“So it begins” is Gandalf’s widely-quoted reflection from the second film of the “Lord of the Rings” trilogy and it’s earned its own place in today’s pop-cultural lexicon. In the movie it referenced an oncoming war with potentially cataclysmic consequences, and it immediately came to mind when we heard about the layoffs at Stone Brewing.

So what does this all mean?

Well, let’s deal with the obvious. Anytime a company lays off people, it’s looking to lower its overhead. In flush times, when a company’s growth potential is in an upswing, it’s common to see organizations staff up. More people are needed to keep up with different aspects of demand.

But when money gets tight and profits slow down, businesses look for ways to trim costs, which can lead to things like the layoffs we saw at Stone last week.

Founded in 1996 by Greg Koch and Steve Wagner, Stone is the 10^th largest craft brewer in the country and has been riding a wave of success for over two decades.

The company just celebrated its 20^th anniversary, and recently opened a destination brewery in Berlin that’s designed as a production hub to serve all of Europe. They’ve also a new east coast facility in Richmond, Virginia that’s ready to go and a 10-barrel brewhouse planned to open in Napa Valley in 2017.

All good when business is booming and “less so” when it’s not…

After years of “regularly boasting year-over-year growth of 50 percent or more,” the San Diego Tribune reported that “growth projections for 2016 had been revised downward several times this year.”

That’s an unexpected and sobering slowdown for a brewery that has basically only known growth and points to bigger problems on the horizon for the entire craft beer industry…

So what’s really happening?

Overall beer sales have been trending downward. In spite of craft beer’s emergence, total beer sales in the states have been declining for years and sent majors reeling from the impact. Beer sales edged down another 0.2% even as craft brewers were showing double-digit sales gains year after year, (including an incredible 12.8% in 2015).

At the same time, THERE ARE MORE BREWERIES CURRENTLY OPERATING THAN EVER BEFORE. And in case you hadn’t noticed, there is such a thing as reaching a saturation point, even in the craft beer biz.

Wolf Street is reporting that “last year alone, about 1,000 new breweries saw the light of the day” and they projected that there may be as many 4,800 breweries operating today in the US.

And add to the mix the fact that the Brewers Association is reporting an additional 2,200 breweries already in planning.

Stone is a smart and savvy organization and these unfortunate layoffs (about 60 employees were notified that their jobs had been eliminated) is also a sign that they are addressing the brave new world that the craft beer biz is entering.

Confronted with Big Beer’s series of craft beer acquisitions, which tactically confuse consumers and unfairly co-opt distribution channels with “predatory pricing” – and beset by the realities of almost saturated market place- Stone is positioning itself to stay solidly independent in an increasingly competitive environment.

Yes, layoffs, unfortunate as they are, are sad. But in business they are sometimes necessary, if your goal is to survive a changing economic landscape. And although Stone’s actions were the first of this scale by a significant craft beer player…we promise you, they won’t be the last. Other craft beer majors will be facing similar choices this year.

Remember, anything that can’t go on forever, won’t…”And so it begins.”