Matthew Gray has cleared many hurdles to keep Ragged Island Brewing Co. running. And the obstacles are still coming.
Gray opened Ragged Island Brewing with a few partners and his wife, Katie, in 2017 after noticing the craft beer boom had seemingly skipped over his hometown of Portsmouth.
The brewery began in a small space inside a nondescript building at the Portsmouth Business Park. Within weeks of opening, Ragged Island found it couldn’t produce enough beer to meet demand at the 900-square-foot location, and soon the search was on for a bigger place.
The partners thought their capacity problems were solved when they purchased the scenic 37-acre Van Hof Nursery property on Bristol Ferry Road, which offered space to ramp up beer production and to host events.
But then the transition was endangered by the COVID-19 pandemic, the effort to get the necessary approvals from the town and slowed renovations to the Van Hof farm, among other things.
Also, Ragged Island’s license to sell directly to consumers hadn’t transferred to the new site. The awkward workaround: Brew the beer, sell it to distributors, then buy it back from stores through a caterer to sell under a tent at the farm.
In the meantime, Ragged Island’s lenders were growing wary, and Gray acknowledges he questioned whether the business would ever fully open at its new location.
“From day one of COVID, it was a huge concern whether or not we’d be viable or we’d be able to open,” Gray said.
Ragged Island was finally able to fully open in 2022 – two years behind schedule – but now the craft brewery and others like it across the state face new headwinds as small-scale, artisanal brewers grapple with changing tastes, newfangled trends and loads of other distractions.
Observers call it a mature market. Sales have dipped and several craft breweries have closed their doors in recent years, as the segment has leveled off from its boom in the mid-2010s. Now, when one brewery closes, a new owner comes in with new concepts and brews.
Case in point: Smug Brewing Co. in Pawtucket closed for good in August, and Discipline Brewing Co. has taken over the Carver Street taproom with plans to open next spring.
“The sky is not falling,” said Nils Weldy, executive director of the Rhode Island Brewers Guild, a nonprofit trade association. “Beer will always have a place on the menu.”
Still, with dozens of craft breweries throughout the state, the market is crowded, and brewers need to stand out to stay open.
Many customers are looking for healthier, less alcoholic options than they were – a trend that emerged from the pandemic. And others have stopped drinking altogether, while the recreational use of marijuana – legalized in Rhode Island in 2022 – has become more popular.
“If you’re not innovating and you’re not growing, you’re dying,” Weldy said. “You’ve got to keep up with your innovative competitors.”
But the pressure to constantly push boundaries can be challenging and frustrating for brewers who usually run small businesses with little money to spare. Adding to that frustration: the so-called “three-tiered system” of alcohol regulation that separates alcohol producers, distributors and retailers with the intention of preventing monopolies.
Craft brewers say the system makes it much harder for the little guy to get their beers on liquor store shelves and restaurant menus.
They’ve lobbied state lawmakers for change, but those efforts have faced opposition from other groups that argue the system has worked as intended and eliminating it could cost jobs.
While debate is expected to resume this coming legislative session, Jeremy Duffy, co-founder of Isle Brewers Guild LLC and managing partner of The Guild beer halls, says these changes – along with creative offerings and prudent business decisions on the part of brewers – are crucial to the industry’s survival.
“There is resiliency, but there are enormous pressures that we’re feeling,” Duffy said.
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UNDER CONSTRUCTION: Jason and Angel Winpenny are the new owners of Trinity Brewhouse in Providence, which is undergoing renovations through November.
PBN PHOTO/MICHAEL SALERNO[/caption]
‘NO LONGER YOUNG’
When Josh Miller opened Trinity Brewhouse in downtown Providence in 1994, he wanted to bring the city – and state – something it hadn’t seen before.
The state had only recently legalized brewpubs, and Miller had his eye on the empty spot on the corner of Empire and Fountain streets attached to the back of the Trinity Repertory Company and a short walk to the R.I. Convention Center.
“I knew we would be very unique, and it would [be] a draw to downtown,” said Miller, a retired state senator.
These days, it’s not unique.
There are dozens of breweries throughout the state, and several have changed hands in the past year.
Miller sold the brewhouse to the owners of The Patio on Broadway earlier this year for $2.25 million. Miller acknowledged the industry is facing challenges but chalked up his decision to sell the business to wanting to slow down.
“I always thought that it takes more focus and investment than I was wanting to put in it,” Miller said. “It’s a young man’s business and I’m no longer young.”
The new owners are remodeling the interior, but they are sticking with the brewpub concept and the Trinity name. “A lot of people probably have memories there,” said co-owner Jason Winpenny. “So once we decided to go ahead, it was important to keep it what it was and update it a bit.”
Some new brews have already been developed, and there have been “quite a few conversations” about offering nonalcoholic beers because of their popularity, Winpenny said.
Meanwhile, the head brewer is staying to help with the transition – the plan is to reopen in November – then another brewer who has worked at Trinity for four years will take over.
While Winpenny says he knows he and his wife and co-owner, Angel, are entering a softening market, he feels comfortable with it because of the Trinity name and long history.
“If it was a new endeavor, I would maybe not pursue [a brewpub],” he said.
There were 42 breweries throughout the state in 2024, up from just six in 2011, according to data from The Brewers Association, a national trade organization. Across the U.S., there were 2,252 operating in 2011, compared with 9,922 open in 2023.
Observers say the hype around craft beer has died down since about 2020. Taproom sales declined under lockdown and many people became more health conscious, leading them to rethink their drinking habits.
More recently, The Brewers Association reported there were more brewery closings than openings across the U.S. in 2024, marking the first time that has happened since 2005.
For Stephen David, there were a few factors that went into his decision to shutter Smug earlier this year.
Being a business owner requires a huge investment of time, and David says he and his co-owner wanted to spend more time with their families. The maturing market, as well as shifting tastes, was perhaps the signal for them to exit the industry.
Now, Discipline Brewing has taken over Smug’s space and most of the equipment with plans of pouring its first beer next spring, says owner Tony Lustig.
Lustig acknowledges he and his co-owners are facing challenges, but he likened it to a journey on the open sea. “There’s some light caps out there, and we’re trying to hit the waves head on as intelligently as possible,” he said.
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EVOLVING INDUSTRY: Jeremy Duffy, left, and Devin Collins, co-founders and managing partners at The Guild Brewery in Pawtucket, discuss the shifts in the craft beer brewing industry.
PBN PHOTO/MICHAEL SALERNO[/caption]
INNOVATIONS
Duffy is concerned about the potential of the craft beer market softening further.
He says he has had lengthy discussions with other Rhode Island Brewers Guild members about how to keep breweries open as the pressure to draw customers grows.
The key to this is to offer what they want, Duffy says.
Five years ago, customers were looking for New England-style India pale ales and double IPAs, Duffy says. Now, customers are reaching for ready-made cocktails and lighter beers.
Customers are also opting for cannabis products. So, Duffy, who offers contract brewing through Isle Brewers Guild, says he’s considering making ready-made cocktails, distilled spirits and THC-infused drinks.
“While the beer market is softening, we’re going to continue to diversify and innovate in order to really be able to reach as many consumers as possible,” Duffy said.
IPAs are still selling well, but brewers are also shifting to pilsners and lagers, Weldy says. These styles have a lower alcohol content that customers are looking for and can be mixed with many kinds of ingredients to create new flavors.
Weldy says he’s noticed more oak, fruit and aged flavors added to lagers and expects that to continue. Especially since traditional craft beer drinkers are constantly looking for new brews.
“That’s what’s so appealing to me: what really feels like an endless variety of beers to try, and I don’t think I’m alone in thinking that way,” Weldy said, acknowledging it can be frustrating for brewers to feel like they must keep changing styles and flavors.
Before closing, Smug tried to lean into the buzz around seltzers by creating its own, along with its nonalcoholic brand Unfazed. But financially, the business couldn’t maintain it, David says.
“A brand needs to be built and invested to speak to that market and that demographic,” David said. “Being a small brewery like we are, we were just spreading ourselves a little too thin, trying to do too many things at once.”
COVID-19 really hurt revenue, keeping people out of the taproom. But it was the questions he got from customers about the calorie content and nutritional facts of Smug’s nonalcoholic offerings that threw him.
“It really went to show that there was more of an interest in that when there wasn’t as much before with the traditional craft beer offering,” David said.
Brian Warrener, an associate professor at Johnson & Wales University and director of its Center for Beverage Education & Innovation, agrees that consumers have become more health conscious – especially younger people – and are shifting away from alcohol and sugar because of health concerns.
“It’s almost the opposite of what beer is,” Warrener said. “That’s really difficult.”
He says breweries should offer products that are more “approachable” that simply taste good instead of “fussy” styles that appeal to craft beer fanatics.
Some bigger beverage companies have had some success producing more ready-made cocktails, Warrener said, which can be difficult to do for smaller companies with fewer resources.
“I don’t say get out of the beer industry, but get into some of those other lines,” he said. “But it’s going to be a tough road, I think, for a lot of smaller craft brewers in the state and the country.”
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FEELING CHEERY: Matthew Gray and several partners opened Ragged Island Brewing Co. in Portsmouth in 2017 and have kept it running while hurdling many obstacles.
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SYSTEM SHAKEUP?
At Ragged Island, taproom sales have leveled off after the initial excitement of the new location, but costs continue to rise. Gray refuses to respond with price increases.
To preserve the bottom line, the owners are looking to improve efficiency without damaging the quality of the product and the service.
Ragged Island borrowed money to purchase a $100,000 canning machine, allowing the brewery to cut costs by moving that process in-house. Also, the company has joined forces with other beer producers to place bulk orders of materials to get better prices.
In one case, several Rhode Island craft brewers combined to order hundreds of small beer barrels.
“Sometimes you have to buy $10,000 worth of hope all at once to make it cheaper for the next few months to operate,” Gray said. “So, there are decisions and discussions about that every single day.”
Ragged Island’s distribution sales have been a bright spot, growing enough to make up for stagnant taproom sales.
In fact, the brewery has put emphasis on its distribution this year, hiring a salesperson to promote Ragged Island products to bars, restaurants and liquor stores. The brewery also started its own distribution company, enabling it to bypass the existing three-tier system for alcohol sales.
The system – which dates back to the repeal of Prohibition – remains problematic for some small brewers and distilleries, according to those in the industry.
When selling their products off-premises, alcohol producers can only work through distributors, which then market those products to retailers that can only sell to customers.
The system is meant to prevent monopolies, regulate alcohol sales to protect public health and offer a clearer way to collect taxes on alcohol. Some say there are a few large distributors that hold a lot of market share and have massive portfolios of beer brands, making it difficult for smaller breweries to stand out.
Craft beer leaders such as Duffy are looking to change the state’s laws to make it easier for breweries to distribute their own beer.
Right now, to self-distribute, a brewery must obtain another license and start a separate company. Just 11 breweries in the state do this, including Isle Brewers, Duffy says. It’s complicated and requires staff and resources that many smaller breweries can’t spare.
Duffy plans on lobbying for legislation this coming General Assembly session to allow breweries to act as distributors without forming a new company, like they do in Massachusetts and Connecticut.
Groups such as the Teamsters Local 251 have opposed that effort in previous years.
A representative for Teamsters did not respond to PBN’s request for comment. Paul MacDonald, a lobbyist for the union, has raised concerns in public meetings about job losses if the state were to give breweries more power to self-distribute.
Some lawmakers have attempted to roll back breweries’ existing self-distribution rights. In 2024, Sen. Dawn M. Euer, D-Newport, sponsored a bill to prevent breweries from self-distributing at all.
It passed the Senate but died in the House after brewers raised concerns about the law impeding their growth and raising costs. Euer did not answer PBN’s questions on the bill.
Nick Fede Jr., owner of the Kingston Liquor Mart who leads the trade group Rhode Island Liquor Operators Collaborative, says lawmakers have been generous to local breweries and distilleries in the past decade.
Former Gov. Gina M. Raimondo’s administration included a tax exemption for craft brewers up to 100,000 barrels per year, which is “unprecedented” compared with other states’ laws, he said. Also, customers can buy up to two cases of 16-ounce cans from a taproom, which cuts into retailers’ bottom lines.
He noted some more successful breweries in the state – such as Whaler Brewing Co., Grey Sail Brewing Co. and Narragansett Brewing Co. – have operated within the current three-tiered system.
And the changes sought by the brewers on how they can sell their products would eat into the sales of independent liquor stores.
“Changing the laws due to current market conditions will only be taking from one small family-run business and giving to another,” Fede said.
At Ragged Island, on-premises sales plateaued somewhat, but it’s not for lack of activity at its 37-acre farm with views of Narragansett Bay.
Gray is focused on making Ragged Island a community gathering spot, a so-called “third place” frequented by people beyond their home and workplace.
Every Thursday, the brewery hosts trivia night in its greenhouse. A summer concert series with food trucks brings in customers, along with other events such as comedy festivals and block parties. In the cooler months, the brewery hosts concerts in the warmth of its barn.
“The idea of having a really strong local brewery is very, very important and still very viable,” Gray said. “But when there’s a lot of competition … it becomes harder to maintain the business.”
