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Friday, November 20, 2015

Black Friday Preview at Belmont Station

One of the things you don't see much of here is promotional content. There's a reason for that, which is there are so many competing events happening all the time that I mostly choose to stay neutral. That doesn't make me very popular in some circles. Oh well.

But there are events that deserve mention. Next week's Bourbon County Stout Sneak Preview at Belmont Station is just such an event. It's happening Wednesday, the day before Thanksgiving from noon to 9 p.m. in the bier cafe at the Station.

Attendees will be tasting four rare versions of Goose Island's most renowned beer: 2015 Bourbon County Stout; Bourbon County Stout Barley Wine; Bourbon County Stout Regal Rye and Bourbon County Stout Coffee. These beers will be available in flights only for ticket holders.

Tickets are limited and must be purchased in advance at Belmont Station. The cost is $30 per ticket, which might seem like a lot until you consider how rare these beers are, You can purchase up to four tickets in advance, but you can only redeem one per person on the day of the event.

The cool thing is that $15 of every ticket sold will benefit the Oregon Food Bank. This is another case of Lisa Morrison and the crew at Belmont Station giving back to the community. They do something similar with the annual Pliny the Younger release. It's damn good stuff.

Just so I don't get called out for hypocrisy, I'm well aware of the fact that Goose Island is wholly owned by Anheuser-Busch. You won't typically find me supporting events or breweries connected to the evil empire. But this event is different. It transcends the beer wars.

Tickets to the Sneak Preview will almost certainly sell out. Keep in mind that you will only be able to taste the beers in question if you purchase a ticket in advance. Tickets will not be sold on the day of the event.

This is a great opportunity to enjoy some great beers while helping out the Oregon Food Bank, which needs all the help it can get this time of year. Kudos and thanks to my friends at Belmont Station for hosting this great event.

Tuesday, November 17, 2015

Ballast Point and the Homogenization of Craft Beer

Yesterday's news that Ballast Point Brewing is being bought by Constellation Brands sent shock waves through the industry. These were different waves than the ones we've seen with other buyouts. It's a sign of the times than few are shocked when craft breweries are bought by big beer.

What shocked people about the Ballast Point buyout is the price. Constellation will reportedly pay a cool $1 billion for the privilege of owning the San Diego brewery. That number surely has more than a few craft brewers wondering what they might sell for. Everyone has a price.

On its face, the valuation seems a little crazy. Ballast Point will sell about 280,000 barrels this year and expects revenue of $115 million. The 20-year-old company has shown solid growth in recent years. Still, Constellation paid a premium, roughly $3,500 per finished barrel. Earlier buyouts were in the $1,000 per barrel range.

Keep in mind that all of these buyouts are a two-way street. Constellation, the keeper of Corona and Modelo, was shopping for a strong craft partner. Ballast Point. which launched an IPO in October at least partially to finance further expansion, was ripe for a big money partner. Both are getting exactly what they wanted.

For its part, Constellation is looking very much to the future with this deal. Craft beer owns 11 percent of the US beer market, but Constellation expects that number to grow as mass market lagers decline. Don't downplay the importance of the Anheuser-Busch/SABMiller merger as motivation. Constellation wanted to secure its place at the craft table and saw Ballast Point as a plum.

Some have poo-pooed the value of Ballast Point. That's crazy. Located in one of the nation's best beer cities, BP has a broad portfolio of beers, many of which are well-regarded outside California...they distribute to more than 30 states. They also have a small collection of pubs. The stature of the brand and their expertise at running pubs means Ballast Point could conceivably open these things all over the country. And those are serious cash machines.

What we may be starting to see with these buyouts is the coming homogenization of craft beer in this country. In the same way that fast food and a multitude of other things have been homogenized over the last 40 or so years, we may well be seeing something similar with craft beer.

When I was a kid, the national chains didn't own the fast food market. There were still a lot of independently owned and operated, mom and pop places. The big chains were around, but independents were easier to find. Since that time, the big shots have almost completely taken over the fast food landscape.

Most of today's craft breweries and pubs are independent. Imagine for a moment what happens when you have well-financed chains operated by the likes of Ballast Point and 10 Barrel opening pubs everywhere. The pubs would be backed by packaged beer in stores. Remember, these operations will enjoy huge purchasing and logistical advantages over independent pubs. Well?

Even if the homogenization doesn't happen quite as I envision, these buyouts are changing the nature of craft beer. The lines are blurring. Regardless of what you or I or the Brewers Association thinks, Ballast Point and the other purchased brands will continue to operate as craft breweries.

What everyone needs to recognize is that these breweries, by way of their connection to big beer, enjoy substantial advantages over independent brewers. The craft beer playing field is in the process of becoming a lot less level than it has been. In a nutshell, that is the risk to independent craft brewers.

Friday, November 6, 2015

Laurelwood Moving 'Contract Brewing' to Full Sail

I'm not the type to troll the OLCC website looking for information on new breweries and pubs. It isn't worth my time because I don't care if I'm first to cover a story. I prefer to provide some perspective that often isn't part of breaking coverage.

Friday afternoon, one of my industry contacts gave me a heads up that Laurelwood has applied for a brewpub license in Hood River. "What could that mean?" he wondered. I immediately thought it might be related to the contract brewing situation. Sure enough.

"We're in the process of switching our contract brewing partner closer to home," Laurelwood owner Mike De Kalb told me via email. "The Craft Brew Alliance wants to get out of the contract brewing business and Full Sail has extra capacity, so it seemed like a natural fit."

Recall that the CBA has been brewing Laurelwood Workhorse and Free Range Red at its Woodinville, Wash. facility since 2013. That arrangement has been a big winner, getting those beers into six-packs of 12 ounce bottles, beer's most popular packaging. As well, the deal freed up production capacity in Portland, allowing brewers to focus on developing more specialty beers. The Full Sail partnership may be a further step in that direction.

"We expect the arrangement with Full Sail to give us added flexibility," De Kalb said. "We'll have more control of the processes and outcomes. The details are still being worked out, but I expect us to to be able to release seasonal beers in six-packs, something we couldn't do with the CBA."

Some are wondering why, if it's a contract brewing situation, Laurelwood applied for a brewpub license. There are reasons for everything.

"This is common in Oregon. Most breweries have a brewpub license," De Kalb said. "With Full Sail, we've worked out an alternating proprietorship agreement. It's a little technical and slightly different than contract brewing. As I said, the details are still being hammered out."

Moving their production brewing closer to home offers benefits. For starters, 75 percent of the Laurelwood beer produced in Woodinville (estimated at 18,000 barrels for 2015 earlier this year) returns to Oregon. Brewing that beer here means reduced shipping costs and fresher beer. It also means easier access to the day-to-day brewing operation.

In case you're wondering, production of Red Elephant cans will continue at the Portland brewery. I assume Full Sail does not have a canning line. At present, Laurelwood uses a mobile canning system for Red Elephant, which has been well-received since its release in cans last summer.

As for the CBA, you have to wonder why they would want to abandon contract brewing. Maybe they need the capacity for the popular Kona beers. No way do they need additional capacity for Redhook, a craft flat-liner. Perhaps they've contracted with Anheuser-Busch to brew wholly owned brands like Goose Island or 10 Barrel for the Northwest. Any such arrangement would be top secret, of course. 

In the case of Laurelwood, they expect to issue a formal press release when the details are fully worked out. The switch to Full Sail won't happen overnight. They anticipate Spring 2016.

Wednesday, October 28, 2015

Paradise by Buyout Light

There's nothing like a junket to the tropics to improve mental and physical dexterity. Wishful thinking, you know. These trips are more or less a regular thing, which means I've talked about the beer scene out here on many occasions. "Out here," of course, is code for Kauai. And it's a veritable desert in beer terms.

Looking at my social media and blog feed, I can't help but be amused and annoyed by some of the reporting. There are those in the blogging and writing community who continue to pander to and coddle breweries that are wholly owned by Anheuser-Busch. They know who they are and you know which breweries I'm talking about. This isn't rocket science.

I take a dim view of buyouts and sellouts and of AB's efforts to leverage its position globally and in the United States. Not everyone agrees or cares, but I think these buyouts are bad for craft beer, whatever that is these days. Anheuser-Busch hopes to purchase enough breweries and distributors to squeeze craft beer out of the comfort zone it enjoys today.

Upon arriving in Kauai, I got a firsthand snootful of what a buyout looks like to consumers. This happened at the car rental joint. I reserved a car several months ago via a website that offers options from among all or most of the car rental vendors here. I've used this approach to rent a car here for many years. This time, we rented from Thrifty.

It was pretty apparent we were in trouble the instant we got to the rental office. There was a line of customers and only two people behind the counter. Outside, a skeleton crew prepped cars that were going back out. Nearby, folks who had checked in and were ready to go waited patiently their vehicles. And waited.

As I reached the front of the line, a gent appeared from outside the ropes and told the agent he would need another car...that the car they gave him had a mechanical problem.  The agent smiled and said he would take care of that momentarily. There were a lot of vacant stares on the faces of people waiting in line. Expectations for a positive experience took a dive.

The agent taking care of my reservation had been to Portland a year or so ago and we struck up a friendly conversation. As he was finishing things up, I discreetly asked him what the hell was going on with Thrifty. I'd rented from them before and never seen a disaster like this.

"We were bought out by Hertz," he said. "A few weeks ago, they came in and switched us to a new computer system, cut staffing and made a mess." He had told me at the start that he had to access another site to find the details of my reservation. The entire process took nearly an hour, for something that typically takes 15-20 minutes in Kauai. Not good.

Of course, there's more to the story. The Hertz buyout of Thrifty didn't just happen. It happened in 2012. But Hertz has been busy dealing with the anti-trust issues that came out of its purchase of Thrifty and Dollar. Hertz had to offload domestic locations of subsidiary Advantage. It evidently took them a while to bring the various locations into the Hertz orbit. Small favors.

In fact, only three companies–Hertz, Avis and Enterprise–control 94 percent of the car rental industry in America. Recent consolidation in the industry, including Hertz' buyout of Dollar and Thrifty, has led to dramatic price increases, as discussed here. Funny how reduced competition leads to fewer choices, higher prices and less attentive service. Huge surprise.

Could this kind of scenario occur in the beer world? Maybe not. But Anheuser-Busch's strategy of buying craft breweries and distributors is alarming. It will enable them to limit access to the market for non-AB brands while their owned "craft "brands, brewed in factory breweries, become readily available. If there's an upside, I don't see it.

Obviously, the significant question is how many people know or care about what's going on in the beer wars. Here on Kauai, I see plenty of people drinking Bud Light or similar garbage. I wonder if they know or care what that choice means. Sounds like a topic for future discussion.


Sunday, October 25, 2015

Oregon's First Brewpub Turns 30

Today marks in important milestone in Oregon history. But you aren't likely to see any coverage in the mainstream media. Why? Because it has nothing to do with the Kardashians or Star Wars or Back to the Future or a mass shooting. Nope.
Mike and Brian with Ron Wolf

Thirty years ago today McMenamins brewed the first batch of beer at their Hillsdale pub. Why is that significant? Because it made Hillsdale the first brewpub in modern Oregon history. The Brewpub Bill, passed in June 1985, paved the way for them to establish a brewery in an existing pub.

It may be instructive to recall that Bridgeport and Widmer were both brewing at that point. Bridgeport was actually selling beer by late 1984. The Widmers were right behind them and began selling beer in April 1985. But neither had a pub. Hillsdale was the first.

Those early Hillsdale beers were brewed with malt extract and other suspect ingredients. Not the best approach and, in fact, the beers were not especially good. Don't take my word for it. I didn't get here until 1989. Brian McMenamin provided his thoughts during a 2013 interview.
We weren’t really sure what the Brewpub Bill meant at first. Did it mean cooking beer on a stove in the kitchen? We knew we could use old dairy equipment. So we went down to Tillamook and found some tanks, jerry-rigged some stuff and it worked. We started making beer and it wasn’t good beer. We hired some people to help with it and we eventually had some decent stuff.
One of the people they hired was John Harris, who would become one of Oregon's iconic brewers at Deschutes and Full Sail before launching Ecliptic in 2013. By 1985, Harris had done some homebrewing, but had no pro experience. There were very few pro craft brewers in those days.. Head brewer Ron Wolf hired him, anyway. Harris recalled his experience in 2013.
On my first day at Hillsdale, I was supposed to bring rubber boots…but I forgot to buy them. I had to wear my hiking boots, which didn’t work very well. Fortunately, they didn't fire me. The system was tiny…about seven kegs. We had no temperature control and we used open fermenters. Consistency was a problem. Beers sometimes got a little sour. The whole concept of small breweries was revolutionary. The brewers at Henry Weinhard considered us renegades because our brewery was so primitive. We got some respect and the beer got better after we started mashing. 
The brewpub concept didn't take off instantly. But combining food with beer produced in tiny, on-site breweries eventually became a thing. Bridgeport established a pub and Portland Brewing opened on Northwest Flanders in March 1986. McMenamin's eventually established breweries in a number of their pubs, which became destinations because you could always find good beer there.

In the greater scheme of things, brewpubs were crucial to the development of our beer culture because they exposed people of all ages to craft beer in a friendly environment. If not for brewpubs, craft beer would have been relegated largely to the dark shadows of taverns and bars, and it's visibility would have suffered. We would not be where we are today.

To celebrate 30 years, a commemorative version of Hillsdale Ale will be poured at all McMenamin's locations today. No, this won't be a malt extract beer. They've examined the brewing notes from that original beer and recreated it to the best of their ability in an all-grain format. Pints of Hillsdale Ale will go for $4. Growler fills will be $8.

As most who follow the local beer scene know, the McMenamins pursued a different course than virtually all of the other craft or micro breweries. They never had any desire to distribute their beer beyond their own pubs and assorted properties. Their plan was wildly simplistic.

"Instead of buying it from someone else, we wanted to brew the beer to sell in our pubs," Brian McMenamin recalled. "If you haven't figured it out, we're stubborn Irish people. We like doing things ourselves."

You might say that stubborn, do-it-yourself approach has served and guided the brothers well over the years. And if you did, I'm pretty sure you'd be right.

Monday, October 19, 2015

Local Relevance: the Latest Catchphrase in Craft Beer

It can easily be argued that local appeal was a huge part of what got the craft revolution off the ground. The demand for locally grown and processed food was underway by the 1980s and it extended to beverages, including coffee and, yes, beer.

The way the movement presented itself early on, at least in beer terms, was a vibrant homebrewing culture. The beers being made were local and that became a big part of their identity when those homebrewers opened breweries. You know who they are.

It's largely a forgotten detail now, but Portland's early craft (then known as micro) breweries leaned heavily on the local angle to sell their product. Doing so fit nicely with the highly provincial nature of Portland. Customers, drinkers in this case, were increasingly attracted to local beers.

As time went by and the early breweries became successful and grew, they looked outside Portland and the Northwest. We saw this with Widmer, Portland Brewing and Bridgeport. In fact, the urge to explore lucrative markets outside core areas has been a theme in the craft beer industry of late. These efforts are not without risk and they don't always pan out. But they are a reality.

So I have to admit I was surprised when I interviewed the folks at Bale Breaker Brewing a couple of months back. They were determined, as part of their business plan, to own their core market in rural eastern Washington prior to chasing the lucrative Seattle-metro market. Some told them there were nuts, that people "out there" don't drink craft beer.

As it turns out, Bale Breaker has been highly successful with their core market strategy. They were unable to keep up with demand for their beer from the day they opened in 2013, and the great bulk of that beer was sold locally. They've since moved into Seattle and the rest of Washington and Oregon is on the horizon. But they say their greatest strength is their home market.

It seems some of the larger breweries are starting to come full circle on the local concept. There's some definite irony attached to that notion, given the fact that all of these guys started out small and local before expanding into distant markets. But never mind.

For many years, Portland Brewing/Pyramid largely ignored its core market on the West Coast and focused on building its brands elsewhere. Those efforts netted mixed results for a variety of reasons. Now they're shifting direction.

When I interviewed Rob Rentsch, the new general manager at Portland Brewing/Pyramid, he talked about the strategic importance of reviving the relevance of his brands in the local and regional market. He was hired specifically to make that happen, and it's a difficult task given the extent of the neglect over so many years. We'll have to see how it goes.

Now I see, via an article in Brewbound, that the Craft Brew Alliance is also focused on the local angle. As you likely know, the CBA is comprised of Widmer, Redhook, Kona and Omission, as well as some partner brands. In the case of Widmer and Redhook, both legacy Northwest brands, the CBA hopes to achieve greater local relevance.

This is a fairly interesting development. Recall that CBA brands enjoy access to the nationwide Anheuser-Busch distribution network. You're app to find at least some CBA beers almost anywhere in the country thanks to that arrangement.

What they've evidently learned is that only Kona has broad national appeal. Perhaps this is because so many smaller breweries are opening up and attracting locals. In that scenario, the people buying Kona are buying an image. It's similar to Corona, which sells well due to its connection to place. Anyway, the CBA will continue to support Kona nationally via a strong advertising campaign. Makes sense.

Widmer and Redhook are where the big local/regional action is. The approach to seasonal releases will be refined with both brands. Widmer Hefeweizen will hit Oregon shelves in cans next March, a move they hope will boost interest in their flagship beer. There's no hint of it in the article, but Widmer will likely do more with its specialty program, which is under-appreciated.

Redhook is a more substantial challenge. Established in 1982, it is the oldest surviving Northwest craft brand. And it has been neglected and mismanaged for years. Part of the plan to revive the brand is retro packaging, an effort to remind consumers of what Redhook once was. Lipstick on a pig, if you will. Then there's American Pale Ale, set to be released nationally. What?

As with Widmer and Portland Brewing, Redhook's path to local relevance will demand effort on the specialty front. Today's vibrant brands are built in beer bars and at festivals and tap takeovers. You cannot reach that audience with mainstream brands. And you have to understand that grassroots marketing like this is intended to generate buzz and credibility. Sales will take time.

Do the established brands have the dexterity and the commitment required to execute the kind of plan that will result in renewed local relevance? I have my doubts, But we shall see.

Tuesday, October 13, 2015

Kurt Widmer's Departure and the Future of the CBA

Yesterday's big news on the impending retirement of Kurt Widmer from the Craft Brew Alliance hit like a ton of bricks. The story popped up on the news wire in the late afternoon and mostly took the form of a regurgitated press release with little or no analysis. It's the "new" journalism, you know.

End of an era
Kurt Widmer will step away from his role as chairman of the CBA board at the end of the year. He expects to spend more time with his wife and family and hopes to write new chapters while there's time. He's a young 63, so there is certainly time for a novel or two.

For a while now, I've been wondering when something like this might happen. Believe me, I have no inside sources at Widmer or the CBA. I'm not even on their media list, so I didn't receive the press release. But I've been thinking this might be a good time for one or both of the brothers to move on. More on why in a minute.

This is a big deal. If you're making a list of the most important folks in Oregon brewing history, Kurt Widmer is on it. He's right there with names like Saxer, Weinhard, Coury, Larrance, Ponzi, McMenamin, Bowman, Eckhardt, Younger, Fish, Joyce and, of course, Rob Widmer.

When the Widmers launched their little enterprise back in 1984, their expectations were modest. Like most of the early craft brewers, they didn't expect to make a lot of money. They were doing something they enjoyed and hoped to make a living at it. It sounds quaint and naive looking back, after they've made millions, but that's how it was in the beginning.

Kurt Widmer was the idea man. He's the one who had experience with European beers, having lived there. He's the one who saw the rising popularity of imports and thought that market could be tapped with beers made here. He's the one who got Rob on board, which took about a nanosecond. And he was at the helm navigating the significant challenges during the formative years.

Things are much different today. The partnership with Anheuser-Busch, announced in 1997, and the formation of the CBA in 2008, have pushed Widmer and affiliated brands Redhook and Kona into markets around the country. This ceased to be a small, self-contained business many years ago, but the transition to a highly structured corporate organization occurred in just the last few years.

When you look at what they've built and what Widmer and the CBA are today, you really have to wonder what Kurt and Rob have left to accomplish. Nothing, I think. That may be particularly true of Kurt, the thinker and idea man who directed traffic for so many years and now finds himself watching as others call most of the shots.

The press release says Kurt will stay on until the end of the year and help identify a successor as chairman of the board. Rob Widmer, who has never held a spot on the eight-person board, has no plans to leave the organization and the brothers will retain their ownership stake in the company. Together, they own nearly 12 percent of CBA common stock. 

Given the current pace of buyouts and mergers in the beer world, I can't help but wonder if the CBA will be fully absorbed by Anheuser-Busch in the near future. Could Kurt Widmer's departure be a precursor? AB owns roughly a third of the CBA and holds two seats on the board. How many of the remaining board members favor a sale? I don't know, may not want to know.

It seems to me the CBA brands, particularly Kona and Widmer, fit perfectly with AB's strategy. If it acquires the CBA, AB can mass produce those beers in factory breweries and flood the market, undercutting independent craft brewers around the country. If that's what's coming down the pike, I'd say this was exactly the right time for Kurt Widmer to get out. 

As with so many things, time will tell.