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Sunday, February 19, 2017

Beware the Coming High End Tsunami

Nikita Khrushchev infamously said, "We will bury you." That was 1956. While there is some question as to the accuracy of the translation, Khrushchev clearly intended it as a shot across the bow of the capitalist world. The Soviet Union was putting the world on record.

Our friends at Anheuser-Busch are more subtle than the blustery Khrushchev, who had a knack for making outrageous comments. AB is quietly implementing a plan designed to bury independent craft brewers. And they might just pull it off.

The so-called High End is leading the charge. As you know, Anheuser-Busch has been busy collecting craft brands over the last several years. There are 10 breweries in the High End collective at this point, with a few more likely to be assimilated.

You might not know it, but the High End kicked ass in 2016, a pretty lousy year for craft beer. The High End's growth rate hit 32 percent, easily trumping the craft segment's single digit growth. Bigly. Every High End brand grew and they're all showing continued growth into 2017.

Don't give the AB charlatans too much credit. Brand building isn't their specialty. But they've learned a thing or two about the craft world, probably by osmosis, as a result of acquisitions. And they have the supply chain, the production efficiencies and the distribution network to leverage their brands.

They aren't standing still for 2017. Instead, they plan to triple their current volume. That's a gigantic goal and probably not remotely attainable. But they aren't just pipe dreaming. They have a plan:
  • Goose Island, the only High End brand family with a national presence, grew 27 percent last year. They expect continued fast growth. Goose IPA, up nearly 80 percent. became the #3 IPA in the land. Much of that success came via aggressive keg discounting in on-premise accounts. AB wants Goose IPA to be #1, which likely means heavy discounting in grocery, where the brand does less well. Expect them to follow-through on that.
  • Seattle-based Elysian will be the High End's next national brand. Despite damage done by the buyout, Elysian has been a big winner in its home market. The flagship, Space Dust IPA, was up over 300 percent last year and will be taken national in March. AB believes Space Dust can be a strong player nationally. Quite possibly.
  • Other High End brands will expand into new markets. Golden Road's Wolf Pup Session IPA, a fast mover, will tap 30 new markets. 10 Barrel, our Oregon-based friends, will launch Joe IPA in 28 new markets.
  • To support growth and expansion, AB is putting field reps in all High End markets and boosting investment in the home markets of their craft breweries. Each brewery will have a regional sales manager to support expansion. Why? Because AB can afford it and they've figured out that these investments are crucial to supporting growth.
  • AB is still trying to figure out what to do with some High End brands. Four Peaks will apparently venture outside Arizona and Devil's Backbone will take baby steps outside Virginia. There's nothing much happening with Blue Point, though it will get a significant brewery expansion. Karbach is so new that marketing plans are pending.
A few years ago, I figured Anheuser-Busch's effort to invade and co-opt the craft beer industry was doomed. They just didn't seem to get it. No more. With small breweries continuing to open at breakneck pace in a largely saturated and flattening market, competition is getting intense. In that scenario, the High End looks well-positioned to assume a strong, perhaps dominant position.

There's a simple, but quintessential piece of intel driving this: Anheuser-Busch has come to realize that, as craft beer has moved into the mainstream, consumers have, too. Simply put, the beer geek consumer who is fixated on high quality, local beer is increasingly in the minority.

What we appear to have today is an emerging pool of consumers who care little about where a beer is made or who makes it. That has opened the door for good beer and good value, particularly in the grocery channel. Through that door Anheuser-Busch is driving a fleet of High End semis.

There's a tsunami coming. And it's not good news for independent craft brewers.

Wednesday, February 15, 2017

Beer Party PDX to Hold Inaugural Fundraiser

A few weeks ago, a group of beer industry operatives met to discuss ways to support civil rights and democratic values. I wasn't at that meeting. But these amazing folks just announced that their initial fundraising event will happen on President's Day, Feb. 20.

The group, Beer Party PDX, plans to hold an ongoing series of events focused on promoting values many in the beer community support. Monday's inaugural event will benefit the American Civil Liberties Union, which is currently leading court battles on numerous fronts.

Participating beer bars include Bailey's Taproom, Bazi Bierbrasserie, Beer Mongers, Belmont Station, The Imperial Bottleshop, Lombard House, Roscoe's, Saraveza, The Thirsty Sasquatch, The Upper Lip, Tin Bucket and Uptown Market. Virtually every corner of the city is covered.

The way it works is simple. Every time patrons buy a beer that's been donated by a long list of breweries and cideries, 100 percent of the proceeds will go to the ACLU. Yep. These folks aren't kidding around. They're all in.

Folks who have donated kegs: Baerlic, Base Camp, Bull Run Cider, Burnside, Cider Riot!, Coalition, The Commons, Crooked Fence, Culmination, Double Mountain, Heater Allen, Machine House, Matchless, Montavilla, New Belgium, Ninkasi, Pfriem, Ruse, Three Magnets, Uptown Market and Vertigo. Lots of good stuff!

A little more on Beer Party PDX. It is comprised of local bar and brewery owners, brewers, business consultants and writers. As a collective, they see the need to help defend attacks on freedom of speech, the environment, voting rights, etc., things under attack in the Trump era.

Group membership isn't limited to folks from the beer community. If you have complementary values and want to get involved, visit the group Facebook page or send them an email at beerpartypdx@gmail.com. 

I'll be supporting the launch party at my local pub on Monday. I hope the event will be well-attended across the city. Look for future events on the group Facebook page and in places like this.

Friday, February 10, 2017

Thoughts on Oregon's Brewery Invasion

This week's Portland launch of Michigan-based Founders Brewing highlights the fact that out of state breweries are targeting this market. Left Hand (Colorado) recently launched and Bell's (Michigan) has soft launched; Modern Times (San Diego) is on the way.

I get press releases announcing this stuff. They include quotes from brewers and distributors about how great it is to be working together. Then come the blog posts, regurgitated from the press releases. Nowhere do I find perspective on why breweries want to be here.

The reason I want some perspective is that Portland is the most developed and competitive craft market in the country. We're saturated with great beer, most of it made in Oregon. Why do interlopers from out of state think they can succeed here? What's their plan? Inquiring minds wonder.

Of course, those aren't things anyone wants to discuss publicly. Brewers and distributors spend plenty of time crunching numbers and evaluating the viability of a brand well before they decide to launch in any market. But you aren't going to hear about it.

My initial thought on Founders and Bell's was that they hope to tap into folks who have migrated to Portland from the Midwest. These transplants are starved for beer from their homeland and packaged product from these breweries sells quickly. Prices don't matter.

The problem is, you can't successfully tap a market long-term with migrants as your primary customer base. It's not sustainable. You've got to reach a wider audience, in Portland's case an audience accustomed to drinking mostly local or regional beer.

What's crazy about what's happening is it runs counter to the local focus that fueled the craft revolution. Portland got a great start because locals were willing to try early beers from Bridgeport, Widmer, Portland Brewing and McMenamins. Local has been a relevant factor ever since.

If interlopers from out of state are going to have increased success here, it may mean the local focus is diminishing somewhat. Or that, at the very least, we're becoming more open to drinking beer that isn't made here if it's good enough. That might not be such a bad thing.

Keep in mind that plenty of non-Oregon craft breweries have attempted to crack the Portland market. Few have succeeded on any kind of significant scale. Lagunitas has done well. Sierra Nevada has done well. Ballast Point is doing well. There are a few others.

Breweries want to prove they can compete here says author and longtime Portlander, Jeff Alworth. "We're the Big Apple of beer. If you can make it here, you can make it anywhere. Eventually, it seems like every ambitious brewery tries the Oregon market. Usually to their regret."

The thing about breweries like Founders and Bell's is they've been highly successful in their own markets and are in the process of expanding to other parts of the country. They make good beer and they've got GABF medals and dedicated fans to prove it. They want to succeed here.

As well, they're capitalized to make the investment required to succeed. "You need to have marketing boots on the ground to build a brand presence here," says one of my industry friends. "Breweries that aren't willing to do that or can't afford to do that have a tough time here."

In fact, more than a few Oregon breweries have cut corners on the marketing end. They expect to win fans because they're here. Some have even doubled down by pushing sketchy, inconsistent beer into the market. A few have gotten away with that approach.

Things may be changing. Well-funded interlopers with the appropriate pedigree are positioned for success here. Migration demographics could be part of that, but mainly Portland and Oregon may be coming around to the idea that good beer is good beer regardless of where it's from.

The result of that evolution is that sloppy, underfunded Oregon brands are going to be pushed out of the market by aggressive newcomers from outside. In fact, that displacement is already happening. Maybe that's good news for consumers.

Wednesday, February 1, 2017

New AB-funded Blog is Business as Usual

I have to admit events of the past week or so have been a serious distraction. It's a little difficult to think about beer when the country appears headed for a Constitutional crisis. The first two weeks of the Trump era have been a wild ride.

Scanning my inbox and social media for beer-related news, I discovered our old friends at Anheuser-Busch are up to no good. You won't want to miss their new ad, set to run during the Super Bowl, which uses a pile of alternative facts to depict the brand's early history. Bizarre waste of money.

Then I learned of AB's latest excursion into the craft beer world. This time, they've funded a blog covering beer and the beer industry. Actually, funding for the venture comes through a creative intermediary that is backed by Anheuser-Busch. That makes the connection a little less obvious.

Honestly, I haven't read through enough of the site's content to give it any kind of objective review. But you can find a pretty good (and funny) beatdown here. Some of my colleagues in the local beer writing community have commented, mostly not in a good way.

You see the problem, right? Any publication that is funded, directly or indirectly, by the world's largest beer company is going to have a perception problem. Keep in mind that in the wake of MegaBrew, Anheuser-Busch is far and away the most dominant player in the beer world.

And here they are financing a site that covers beer. Why would they want to do that? I'd say they want a place at the table. They're certainly aware that there are hundreds of more or less independent blogs, many of which don't provide very favorable coverage of AB initiatives and brands. This blog, for starters. They'd like to have a voice.

The challenge for the new site, which I mentioned to a gent involved in the venture on Facebook, is there will be the perception of potential conflict of interest regardless of what they cover. His response is they intend to make the AB connection clear (we shall see) and are focused strictly on good coverage. Fine. But the connection to Anheuser-Busch is a huge issue. At least for me.

The good news for AB and for the folks launching the new site is the average craft beer consumer, in contrast to well-informed beer geeks and writers, doesn't pay that much attention to who owns brands and finances websites with beer-related content.

In fact, the average craft beer consumer very often has no interest in these issues. There are plenty of people who are just fine ordering Goose Island in a bar or buying 10 Barrel in a grocery store. They don't want to be bothered with the details of why it might not be a great idea to give their money to the world's beer behemoth.

My guess is the new blog will benefit from that same mindset. A majority of people who read blogs aren't beer geeks. They're simply out there surfing for information. When they come upon the site, most won't know or care that there's a potential conflict of interest in the coverage.

Indeed, consumer ambivalence is exactly what Anheuser-Busch is counting on. They've been counting on it with their brewery acquisitions, with their fake craft brands and now with the new blog. This is strictly business as usual for them.

Tuesday, January 24, 2017

Oregon Beer Awards Judging, 2017

Fresh from nine days in Hawaii (yes, I missed the snow), I found myself sampling beer at the Oregon Beer Awards judging on Saturday and Sunday. Though the Awards have been around for a few years, this is just the second year in which blind judging was used.

Stuff you may already know if you watch these things: There were 974 beers entered by 112 Oregon breweries this year. That's up from 525 beers and 78 breweries last year. It's the only double-blind tasting competition in Oregon.

Although the event is sponsored by Willamette Week, the competition is run by Breakside's Ben Edmunds. Judges are mostly brewers, publicans and others who work in or around the industry. They invite a few local writers just for kicks, I suppose.

One of the wise things they did this year, having learned something last year, is reduce panel size to three or four in the prelim rounds. They also kept panels mostly together. The panels were larger last year and judges switched panels a lot. The result was that things bogged down and we got way behind schedule. Much, much better this time around.

Medal round panels, at least the ones I was part of or witnessed, were larger. That also makes sense because you want more palates to draw from when you're trying to pick the top three beers from a flight of 10 or so beers that are all really good. It was very tough to pick winners in the medal flight I participated in.

A few people have asked me how drunk judges get. Not very, I'd say. The beer is served in small plastic cups and judges rarely consume all of the beer in any of the cups. Most who judged full days this year reviewed six flights of roughly 10 beers each per day. The ounces add up fast, but food and water was provided and there were breaks. I saw no stumbling.

After judging a full day last year, I opted to change things up this year. I judged beer Saturday morning and Sunday afternoon (allowing me to fully miss the dreadful NFL conference championship beatdowns). I did the split because I felt like my palate got pretty fatigued in the afternoon session last year. Avoiding that prospect seemed like a wise move and it was.

The first thing you realize in these tasting excursions is how much differently brewers evaluate beers than most of us who write or watch the industry. Jeff Alworth has a lengthy and informative post about this. In a nutshell, brewers often taste and identify imperfections in brewing processes and ingredients. They do the same thing with good beers. Their comments tend to be fairly objective.

Meanwhile, I can identify good and flawed beers. During each flight, I'd take notes on each beer and identify the ones I thought  flawed or not quite right. I'd also choose my top three or four in the flight. My choices generally jived with the brewers on the panel. But my opinions tended to be subjective, not objective. Which means I usually couldn't objectively describe why a beer was flawed or near perfect.

Thanks to the folks at Willamette Week for sponsoring the competition. Special thanks to Steph Barnhart of WW and to Ben Edmunds, both of whom worked tirelessly to make this event work. Thanks are also due the countless volunteers who helped in a variety of ways. Finally, Widmer Brewing generously hosted the judging and provided lunch both days. Thanks, folks.

Medal winners in 22 categories, as well as a host of other awards, will be announced during the Oregon Beer Awards ceremony at Revolution Hall on Feb. 28. Tickets are available here. There will undoubtedly be some surprises. Why? Because the beers were evaluated blindly and honestly. Brewery stature meant nothing. Only the beer mattered.

See you at Revolution Hall.

Sunday, January 15, 2017

Kauai Beer Company Grows Up

I first visited the Kauai Beer Company back in the fall out 2013. They had opened their doors about a month earlier and the place was pretty stripped down. Owner Jim Guerber had a plan to build the business piece by piece, and that's exactly what he's done.

Back in those early days, they were pouring only four of their own beers. The flagship Black Limo, a schwartzbier, was at the top of the list, and a nice interpretation of the style. Except for a crock pot containing some chili or stew, there was no food. That and more beer was yet to come. The original post is here.

I returned to KBC the following April, commissioned to cover the brewery for a BeerAdvocate piece. That's when I had the chance to sit down with Guerber and his compatriots...his son and head brewer, Justin, marketing director, Larry Feinstein, and brewer, Eric Burda (who recently left the building).

I don't know how many times I've listened to brewers describe grandiose plans that sounded totally delusional. More times than I want to think about. But I never had that feeling with Guerber and his crew. Their plans to brew more beer, bring food into the mix and expand the operation in various ways sounded pretty reasonable.

That was likely because I could see Guerber was taking a cautious approach to the business. An accomplished homebrewer and owner of a custom software company, he thought his brewery could be successful. Having made the substantial original investment required to get the doors open, he was determined to build things out as the business grew.

When I next visited in late 2015, it was clear that things were evolving. There were more house beers pouring and they had expanded from food trucks (which appeared on special nights) to an in-house kitchen serving lunch and dinner several days a week. The space still had something of an unfinished look, but they had made good progress.

This week's visit confirmed what I suspected all along, which is that these guys would build a thriving business. I walked in during a weekday lunch hour. The place was buzzing with activity, many of the tables and most seats at the bar taken. The place now looks like an established brewpub, with a good selection of beers, a locally-sourced menu, friendly ambiance and schwag.

Most KBC beers are designed for the tropical climate. They tend to be fairly light on the ABV scale. The flagship Black Limo (5.0%) continues to be a favorite of locals and tourists. Lihue Lager (4.9%) is essentially a co-flagship with a strong following. My clear favorite from the rest of the list this time around was a robust India Pale Lager (6.5%), loaded with hop flavor and aroma.

The menu is island fare, a mix of sandwiches, salads, soups, entrees and appetizers. Lunch and dinner options are slightly different. They also have Truck Stop Thursdays, in which two or three food trucks pull up out front and sell their stuff to patrons. This is how KBC initially brought in food, considered a special event. It continues on in that form and is well-supported.

I didn't expect any special treatment. But Jim and Justin came round to talk and gave me a renewed tour of the facility. They revealed new plans for expanded brewing capacity, a larger kitchen and a beer garden, all of which will require removal of the current roof (Jim owns the building) and considerable renovation. These upgrades will undoubtedly happen in due time.

My comment to Jim when he initially stopped to talk to me at the bar was that his little brewery has grown up. And it most certainly has. From nothing more than a shell several years ago, Kauai Beer Company has evolved into a solid business. My guess is it will continue to move forward as each upgrade is considered, planned and implemented.

In case you're wondering, Kauai is still very much the beer desert I described in earlier posts. It isn't easy to find authentic craft beer here. The big beer companies seem to have a lock on the market, particularly in the resort areas. Which makes Kauai Beer Company an oasis for locals and tourists, mostly grown up and ready for future adventures.

Thursday, January 12, 2017

Tracking Craft's Emerging Mass Market Status

It's vacation week for me. While my Portland friends are stuck shoveling snow and braving treacherous roadways and walkways, I'm enjoying a week in the tropics. It's a tough job, but I guess someone has to do it. Might as well be me.

These respites away from the real world give me a chance to think about beer, something I seem to spend less and less time on these days. I've been trying to connect the dots between two articles I read on this trip. One by Andy Crouch, the other by Jeff Alworth.

Crouch's piece is in this month's BeerAdvocate, a publication I read sparingly these days. (There is no current web version of the article that I can find.) His basic premise is that our fixation on chasing multiple exotic beers at pubs and bars has ruined the simple experience of enjoying beers with friends. He describes a setting outside the U.S. in which all patrons are drinking one beer and having great conversations unrelated to beer.

Alworth's piece appeared on the Beervana blog, though it probably should have appeared in formally published form somewhere. His premise is that stratification is occurring in craft beer and that the largest brewers, though they continue to pander to the specialty audience, are aggressively going after an emerging mass craft market with trendy, disposable brands.

I'm not really sure Americans can ever return to a situation where we're satisfied drinking a single type or brand of beer in an evening. That was certainly the reality 40 or more years ago, when most of us drank tasteless industrial lager. There were a lot of different brands, but we were drinking basically the same beer and there wasn't much conversation about it.

Even in the early days of craft, there was nothing like the promiscuous market we see today, with folks striving to drink exotic variety. In those days, people were often satisfied to spend an evening drinking pitchers of the same beer. Breweries and bars typically had only four or five brands, so options were limited. It was a different world.

The specialty craze ramped up over the last 10 or so years, driven by breweries in an increasingly crowded market wanting to differentiate themselves and by a small, but aggressive crowd of geeks that became virtually addicted to exotic beers, pretty much regardless of cost. This crowd, though small, helped push craft dollar volume growth into the double digits in recent years.

What the large craft brewers have come to realize is that the specialty crowd is not the future. They recognize that the mainstream popularity of craft beer has created a huge pool of consumers who enjoy good beer, but aren't really interested in chasing exotic styles. That mass market is craft's future and that's where the large brewers are turning.

There's nothing, really, to add to what Jeff wrote in his piece. His notion that large brewers are targeting the mass market with trendy, disposable brands is absolutely correct. Consumers currently demand zesty IPAs and that's what brewers are delivering. They will easily move on to the next trendy thing when it comes along with new disposable brands. And so on.

Will we ever get to a scenario in which consumers drink a single type of beer, such as Crouch describes? Some might argue we've already crossed that bridge in some sense with the popularity of IPA. Even here, there's demand for numerous brands...Lagunitas, Ballast Point, Goose, etc. Spoiled Americans will probably always demand multiple brands of any trendy style.

The most intriguing thing about what's coming will be seeing how the big craft brewers implement a mass market strategy. My guess is the tactics will look something like those used in the past by macros to tap broad regional and national audiences. Irony abounds.

This transformation is gonna be comical and messy, I suspect. I look forward to watching it unfold.