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Thursday, June 23, 2016

Thinking Back to a Time Before Craft Beer

Reading an interview with Keith Richards, he asks his young interviewer when he was born. "1968," the writer says. "I can't imagine that," Keith says. "What's it like to live in a world where the Rolling Stones were always there?"

Similar logic applies to craft beer. If you were born after 1970, you likely do not recall a time without craft beer. I'm fudging the dates a little. We had craft in this country prior to 1980. There was New Albion and Anchor. There was Henry's Private Reserve, Oregon's original craft beer. But craft as a mainstream beverage was rare before the 1990s.

If you were born prior to 1970, you likely have no trouble recalling the dark ages. You entered a tavern, bar, restaurant or store and were confronted by a barrage of apparent choices. But those macro lagers had everything in common and didn't distinguish themselves in any meaningful way. They were light and tasteless.

Yet people had lengthy arguments about which was the best of the macros. And how much different they were. It's hard to believe, looking back. Some had a thing for Budweiser. If you lived where you could get it, maybe you liked Coors. Or maybe you preferred a regional brand like Oly, Rainier or Lucky Lager. It really didn't matter because the beers weren't much different.

Given that reality, advertising was the key to differentiating product. The pre-craft era might fairly be described as the golden age of beer advertising. Every brewery, usually via its ad agency, had a story to sell. Consumers identified with a brand based on how it was positioned in print, TV and radio ads. This is how it was done in the decades following World War II.

That scenario worked to the distinct advantage of big beer, which had the money to launch national and regional ad campaigns. Smaller, regional breweries, including Portland's Blitz-Weinhard, had an increasingly difficult time competing with large national brands, even in their home markets. That helped push more and more consolidation.

Of course, it would all come tumbling down. The era of huge advertising budgets and massive brewery consolidations eventually imploded. Craft beer didn't cause that to happen. But smaller, more agile craft brands, far less dependent on ad campaigns and size, have contributed mightily to the discomfort and decline of big beer since the turn of the century or so.

So three cheers for the golden days of yesteryear, when a beer was a beer was a beer. And choices were often based on things unrelated to the actual beer. May those days never return.

Friday, June 17, 2016

No Sane Person Has a Clue What's Coming

Back when I was working on my book, Portland Beer, I interviewed a lot of well-connected folks. One was Gary Fish, founder of Deschutes Brewing in Bend. He provided several interesting comments, which got even better when I read Jon Abernathy's book on Bend's history.

Keep in mind that Fish is a guy who stuck out the early days in Bend, a time when the pub was vacant many evenings. Success wasn't assured. One of the last questions I asked was if he had in any way anticipated what craft beer has become. "No sane person would have," he retorted.

I bring it up because we are nearing the end of Portland Beer Week, possibly the craziest 11 days on the city's annual calendar. The event, actually it's a nearly endless series of events, has been around for several years. Like the rest of the industry, it keeps growing and growing.

This year's rendition included release parties, tastings, festivals, dinners, seminars and more. The seminars aren't new, to my knowledge, but there were more of them this year, I suppose because there's intense interest in how beer is produced, marketed and so forth.

For the past two weeks at least, my email box and social media feed have been packed with event invitations and reminders. I attended only a couple of events intentionally, then walked in on one unintentionally. That's how nuts it is.

So forget Gary Fish's comment for a moment. He was certainly right. Ask yourself, instead, where this industry will be in a year? Or in five years? Better yet, what will it look like in a decade? The answers are far from certain.

There's a great column in the June issue of BeerAdvocate Magazine by Andy Crouch. In it, he talks about his experience at the recent Craft Brewers Conference in Philly. The conference has grown by leaps and bounds in just the last 10 years. I attended last year in Portland. Bonkers.

Crouch, who's been writing about craft beer for quite a while, talks about walking around the hall and not seeing many familiar breweries. There was a time when there weren't that many brewers. Or writers, for that matter. People knew each other. It was quaint. Those days are over.

You look at CBC and at PDX Beer Week and you see hordes of craft beer fans. There's a certain freneticism surrounding the industry, with more people and more money flowing in and countless new breweries and related businesses opening all over the place.

We can look back and see where craft beer came from. If you know the story, you know the revolution got off to a sluggish start 30-plus years ago. But it's ramped up considerably in the last 10 years. The pace of growth and change is so rapid now that it's almost impossible to keep up.

Many years from now, someone in today's industry is going to be asked if they anticipated changes that happened on their watch. And their response will almost certainly mirror Gary Fish's: "No sane person would have."

Friday, June 10, 2016

Revised Severance Policy Suggests Imminent CBA Sale

For a while now, I've wondered about the future of the Craft Brew Alliance. There are a number of reasons, which I'll get to. My working assumption for a year or two is that they would sell, mostly likely to Anheuser-Busch. Recent developments suggest a deal may be imminent, although maybe not the deal I envisioned.

Let me back up for just a moment. The principal players in the CBA, you will recall, are Widmer, Redhook and Kona. No need to review the history of the organization here. But do keep in mind that Anheuser-Busch owns roughly a third interest in the CBA. That's been the case for a number of years.

Over the course of the last few of weeks, CBA stock gained 36 percent. It jumped 8.1 percent this past Tuesday. Why the increase? Some think it's linked to the announcement of an updated severance policy for executives in the event company ownership changes.

The new policy, unveiled on May 24, calls for executives to receive 18 months of their base salary, plus their annual target bonus and health benefits, if the company is acquired and they're out of a job. Execs who leave prior to a takeover would receive less favorable severance.

Some will say it's just a coincidence, that the severance policy has nothing to do with anything. But one of the things you don't want when positioning yourself for a sale is the appearance of instability. You cannot have executives jumping ship. So you make it worth their while to stick around.

By the way, CBA stock isn't going up specifically due of the severance plan. That's not how these things work. What's happening is investors have sniffed out the fact that the CBA is likely to be sold and there's an opportunity to make some money, one way or another.

Inquiring minds may fairly wonder why the CBA might want to sell. Several reasons:

Struggling Brands
In case you aren't aware, the growth of craft is slowing nationally. That's having a particularly dramatic affect on older, established brands. They face steep challenges staying relevant in a sea of newcomers. Widmer and Redhook are perfect examples of that theme. In certain quarters, there's a perception that both brands, among hundreds of others, are tired and past their prime.

Anheuser-Busch's incentive programs, which have been widely reported in a variety of places, work against the interests of the CBA, despite the partial ownership arrangement. That's because distributors are incentivized to sell AB-owned brands. Since the CBA isn't fully owned, its beers don't get the attention that AB's High End brands get. It's a pickle for the CBA, which has derived significant benefits through its relationship with Anheuser-Busch dating to 1997.

Some in the industry believe the key to surviving in an increasingly crowded, competitive and complex marketplace is to partner with big beer. Breweries that do so give up, at a minimum, the perception of autonomy. What they get in return is the security of a partner with deep pockets, a massive supply chain and an extensive distribution network.

Despite its declining brands, the CBA possesses a gem in Kona, which has built a strong national following mostly because it's marketed like Corona. People somehow visualize the beach when drinking Kona. It hardly matters that Kona consumed on the mainland is also brewed here, not in Hawaii. Anyway, Kona is a big fat target for the likes of AB, which desperately wants to take a bite out of Corona/Constellation.

It's hard to know how much influence Kurt Widmer had at the CBA in recent years. He was definitely the visionary behind the origins of Widmer Brewing. Did his retirement at the end of last year open the door to acquisition? There's no way to know and no one talking. My guess is he retained a fair amount of power over the direction of things until he retired. Not so much now.

Returning to my original assumption, I now believe they will likely do one of two things: Either they will sell to Anheuser-Busch or they will somehow buy their independence and focus on rebuilding their brands via new partnerships. Continuing along as they have been is problematic, given what's happening in the industry and what their friends in St Louis are up to with acquisitions and incentives.

It turns out there's another possibility I hadn't considered until an industry friend mentioned it. In that scenario, only Kona would be sold to Anheuser-Busch. That makes some sense. Kona, as noted, is the crown jewel the CBA portfolio. Its seismic growth potential makes it a high value asset and provides plenty of incentive to any potential suitor.

One of the things AB would likely do with Kona is open Hawaiian-themed, Kona brewpubs around the country. We've seen a tiny bit of that with 10 Barrel (pubs in several cities), but Kona is an emerging national brand oozing with pub and shelf appeal. None of the other CBA brands are in the same league and, honestly, there's nothing with the upside of Kona out there.

What would happen to the remaining CBA brands? Here's where it gets crazy. In the scenario described to me, those brands would be sold to Pabst. Interesting. Pabst, you may recall, is currently leasing (with an option to buy) the antiquated CBA brewery in Woodinville, Wash. Could a deal like this happen? It sounds pretty far-fetched, but stranger things have happened.

If you're wondering about a timeline, time is of the essence. The slowdown in overall craft has the industry on edge. There will undoubtedly be deals this year. The various pressures and incentives suggest the CBA is ripe to be part of that. But we shall see.

Monday, June 6, 2016

Fruit Beer Fest Moves Onward and Upward

This week's marquee event is the Portland Fruit Beer Festival, returning for its sixth year. As you may know if you're reading along, this event has been its own worst enemy due to overwhelming popularity. The space next to Burnside Brewing hasn't been adequate in recent times.

Which is why organizers are pleased to announce the festival is moving to the larger, shadier North Park Blocks this year. The expanded venue will provide space for additional beer and cider offerings, more food options, more music and more places for attendees to just chill.

The festival happens this weekend, June 10-12. It's worth mentioning that, along with the larger more user-friendly venue, event hours are also expanding. In previous years, Friday hours were short or non-existent. But they're open three full days this year. Spreading out the anticipated crowds is a good thing.

General Admission packages start at $25 ($27.40 online) and include a branded festival cup and 12 drink tickets. Advanced ticket holders or those who arrive early Friday will receive an extra 3 drink tickets. Tastes of beers and ciders go for 1-3 tickets. Additional tickets cost $1.

Another new feature this year is the Burnside Can Garden, which will be located inside the festival. Want to escape the crowds and drink something other than fruit beer? Enter the Can Garden, where they'll be serving Burnside Couch Lager and IPA in cans. Hey, not a bad idea.

The primary reason this event has generated such enthusiasm in recent years is the beers. They are typically unique interpretations of what you can do with fruit and beer. I missed the media preview the other night due to another commitment. But the list is impressive, as always.

Obviously, the elephant in the living room is the new venue. The Burnside folks had been thinking about moving to a larger venue for several years. It didn't happen because they were comfortable using their own space, which they expanded and made about as user-friendly as possible.

But all things must pass and it was time to move onward and upward. Understand, the move is not without risk. The new space is more costly and the logistics are tougher. The event must grow to justify it. If the weather doesn't cooperate or if fans don't show, organizers could find themselves upside down. It's unlikely, but that's how these things work.

As always, there's a lot more information on the event website here. I'm not sure if it's still the case, but they were looking for more volunteer servers the other day. Extra tickets were part of the deal. That may no longer be the case. Visit the website for info.

Friday, June 3, 2016

The Unfortunate Rise of Beer Geekery

My friend (I use the term loosely) Jeff Alworth just posted a piece that explores why he doesn't feel he's a beer geek. It's a fairly nuanced review of the differences between a beer geek and a beer nerd, and how those beasts, if you will, behave out on the open beer range.

In fact, Jeff isn't a beer geek. He's not particularly interested in chasing down new beers or trends. You want to experience a new brewery with Jeff? It's not tough because the list of relatively new places he hasn't been to is long. Invite him to meet somewhere. Anywhere. Please.

By his own admission, Jeff is a beer nerd. He writes books about beer, beer styles and (often) antiquated brewing techniques. He's interested in the types of things that bore your typical beer geek to death. As John Foyston and I decided several years ago, Jeff enjoys, "thinking about beer."

While Jeff was thinking, a crowd of craft beer super fans reached legal drinking age. And it continues to grow. These are the folks you see waiting in line to buy special event tickets or taste rare beers. They're the ones you see drinking trendy beers and yacking relentlessly about all the new breweries they've been to. They know everything there is to know.

Except how to enjoy a beer. Because the simple act of enjoying a beer is largely lost on this crowd. If I had to compare it to something in my own experience, I'd say it resembles what I saw with music when I was in college. Everyone wanted a fancy stereo with lots of sexy lights and switches. The stereo itself became the center of conversation and attention. The music was secondary.

 Jeff adds some useful perspective on our present situation in his post:
I could give up beer, the beverage, more easily than I could coffee. By far. But what I'd find very hard to give up is the simple pleasure of sitting with people in a pub and enjoying a pint. In that context, I like a good beer, but it isn't the central feature of the outing. This view is far more prevalent in pub-going countries, where people regularly drink a lot of beer over the course of a year. But the term "beer geek" just doesn't fit. They're beer drinkers, and surely beer lovers. But not beer geeks.
As I've said in previous posts here, I believe beer geeks are driving a lot of the growth in craft beer. Particularly when you look at dollar volume growth and the growing importance of high end product. Most of that stuff is being bought by beer geeks. Cost is no object with these folks.

Not that long ago, you could walk into a brewery or pub, choose your beer from a short list and enjoy it. You might even order a pitcher to share with friends. Choosing the beer wasn't complicated. You made a judgement call and lived with it. The beer wasn't the central feature of the outing.

That's changed...or is changing. Many can't order just any beer today. They crave something new or special, something that can be showed off and discussed at length. The days of beer being a secondary, casual part of the experience are in decline, possibly rapid decline, for many.

Good beer has certainly changed how we think about beer. And mostly for the better. But beer geekery may be one of the more unfortunate developments of the craft era.

Tuesday, May 31, 2016

Hot Summer in the City at Anheuser-Busch

Memorial Day traditionally marks the beginning of the lurch toward the coming dog days of summer. Official summer won't arrive for a few weeks, but a few days of warm weather will give us a taste of what's on the horizon. For better or worse.

Now seems like a good time to check in again with our good friends at Anheuser-Busch. Summer is a busy time for them and, anyway, their efforts to maintain market share using unscrupulous strategies and initiatives are drawing scrutiny and bad press.

Summer Discounting
AB launched aggressive discounting programs in supermarket chains over the Memorial Day weekend and beyond. In one scenario, customers buy an 18-pack of Bud/Bud Light and get a second at 50% off. In another, you buy two 12-packs and get a third for a penny.

Convenience stores in many areas are seeing similar deals targeting the holiday weekends of summer. You'll see 12-packs of Bud/Bud Light selling for $9.99 coinciding with Memorial Day (through June 6), Fourth of July and Labor Day weekends. 12-packs will sell for $10.99 the rest of the time, according to reports.

The discounting extends to AB craft/crafty product, brands like Goose IPA and Shock Top, in some markets. Buy two six-packs of these brands and get a third for free. These offers may or may not be linked to the various holiday weekends.

Naturally, AB says there's no summer price war. They're just trying to attain an appropriate "price mix." Sure thing. In fact, this kind of price cutting is pretty cutthroat and something only Anheuser-Busch could pull off thanks to production and distribution efficiencies.

How much will the discounting gambit help or hurt? Hard to say. The big idea is to hang onto Bud/Bud Light drinkers while at the same continuing to build the market penetration of their craft and crafty brands. The only brand in the AB premium family showing growth is Michelob Ultra, perhaps a sign that Millennials will go for light beer when they get fat.

By the way, it's worth noting that AB's craft acquisitions are up 40 percent for the year in IRI, outperforming the craft segment as a whole. Goose Island is a big part of that and a nice example of what you can do with a flaccid brand when you have a massive, nationwide distribution network. Elysian, Golden Road, Blue Point and Four Peaks and Breckenridge are all up.

Branch Distributors
As many who stop by here know, the AB distribution network is a topic of interest for the Department of Justice as it reviews the pending acquisition of SABMiller. Beyond the issue of wholly-owned branch distributors is an incentive program that appears to violate anti-trust laws.

You know how it works, right? AB-affiliated distributors, owned and independent, are financially incentivized to advertise and sell AB brands. Distributors that tow the company line by moving 98 percent of their sales in AB brands receive the bulk of their advertising budget back.

This practice, contrary to the stated position of AB suits, is almost certainly a violation of fair trade regulations because it is designed to thwart promotion of smaller craft brands. The DOJ is evidently talking to craft brewers and distributors to develop a full understanding of how AB's incentive program restricts market access and hurts small brewers.

Just as branch distributors should be considered illegal, so should anti-competitive incentive programs. We can only hope DOJ approval of the ABI/SABMiller merger is contingent on the resulting behemoth agreeing to meaningful rules on distributor ownership and incentive programs. Otherwise, this merger/acquisition is big trouble for craft brewers.

Seattle Slip
You are surely aware of the recent situation in Seattle, where the Washington State Liquor and Cannabis Board (WSLCB) is charging AB with exercising exclusivity arrangements at several concert venues. The violation carries a fine of $150,000 and a three-day suspension. The fine is pocket change to the behemoth. The suspension will never happen.

Investigators discovered two venues that sold only beer available through Anheuser-Busch distributors. That alone is not illegal and would not have triggered any action. Except a manager at one venue told investigators that the venue did, indeed, have an agreement to sell only products provided by an AB distributor. In Washington, as in most states, that arrangement is illegal.

In fact, anyone who has attended a concert or sporting event has probably been subjected to this kind of subterfuge. You know the fix is in when you walk around a stadium or concert hall searching for a decent beer and find nothing but swill. Only in recent times have we started to see a shift toward better beers in these situations and now only because consumers demand it.

We don't know how the Seattle case will turn out. Consistent with past behavior, AB denies that it did anything wrong and has the resources to make sure the case drags on for years, if necessary. My guess is they will eventually pay all or some portion of the fine without admitting guilt. And the cycle of forcing them to comply with legitimate laws will start anew.

It's going to be a long, hot summer.

Friday, May 27, 2016

Looking for a 3-Way? Your Wait is Nearly Over

One of the most popular summer seasonals is preparing for another road trip. The fourth rendition of 3-Way IPA, a collaboration between Astoria's Fort George Brewing and two rotating breweries, will hit tap lines and store shelves in the next few weeks.

If you don't know about 3-Way IPA, you may not have been paying attention. It's been a sought-after beer since first launched in 2013. Each year features a new collaboration, new recipe, new can design, but with the same name. It's available in 16-ounce four-pack cans and on draft from June through September,

Past collaborators
2013 – Gigantic, Lompoc
2014 – Boneyard, Block 15
2015 – Georgetown, pFriem

Hardcore hopheads will readily recall the 2014 collaboration, which featured what you might call the best aspects of the three breweries. Fort George had a tough time keeping up with the demand for that beer. Last year's follow-up was a completely different beer, as advertised, and didn't quite reach the standard set in 2014.

The collaborating breweries this time around are Barley Brown’s of Baker City and Melvin Brewing of Jackson, Wyoming. In other words, another great trio of breweries and brewers.

The Beer
"The goal with the grain bill was to produce an ultra-pale color, creating a simple, yet solid canvas for maximum hop expression," the press release says. "A lower than average mash temp decreased the amount of residual sugar. This lets the beer to have sweetness derived from the hop character rather than the malt."

Hop additions (again from the press release) include:
1st - Apollo for bittering - a high alpha hop that tends to exude grapefruit notes and contributes to an elaborate citrus character as it interacts with the aroma hops.
2nd - Simcoe, and a lot of it. This addition is twice the quantity of the 1st addition.
3rd - Simcoe, Citra, and Mosaic, added later than the average 3rd addition to decrease bittering and magnify the pleasant citrus character.
Dry Hopping – Double dry-hopped with Galaxy, Mosaic, and Citra. These hop additions create peach, pineapple, and grapefruit taste and aroma. The second dry hop addition is roused with CO2 to boost the hop efficacy.

Portland Release Party
Four-packs and draft of the new 3-Way will be available starting the week of June 13. Keep in mind that Fort George beer is distributed exclusively in the Pacific Northwest. A Portland release party is set for Friday, June 10, at the White Owl Social Club. Collaborating brewers will be in attendance, along with an assortment of beers from each brewery.

It'll be interesting to see how this year's beer holds up. If it comes close to matching what 3-Way was two years ago, a lot of people will be hoping Fort George has enough cans and enough hops to keep the beer flowing through the summer.