In 2024 City-State Brewing had their best year in wholesale distribution. You could find their beer in Safeway, Whole Foods, and almost 80 other accounts. Despite that, the future didn’t look good for the fastest-growing craft brewery in Capital Eagle’s portfolio. It’s a familiar tale to those of us who read and write about the drinks business; younger adults are drinking less, and going out less, than previous generations. These trends were exacerbated by a global pandemic, and in 2025 DC is subject to government layoffs known as RIFs (reduction in forces), masked federal agents disappearing people off the street, and now a government shutdown. “The beer market in DC has shrunk by 33 percent, there’s no going back, this is the new normal,” City-State founder and CEO James Warner tells us in a wide-ranging interview.
City-State last made beer in March and the brewing equipment has since gone to auction. Their brewers have moved on, to Other Half, Red Bear, and elsewhere. We–I–gave them months to stay in business at the time. I was wrong. City-State is now City-State Public House, and they’re about to pour their own beer again. One of the few bright spots in the beer business right now is that while more breweries are closing than opening, some beer brands live on, often thanks to excess capacity at other breweries. For City-State, this comes from a win-win contract brewing arrangement with Red Bear, down the Metropolitan Beer Trail. Here is how a brewery closed, became a taproom, and continued to sell their beer.
In December 2024, City-State sat down with their distributor, Capital Eagle. Despite a strong 2024, sales projections for the brewery’s beer in 2025 did not look good, and contract brewing for other brands, which netted more money for City-State than making their own beer, was also set to decline. “The thesis was that people cared more about coming here, to City-State, than about who was making the beer,” Warner says. So “if we took all the money we spent making beer, including staff and ingredients, and spent that on wholesale alcohol, what would that look like?”
Warner gave the brewery staff ample time to find other work and never missed making payroll, confirmed by talking to former members of the City-State brewing team. Recall that in DC’s brewing history, nearly a decade ago, Gordon Biersch was one of the 97 complaints against District businesses that violated the Fair Labor Standards Act across a 2016-2018 timeframe. About a month ago, employees at Iron Hill Brewery and Restaurant received no prior notice and were informed of the brewpub’s closure the morning the company posted on social media. Fortunately these fates have not befallen City-State or its new iteration, City-State Public House.
“The alcohol industry has been super supportive of this transition,” Warner tells us, acknowledging that moving from a brewery to a taproom is “untraditional.” “I got into this to make culture in DC, be a part of DC culture, and celebrate that culture,” and that can still happen at City-State Public House as a third space in the community, as a place for events, meetings, and gatherings. Business partners like the landlord and City First Bank were also on board with moving to a taproom model. Warner came to an agreement with the landlord to return about half the space, operating at a lower rate of rent; savings were reinvested, including a slushy machine that quickly paid for itself. Part of the production brewery area became event space and the business hired an events manager to ensure a steady flow of patrons.
An interesting thing happened along the way; those patrons asked for City-State beer brands. The brewery built up a supply of kegs before shutting down and auctioning off the brew house, but with those dwindling, Warner looked elsewhere to make more beer. Red Bear made a lot of sense. City-State’s longest-serving employee, Thad Adkins, had left to join the Red Bear brewing team, and Red Bear’s head brewer Devin Antoncic was an alumni of 3 Stars Brewing Company, as were City-State’s former brewers. Red Bear is a fellow member of the Metropolitan Beer Trail. Keeping it local “has increased the number of touches and interactions between breweries, staff, and owners in a positive way,” notes Warner. City-State isn’t the first brewery to cease production and then come back as a contract brewed brand. Calvert Brewing Company closed their brewery and sold their recipes and intellectual property; now their beer is brewed at Burnish Brewing on Maryland’s eastern shore. Dynasty Brewing Company may look for a similar arrangement to supply their Leesburg, Virginia taproom when their Ashburn brewery closes at the end of November.
On Saturday, November 1, 2025 Navigator Bear Irish-style Red Ale will once again flow from City-State taps. Air and Space IPA, Lost Laws lager, and Torn Mag dark lager will soon follow in 10 barrel batches, all brewed at Red Bear, with former City-State head brewer and 3 Stars alum Greg Schmidt consulting on the brewing process. As part of the arrangement, some of the 34 taps at City-State Public House will pour Red Bear’s beer. “Both companies were built to brew for a DC wholesale market that has never recovered from the pandemic,” says Warner. Win-win.
We asked Warner an impossible question: if he knew in 2019 what he now knows about the beer business, would he do it all over again? His answer was thoughtful and circumspect. “With perfect knowledge… we probably wouldn’t have gone into wholesale and distribution,” he replies, qualifying that “investors in 2019 may have not been interested in a brewpub. The landlord may have been less interested in that model as well.” In 2019, people wanted to invest in wholesale and distribution so that they could buy cans of beer in stores. Warner also notes that paying for smaller brewing systems isn’t necessarily cost effective because a similar amount of staff would be needed to make less beer, and that off-premise sales may drive on-premise sales. That is, kegs and cans in distribution serve a dual purpose, acting as a draw and advertisement for people to drink in brewery taprooms. Now, in 2025, “it doesn’t make sense to brew professionally in DC unless one of the owners is a brewer,” to save on labor costs, he notes. Payroll is often the largest cost associated with running any business relying on employees.
As a result of this transition, taproom sales are up compared to the same time period in 2024, City-State is more profitable, and Warner is both sleeping better and losing weight thanks to compounded semaglutide. He knows that “businesses in crisis put a strain on everyone,” and is “proud of how employees were treated and how this [transformation] was handled.” There are, of course, clouds on the horizon. We asked about the increased federal law enforcement presence in DC, especially at the nearby Rhode Island Avenue metro station. Immigration and Customs Enforcement and the National Guard have “absolutely” factored into sales over the last few months, says Warner, noting that top-selling non-City-State beer is Furious George Hefeweizen from Odenton, Maryland’s Crooked Crab. “We have experienced depressed sales due to this deliberate assault on DC’s economy.”
Despite these headwinds, Warner has a message for City-State patrons: “Thank you for sticking with us through the transition. We’re still making culture in DC, still focused on our mission. We exist because of the people who come through our doors… check us out again. We’re happy to be here; it’s a privilege to serve our community, the neighborhood, and the city.” Warner spent years and hundreds of thousands of dollars trying to open City-State. He’s not about to give up. A glance at City-State’s event calendar shows a full slate. “I started City-State to create a hometown brand for DC, and that work continues,” says Warner. We’ll drink to that.
Wunder Garten, 1101 First St NE, Washington, District of Columbia 20002
51 M Street Northeast, Washington, District of Columbia 20002
Red Bear Brewing Co, 209 M St NE, Washington, District of Columbia 20002
550 Morse Street Northeast, Washington, District of Columbia 20002
327 S Street Northeast, Washington, District of Columbia 20002
metrobar
640 Rhode Island Avenue Northeast, Washington, District of Columbia 20002
City State Brewing, 705 Edgewood St NE, Washington, District of Columbia 20002
Dew Drop Inn, 2801 8th St NE, Washington, District of Columbia 20017
Right Proper Brewing Production House, 920 Girard St NE, Washington, District of Columbia 20017
3126 12th Street Northeast, Washington, District of Columbia 20017
