Deep Ellum Brewery on St. Louis Street has closed, but Monster remains under lease.
Dallas — Editor’s note: The following article was Dallas Business Journal.
Deep Ellum, home to a brand synonymous with Dallas’ craft brewing community, disappeared soon after being acquired by the beverage giant that makes Monster Energy Drinks.
Deep Ellum Brewery, known for producing Dallas Blonde Ale and Deep Ellum IPA, announced its decision to close its taproom and brewery in an Instagram post on May 30. “We are heartbroken by today’s news, but our love for Deep Ellum will always run deep,” the company wrote. The craft brewery was the first to open in Dallas 20 years ago, opening in the former paper company space on St. Louis Street, according to WFAA.
In a statement to the Dallas Business Journal, a spokesperson for the Monster Brewing Company division of Monster Beverage Corp. (Nasdaq: MNST), the brewery’s owner, said the company will continue to sell beer under the Deep Ellum name but production will occur at other facilities in its network. The company said it has eliminated 25 positions from its taproom and production teams in connection with the closure.
“We appreciate their hard work and are offering each of them outplacement assistance and encouraging them to apply for open positions within the company,” a spokesperson said in a statement. “The Deep Ellum family of brands will remain an important part of the Texas beer industry, and we are committed to maintaining the quality of our beers and the unique identity of our brands as we navigate this rapidly changing situation.”
Colorado-based craft beer and hard seltzer company Kanakee Craft Brewery Collective LLC acquired Deep Ellum Brewing in 2018. The acquisition was positioned as a way to give Deep Ellum access to additional capital and allow the burgeoning brewery to rapidly expand outside the state through the larger company’s distribution network.
But in 2020, Deep Ellum Brewing Co. founder and former CEO John Reardon said he was fired after filing a lawsuit against Canarky a month earlier. The suit claims the beer conglomerate failed to pay him what was set out in the original sale, Eater Dallas reports. Reardon also said Canarky intentionally sabotaged the brewery’s success to avoid making profit-based payments, and that the new owners did not maintain adequate supply or market the beer properly, Eater reports.
Reardon has since settled the lawsuit and moved on. He told the Dallas Business Journal that he wasn’t too concerned about the closure at first, but then he encountered an outpouring of stories and memories from the brewery.
“I can’t say I’m shocked that the Deep Ellum location closed, but the Deep Ellum brand was built on its impact and footprint in the community, so it’s hard to think of it as just one or the other,” Reardon said. “We’ve had weddings there, we’ve had people get the brand tattooed on their bodies, so the memories that are made within those four walls are truly one of a kind.”
In 2022, California-based Monster Beverage Co. acquired Canakee Co., which includes Deep Ellum Brewing, along with Canakee’s other brands Cigar City, Oskar Blues, Perrin Brewing, Squatters and Wasatch, for $330 million in cash. The division was renamed Monster Brewing Co. in January.
“My view is that Monster bought them for the knowledge, the sales staff and the distribution network, and the brewery is more of a toy,” Reardon said.
Monster sells energy drinks and other beverages, including beer and hard seltzers, and was expected to report net sales of more than $7 billion in 2023. The company is closely tied to The Coca-Cola Co. (NYSE:KO) through distribution agreements and other partnerships. Coca-Cola controls about 19.6% of the company’s voting power, according to filings with the U.S. Securities and Exchange Commission.
According to SEC filings, Monster’s alcohol business lost $31.5 million in 2022. In 2023, the alcohol business is expected to lose $81.1 million, which the company said in a statement was due to a $42.7 million impairment of intangible assets, property and equipment acquired from Canakey related to “challenges in the craft beer and carbonated water categories.”
Monster is expected to sell $184.9 million in alcoholic beverages in 2023, up about $83.5 million from the previous year. But about half of those sales won’t come from craft beer brands, but from Monster Energy’s The Beast Unleashed, a flavored malt drink celebrating the 21st anniversary of the company. In March, Monster laid off 12 employees at its Cigar City location in Tampa, Florida, Brewbound reported.
What this means for Dallas’ craft beer scene
Other local breweries didn’t expect the closure, including Art Harvey, founder of Westlake Brewing Co., located on Commerce Street just a few blocks from Deep Ellum Brewing’s shuttered facility.
“I was really surprised to see them closing so soon after acquiring it,” Harvey said in an email. “They had made the decision to close the kitchen portion of the taproom several months ago, and I knew this might be a bad sign.”
Harvey said the people at Deep Ellum Brewing Co. inspired the creation of many breweries over the past decade, and that the brewery’s existence itself influenced many of his decisions in founding Westlake Brewing Co. in 2019.
“Their edgy marketing embodied the somewhat rugged spirit of the neighborhood,” Harvey writes. “They captured the vibe of the neighborhood so well with their brand, and being just a few blocks away from us, forced us to invert our branding and customer experience. We couldn’t have been more Deep Ellum than Deep Ellum itself. [Deep Ellum Brewing]. “
He says Deep Ellum Brewing was a big influence in choosing the area for his brewery: The presence of other breweries and cideries nearby helped Deep Ellum attract what he calls “beer tourism,” which he expects will likely decline now that Deep Ellum Brewing is gone.
“From the moment we opened, we had a steady stream of roller bag-toting travelers coming in, some just having landed in Dallas and others just exploring the city before catching their flight home,” Harvey wrote. “I love chatting with customers in the taproom, and almost without exception, they stop by at least one of the two neighborhood barbecue joints and several craft beverage makers.”
Breweries that are bought by larger companies typically change dramatically after the acquisition, but the speed of those changes varies from brewery to brewery, he said.
“There may be an added bitterness from ‘selling out,’ but the beer always tastes a little different afterwards,” Harvey writes. “Real change is usually driven by the acquirer’s attempt to achieve economies of scale by consolidating suppliers and raw materials, eliminating redundant functions, increasing utilization of existing resources, and squeezing more profit out of them.”
“Money becomes more important than the love of beer in most cases. Most of these changes take time. The damage to a loyal fan base, the diminished sense of purpose among remaining staff, and the decline of passion-driven creativity can all happen much sooner.”
Molly Reynolds, co-founder and creative director of Celestial Beerworks in the Medical District, said it would be a shock to see a staple of Dallas’ craft beer scene leave, and her team recently worked with brewers in Deep Ellum to participate in their homebrew festival.
Reynolds said he believes most breweries are struggling to get customers in and generate interest in beer, at a time when costs are rising and consumers have more alcohol options than ever before.
“I think it makes sense for large corporations and conglomerates to separate out elements that may not be profitable,” Reynolds says, “and it certainly makes sense for them to do that.”
Most of the ingredients in beer, from malt and yeast to cans and labels, are much more expensive than they were a year or two ago, Reynolds said. At the same time, beer geeks aren’t flocking to new releases as they once did, and young people are less interested in things like 21st birthday parties and quiz nights.
“Some people who were very into beer have moved over to bourbon or are drinking less than they used to for health reasons,” she says, “but we’re also finding that a lot of Gen Zers who are coming of age aren’t interested in beer. … A lot of people don’t have the extra pocket money that they may have had before or even during the pandemic.”
Reynolds said Celestial has largely given up on attracting younger customers, focusing instead on millennials and older generations.
She worries that brewers at the Deep Ellum brewery won’t be able to find other places to work because other breweries in the Dallas-Fort Worth area have already closed, including Brutal Beerworks in North Richland Hills and Shannon Brewing Company in Keller late last year, Neutral Ground Brewing Company in Fort Worth in March and Funky Picnic in Fort Worth in April.
“Hopefully these people can get jobs elsewhere or at the brewery, but it’s certainly a scary thought,” she said.
The uncertain fate of real estate
Reardon said he owns the land where Deep Ellum Brewing Co. sits and leases it to Monster Co. A limited liability company affiliated with Reardon is listed as the landowner with the Dallas Central Appraisal District.
The former brewery sits in a burgeoning corner of an area that’s attracting a lot of interest from real estate developers.
“Obviously it’s a nice piece of land in a nice area,” Reardon said. “We don’t know where it’s going to be moved to, but it was obviously built out to be a brewery with a fair amount of equipment. … Their intention may be to move the equipment out and then get out of the lease, but who knows. Clearly they’re acting selfishly.”
Reardon said another craft brewery could potentially move into the building if Monster leaves. So far, Monster, who has about four years left on their lease, has not indicated they plan to leave, but he’s not sure what they plan to do with the building, if they have any plans.
“The thing about this area is that there’s always something new happening,” Reardon says. “I think now is the perfect time for someone to come to Deep Ellum and start a local brewery. This area is ripe for that.”
In addition to its tradition as an entertainment district, Deep Ellum is also diversifying as a place to live and work.
Deep Ellum has added hundreds of housing units in recent years, many of them in apartment complexes south of Canton Street near Deep Ellum Brewing, such as Indy, Crosby and the 2800 Taylor complex under construction right next door.
The area is also seeing new office and industrial projects, including Mark Cuban’s Cost Plus Drugs pilot facility on Taylor Street.
Stephanie Hudeberg, executive director of the Deep Ellum Foundation, declined to comment on future plans for Deep Ellum Brewing Co., but she expects drinkers will continue to flock to the area.
“We expect and hope that beer lovers will continue to come to Deep Ellum,” she said. “We have a track record and history of being an incubator for great entrepreneurs and small businesses, and expanding well beyond Deep Ellum.”
When asked if she was sad that Deep Ellum Brewing Co. beer will no longer be made in Deep Ellum, she said she was grateful for all the brewery has done for the community.
“We’re pleased that the Deep Ellum Brewing brand will continue to be available to customers locally and far and wide,” she said. “You’ll continue to see the brand in bars and restaurants throughout Deep Ellum, and we look forward to them continuing to be involved in our community as they have for so many years.”
Reardon described the brewery as a cornerstone of the community.
“So many stories, so many laughs, so many tears, and even babies have come from this place,” he said. “I always hoped that this place would be the foundation for the future, the foundation for Deep Ellum. But the Monsters didn’t see it that way, and who knows where this place really goes from here.”
