Just the news that interests us. Big plays, smart moves, and otherwise curious indicators of beer's possible future.

Just the news that interests us. Big plays, smart moves, and otherwise curious indicators of beer's possible future.

On July 26, Night Shift Brewing informed employees that it would eventually cease the majority of brewing operations at its Everett, Massachusetts facility in order to address supply shortages and to protect the future of the company. Instead of making all beer and other products at their headquarters, Night shift will expand a contract brewing agreement to make beers and hard seltzers at fellow Massachusetts breweries Jack’s Abby and Isle Brewers Guild. The partnership may eventually lead to an alternating proprietorship , a structure that allows two companies to take turns using the same physical brewing space.

Jack’s Abby and Isle Brewers Guild already combine to contract brew half (about 19,000 barrels) of Night Shift’s total volume, which was 38,840 barrels last year. Night Shift co-founder Michael Oxton says outsourcing additional production is necessary to keep the company afloat, which will eventually include phasing out up to a dozen brewing positions. He declined to specify how much money would be saved in the new arrangement, saying that “this move is not about saving us more money, but primarily about preventing us from going out of business."

Night Shift for years has used a contract brewing arrangement to produce certain brands, including Nite Lite Light Lager . As more production is moved from Everett to other brewing spaces, Night Shift plans to continue to use its home base for R&D and other smaller-scale production projects.

Night Shift is one of the top-10 largest breweries in Massachusetts and distributes its beer to 12 states in the Northeast. Just three years ago, Night Shift distributed only to Massachusetts, New York, and Maine, adding nine new states since 2019.

Rob Burns, Night Shift’s co-founder president, said an inability to source any carbon dioxide, necessary for carbonating beer, was “the straw that broke the camel’s back” this week. Without the CO2, the brewery couldn’t package and sell any new beer, a problem that has threatened Night Shift and other breweries for two years. A total lack of CO2 would cause a shutdown in brewing at the facility, as Night Shift doesn’t have additional, empty tanks to store brewed but uncarbonated beer in.

In addition to solving that ongoing problem, Night Shift must now prepare for the next phase of business.

Oxton says outsourcing production is a necessary decision now to protect the company’s future. “They’re not always decisions we want to make, but it’s a preservation atmosphere. … We just literally cannot afford to keep these production people on and make beer here,” Oxton says. 

The company’s 12 full-time production employees will continue to be paid through October 1, at which point they will receive severance packages if they are not retained for other non-brewing jobs. At least one “junior brewer” job has been recently listed on LinkedIn , offering up to $18 per hour and benefits. At a minimum, that would suggest the company could save hundreds of thousands of dollars annually by removing those positions and their benefit packages.

There are no layoffs planned for the company’s other 138 employees. The Everett taproom and Night Shift’s five summertime Owl’s Nest pop-up beer gardens around the Boston area will continue to operate. Burns says Night Shift’s brewing team includes some of the company’s earliest staff (which potentially makes them higher-paid than other, newer employees). Burns describes the prospect of laying some of them off in October as “heartbreaking.” 

After years of investing millions to accelerate growth in production and sales, Night Shift’s decision to stop brewing on-site is an acknowledgment of the challenges to maintain an existing business structure in today’s rapidly-changing environment. It caps a rocky few years for Night Shift that saw the company cancel a planned Philadelphia expansion in May 2020 and sell its distribution compan y in September 2021. Both moves, with hindsight, company leadership now say were blessings in disguise as ways to provide the flexibility that is now required to shift operations and plan for the future. At the time of selling distribution rights, Oxton t old Brewbound the move would allow leadership to focus solely on the brewery side of operations for the first time in five years, noting that “it just feels like the brewing and the brand side of it just makes the most sense for us, and that’s where we can have the best impact, as a company.”

Additional investments last year were set to focus on a $500,000 ad campaign , announced in March 2021. However, Oxton says Night Shift did not invest the full half million in the campaign, noting that Night Shift did spend “a lot” on marketing events, paid social media posts, merchandise, and other marketing that year.

Night Shift’s next moves will now focus on different kinds of financial planning.

“Changing what is an inefficient production setup should save us money, but it’s likely we’ll reduce our shelf pricing as well given market pressures. And inflation has put additional margin pressures on our business,” Oxton says. “To sum it up, there’s no clear profit ‘win’ on the horizon, just the need to not be negatively profitable or insoluble.”

Reducing prices bucks the prevailing industry trend, which has s een breweries eager to raise prices recentl y in response to inflation and higher input costs. According to data compiled from market research company IRI, the average retail price without discounts for a case of Night Shift's beer has seesawed in recent years, and is currently about 20 cents lower than where an average case ended last year.

Finding a solution to challenges with expansion and competition in the market has been amongst discussions at the company for months.

In January 2022, Night Shift’s leadership team met with production staff to inform them of the severity of the financial challenges the company faced. A current Night Shift brewer says that at that meeting, production staff was told they would not receive raises or cost-of-living adjustments “at any point in the future.” They say production staff was also told at this time that leadership was “really worried about money and the loans that they have and how they were going to make their margins work with the challenges that [the space in] Everett produces.” 

Brewing staff was then told it would be cheaper to move brewing operations to Jack’s Abby and Isle Brewers Guild, though this was presented as a hypothetical at the time. (This brewer asked to remain anonymous because they are unsure whether speaking to the media would violate the terms of a non-disclosure agreement they signed a few years ago.)

This week’s acknowledgement of the need to move brewing production elsewhere echoes Night Shift’s decision to sell its distribution business to Sheehan Family Companies: Last year, the Night Shift needed more resources to scale, but was financially unable to acquire the number of trucks, warehouse space, and drivers it would need in order to be competitive. 

Over the past two and a half years, the company has spent $10 million to upgrade brewing equipment—including a new 60-barrel brewhouse purchased in 2019 and an 18-head rotary canning line purchased last year—that ultimately haven’t solved logistical challenges at the Everett facility. 

Low ceiling heights mean the brewery can’t double stack can pallets, and a lack of storage space means Night Shift generally receives raw materials just a week or two in advance. 

Given tight supply chains, the inability to store materials is a critical disadvantage. 

Because Night Shift leases its brewery space and the property line doesn’t leave room for expansion, it’s essentially stuck with the space it has.

Those challenges compound a series of events that haven’t allowed Night Shift to use new space, sell more beer, or create new products fast enough to plug budget gaps.

Building a Philadelphia brewery was intended to alleviate space and capacity issues, but Burns says the company had to scrap that project when the COVID-19 pandemic began. This left Night Shift in the same ill-fitted building with expensive equipment that, once it outsources all of its brewing, won’t be fully used. There is a plan to keep the Everett brewhouse as a research and development facility, but Burns acknowledges that a 60-barrel system is vastly oversized for this purpose. He says selling the equipment could be an option, but that he sees a glut of used brewery equipment already for sale nationally.  

Another plan was to acquire federal and state distilling licenses for the Everett location, which Night Shift just completed. The company hoped to begin small-scale distilling next year that will allow it to produce what Burns calls “higher-margin products” such as liquor and ready-to-drink cocktails, but those efforts won’t come quickly enough to justify continuing production in Everett.

Additionally, moving from self-distribution t o distribution through Sheeha n has reduced Night Shift’s margins on the beer it produces and resulted in sales disruptions. After selling a record $23.1 million in chain retail sales in 2020, Night Shift saw its sales fall nearly -27% to $16.9 million last year in those same stores, a figure that’s roughly even with its 2019 sales.

Sam Hendler, co-owner of Jack’s Abby, says the two companies had been in discussion about moving additional production to Jack’s Abby for years.

“It dates back to the really hard decision they had to make to kill the Philly production facility and it wasn't super long after that we started brewing some beer for them,” Hendler says.

But it was the carbon dioxide shortage, Burns says, that proved to be the final straw. Night Shift was informed last week by its supplier, American Gas Products, that its scheduled shipment of carbon dioxide would be delayed. As the days passed, it became clear that no shipment would be forthcoming. It has been unable to source this from any other supplier, and without carbon dioxide to carbonate beer, the brewery cannot package and then sell its beer. (A shipment from another CO2 supplier will arrive this week but will likely only be a one-off delivery that only lasts a few weeks.)

“This is not an abrupt, all-of-a-sudden awareness of the challenges,” Burns says. “Our team has done the very best they could for a long time to make it all work.” Night Shift hopes its partnership with Jack’s Abby and Isle Brewers Guild will be completed by the end of the year. Until then, those breweries will brew Night Shift’s beer under existing contracts. Nite Lite, Lime Lite, Day Lite, Santilli IPA, Whirlpool IPAs, and Hoots Hard Seltzer will be produced by Jack’s Abby or Isle Brewers Guild in the next two months, though Night Shift is still in the process of determining which facility will make each of these brands. Oxton says that Night Shift is “generally confident” that it can meet the majority of its current production goals.

Hendler says an agreement to product Night Shift brands will prove advantageous for both breweries, allowing them to order larger quantities of ingredients and to be more efficient in only staffing one brewing facility. Both companies will maintain their independent ownership, which Hendler says is becoming increasingly difficult for regional breweries. 

“A lot has been written at this point on the challenges for the brewers ‘stuck in the middle’ [between small, taproom-focused breweries and national breweries]. It’s a tough place to operate right now and I think it's only getting tougher,” Hendler says. “This is a reaction to a lot of that, and one that allows us to stay independent.”