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Wednesday, May 13, 2020

LIfe Chronicles: The Case of the Artificial Knee

Long before I started thinking about craft beer, I was playing sports or enjoying some form of active recreation. You think you're indestructible. It never occurred to me that I might one day have knee problems or, perish the thought, need to have knee replacement surgery. How naive I was.

Pre-surgery: Bone-on-bone
A year ago this time, I was taking steps to deal with an arthritic left knee. Both knees had been problematic for a decade or so, the result of too much racquetball for the last 30 years; too much tennis, football and related high impact activities dating back to boyhood. Meniscus tears in both knees were repaired arthroscopically in 2006.

By 2013 or so, the left one was bothering me again. It was a different pain. X-rays showed narrowing space between the bones on the medial (inner) side. I was nearly bone-on-bone. The orthopedist told me I'd eventually need to have the knee replaced. I did what I could to extend the life of my natural joint, but it had gotten so bad by late 2018 that I had trouble walking my Labradors or doing much of anything.

Getting a knee replaced in American healthcare is a process. You jump through a lot of hoops along the way. When I saw my primary care doc for another issue, I mentioned the knee. She suggested I get x-rays while I was there. I don't suppose she was all that surprised when the films showed severe osteoarthritis in the knee.

The first thing they ask you in that situation is what your goal is. Are you going to be okay with limited activity and a lot of TV watching or do you want to be active? That info helps them formulate a treatment plan. In my case, I hoped to stay active. I wasn't interested in wearing a brace or being significantly limited in what I could do.

My primary care doc gave me a prescription for an anti-inflammatory medicine, a drug that had helped quite a bit when the arthritis first appeared. It was ineffective at this point. She also referred me to orthopedics, but first I got a cortisone shot. That's one of the hoops you have to jump through before they consider more invasive treatment. Some people respond well to cortisone. In my case, the shot reduced my static (sitting) pain, but did little to reduce the pain during activity.

Not responding well to the cortisone shot put me in line for more aggressive therapy. When I saw an orthopedic doc, he reviewed my films, considered my general health and told me I looked like a good candidate for partial knee replacement. That was the case because my knee appeared to be in relatively good shape, except on the thin medial side.

If you do a little research, you'll discover partial knee replacements aren't as common as total replacements. There are a variety of reasons for that. Age is one factor. Some people wait until they're quite old and their knees are completely shot. The medial side of my knee was ruined by activity, not age, which meant the less invasive partial replacement was an option for me.

Why did I prefer a partial replacement? A number of my friends and work associates asked that question. The answer is that a partial replacement is far less invasive. You keep your ligaments, tendons and knee cap. With a total replacement, all that stuff is gone. Recovery from a partial replacement also tends to be faster. And you can always replace a partial with a total someday.

Although I was a candidate for the surgery, the orthopedic folks had to (again) remind me of less invasive options (like wearing a brace) and walk me through the risks of surgery. One of those risks is that some patients don't derive much benefit. They get the surgery and don't get the results they were hoping for. It's not a huge percentage, but it is one of the risks.

My next stop was an MRI tunnel. An MRI, they told me, would confirm for the surgeon that my knee was what they were seeing on the x-rays. What they evidently don't want to do is go into surgery without seeing the entire picture and discover problems that didn't show up on the x-rays. Surprises like that aren't very welcome in the operating room, I guess.

The MRI was fine, supporting what they were seeing in the x-rays. They felt comfortable about the surgery. This was last summer. I found they were scheduling several months out, which meant my surgery would likely happen in the fall. In the end, it was scheduled for October 30, just a few days after I was set to return from a trip to Kauai.
One day post-surgery

I had to be careful with my legs on that trip. Why? Because one of the concerns with a surgery like this is infection. All of the medical people I interacted with warbled on and on about that. They don't want you showing up for surgery with a bunch of cuts or scratches on your legs. That meant I had to be careful when I was mingling with the ocean and rocks.

The surgery itself was quick. I arrived in the morning and was quickly put into the prep area. My left leg got the sanitation treatment. Again. I got a spinal block and they gave me some medications to help post-surgery. With a partial replacement, they expect to send you home the day of the surgery. They don't want you hanging around sucking up hospital space and staff time.

My surgery took less than an hour and I woke about 45 minutes later. A nurse was massaging my feet. The spinal block hadn't worn off and my legs were fairly numb. I guess massaging the feet gets blood moving and helps bring the feeling back. They gave me some food, Pretty soon, the feeling in my legs returned and I was able to get up. They want you up and around quickly with a surgery like this to help prevent clotting. I probably overdid it. They worry about patients falling. I didn't.

The medical people expect you to have some pain after knee replacement, though they admit everyone is different. I was given over-the-counter meds and told to take them for several weeks. For pain, they game me Oxycodone and told me to take it as needed. They advise you to stay ahead of the pain. I never had much pain, but I took the Oxy for a couple of days, then stopped.

I slept in a bedroom on the main floor of the house for the first week or so. That first night, the smoke alarm in that room started chirping a low battery warning. Perfect. Rather than wake up my wife who was sleeping upstairs, I ambled downstairs (cane-assisted) and got a new battery, then stood on a chair and replaced the offender. Maybe I should have handled it another way. No harm done.

They had given me an ice machine and advised me to use it and elevate my left leg several times a day. The idea is to keep swelling down and speed healing. I followed that advice faithfully. I was given exercises I could do in or out of bed. Those exercises were similar to the ones I had done years earlier following arthroscopic surgeries and I did them as directed.

The medical people pushed me into attending physical therapy sessions. I hadn't done formal PT after my scope surgeries and was skeptical about it following knee replacement. Most people who have knee replacement need PT. No doubt about it. But I had learned to do my own and I'm disciplined enough to do the exercises religiously. The people in the PT clinic were terrific, but they didn't offer much of anything I couldn't do on my own.

Post-surgery: No bone-on-bone.
In fact, their approach was so conservative that I didn't have the desired range of motion in my new knee when I visited my orthopedic office for a follow-up two weeks post-surgery. My PA (physician assistant in orthopedics) was mystified. He gave me an exercise to remedy the issue, which worked well. The PT folks were contacted. Honestly, I don't think they knew what to do with me. Most of the people I met in PT were significantly older than me and had gotten total knee replacements. Totally different bag. I quit formal PT soon after my follow-up appointment. My PA green-lighted that.

My early recovery was fast, maybe too fast. I was driving and walking the dog within a week. I probably did too much. Then I started having odd pains in the repaired joint about six weeks out. I wondered if something had gone wrong. My PA advised me that many patients have strange pains during the recovery process, which can take six months or more. He would have been happy to see me, but I begged off, realizing what I was feeling was probably normal.

Four months after surgery, the odd pains began to fade. I passed through six months a few weeks ago and can confidently say I'll have a full recovery. I walk without pain, can even run if I want to. I know I'll ski again. Golf won't be a problem. Keep in mind that I could never have done those things again without the surgery. No chance. I don't know about racquet sports. Pickleball I will definitely play. After the pandemic ends, I'll hit the racquetball around and see how it feels. Maybe I'll play again occasionally, maybe not.

How does the knee feel? The orthopedic folks will tell you that a replaced knee will not feel like the real thing. That's definitely the case. There's a plastic spacer/pad between the two metal pieces, invisible in the x-rays. That pad simply can't mimic the natural joint cushioning. It gets a little clunky at times, but feels a whole lot better than bone-on-bone. Trust me.

Some of the people I played racquetball and tennis with over the years either have considered or will contemplate having this surgery. It's not a big deal. It was an easy decision for me because my knee hurt every minute, regardless of what I was doing. I was absolutely unable to do normal things, like go on any kind of significant walk. Now those things aren't a problem. Even an ill-mannered Labrador puppy is okay.

My thanks to Dr. Eric Bosworth and the folks at Kaiser Permanente, particularly the team at the Westside Medical Office in Hillsboro. They made my journey relatively painless and positioned me for a good outcome. Thanks also to my wife, Laura, who took care of me during my recovery and encouraged me to follow the advice of medical people. I actually complied with some of it.

Thursday, April 23, 2020

Pandemic 2020: The Great Disrupter

It goes without saying that the pandemic we are currently passing through has been a catastrophic disruptor in myriad ways. By the time we exit the other side, whenever that is, this will be the greatest deflationary event since the Great Depression.

There will be no return to anything approximating normal in the near term. Supply chains are broken and too many are or will be unemployed. The government response has been wholly insufficient. A recent column in the New York times predicted a very slow return to what the city was prior to the pandemic. Regardless of how and when stay home orders are lifted around the country, recovery will surely be long everywhere.

Mucking up the works is the fact that a vaccine for the coronavirus is probably a year or more away. This bug isn't going away quietly and infection rates are likely to spool upward once restrictions are lifted. That means there will be some risk involved in going to public places and a pretty good chance a lot of people will limit that risk when things begin to open. Once there's a vaccine, attitudes will moderate. But that's not happening soon.

Even when it's risk-free to go out again, will people go? Keep in mind that many small businesses, including breweries, pubs and taprooms, won't reopen when this shitstorm subsides. Or they'll have limited payrolls. The pandemic is delivering a monstrous hit to the economy and a lot of people aren't going to have jobs or disposable cash in the immediate aftermath of this thing.

Another factor that hasn't been widely discussed is that people are experiencing new things. They're doing things at home that they've never done. I saw my neighbor cutting her son's hair. I see people gardening and cooking and doing things around the house that they haven't been doing forever. It's fair to wonder how much of that carries over when things reopen.

In beer, it's been interesting to watch the creative responses to the closure of bars, restaurants, pubs and taprooms. Draft died a quick death in the wake of stay at home directives. Places that were never interested in packaging beer for retail sale have been forced to do just that. Boneyard, Barley Brown's and Rosenstadt, for example. It was package or perish. Beer-to-go and by delivery are part of that,

These sales models aren't really sustainable for smaller breweries. Selling draft beer direct to consumers is a good business. Kegs in distribution are okay. But packaging and distributing add cost and offer lower margins. Same goes for delivery of packaged product. Aspects of these "revised" models may carry on in some form when we emerge from the pandemic. But these are really emergency measures put into play to keep places afloat.

Creative strategies won't be enough. There will be brewery failures, lots of them. More than 46 percent of breweries surveyed by the Brewers Association reported they could survive only one to three months. Nearly 13 percent said they would last a month or less. There were more than 8,000 breweries in the United States prior to the pandemic. We may lose a third of them.

Keep in mind that more than half of the craft breweries we have today opened in the last five years. Also keep in mind that those breweries contributed 94 percent of craft growth in 2019, while breweries that opened in 2014 or earlier contributed just 6 percent. Shocking. That point was made by Bart Watson in his State of the Industry presentation at the Craft Brewers Conference.

There's an important point to be made here, which is that newer breweries succeeded primarily by selling directly to consumers in draft, specialty bottles and premium 4-packs. A huge percentage of newer brewers adopted that model, which the pandemic has now laid low. Watson, in his presentation, wondered if perhaps too many have bet on the direct strategy. We shall see.

While there will be fewer brewers on the other side of the pandemic, there will also be fewer places buying beer. As Watson pointed out in his talk, a huge number of bars and restaurants aren't going to reopen. That number will be significantly larger than the number of breweries that close. So even though there will be fewer breweries, they will be competing for far fewer tap handles in the establishments that do survive. How this plays out is uncertain.

In some sense, it appears the pandemic has reopened the door for established breweries that rely on large scale production and distribution to grocery and retail chains. Beer sales in off premise channels are up, which may provide a boost for larger craft breweries that have been losing market share to upstarts who own the direct to consumer market, but can't effectively compete in grocery.

The only thing we know for sure is that craft beer, like a lot of other industries, will almost certainly look substantially different on the other side of the coronavirus mess. Exactly what it will look like remains uncertain and unpredictable.

Photo credit: Barley Brown's

Monday, April 6, 2020

Larrance Sells Cascade; Will Carry on with OBF

The sale of Cascade Brewing to a group of local investors, announced by press release last week, is one of the bigger beer stories of the pandemic. It puts an end to a part of Art Larrance's beer legacy in Oregon. He received a lifetime achievement award from the Oregon Brewers Guild in February, but his final legacy is yet to be written because he'll continue to be part of the industry for now. 

In fact, the terms of the deal, described as a "phased transition sale," will require Larrance to remain involved in Cascade's business in an advisory capacity pending regulatory review, and to provide assistance to the incoming ownership. I'm not sure if there's a contractual time limit or if it depends on how long it takes to work jump through regulatory hoops. Anyway, it ought to be an interesting arrangement.

The sale did not come as a much of a surprise to many who follow the industry. Cascade has been slipping for several years. A Brewbound story reported that annual barrelage declined 21 percent 2017-2018. Those are the most recent Brewers Association numbers. If you look at Oregon stats, the output of Cascade's blending house, where the lucrative sour beers are produced, was down 27 percent 2018-2019. Even more depressing.

Why would the business be tanking? Maybe because the market for specialty sour beers has become increasingly crowded and competitive. When Cascade launched its sour project in 2002-03, the resulting beers were a novelty. Today, sour beers are widely available. It may be that Cascade didn't keep up with the curve of what others were doing. I don't know if that's an accurate point. I do know my geek friends who currently chase sours have a lot of choices and most prefer beers from breweries other than Cascade. 

Cascade's trajectory is the key to understanding why Larrance decided to sell, though the pandemic may have made the sale more urgent. The curious thing to me, when I read the press release, is how the new owners intend to restore Cascade's status in a crowded market. The incoming team has experience in brewery, restaurant and taproom management, but does not appear to have knowledge of the niche industry Cascade is part of. That makes the sale intriguing.

When I spoke to Larrance on the phone, he told me it was time for him to step aside and let new owners write the next chapter in the Cascade story. "I'm getting old," he said. "I need to retire and let younger folks take on the challenges of today's industry." That's a pretty standard response in situations like this. If he were a politician, he would have said he wanted to spend more time with family. The deal had evidently been in the works for a while and now was a good time to finalize it. 

With Brian Yaeger at the Barrel House, 2013
The seeds of Cascade's story go back to Larrance's days at Portland Brewing. Recall that he and high school buddies Fred Bowman and Jim Goodwin co-founded Portland Brewing in 1986. They and the other founding brewers were instrumental in getting Oregon's Brewpub legislation passed in 1985. The Brewpub Bill (aka SB 813)  allowed breweries to sell their beer directly to consumers and essentially launched the craft beer revolution here.

Portland Brewing was highly successful in its original location on Northwest Flanders. It later moved to a much larger facility in industrial Northwest Portland. Soon thereafter, Larrance was tossed to the curb when the founders lost control of the company, a story detailed in Portland Beer. Being forced out unceremoniously provided the motivation that resulted in the founding of Cascade Brewing and, eventually, the opening of the Raccoon Lodge in 1998. 

The Raccoon Lodge has always been an enigma. It failed to ever build much of a following. The beers, which were always branded as Raccoon Lodge products, were serviceable, if not exciting. But the location in Raleigh Hills was problematic from the start. The reason is that beer fans from Beaverton and the westside have no problem traveling to the city core, where the craft beer scene has always been centered. But folks from the core rarely return the favor by traveling to the westside. So the Lodge was not a winner. 

Larrance built the Lodge with help from associate Ron Gansberg, who left Cascade suddenly a couple of years back. Gansberg alone brewed the Raccoon beers for many years. From the start, he and Larrance were determined to come up with what they referred to as a "magic elixir." They did not want to be part of what they called the "hops arms race" that was then underway. That didn't seem like a viable business strategy. Instead, they wanted to develop a product that could be produced on a small scale and sold at a premium price. 

People forget, but the sour program they landed on did not come about by way of an established concept. It was the result of creative experimentation. They saw people like Alan Sprints producing small batch specialty beers. They saw brewers playing around with barrel aging. Gansberg's initial experiments involved putting an English-style IPA in wine barrels. They then tapped a barrel every month over a four month period to see how the beer had evolved next to the same beer from stainless. 

Those experiments fueled their interest in the idea of barrel aging and bacteria. In the end, they chose to produce Northwest style sour beers featuring Oregon fruit, a style that didn't exist previously. They chose lactobacillus for fermentation because they felt it was a unique option. It took some trial and error to get the beers where they wanted them to be, but eventually Cascade was winning medals in competitions and praise from a variety of publications. Larrance has always claimed that he provided Gansberg with the tools needed to build a successful program and otherwise stayed out of the way. 


The Barrel House in 2011
Of course, medals and national recognition failed to solve the Raccoon Lodge problem. They needed a location in the city core. Larrance finally found the space on Southeast Belmont, where Cascade Brewing's Barrel House opened in 2010. The area around the pub has morphed considerably since then, with trendy shopping and residential spaces. But the Barrel House was a gigantic hit from the start. It made Cascade beers readily accessible to the crowd that wanted them and would likely not travel to the westside. It also allowed for easy tourist access and the Barrel House in its heyday always attracted visitors from afar.

The success of the beers created a new problem: they did not have enough production space. That's what led to the opening of the Blending House off Highway 217 several years ago. The climate-controlled space quadrupled the available room for blending and aging from 5,000 to over 22,000 square feet. That facility is pretty amazing to behold. Larrance spent a bundle. 

In the face of declining business, Cascade did not stand still. They rebranded several years ago, introducing refined labeling appropriate for beer that sells at wine prices. They also moved away from the large format bottles to smaller ones. More recently, the Raccoon Lodge was rebranded as The Lodge at Cascade Brewing, an overdue ploy to leverage the Cascade name. It will be interesting to see what the new ownership group does to reverse the downward momentum, given what has already been done. 



Art Larrance, who turned 76 in February, will carry on as director of the Oregon Brewers Festival. an event he helped found in 1988. Once the premier beer event of the year in Portland, OBF has seen declining attendance in recent years. It now runs three days in late July, down from five a few years ago. The coronavirus pandemic may force its cancellation this year. Organizers will make a decision on that in early May, Larrance told me. Industry friends tell me OBF is for sale, has been for a while. 

I met Art Larrance a quarter century ago when I started volunteering at OBF. Our relationship was cordial, but remote until 2010 or so. That's when I first started talking to him about the book I hoped to write on Portland's beer history. He provided gracious assistance, connecting me with people from the old days and sharing his collection of historical materials. The book could not have been written without his help. 

What does the future hold for Art Larrance? I last saw him last summer at the Lodge, where we had arranged to meet to talk about something. I wound up riding along as he delivered a keg to a pub in Hillsboro. Yup, one of the founders of Oregon's craft beer movement was selling and delivering Cascade beer. Retirement, whether full or partial, won't change him that much. He knows a lot of people and likes to jabber about the business. He'll be around.




Friday, March 27, 2020

The Pandemic and Beyond

The past two weeks have been catastrophic for the American economy. Millions of jobs have been lost, at least for the duration of the coronavirus pandemic. We don't yet know when the economy will reopen. But there's a good chance it will never be quite the same.

Craft beer has, of course, been hard hit by social distancing and shelter in place directives. The closure of bars and pubs has sent owners and employees scrambling. I'm not sure how many people have been laid off in the Oregon beer industry. It's a big number.

Many of those people had jobs in pubs, bars, taprooms, etc. Deschutes laid off 300; McMenamin's 3,500. Anyone who follows the industry knows someone who was laid off or had their hours and/or pay reduced. Or maybe they weren't paid on schedule for work already done, as in the case of Brandon Easley and laid off McMenamin's employees. The money simply isn't flowing as it was a few weeks ago.

I've seen people whining about the layoff numbers. What were these companies supposed to do? If the United States had job saving programs like some European countries, people might have stayed in jobs, albeit with not much to do. Instead, they're collecting unemployment benefits. At least being laid off allowed for that.

I suspect the layoffs aren't over. On-premise sales are flat, something we haven't seen since Prohibition. Many breweries are holding onto production staff to keep packaged beer flowing into distribution channels, or to sell on a to-go or delivery basis. But these are stopgap measures designed to keep places afloat, not a shift in how they hope to generate profits going forward.

As much as everyone is hoping for a fast recovery, it seems unlikely with the economy at large or craft beer. It's become obvious as we've stumbled through the pandemic that American small businesses are leveraged and lack the reserves to weather economic jolts as severe as this one. They need a steady flow of inbound cash to stay viable and it isn't there.

Craft beer has its own problems. There are too many breweries and markets are saturated in many areas. A colleague told me he believes 20 percent of American craft breweries will fail as a result of the pandemic...roughly 1,600 breweries. I think that estimate is low. The pandemic is going to accentuate overcrowding and saturation issues, accelerating the failure rate.

We don't know when the social distancing and shelter in place directives will end. That's probably a month or two away. When they do end, everyone will start to dig out. As breweries ramp up production, they won't be doing so for a full complement of patrons. Why? Because people aren't going to immediately have disposable cash. This epidemic is an economic calamity.

Habits and attitudes are also going to be altered, just as they were by 9/11 and the Great Recession. How long will it take for confidence to return? When will people feel comfortable in group gatherings? Even when they can afford to do so, when will they flock back to bars, pubs and taprooms? My guess is that's going to take some time.

In fact, it's difficult to imagine what the post-pandemic economy looks like. We won't truly begin to assess the event's downstream impact until we reach the other side. But it's going to be a tough slog for everyone when restrictions end. And craft beer is far from immune to that reality.

All anyone can do is make the best of things and hope for better days.



Friday, February 14, 2020

Grains of Wrath to Open in Former Side Bar Space

Grains of Wrath is coming to Portland. Naturally, this isn't the first place you're hearing about that. It was splashed across social media and various beer sites after the press release hit inboxes Wednesday. But there's more to the story than most realize.

Camas Patio
As almost everyone knows, Grains of Wrath (GoW) has been operating in downtown Camas for about two years. The business there has been an unqualified success, attracting patrons from all around. It's packed during peak hours, often busy in between.

Brewmaster Mike Hunsaker established a solid reputation in Portland via his time at Fat Heads. Hunsaker is surely best-known for his IPAs, but he has extensive brewing chops. He's won a number of awards at GoW, including medals for his Vienna Lager at GABF in 2018 and 2019. Hunsaker's beers are good enough that people cross the bridge to enjoy them.

Wednesday's press release announced plans to open on North Williams. I assumed that meant they would be taking over the old 5th Quadrant space. That was based on the fact that GoW operates a highly successful pub business in Camas and would be replicating that model here.

Not the case.

In fact, GoW will occupy only the relatively small space that was previously Lompoc's Side Bar. The place, expected to open this spring, will comprise a brewery and some 50 seats. It'll be a 21 and over establishment that features Hunsaker's beer, light food, liquor, wine and cider.

"The expansion is limited by design," co-owner and general manager Brendan Greenen told me via email. "We like the retail aspect of a taproom, but don't have a lot of interest in another restaurant unless it's the perfect storm of location and opportunity. We have a large restaurant as it is, and intend to keep that as our home base for now."

The Team (courtesy Grains of Wrath)
There's more to unpack. Greenen and partners, Hunsaker, Shawn Parker and Brendan Ford, see a lot of great restaurants in the North Williams area. They don't really want or need to compete with those places. Instead, they feel like they can supplement the texture or the area with a focus on great beer, liquor and limited food.

"The 21+ focus is really just a factor of the tiny space," Greenen said. "What we've seen in our Camas location, especially during the summer with our large patio, is that kids get restless and want to get up and move around. In a large space like our brewpub, that’s generally not an issue. In a small space like in PDX, it would present multiple issues."

They aren't exactly sure what 'light food" means. Part of the problem, as they renovate the recently leased spaced, is figuring out where to put the food prep area. And what to offer in a limited menu.

"We're still kind of fleshing the menu ideas out," Greenen said. "We're looking at a couple of spots within the leased space to figure out where it would be best to place that part of our operation."

They're leaning toward a quality sausage/meat/small plate menu in which they would partner with  local purveyors to have quality product, yet a small menu. The reason they want food is they want to be able to offer liquor to customers, in addition to beer, wine and cider. Makes sense.

So what we'll have is a Grains of Wrath outpost in the old Side Bar space. They hope to launch the brewing part of the operation there by late summer. Until then, all of the beer will come from Camas. That hardly matters. Hunsaker's beers have fans. When GoW builds it, people will come.



Tuesday, February 4, 2020

At pFriem, Business Symmetry Drives Success

The business of America is business. Cool Calvin Coolidge said something like that nearly a century ago. It was in the middle of Prohibition. He certainly wasn't thinking about beer. But the folks who formed pFriem Family Brewers have taken that notion to heart.

Head brewer Gavin Lord in the new warm room.
A group of media nerds had the pleasure of touring pFriem's soon-to-be open production facility in Cascade Locks over the weekend. The new facility is a crucial cog in the strategic plan that the pFriem brain trust has articulated. Without it, they would be unable to support growth moving forward.

Since it opened in 2012, pFriem has been in an almost constant state of expansion. The Hood River headquarters houses the original 15-barrel brewhouse and they've increased the size of the space several times. This is where they produce the widely popular IPA and Pilsner, the various seasonals, as well as the barrel-aged stuff.

In fact, everything has been produced in Hood River. Last year, that meant something like 140 different beers, all told. Limited space in Hood River has caused logistical challenges. Producing barrel-aged product is a time consuming, space hogging process. Keeping kegs, bottles and cans of the most popular styles requires production and packaging space. Then you need space to store kegs, bottles, cans, grain, hops, as well as product that is conditioning or ready to ship.

For the past several years, pFriem has been leasing space where it stores some the materials it uses in the production and packaging process. They've been forced to navigate logistical hoops involving material storage, as well as warm room conditioning and cold storage in Hood River. It's been a drag on progress and something needed to be done.

Like everything else they do, the 22,000 square foot facility in Cascade Locks was not planned in haste. They started thinking about it three years ago. The idea was that it should be big enough to meet their needs for 4-5 years once open. Besides being obsessed with quality, these guys are meticulous planners. They're well aware of the slowing that's going on in craft beer, also aware that their own numbers continue to grow.

Union Local 541 box
Perusing the new facility, I tracked down founding partner, Rudy Kellner. I asked him if they think the place is big enough to support pFriem's upward trajectory. I asked because I've seen how fast places like this fill up when a brewery is in high growth mode. He told me the facility is actually a bit bigger than they originally envisioned and they feel comfortable. It figures.

They're playing it safe, obviously, knowing full well that it's better to have space you don't need than to need space you don't have. If it winds up being too small in a few years, there's a readily available and buildable lot next door, Kellner said. No stone left unturned.

The new facility will soon house the entire barrel program. There's room for hundreds of barrels and brewers will be able to access and move them fairly easily. A significantly larger warm room (than what they have in Hood River) has garage doors on a long side so stacks of packaged product can be efficiently moved as needed. Ample cold storage, space to stage empty packaging materials and ingredients, as well as a designated Coolship room, complete the picture.


They put a lot of thought into this place. There won't be an official tasting room or pub in Cascade Locks, though they will host an unknown number of special events in an open area near the barrel stacks. I don't know what the area around the facility is going to look like, but it may lend itself to small outdoor fests down the road.

Up until now, pFriem's barrel program has been rumbling along in cramped quarters. The space in Hood River was insufficient to support the robust innovation and production goals of that program. The Cascade Locks facility changes the game completely, allowing for the efficient production of a high value product that's a small, but important part of the business.

Fans who want to tap into those beers may be interested in pFriemsters Union Local 541, which pFriem launched last summer. The club was initially available only to Founding Members, but there are a limited number of spots are available to new members in 2020. Members receive regular allocations of rare pFriem beer, exclusive merchandise, VIP access to events and more. Hubba.

With the space-intensive barrel program gone from Hood River, pFriem will undertake a renovation and expansion program there. The 15-barrel setup will carry on, to be used mainly for smaller batch beers. They'll install a new state-of-the-art brewhouse that's roughly three times the size of the original, which is where the high volume beers will be brewed. Plus, a canning line.

Indeed, the introduction of Pilsner and IPA in cans last year was and is a gigantic home run. Cans account for about a third of of total sales, and helped grow brewing volume by 50 percent in 2019. Although IPA edges Pilsner in can sales, Pilsner is pFriem's best selling beer, a development they would never have predicted back in 2012. They are evidently looking at putting additional styles in cans once the new brewery ramps up.


But beer isn't the only focus at pFriem. Their desire to evolve and expand food offerings at their pub has been thwarted somewhat by the limited size of the kitchen there. That's going to change. The pub will close for several days (Feb. 18-21) to facilitate a kitchen remodel that will grant head chef Justin Congdon and his staff space needed to upgrade their program. The pub will reopen on Feb. 22, just in time for Zwickelmania 2020.

It's worth mentioning that the Ports of Hood River and Cascade Locks have embraced and supported pFriem's mission. Beer is manufacturing and the Gorge welcomes those jobs, as well as businesses that attract year-round clientele from Portland and beyond. The success of pFriem has confirmed the strategic faith the Port of Hood River had in them from the start.

There's an instructive note here. As I've said before, pFriem appears to do a lot of things well. In a maturing industry that is increasingly crowded and competitive, it continues to flourish. There's nothing easy or lucky about it. Lots of places have appeared on the scene in recent years. Some have made good beer. Few have been able to maintain their integrity with scaled growth.

In effect, pFriem is showing us what a successful contemporary craft brewery looks like. They plan and manage for success. The co-founding team of Josh Pfriem, Ken Whiteman and Kellner has navigated a steep growth curve in a challenging industry while maintaining core values of innovation, quality and employee growth. The art of business symmetry.


Tuesday, December 31, 2019

Memories of a Tumultuous Year

It's been a tumultuous year in beer. There's a chance it was a transitional year, as well, but we'll have to wait and see how what happened in 2019 plays out. The world of craft beer is considerably changed from what it was just a few years ago.

Stressed Market
Although we continued to see brewery openings throughout the land, the market has become overcrowded and stressed. Everyone is trying to figure out how to stay relevant in a saturated market.

The strategy they've come up with is brewing beers that are somehow unique...the idea being to keep consumers interested and engaged. That theme will surely carry on in 2020, with breweries chasing wild approaches and recipes, hoping something will stick, even if only briefly.

Beer quality was and is a casualty. I'm amazed at how many poorly executed beers I tasted in 2019. To me, that's the consequence of brewers being more focused on experimental recipes than quality. Plenty of those beers should have been sewered. How embarrassing.

Shifting Tastes
Demographics and lifestyle changes have altered the beer and alcoholic beverage landscape before. We watched it happening again in 2019, as some of the people who drove the growth of craft beer in recent years started looking for lighter choices, craft beer not generally being a light choice.

The most ominous sign of that shift may be White Claw and other hard seltzers. The volume growth of this stuff was off-the-hook last year and it will probably continue on that path. It isn't just millennials guzzling seltzer, though they were and surely are the primary marks for this junk.

Craft brewers responded to shifting tastes by offering lower ABV beers, even their own seltzers. On my travels through the year, I regularly came across lower ABV offerings. Some were memorable, some not. But the fact that they existed was a revelation.

The rise of craft lagers was surely related to the shift, though there may be more at work here. There are some fine lagers being produced by craft brewers, as if to prove that you can make a light-colored beer with aroma, flavor and character. A great trend and one that will likely continue.

Of course, lagers won't get craft beer out of the funk it's currently in. Why? Because those beers are more likely to be purchased and consumed by hardcore beer fans than by mainstream consumers who don't know or understand why these beers are special.

If craft lagers ever get as popular as IPAs, big beer will saturate the mainstream market (grocery and c-stores) with well-made industrial lagers selling for less than what good craft lagers sell for. They've already done that with most craft styles and would surely do it with lagers.

Stratification and Danger
One of the more serious developments I see in craft beer is the stratification that's occurring. It involves smaller, typically newer brewers and larger, typically older ones, as well as the crafty stuff produced by big beer. The picture continued to morph last year, and not for the better.

The little guys, of course, are catering primarily to the demand for local beer in pubs, taprooms and beer bars. They account for most of the growth that's happening across the industry, partially driven by the unending number of new openings. Beer fans love new breweries.

That trend led to saturation, hypercompetition (see above) and closures...we saw a lot of them in 2019. Closures aren't always related strictly to beer quality, but I expect we'll see more of them in the coming year, as poorly run or highly leveraged operations are forced out.

Larger (mostly regional) craft brewers can't really compete with the little guys in the local channel. They aren't as nimble or creative. They rose to dominant positions by making a few basic styles well and packaging them for retail distribution. That strategy is becoming increasingly problematic.

What's happening is that the regional breweries are being gradually squeezed out of that space by big beer, which has acquired enough craft breweries to achieve a dominant position in that channel. It's a tough time to be a regional brewer, which is partly why more of them sold in 2019.

Big names, like Colorado's New Belgium and Oregon's Craft Brew Alliance sold, the latter for a price that was significantly below what shareholders hoped. Even moderately-sized Laurelwood sold out. Instability in the market is the primary reason in each case.

This is a worrisome situation. Regional craft breweries formed the backbone of the industry for most of the last 30 years. They are now being assaulted from above and below, the result being declining sales and financial catastrophe. Big beer is the big winner.

I don't expect this situation to moderate much in 2020. We'll see more closures on the small brewery front and further financial distress among larger craft breweries, probably leading to more consolidation and additional power for big beer. Not ideal.

My Year
For the record, I'm glad 2019 is in the books. I gained a new knee (part of one, actually), but also lost a beloved dog. I'm not yet recovered from either of those events, but I'm hoping the year ahead is a good one. Hope is what keeps us going, I suppose.

Happy New Year!


Wednesday, December 4, 2019

All the King's Horses...

It's selloff season. Earlier this week, Ballast Point, purchased by Constellation Brands four years ago for a billion dollars, was sold to tiny Chicagoland Brewer Kings & Convicts. We don't know the terms of that deal, but we know the sale price was substantially less than a billion bucks.

That follows the sale of Portland-based Craft Brew Alliance, which sold out to Anheuser-Busch for significantly less than a contract stipulated after AB simply let that contract expire and paid what it wanted. Then there's Colorado-based New Belgium, which recently sold to Little Lion/Kirin.

If you're an objective observer, you might conclude that the craft beer bubble is bursting. The problem, of course, is that interested parties typically fail to perceive the existence of a speculative industry or bubble until it's too late. Only in retrospect is reality plain to see.

There are plenty of examples of bursting bubbles out there, the most recent being the U.S. housing bubble that collapsed in 2008, leading to massive destruction of global wealth. By early 2009, the 12 largest financial institutions in the world had lost half of their value. Not great.

The craft beer industry isn't on the level of the housing collapse. However, I have characterized craft beer as a bubble industry more than once in these pages. It's a concept that is not generally well-received among industry-connected folks. But never mind. What do we know about bubbles?

Hyman Minsky (1919-1996) was an American economist whose research attempted to provide an understanding of the characteristics of financial crises, which he attributed to swings in a fragile financial system. Minsky identified five stages in a typical credit cycle or bubble:

Displacement: A displacement occurs when investors get enamored by a new paradigm, such as an innovative new technology or product, at a time when interest rates (or the cost of market entry) are historically low.

Boom: Prices rise slowly at first, following a displacement, then gain momentum as more participants enter the market, setting the stage for the boom phase. During this phase, the asset in question attracts widespread media coverage. Fear of missing out on what could be an once-in-a-lifetime opportunity spurs more speculation, drawing even more participants into the fold.

Euphoria: During this phase, caution is thrown to the wind, as asset prices skyrocket. The "greater fool" theory plays out everywhere. Valuations reach extreme levels during this phase. New valuation measures and metrics are touted to justify the relentless rise in asset prices.

Profit Taking: By this time, the smart money – heeding warning signs – is generally selling out positions and taking profits. But estimating when a bubble will collapse can be difficult because, as John Maynard Keynes put it, "markets can stay irrational longer than you can stay solvent."

Panic: In the panic stage, asset prices reverse course and descend as rapidly as they ascended. Investors and speculators, faced with margin calls and plunging values of their holdings, now want to liquidate at any price. As supply overwhelms demand, asset prices slide sharply.

I'm not sure where the various pieces of the craft beer industry belong in the five stages. Newer breweries probably belong in the Boom or Euphoric stage. They're fresh and see the sky as the limit. Profit Taking will come soon enough. But it's clear that elements of the established industry have entered the Panic stage, a point at which they will sell for any reasonable price to avoid the realities of a flat market that is overcrowded and intensely competitive.

Keep in mind that a bursting bubble isn't strictly defined by a selling spree. The flipside of that is the places who have nothing to sell and simply close. We've seen that here at home with the likes of Alameda, Lompoc and others. The Laurelwood version of the story differs because some of its brands have a regional following and could be sold.

One thing to note about a bubble: Once it is punctured and losing gas, it's unlikely to inflate again. If what's happening in craft beer is a bursting bubble, all the king's horses and all the king's men won't be able to change that.


Wednesday, November 13, 2019

Craft Beer's Rabbit Hole

When interviewed for the film PDX Brew City in 2014, I was asked if I thought a craft beer bubble was forming. It wasn't a hard question to answer. Of course there was a bubble forming. I could see it during my research for Portland Beer.


Portland's brewery count was around 20 in 1999 and about 30 in 2009. It then began to spike upward, surpassing 50 by the end of 2012. We have something like 75 today. National numbers show a similar upward trajectory beginning in 2007. There are around 7,500 breweries today.

PDX Brew City has gone through several iterations. When I saw the film early on, my response to the bubble question produced a fair amount of snickering from the audience of mostly industry folks. Craft beer was still exploding at time and not many wanted to consider the eventual downside. Last time I saw the film, the bubble comment had been edited out. No need to ruffle restless feathers.

Of course, there's plenty of recent evidence in the form of closures. consolidations and related data that confirm the craft beer bubble is losing its form. We aren't talking about a total implosion, but the upward trajectory of the industry, once considered unlimited by some, perhaps many, has flattened considerably. What happened?

Saturation
Market saturation is the first and most important component in what has come to pass. It happened because the number of operating breweries and the volume of beer produced surpassed growth of the actual consumer market. When craft was growing at 15 percent annually, a thousand or two new breweries a year maybe made sense. In our present circumstance, no.

Saturation is not monolithic. By that, I mean there are still places that aren't locally or regionally saturated. Rural areas were slow to catch the craft beer bug and are slowly catching up. Most urban areas are fully saturated. That isn't just about breweries, by the way. Saturation includes breweries, pubs, taprooms, growler fill stations, pop-up bars, etc.

With consumers chasing more local beer in pubs, taprooms and the like, large regional brewers have experienced massive sales declines, particularly in mainstream grocery and retail. Those channels are now largely the domain of mass market lager and "pseudo" craft. Independent brewers, who once bolstered profits via mainstream channels, have been increasingly marginalized.

Innovation Craze
In an increasingly crowded market, brewers have gotten desperate to somehow differentiate themselves from others. You might think that would lead to an intense focus on quality standards as a way to stand out from the crowd. And there's more good beer today than there was 10-15 years ago. But quality has not been the primary focus.

What happened, instead, is that brewers started fooling around with radical approaches and ingredients, hoping to tweak the interest of fans who want something different every time they sip a beer. The rising power of social media influencers, who hype newness and uniqueness, almost certainly played a role in this transformation, in which craft beer achieved cult status.

What it means is newness and coolness are king. Breweries strive to produce a continuous stream of fashionable beers, preferably packaged in cans or bottles with glorious artwork designed to catch the eye of dazed consumers. Beer bars, taprooms and bottleshops must keep abreast of the newest beers and trends or be considered out of touch, irrelevant.

Overload
The logical extension of saturation and innovation craze is the endless onslaught of events intended to create buzz and interest. These take the form of tap takeovers, release parties, tastings, as well as large and small festivals which cram the weekly, monthly and yearly calendar. There was a time, years ago, when we talked about event fatigue. We hadn't a clue what was coming.

Here again, the rising importance of social media influencers has helped drive what some might regard as event madness. Social media channels are bombarded with event details. The purpose of the madness is that breweries, taprooms, and festivals are able to show that, yes, they are perfectly in sync with market fads, trends and sensibilities. Almost everyone is stuck playing the game.

The cumulative effect of the cavalcade of events is overexposure and confusion. In practice, you see beers and brands being wildly hawked all over the place on a daily basis. They melt together and fade into the background quickly.

Rabbit Hole
This is the rabbit hole down which craft beer has fallen. You have to wonder where we go from here. Or if there's an upside.



Monday, October 28, 2019

Lompoc and the Legacy Brewery Hex

Finishing up a week in Hawaii, I got a message suggesting that Lompoc Brewing was about to close. Two or three inquiries later, I learned it was all a vicious rumor, apparently started by irresponsible, fake news journalists and suspected communists.

A day later, the vicious rumor turned out to be true. Jerry Fechter was calling it a day and closing the Fifth Quadrant Brewpub, along with Sidebar. The Oaks Bottom Pub will carry on with Fechter at the helm, but it will remain a pub with no brewing and no connection to Lompoc. 

Fechter's collection of pubs had shrunk from five a few years ago to just three in recent times. Hedge House on Southeast Division closed two years ago and now houses Little Beast. Lompoc Tavern, formerly New Old Lompoc where the adventure started in 1996, closed in September 2018. 

When I was putting the final touches on Portland Beer in 2013, I included Lompoc on my list of the city's significant beer businesses. Laurelwood and Lucky Lab were the other two...the list being focused mainly on the multi-pub footprint of the three entities. 

These are all what we currently refer to as legacy breweries. I'm not exactly sure how to define "legacy brewery." Is that a five-year-old brewery? 10 years old? 20 years old? Or does it just need to be a brewery that has failed to keep up with the twists and turns of the market? You tell me.

The Lompoc story is fairly well-known. Fechter, a transplant from Ohio and wannabe brewer, worked at Old Lompoc Brewing in Northwest Portland for several years in the early 1990s. When he saw an opening, Fechter inquired about buying the business. During a round of golf.

Soon enough, the owners came back with a number. Fechter thought he could manage it, but realized he would need an investment partner to pull off the purchase and make needed improvements. That's when legendary Portland publican, Don Younger, entered the picture.

Don Younger tribute beer in 2013
Fechter and Younger mixed blackout drinking with business over a period of several months. They eventually hammered out an agreement whereby Younger became a partner in the business, but stayed mostly in the background while Fechter managed day-to-day operations.

It turned out to be a good match. Old Lompoc was renamed New Old Lompoc to signify the change in ownership and did well. Fechter and Younger later opened the Fifth Quadrant, Sidebar and Hedge House. Fechter also partnered with the late Jim Parker on Oaks Bottom Public House. After Parker exited and Younger passed away (in 2011), Fechter became sole owner of the businesses. 

As the list of brewery/brewpub failures grew over the past few years, many were left wondering which brewery might be next. After seeing Lompoc Tavern and Hedge House close, I added Lompoc to my "Most Likely to Fail" list. There was nothing diabolical about it. I always liked Jerry, who is one of the more jovial people you'll ever meet.

In recent years, I had several conversations with Fechter and with Mike De Kalb of Laurelwood about the difficulty faced by older, so-called legacy breweries. Probably the biggest challenge is that the people who follow craft beer tend to be attracted by shiny new breweries and beers.

Sidebar entry 2014
In the saturated beer market that is Portland, fads and trends are king. Customer loyalty is zero. Drinkers bounce from pub to pub and beer to beer with little thought, seeking the newest thing. That's why you rarely see a non-rotating tap at beer bars and pubs. Bad for business.

This is surely truer in a place like Portland, which is overrun with breweries and pubs, than it is in a rural setting like, say, Baker City or Yakima. The sheer glut of beer-centric businesses in Portland make it an increasingly difficult place to stay viable and relevant.

Add to overcrowding and fierce competition the fact that craft beer market growth is static or in gradual decline. That's bad news for everyone, including breweries that opened more recently, as they, too, will get old and be forced to deal with the challenges Fechter and De Kalb faced.

Laurelwood worked hard over the past decade to build brand recognition outside Portland. That's likely why, as things got tough, De Kalb was able to sell Laurelwood's intellectual property to Legacy Breweries, parent of Ninkasi. Laurelwood's core brands have value in regional distribution.

Lompoc was not in a similar situation. Its brands never gained the kind of following that would have attracted Legacy or a similar entity. Fechter had his collection of pubs and that was where he was going to live or die in an increasingly trendy, difficult market. We know things didn't work out.

I don't think Lompoc failed due to bad beer. Sure, their standards came off as a little flat next to the fancy stuff many breweries are pushing out in wrapped cans. But you could always find more interesting stuff on tap in the Lompoc pubs.

C-Note was a favorite of mine
What went wrong? It wasn't the food and service, which I always found decent. I suppose the beer could have been more exciting and certainly more visible in beer bars and taprooms, though that would have been difficult as competition stiffened. At the end of the day, I think Lompoc mostly fell victim to being old and less cool in a saturated sea of newness.

The last day is Tuesday, Oct. 29, when the Fifth Quadrant and Sidebar close for good. Fechter will hold a "garage sale” next Saturday, Nov. 2, at Sidebar from Noon to 5 p.m. Vintage Lompoc bottles, schwag, glassware and more will be for sale.

Fechter's trajectory? Untied from the Lompoc brand, he'll be free to build the tap list he could never have built at Lompoc. With no brewing, he'll focus strictly on the pub part of the business. Things may work out fine for him, though I doubt he's pleased with how it happened.

Farewell, Lompoc. Thanks for the memories.



Wednesday, October 2, 2019

The Long Goodbye After 30 Years

Most of my beer friends don't know it, but my top priority when I arrived in the Portland area back in 1989 was to find a place to play racquetball. I eventually settled on Lloyd Athletic Club (then Lloyd Center Courts), where I've been a member for 30 years. My time ends in late October.

Racquetball was my passion in those days. I wanted to join a club that had at least a handful of good players. Location was a secondary concern. I scoured both sides of the Columbia River for months before making a decision.

I chose Lloyd Athletic because it had a large group of active players and was in a reasonable location. Traffic wasn't as much of a mess as it is today. A trip to LAC from my house or office in Vancouver took about 20 minutes most days. That seemed okay.

By the time I moved to Portland in 1993, I was deeply immersed in the culture at Lloyd Athletic. I played challenge court, in leagues and sanctioned tournaments...literally thousands of matches. It was a fun place and I made a lot of friends...even met my wife there. I continued to play most of my racquetball there even after I became racquetball director at a club in Vancouver. 

If you're looking for a beer angle, there is one. As I've noted before here, the club had three tap handles in the old days. They were occupied by Bud, Bud Light and Widmer Hef. We often wagered pitchers on games.  If you were brave, the bet was for Widmer, which was something like $7 a pitcher. Bud and Bud Light were around $5. The club was a great social setting and we drank a lot of beer after playing. There are four taps now and the beer selection has improved considerably.

I've been thinking of leaving LAC for several years. I joined because of racquetball. My body, primarily my knees, can no longer deal with the game. I'll have partial knee replacement surgery in late October. Playing racquetball again will be possible, but maybe not wise. I probably should have stopped 10 years ago. Playing on increasingly brittle joints wasn't smart.


As my time on the court faded over the course of the last five or so years, I started using the club primarily as a place to work out with weights. The workout routine I follow can be done pretty much anywhere. For people who want court sports (the club has racquetball and squash courts), LAC is a good option. But I don't really need the courts any more. 

There's more at work, of course. Traffic congestion makes for awkward car trips to the club. Parking is another issue. LAC has a small lot that's full most of the time. That wasn't a big problem in the old days, when membership was capped at around 300. Even if the lot was full, street parking was free. Today, you pay to park on the street. I avoid parking and driving issues during the summer by riding my bike, but that's not practical for much of the year. It's also increasingly dangerous.

What made the decision more difficult is that new management is doing great things. The club is cleaner and better in many ways than it had been under prior management, which seemed intent on running it into the ground. I doubt LAC will ever be what it once was in a racquetball sense because the game has failed to catch on with millennials. But there's reason to think the place can carry on as a nice fitness club with great social amenities.


Regardless, it's time for me to go. With racquetball no longer a priority, there are workout options closer to home, places I can get to by bike or car in far less time and with less hassle. Once my knee is recovered from surgery, I'll join one of them and see how it goes. Easier access may encourage me to work out more often. We'll see about that.

There are things I'll miss about Lloyd Athletic. Almost all of my racquetball contemporaries are gone, but I still have friends and acquaintances there. And I'll miss the familiar feel. It will be impossible for me to replace or replicate the friendships and experiences I acquired there.

But sometimes you need to move on.

Postscript: I quit Lloyd Athletic two weeks prior to my surgery. Three weeks later, I rejoined the club. The other potential workout places I considered didn't agree with me. So I'm accepting the traffic and parking hassles that come with membership. Still not sure about my racquetball future, but my repaired knee feels good.