Are Tasting Rooms Hurting San Diego’s Beer Bars?

For many San Diegans, it’s a point of pride: Our county has more breweries per capita than any other county in America. It has also recently been listed in a national report by Cushman & Wakefield as the nation’s top market for the number of its operating craft breweries. It’s indisputable: The growth of the brewery industry in San Diego over the past five years has been nothing short of astounding.

Growth is great. It’s exciting. And it makes us feel like we’re all a part of something dynamic and cool. But fast-paced and far-reaching industry expansions can also create hardships for people within that industry, as well as for those on the outside. In many cases, the negative effects of growth are unforeseen and unintentional, but that doesn’t make them any less serious.

Karen Barnett, owner of Small Bar in University Heights (one of San Diego’s iconic craft beer hubs), has recently started to speak out about how she feels the proliferation of brewery tasting rooms is hurting her business. Although Karen is the person who has been the most vocal about the issue, she confirms that many of her fellow bar and restaurant owners are experiencing the same problems. And it’s no wonder. In just the past few years, nearly 30 satellite tasting rooms have popped up in San Diego — and that’s in addition to our 150+ breweries.

In an effort to spark a wider discussion about a phenomenon that’s affecting the beer community, I sat down with Karen so I could get a handle on what the key components of this issue are. I also wanted to find out what she sees as possible solutions.

Let’s first talk in the broad sense about what your concerns are about tasting rooms.

The concerns I have are not necessarily with the idea of a satellite tasting room. The problem that I see is — because there’s an oversaturation of breweries in San Diego — they just can’t sell enough beer. And because they can’t sell enough beer, they’re exercising their right to open up satellite tasting rooms, but they’re opening them in places that are problematic.

Each brewery is allowed to have up to six tasting rooms — it comes with their (Type 23) license. Now, these tasting rooms are popping up in places where craft beer drinkers are already known to be living. And I think one of the reasons those people have chosen to live in those neighborhoods is so they can frequent establishments like mine. It’s because of what we’ve built. What Toronado has built. What Tiger! Tiger! and Hamilton’s have built. It’s because of what we’ve all built in our communities; we’ve helped to drive this boom of education about beer and showed people why you should be drinking one beer over another.

Some of the neighborhoods you’re talking about are actually built around the places like yours.

Yes. I kind of feel it’s a situation where the tasting rooms are capitalizing on the culture that we’ve helped to build — if we hadn’t sold their beer, for example, they wouldn’t have an industry to grow from.

And they wouldn’t have consumers that know their beer.

Right. Or even consumers who just know to drink good beer. What it comes down to is that everyone is trying to get their slice of the pie, but I don’t think the pie is big enough to be shared in so many directions. If it were one tasting room, it wouldn’t be that big a deal. But when you’re talking four or five within two miles of a business like mine — and I’m watching my numbers go down as I drive by the tasting rooms and see them packed full — that’s frustrating. They have the ability to pour full pints. They can charge the same price that I do (or less). They can park a food truck out in front of their business or can put a pop-up in their business. They allow dogs. They allow kids. These are all restrictions for places like mine, which I have to abide by.

You’re saying it’s not a level playing field…

I feel it’s a case of “don’t shit where you eat.” Some of these breweries I have helped to launch. I welcomed them into Small Bar when they had just opened, put them on tap, made a big deal about it, and then a year later they’re my neighbor. And they’re asking me not only to buy their beer, they’re taking my neighborhood customers and even sometimes my staff. So it leaves a bad taste in my mouth. I feel like it’s disrespectful and it’s not being sensitive to what my business is. And then, in addition, asking me to buy their beer — that’s pretty bold.

It must be kind of weird for you to feel like you’re working across purposes with some of these brewers and breweries, folks you support as part of the craft beer community here, right?

Yes. Many of these people are my friends. But they didn’t come talk to me before they made their decision [about where to open].

Is this an issue that has been raised with the brewers or the Brewers Guild?

I’m not sure it’s been raised with the Brewers Guild. That’s kind of why I’ve started to talk about it. Because nobody’s talking about it. People are just kind of taking it. I understand, from the brewery perspective, that they have a lot of money sunk into the business and they have to do what they have to do to keep their business afloat, but at the same time I would ask them, “Why are you in this business? What’s your business model?”

Is there a more sane or fair way for breweries to figure out where to put their tasting rooms? It seems that lots of breweries all rush to the same two or three areas.

Right. Newport Avenue in OB. 30th Street. And North Park in general. I had this conversation recently, actually with a brewery that is opening a tasting room, and I wanted to have a respectful conversation about what made them decide on their location, and why they thought that was okay based on our relationship. And their response was that they did research, and they knew that tourism is booming, and that going there wasn’t going to affect me at all. They expect me to do just as well as they’re going to do because we’re building this neighborhood to be the next tourist hot spot. But I just don’t really see that. I could be wrong, but I don’t see it.

A great beer bar like Small Bar, though, is offering a different kind of service to patrons than a tasting room where you can only get the beer from that one brewery. At Small Bar you can come in and choose from 42 taps that are curated by someone who really knows and cares about great craft beer from all over. So isn’t that different enough?

Let me put it this way. I would say that the average person has a weekly or monthly budget of what they can spend on beer, on eating out, on that kind of thing. Disposable income. Let’s say they have $50 a week. So, every time a new place opens, those people are saying, “Oh, I wanna check that out.” Now, I’m not crazy enough to think that those people were always spending their $50 at my business, but when I talk to my colleagues in the industry and we talk about these tasting rooms popping up and everyone agrees that they’re getting hurt, it’s very clear that we’re losing business.

So you’ve spoken to a bunch of your fellow publicans about this very issue?

Yes. Yes, I have.

And they have the same concerns?

Absolutely. And it’s not even just San Diego. I have a friend, Chris Black, who owns Falling Rock in Denver. It’s a huge beer bar in Denver and he’s starting to see his numbers go down because tasting rooms are starting to pop up there, too. He’s going to be a speaker at a conference coming up and he says he’s going to bring it up and talk about it. So, it’s not just me feeling it, but I feel it’s just me talking about it.

So let’s talk possible solutions. What are some of the ways you think you could better coexist with all these tasting rooms?

I think that there are tons of up-and-coming neighborhoods; they’re filled with people who are mid-to-late-thirties who are just buying their first homes. These are places where they can afford to buy homes — and those places aren’t in North Park or University Heights. It’s in City Heights. In La Mesa. In El Cajon. I think the growth potential for locations like that is huge. People out in those neighborhoods want variety — and there’s just too much variety here.

Look, do the math: There’s 150 breweries and each of them is entitled to do up to 6 tasting rooms. That’s 900 tasting rooms that we could have in San Diego County! So why do we have to put them all right here? I say, make destinations. We should have things in all parts of the county so people can go all over and explore different neighborhoods. By putting all the tasting rooms in one place, you’re starting to take away from that one area’s neighborhood and the people that live there. There’s only so much disposable income those people can use in those neighborhoods.

Here’s the second solution: When I was still part of Hamilton’s, the first tasting room that opened was Stone, right on 30th Street, just a few blocks up from us. We had concerns about what this was going to do to our business, and Stone assured us that nothing would change for us and we shouldn’t feel threatened. Still, we pushed it and asked for lots of information, and — I don’t know if it was from our conversations or they decided on their own — but Stone decided to have restrictions on the amount of beer you could consume at their tasting room. So, you could go in there and get four or five tasters and then you could take a growler home or you just had to go. And I appreciated that because, in my opinion, that’s the definition of what a tasting room should be. You should be able to go in, have a taste, and see what this brewery’s all about; find out where they’re on tap. Take some home and enjoy it. And then go visit those places where that brewery is on tap. And, guess what? When those customers come in and tell me they went and tasted in a tasting room, that tells me there’s a demand and I’m probably going to buy more of their beer, instead of having them competing with me. I wish that more tasting rooms would actually adopt the approach that Stone took. What people are doing now, in essence, is creating bars.

Have you considered organizing around this issue more formally?

I think the most important thing to me right now is consumer awareness; for consumers to know how their patronage of tasting rooms is affecting a business like mine (and many others). I don’t think most people realize what they’re doing to the small businesses when they choose to spend a majority of their income at places like that.

The tasting rooms would argue that they’re a small business, too.

Yes and no. They’re coming into a scene and being opportunistic in an industry that they weren’t a part of five years ago. And let me just clarify something here: I don’t have a problem with breweries. Breweries mean more jobs, they pay their dues with crazy rents — I see breweries differently. The pizza place that’s opening up across from Small Bar is going to have a brewery and that doesn’t bother me. I think that’s adding character to this neighborhood.

Do you think the breweries are feeling forced to open tasting rooms because there just aren’t enough tap handles at bars like yours around town?

No. This is a huge county. I think that there are too many breweries and I think that they’re not all making amazing beer. I think people need to be honest with themselves and with what’s happening. The bubble’s absolutely going to burst. The problem, I think, is that the brewers and everyone in the industry believes that we’re all just killing it business-wise, but the truth is we’re not. That was maybe true five years ago, but it isn’t anymore.

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Because this is a complicated and sensitive subject for many people in the beer community, we welcome your comments and thoughts as part of our effort to consider and debate all sides of the issue. If you are a brewery/tasting room owner and wish to present an additional point of view in this forum, please contact me at [email protected] so we can discuss it.