business.
Neither Day, the director of marketing, nor Howes, the New Jersey sales manager, say they have bad feelings about what they agree is a natural part of business. But the circumstances for the firings don’t line up with how the company seemed to be projecting itself, they say.
According to 2018 IRI sales, Lord Hobo increased its volume in national grocery, convenience, and other stores, as well as Massachusetts liquor stores, by 50%. In those Massachusetts liquor stores alone, the brewery’s growth was at 64% last year. Looking at the rolling, 52-week period from mid-June 2018 to mid-June 2019 reveals a different perspective, however. Lord Hobo’s portfolio of beers was only up 3% (national chains, plus Massachusetts liquor stores) or 5% in-state (Massachusetts liquor stores) compared to the previous year.
Bill Dillon, vice president of sales for Lord Hobo, said that retail outlets are the "main driver" of the company's sales strategy. Volume shipped to those stores is up almost 20% in 2019, he notes, although that reflects the amount of beer sent to stores, not necessarily what's being bought by customers, which is what shows up in IRI data. He tells GBH that some IRI information may be off because some brands weren't registered properly with the market research firm.
That said, there’s also Lord Hobo’s renovated, 180-max-capacity taproom, which opened in November 2018, to help drive profitable, on-site business. The brewery’s 617 New England-style IPA is also sold at the Boston Red Sox’s Fenway Park, where Lanigan says the beer is the #2 seller behind only Bud Light. Lord Hobo is also sold at the Encore Boston Harbor casino.
But these various sales avenues don’t represent Lord Hobo’s main push to move a projected 50,000 BBLs. Instead, the brewery is depending on retail outlets and new pricing strategies implemented in April.
Listed prices for several packaged beers have dropped significantly in the past year. Variety packs of 12oz IPA cans decreased from $34 in September 2018 to $30 today; a case of 16oz cans of Virtuoso New England-Style Hazy Double IPA dropped from $75.50 in December 2018 to $71.95; a case of 12oz cans of Hobo Life Session IPA went from $36.50 in October 2018 to $32.50 in December, and was most recently listed at $25.50.
Freebird Golden Ale, a new release that sells in 18-packs, is being sold to retailers at $15 per pack for the first 24. That price drops to $14 a pack for those ordering 25 or more, then again to $13 for orders of 40 or more. That last price, for context, is $4.32 per six-pack, prior to a retailer markup.
“From a manufacturing perspective, [Freebird] helps gobble up fixed overhead costs so everything else we have can be more profitable,” Dillon says, pointing at production cost efficiencies. “As our volume starts to increase, our costs start to decrease, and we’ve taken a hard look at how we can pass along those savings to retailers and customers.”
The former Lord Hobo employee who asked to remain anonymous says that a focus on costs did get more attention in recent months, although they claim that came in the form of budgets being cut, delayed payments to vendors, and increased pressure to move volume. "Pumping the market with new products is a temporary fix; it’s not sustainable," they say.
The brewery’s plays for additional volume, and attempts to find new ways to shift its beer in-store and on-site, clearly show a company looking to grow aggressively. As highlighted by Tony Robbins, the brewery is hoping to go “from a $10-million company to a billion-dollar company in 10 years.” That said, the recent departures among its sales, marketing, and taproom leadership are just the latest in a string of personnel losses. Lindsay Berk, who served as vice president of marketing from June 2017 to January 2019, and Rick Maher, chief commercial officer from March 2016 to September 2018, both recently exited the company.
Day notes that other large breweries that have grown quickly in recent years didn’t get rid of key positions to meet their goals—especially not positions that are so tied to moving product. Rhinegeist Brewery (which has been one of the few large breweries to show consistent growth in recent years), Night Shift Brewing (expanding quickly in Massachusetts), and Tree House Brewing Company (adding new production spaces) have all experienced strong growth without sacrificing tenured staff, he says.
“I don’t think it’s natural or normal, but it can obviously happen,” Day says.
Howes says that he was excited to join Lord Hobo because he knew the financial backing from Lanigan’s startup and PE money offered significant growth opportunity. Having formerly worked as an account manager in central New Jersey for Anheuser-Busch, he was thrilled to move to “a smaller brewery that had a family feel to it.” At work and at home, Howes says he proudly represented Lord Hobo, whether by sporting company clothing or talking about his love for the brand with friends.
“A sudden change is difficult, and when you don’t see it coming, it’s hard to understand, but I understand that’s part of the industry,” he says. “But if you don’t have the staffing power where you need it, the other challenge is how competitive the market can get if you don’t have people out there all the time excited to represent the brand.”
The entirety of this situation—the massive growth, large investments, and staffing changes—shows just how unique a company Lord Hobo has been during its infancy. Lanigan’s goal has clearly been to grow quickly; as far back as 2017 (when Lord Hobo was producing about 32,000 BBLs), he noted the brewery’s need to “get past 100,000 barrels and need to play defense.”
As the beer industry continues to move toward extremes—and companies opt to either remain really small or grow really big in order to find success—Lanigan is aware of the challenges that are still in store.
“The future is not guaranteed. Nobody cares how good we were last year,” he says. “We have to develop a raving fan culture and give those raving fans a reason to come back. We have to constantly improve and offer a better experience.”
He also notes that the two most important ways to cultivate a “raving fan base” are innovation and marketing—both of which happen to be areas that lost positions as part of last week’s job cuts.
Dillon says that the losses would seem counterintuitive to ambitions, but that "we weren't getting the performance we wanted out of some brands," and that restructuring will be "better suited for long-term, sustained growth." New positions like "key" account managers and business development reps will solely focus on serving top accounts and getting new draft placements, for example.
When asked about hitting Lord Hobo's goal of an additional 13,000 BBLs of volume in 2019, Dillon didn't outright confirm it would happen, but spoke about enhancing connections to distributors, retailers, and customers as a way to build interest, loyalty, and ultimately, volume.
Day was a bit more direct. While he didn’t feel comfortable giving specific projections, he simply says that the kind of growth being sought by Lord Hobo is “genuinely very difficult” and that if he were a forecaster, “it leaves a lot to be seen.”
The former employee who asked to remain anonymous also questioned Lord Hobo’s potential to hit 50,000 BBLs this year, especially as the brewery has lost "so many integral players" related to selling the beer. Behind the scenes, staff were "dedicating their lives to building a company that could become a household name," they say, but "pieces are already crumbling" that would otherwise help build that sustained success. They add that a lack of planning will be a key challenge going forward, something echoed separately by other former employees.
One thing prognosticators can count on, at least, are two happy, raving, future Lord Hobo fans. As part of marketing promotions set to conclude this summer and winter, the brewery is giving away an S-Works Turbo Levo bicycle, valued at $12,000, and a 1979 Pontiac Firebird Trans Am, which has models selling online for $23,000 and up.
The future may not be guaranteed for Lord Hobo, but it does hold some exciting rides for two lucky drinkers.