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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. 

Thursday, September 5, 2019

A Sweeping History of Southern Oregon Beer

Southern Oregon Beer: A Pioneering History by Phil Busse
Foreword by Jim Mills (founder of Caldera Brewing)
The History Press/American Palate, 128 pages
$22

Unlike Portland, Bend or Hood River, Southern Oregon isn't apt to appear high on the list of places beer nerds dream of visiting. The relative remoteness of the area surely figures into that. Regardless, there's good beer and a good story there.

Phil Busse's new book tracks the Southern Oregon beer story from frontier to contemporary times. It's part of the History Press series focused on American beer cities and regions. Portland Beer shares the same publisher.

It turns out the Southern Oregon story is quite different than what happened in Portland. The reason is largely the result of geography. While Portland was a bustling port with products moving in and out by the mid-19th century, Southern Oregon was isolated until the arrival of the railroads in the latter part of the century. In that way, it's trajectory more closely parallels Bend than it does Portland.

As a result of its isolation, Southern Oregon's early breweries were small and self-contained. Unlike Henry Weinhard, who was shipping beer up and down the coast and to the Far East during the second half of the 19th century, Southern Oregon's breweries served a local clientele. They had no access to outside markets.

Unknown to many today, the dominant town during that time was Jacksonville. Busse recounts Jacksonville's brewing history, led by several German immigrants, against its frontier veneer. There are some fascinating characters involved in that story. Jacksonville's stature faded after it was bypassed by the railroad. which cut a straight line from Grants Pass to Ashland. Medford was born in between, eventually to become the area's largest city.

The coming of the railroad invited national brands to the table throughout Oregon. That reality had a negative impart on Southern Oregon's small breweries. Busse notes that the brewery count was winding down years before Oregon implemented statewide prohibition (ahead of the country) in 1916. The national brands, particularly Anheuser-Busch, were the primary reason.

Busse spends a lot of time talking about the people who drove the region's beer industry during the pre-prohibition era...Veit Schutz, Joseph Wetterer and John Gottlieb Mehl, founders of the region's earliest breweries, but largely unknown outside this book. There are also a several women included in the coverage...Fredericka Wetterer, Mary Mehl and Marie Kienlen. All became prominent beer industry icons. There was, in fact, a semblance of equality on the frontier.

Prohibition all but destroyed brewing in Southern Oregon, as it did across the country. Most of the area's breweries closed. A Weinhard-owned facility in Medford got by making ice. There was a bizarre attempt to keep going on the part of Grants Pass Brewing, which manufactured denatured alcohol (legal for industrial use) and sodas. However, the soda turned out to be a ruse, as the brewery continued to make beer until it ran into trouble.

During the Prohibition era, Southern Oregon enjoyed great success as a producer of hops. It's an interesting concept, covered nicely here. The market for hops in the United States had collapsed. But World War I had destroyed agriculture in much of Europe. Hops acreage in Southern Oregon increased dramatically and the region joined the rest of the state in selling hops to European customers. There was, of course, no prohibition in Europe.

Beer was becoming the haven of the national brands by the time Prohibition ended in 1933. The situation got worse with the coming of World War II. By the end of the war, advances in packaging, refrigeration and shipping extended the reach of big beer. Despite increased per capita beer consumption, the brewery count was in steep decline. By 1947, there were only two breweries operating in Oregon: Blitz-Weinhard in Portland and Sick's Brewing in Salem.

The contemporary story of Southern Oregon beer is essentially focused on Rogue, Caldera and the smaller places that popped up in the area over time. Busse reviews the circumstances that set the stage for the success of the Rogue and Caldera and they helped fuel the beer culture there...things like the legalization of homebrewing in 1978 and passage of Oregon's Brewpub Bill in 1985.

The Brewpub Bill story is a retelling of what I reported in Portland Beer, which is listed in the brief bibliography. Prior to the publication of my book in 2013, everyone had the story exactly wrong. Even the main players thought the Brewpub legislation passed as part of a bill that let Coors into Oregon. I discovered that was not the case, that brewpubs were made legal as part of legislation that addressed liquor licenses at bed and breakfast establishments. There's no attribution in the text, but it's clear enough that this has become the accepted version of the story. Good to know.

There are some silly errors in this book For example, the author describes the Burt Reynolds character in Smokey and the Bandit as a "truck driver trying to smuggle a load of Coors across state lines from Texas to Georgia." As you may know, the Bandit was driving interference for the truck carrying the beer. The truck driver was the Snowman, played to the hilt by Jerry Reed. That error is immaterial to the story and mostly just a little amusing.

A more serious concern is the lack of an index. That's annoying in a book like this because you can't easily access details. Even a rudimentary index would be better than nothing. This may not have been Busse's decision; it's quite possible that the penny pinching publisher didn't want the extra pages. Perhaps some of the non-historical photos could have been dispensed with.

In the end, this is pretty good book. Busse does a nice job detailing Southern Oregon's beer past. There's enough detail, in terms of names, dates and places, to make your head spin. In a good way. I think the book will have strong appeal with anyone interested in Southern Oregon history. I'm not so sure about beer fans interested in the history of iconic beer cities. But who knows.

Finally, I should note that I don't know Phil Busse. I met and spoke to him briefly at a book launch event at Powell's last week. He's a longtime Oregon journalist who has extensive experience with alternative weeklies. He helped found the Rogue Valley Messenger in 2014. Other than the Powell's event, I don't know what plans he has to support the book release.

Tuesday, August 27, 2019

The Day Anheuser-Busch Blinked

It turns out I was wrong. For the past couple of years, I had been expecting and predicting that Anheuser-Busch would purchase the Craft Brew Alliance based on contractual terms agreed to in 2016. The final deadline came and went last week with no offer. Blink.

There are reasons for everything and those of us who expected a deal missed the most important indicator...which is that the last of three escalating offer prices agreed to in 2016 was entirely too high in 2019. That's really what it came down to.

The escalating contractual prices have been reported here and there over the course of the last three years. During the first two years, AB could have purchased the CBA for less than the $24.50 required by the final 2019 deadline. It failed to act.

Had AB followed through with a purchase last week, the hefty price would have delivered a veritable financial windfall to CBA shareholders and executives, alike. Those folks are now holding stock that's trading at around $10/share. They were hoping for a gravy train deal that didn't happen. Sucky.

It was fairly obvious in recent weeks that the chances of a deal were dimming. The stock price was meandering around at under $15. Had anyone sniffed a deal, the price would have rocketed to $20 or more. Even the $15 price was artificial, propped up by looming buyout potential. As soon as it became known that there would be no deal, the price collapsed. And here we are.

Those of us who believed a deal would happen thought AB would pay the premium price to avoid the possibility of CBA being sold to another interested party. Prior to the deadline passing, the CBA could have sold itself to anyone, but AB had the right to counter. Now that the deadline has passed without a deal, the CBA can sell itself to anyone at any price and AB has no recourse.  

There's a toxic pill attached to that because, as I've noted here before, the 2016 contract requires Anheuser-Busch to fulfill contract brewing and distribution terms through 2026 (2028 for the master distribution portion of the contract), regardless of who owns the CBA. Should the CBA be purchased by say, Heineken, AB would have to honor the terms of the contract. Many of us thought they'd avoid that possibility. We whiffed.

I need to backtrack for just a minute. One of the things everyone should fully realize is that outside Kona, the CBA has no value to AB. Widmer and Redhook are in steep decline. The other brands, even the ones that are growing, are small and really of no interest to big beer. The only reason they would buy the CBA is Kona, which continues to grow in a tough market. 

Why was Anheuser-Busch willing to risk the possibility of losing Kona and being stuck with some fairly nasty contract terms? Good question. With craft beer flat or growing slowly, AB may fear that even Kona will falter. That notion may have been bolstered by the knowledge that the CBA primed the pump with advertising to help fuel Kona growth in early 2019. 

But the market likely held the real key. Because the CBA has been routinely missing on revenue projections, shareholder return has been poor and the stock price has suffered. AB may have simply concluded it could pass on the buyout deadline and acquire the CBA for significantly less than the required offer price. That could happen in coming weeks.

There's another possibility I haven't seen mentioned. As part of its merger with SABMiller, Anheuser-Busch is required to give the Department of Justice 30-day notice of any brewery acquisition. What if AB gave DOJ notice and DOJ refused to consider the acquisition? I don't have any evidence of that, but I doubt either party would have admitted it. So it is a possibility.

Where does the CBA go from here? They'll discuss the future in a press conference next week. Some think the CBA can carry on independently (AB owns 31 percent). It will receive a $20 million international distribution incentive payment from AB that kicked in when no buyout materialized. That money could be used to pay down debt or finance marketing efforts for Kona.

Honestly, though, it's tough to see a way forward for the CBA under its current leadership. For the last three years, that leadership has been focused almost entirely on selling the business to Anheuser-Busch at a premium price. They failed. They also invested in pet brands and programs that failed to deliver value for shareholders. And they don't alone have the ability to help Kona, their only significant growth engine, reach its full potential nationally and internationally.

My guess is the CBA will soon sell to someone for something less than $20 a share. The buyer may or may not be Anheuser-Busch. In fact, I believe current CBA leadership, having been jilted at the altar, will aggressively try to sell to someone else while AB is stuck holding the 2016 contract bag.

The weeks and months ahead ought to be interesting. Don't touch that dial. 


Sunday, August 11, 2019

Biskie and Me: Life With the Best Dog

She was born on Valentine's Day in 2009 in rural Oregon City. I don't recall the size of the litter, but I think it was the third for her parents, Lucy and Chester. Biskie would, of course, become my best friend and virtual assistant for much of the next 10 years.

She wound up with us by good fortune. Her older brother Blitz, born in 2007, replaced Bert, our Lab who passed away in late 2006. We liked Blitz' personna so much that we planned to get a second dog from the same parents the next year. This one, at my wife Laura's request, would be a girl.

We were in line to get the pick of the 2008 litter. Then Laura suffered a bad knee injury while skiing. Surgery and recovery time would be needed. With me working a crazy schedule, we decided a new puppy maybe wasn't the best idea. So we gave the pick to a friend and work colleague of mine, Tara, who today has Roxy.

We didn't put ourselves on the list for the next litter because we weren't sure what we wanted to do. We were both working a lot. After I got laid off in February 2009, we changed our tune and decided the time was right for a puppy. Puppies are labor intensive and it looked like I'd be at home for a while. The economy was woefully bad.

The catch was we weren't on the breeder's pick list. When we contacted her, we learned all the girls in the most recent litter were spoken for. Crap. Laura looked at pups from different parents and decided to pass. A week or so later, the breeder called and told us one of the buyers had backed out because they were moving. A Lucy/Chester pup would be available.

Which pup we didn't know. We were at the bottom of the list and would have access to the pup that was passed over by other buyers. Laura went out to Oregon City and looked at the pups. But we still didn't know which one would be ours. Of the two females in the mix, the breeder picked the one she thought was right for another buyer. We wound up with Biskie by default. A windfall.

With Blitz, April 2009
I need to digress for a moment, because 2009 was a dreadful year for us. Early on, Laura's dad passed away. He'd been recovering from a stroke, but his death was unexpected. Then I was laid off, with really no chance of finding comparable work. Before the year was out, my dad would also pass away. Biscuit was the only good thing that happened to us that year. And she was great.

She was supposed to be Laura's dog, but it didn't stick. I was at home with her every day. I took the two dogs on regular jaunts. For several years, we would get in our beat up Mazda pickup and drive to Fernhill Park, an off leash dog park where they could run and chase squirrels until they were exhausted. Such great times, thinking back.

At 3 months, May 2009
Because I was home with her most of the time, Biskie never spent much time in a crate. Her destructive brother did a lot of crate time, but she never destroyed anything. That might have been because I was with her constantly or because she had Blitz to keep her entertained. I tend to think the former. Take your pick.

About the names, we have chosen B-names for all of our Labs...Bert, Bruno, Blitz and Biscuit. Why? Because all but one of the Labs I grew up with had B-names...Beau, Banana, and Burleson. The only exception to the rule was Angus, a Lab I knew as a child. Laura went along with the naming convention and it stuck.

Biskie was just a baby when I took her to visit my mom in Liberty Lake (near Spokane) in July 2009. That's where she did her first significant swimming and retrieving. She was a natural who had no problem jumping off a dock or entering the water from the shoreline. I have photos and video of those early retrieves.

Liberty Lake, July 2009
It was evident from the day she arrived home that Biskie was a special girl. She was easy to manage and had a warm and entertaining personna. On that trip to Liberty Lake and on our various travels, she would eagerly follow my lead most of the time. I never worried about her racing off after something. I trusted her and my trust was (almost) never violated.

Her life was not without drama. She could be awkward at times. On one occasion, she jumped out the back of the truck with the tailgate still up while we were unloading the dogs. She went head over heels and caught a paw between the bumper and the truck body. Miraculously, she wasn't injured, a tribute to youth, flexibility and strength...but not coordination or good sense.

Whether by DNA or injury, Biskie developed something of an unstable rear end early in life. As a result, she refused to walk on bare wood or tile floors. We solved the problem at home with mats in the kitchen, rugs in the common areas and towels in between. When taking her on trips, we always carried a stack of towels to create a path on unfriendly surfaces we might find. A quaint memory.

Safe passage
Another cute habit was her desire to collect sticks on our run/walks and bring them home. On occasion, she would attempt to carry sticks that more closely resembled small logs. She succeeded from time to time. People who saw her doing this would chuckle and sometimes ask to take photos of our silly girl.

A less fortunate quirk was her habit of scooping up and swallowing chunks of paper, garbage and other junk while running around in the nearby park. She got extremely ill and had to spend a night in doggie ICU after eating a soccer sock that plugged up her gut and almost killed her. That incident may have contributed to the condition that eventually struck her down.

Biscuit was not aggressive. There was never any threat of her biting a child or attacking another dog. But she took exception from time to time. If her older, larger brother attempted to co-op her food, she bit him about the ears and cheeks in protest. When a dog rudely stole a stick she was carrying on a walk one day, she looked to me for direction. "Get your stick," I said. She chased him down and bit him on the back of the neck until he dropped it. "Good girl!"I  told her.

As mentioned, she became a sort of work assistant for me. Although not by choice, I never returned to full-time work after being laid off in 2009. No one would hire me. Still true. That led to a lot of freelance and contract work, most of which has been done at home. She was my constant companion, sleeping or chilling quietly on the pad next to my desk.

That arrangement came in handy when I was working on Portland Beer, essentially a fulltime job without the luxury of pay or benefits. As I toiled through the research and writing, I would occasionally get stuck and need to think something through. I would get down on the floor and cradle her head in my arms while considering the issue at hand. She accepted the contact gladly.

Collecting sticks on the Oregon coast, April 2016
There are so many great memories. One of the best is a trip we took in August 2016. We stayed in a house near the Deschutes River outside Sunriver. With easy access to the river, we took the dogs swimming daily. Biskie became expert at leaping off a boat dock to retrieve whatever we'd throw in the river. It was so damned entertaining to watch. Also fleeting.

We got disturbing news the following August. She had been peeing involuntarily in the house. A trip to the vet revealed high blood sugar. Our sweet girl was losing the function of her pancreas and had to start insulin therapy. The worst thing about that isn't the shots, by the way. The worst thing by far is the knowledge that your pet's life will be shortened.

For the next two years, we worked diligently to manage her blood sugars and keep her healthy. She immediately lost 10 or so pounds of water weight, not a bad thing. We struggled at times with blood sugars as her pancreas sputtered and produced erratic amounts of its own insulin. Eventually, we started feeding her four small meals a day to balance things out.

The shift in feedings required us to adjust our schedules. Fortunately, Laura retired shortly after we learned of Biskie's illness. I had started working a regular consulting gig, still doing a good portion of work at home. We had the flexibility to care for her, though it meant someone had to be at home to feed her and give shots. We traveled separately, except on one or two occasions.

Sandy River Delta, 2011
I think we always knew the diabetes would catch up with her at some point. Certainly Laura knew. She worked in healthcare for 42 years and has expertise in diabetes. Biskie lived a quality life for most of the two years she had left. She lost most of her eyesight over the course of the last six months, but still functioned more or less normally by smell, sound and feel. Dogs are amazing.

Two of the biggest challenges we faced were occasional bouts of appetite loss and vomiting. Those issues are more significant with a diabetic dog than with a normal one because the result is erratic blood sugars, weight loss and possible death (low blood sugar). Our solution was always to change her food. Her appetite would return and she would rebound.

We didn't know when we'd run up against a wall. I needed to make a short trip to Liberty Lake in early August. Just before I left, Biskie had a bout of appetite loss and erratic blood sugars. In fact, both dogs had been ill with some sort of gut issue. Once again, changing her food brought back her appetite and she rebounded. She did fine while I was gone.

When I returned home Monday evening, both dogs greeted me. Biskie ate well and went on her normal walks Monday evening and Tuesday morning. When I arrived home on bike after a workout and a beer that night, she was waiting for me inside our driveway gate. That was normal. I had no idea the walk we were about to take would be our last. Life can be brutal.


On Wednesday morning, our girl didn't get up to eat her breakfast. Like her brother, she was always food driven, so this was a serious concern. She refused to eat anything. I got some hamburger and she ate a little, but couldn't continue. She was fading badly by Wednesday evening. Thursday afternoon, she slipped away peacefully in our arms at home, with assistance from a caring vet.

I've not been able to shake her loss. We had such a special connection, I think due to the hundreds of hours I spent with her while she was young and during a time when things were going poorly for me. We became pals. The suddenly severed connection has left me with a deep sense of loss. Laura had a slightly different relationship with our girl, but feels a similar sense of grief.

I can't help feeling like we were somehow cheated, that the 10 years we had with her weren't enough. But there's nothing to do about it. We don't have a time machine or a way to bring her back with a strand of DNA. So the memories we have are all we're going to have. Damn.

Godspeed, sweet girl. We loved you so much.💔

________________________
Note: We are not dogless. Blitz survives his sister and is a little confused about how to act as a solo dog because he has always had a stablemate. Biskie was his pal for 10 years and was always the one running things, even during her illness. He's trying hard to work it out...a good boy.

PS: At three weeks, I realize that our sense of loss is magnified by the fact that, with a brief exception, we've had two dogs in the house for nearly 25 years. Having just one seems strange and has been as hard for us to get use to as it has been for Blitz.