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Thursday, September 25, 2014

The Elusive Question: Can Beervana Keep Growing?

Tuesday evening's Oregonian Speaker Series program at the Green Dragon was set to address this question: Can Beervana Keep Growing? Pretty straight forward. All of the pre-event materials included a reference to the significance of that question.

And let's face it, this is a question that's on the minds of many. Despite the fact that craft beer is booming in Portland...or maybe because it is...a lot of inquiring minds wonder if we might be reaching a saturation point. Are we coming to a moment where there's a shakeout such as we had in the mid-1990s?

The Oregonian Media Group assembled a panel of "experts" to consider the question. Moderated by John Foyston, the longtime Oregonian beer writer, the panel included:
  • Gary Geist, co-founder and co-owner of the Lucky Labrador
  • Graham Brogan, head of brewery operations at McMenamins
  • Karl Ockert, founding brewer at Bridgeport and technical director of the Master Brewers Assn.
  • Jeff Dense, political science professor at Eastern Oregon State University 
  • Mike Wright, founder and owner of The Commons 
  • Brian Butenschoen, executive director of the Oregon Brewers Guild 
The conversation veered back and forth under Foyston's guidance. Panelists discussed what it was like in the early days of craft beer in Portland. Like Rome, the beer culture we have wasn't built in a day. There was also talk about the proliferation of styles and mention of today's crazy financial numbers. Lots of smiling faces.

I should mention that the audience was made up largely of industry-connected folks. The gal seated next to me manages one of best craft beer watering holes in the city. Across from me was a gent who is preparing to open a taproom in Hillsboro. He introduced me to a banker who works with beer-related businesses. Nearby, I identified brewers and other industry folks.

Given the audience, it was probably best that the quintessential question involving future growth was never asked...or answered. One or two panelists briefly offered that they saw no end to growth in sight. Butenschoen pulled out (what appeared to be) handmade charts showing steady growth over the years. Relief circulated around the room.

However, I was hoping for a little more. I know I'm not alone in thinking Portland can't accommodate an infinite number of breweries. We consume a lot of the beer we make and, because our beer is in demand in other parts of the country and world, some of what we make can be exported. But we will reach a saturation point. We just don't know when.

The question of how many breweries is too many is complicated. A lot of factors play into the economics of beer in Portland and elsewhere. There's certainly no way the issue was going to be fully evaluated and addressed by this panel during the hour or so they occupied the stage.

In fact, if organizers intended to seriously consider the question, this wasn't the panel to do it. Why? Mainly because folks who have a vested interest in an industry generally aren't the best objective sources. It's a little like asking the NFL how it's doing on domestic violence and expecting a candid answer. No offense to anyone on the panel, but it really should have included a mix of people who watch the industry, but aren't financially linked to it.

That approach has a potential downside, for sure. You may wind up hearing things that run counter to industry thinking. That sort of thing can create controversy and make people feel insecure about the future. Which can be bad for business. And pocketbooks.

Tuesday's gathering was an entertaining event. The admission ticket included a pint of beer and the Green Dragon has a great tap list. It was great to see familiar faces. But the question of craft beer's future prospects was never seriously asked or discussed. Not the best...given the billing. There's always next time, I suppose.

Monday, September 22, 2014

Ruskies get their Blue Ribbon

They have a few problems in Russia. The antics of Mr. Putin related to the Ukraine and Crimea have the entire world on edge. Perhaps things will improve now that they have acquired a Blue Ribbon. We can always hope.

Many Americans were aghast to learn that Russia-based Oasis Beverages last week purchased a majority stake in Pabst Brewing. After all, Pabst occupies a legendary place in US brewing dating back to 1844. And Pabst Blue Ribbon was recently a popular hipster brand. Talk about catastrophe.

The specifics of the sale were not released. However, industry analysts believe Pabst sold for around $750 million, three times what it sold for in 2010. Please note that Oasis purchased the entire Pabst portfolio, which includes Rainier, Olympia, Colt 45, Schlitz and 15 more.

Honestly, it's rather amusing to see such a lowly collection of brands sell for what seems like such a steep price. Imports and craft beer are the fastest growing segments in the industry. Domestic beers, including the sub-premium brands that infest the Pabst portfolio, are in decline.

Which makes you wonder what Oasis is up to. We're talking about the largest independent brewer in Russia, with an extensive collection of brands. The company has some solid experience with yellow beer and they evidently want to give the US market a try. Good luck to them.

The Pabst portfolio
I've seen comments here and there from people bemoaning the fact that iconic Northwest brands Olympia and Rainier, as well as nationally known PBR, are now owned by Ruskies. But concern over foreign entities owning American beer brands is a horse that left the barn a while ago. Last time I checked, Anheuser-Busch was owned by InBev, a Belgian company.

There are those who believe the Russian connection will cause sales of the Pabst brands to decline further, which may be somewhat inevitable. Remember, the people who buy these beers on a regular basis identify strongly with the brands. Never mind they are often thinking about what those brands represented 40 or more years ago. These connections can take a lifetime to sever.

For Portland folks, there is an historical footnote. It was Pabst that bought Blitz-Weinhard in 1979. At the time, Blitz was riding the success of Henry's Private Reserve. Pabst, on the other hand, was in bad shape with plummeting profits. Plans to release a follow-up to Private Reserve were squashed. It wound up being a short-lived, dysfunctional relationship that damaged Blitz' prospects considerably. Blitz would go through two more owners before being sold to Miller in 1999.

It may be instructive to note that Pabst never actually won a blue ribbon. The beer apparently won many awards at various competitions, and a silk blue ribbon was put around the neck of every bottle starting in 1882. But the claim that Pabst won a blue ribbon at the 1893 Chicago Exposition is false, as all beers that scored within a particular range received a certificate and medal. Pabst alone decided to name its beer America's Best and market it as Pabst Blue Ribbon.

But no one need tell the Ruskies about that.

Wednesday, September 17, 2014

Time Travel Along the Snake River

A trip to the other side of the mountains is always a sobering mission from a beer perspective. There just isn't that much going on and there aren't nearly as many choices as there are in the city. To some extent, this is the downside of being a spoiled Portlander.

The occasion for my trip to eastern Washington was my high school class reunion. There's no need to delve into the sordid details, but I will say it's been a decade or two since I graduated. As I've mentioned here before, Lucky Lager was a go-to beer in high school. Perhaps that provides an appropriate historical reference point.

Traversing the spacious and sparsely populated hinterlands between Portland and Clarkston, Wash. is like entering a sort of time warp. The rural towns that occupy the mostly vacant space look much the same as you suspect they did 60 or 70 years ago. Main streets with general stores and diagonal parking are a dead giveaway. Time moves slowly here.

By the time you reach Clarkston, located on the Snake River across from Lewiston, you've edged forward a few decades on the time continuum. There's a Costco and a Walmart, and diagonal parking is yesterday's news. The Lewiston-Clarkston valley is a veritable mecca of modern chic compared to the dusty ag towns of the interior. But it still lives several decades in the past.

This was once and to some extent still is a proud blue collar community. It has suffered many of the same misfortunes that have hurt similar communities as decent paying manufacturing jobs have been displaced by automation or outsourced overseas. Ag and wood products are still important, but tourism in various forms appears to be fueling what amounts to an emerging service economy.

I have no idea how many of my graduating class of around 200 left the valley. Some left and later returned. I think it's safe to say most who left have done better economically than those who stayed. There are exceptions, for sure, and, anyway, this is about what you would expect to find in a place where opportunities are limited. Many leave seeking greener pastures.

As you might expect, craft beer has been slow to catch on here. Riverport Brewing, which opened several years ago in Clarkston (my 2012 story is here), produces some nice beers and has a growing following. Nonetheless, you get the sense that crap macro runs the show here. Most of my former classmates were fine drinking yellow beer during reunion festivities.

The six hour drive back to Portland gave me some time to consider the question of why my old hometown and others like it have not exactly embraced the craft beer revolution. This wasn't the first time I'd thought about this issue, but what I saw at the reunion got me thinking again.

A big part of the answer, I think, is demographics. Portland has had a strong craft beer culture for several decades. Today it is fortified and to some extent driven by young adults...Millennials from here and from all over the country. This city has gotten younger in recent times and these new residents have actively embraced the beer culture.

That scenario operates in reverse in the old hometown. There is no strong craft beer culture and no dominant young adult presence. Instead, you see a lot of those folks leaving the valley seeking greater opportunity elsewhere. As a result, you have an older culture that is somewhat stagnant and slow to embrace progress in many areas, one of which is beer.

The actual demographics generally support this theory. Portland is more than 10 times larger than Lewiston-Clarkston (609,000 vs 50,000). But size doesn't drive the beer culture. The key to that is likely the 35 percent of Portland's population that lies within the 25-44 age group. That's more than 200,000 souls of prime beer drinking age. Lewiston-Clarkston, with 26 percent of its population in that age group, has about 13,000...a huge difference.

Contrary to what some think, Clarkston was a great place to grow up. You knew your classmates and your neighbors, and you could have a lot of fun without getting into much serious trouble. There are a lot of advantages to small town living in general. One of the disadvantages is that change tends to happen slowly. And so it is with craft beer, which may never be fully embraced here.

Thursday, September 11, 2014

Shelter from the Sports Storm

The start of another NFL season seems like a good time to consider the impact of the 24-hour sports cycle, gone bonkers at the moment thanks to the Ray Rice media circus. The fact is, it is increasingly difficult to find a bar, pub or tavern that hasn't jumped on the sports bandwagon with large TVs and related promotions.

Don't misunderstand. I enjoy televised sports as much as the next person. I'll often go where I know I can watch a game while drinking a tasty malt beverage. But there are limits to what I will tolerate when it comes to non-stop buzz.

Fortunately, not everyone has joined the sports stampede. There are still a few places that have a retrograde view of what a pub is or ought to be about. Belmont Station is a good example. They offer great beer in a space void of TVs, which opens up the opportunity for conversation uninterrupted by visual distractions. Imagine that.

Looking back, the proliferation of sports-themed joints linked to craft beer is a relatively recent phenomenon. As far back as the 1970s, lots of watering holes had small TVs, often behind the bar, that were switched on to track live games and scores. That's a far cry from the non-stop barrage of giant screen banality we see today.

The thing is, sports TV did not play a significant role in the early development of brewpubs and breweries, most of which chose a more traditional pub approach. That rationale has been turned on its head today, as a long list of places has caved to the sports craze.

Part of what's driving this reality is the glut of sports programming looping around the clock on countless channels. If you go back 10-15 years, there weren't all that many options for live games and you didn't have multiple ESPNs and other channels endlessly hawking highlights.

My guess is owners and managers hop on the bandwagon because they'd rather not risk alienating the crowd that craves sports and entertainment. Shrinking attention spans mesmerized by non-stop moving images are a factor in this, for sure, but never mind. Marshall McLuhan isn't in the house.

I always wonder what differentiates places like Belmont Station from the countless joints that feature a barrage of sports programming. What mindset causes them to go against the flow? I put that question to Belmont Station co-owner, Lisa Morrison.

The philosophy she and partner Carl Singmaster share is pretty simple, she says:
We want to offer a place where the art of conversation can mingle with the enjoyment of a fine beverage. We have so many technological distractions in our lives. Our goal is to offer a spot that can take you away from that for a while and bring people together. And if you want to watch a game or whatever, you can do that on any number of personal devices. We even provide complementary WiFi. 
On any given day, you'll find people hanging out in the bier cafe, occupying tables on the sidewalk out front or sitting in the more recent addition in the rear. They're enjoying beer and conversation, usually. You occasionally see people staring at a laptop, tablet or phone, but mostly there's just a lot of talking and social drinking.

There's every reason to believe the sports craze will continue to infiltrate places that are new or haven't yet jumped on the bandwagon. Places like Belmont Station are the increasingly rare alternative, for those who want a more traditional experience. It's too bad there aren't more of them.

Thursday, September 4, 2014

The Inevitable Morphing of Craft Beer

Jeff Alworth's recent post on the morphing of craft beer drew a flurry of comments to his blog's Facebook page. Strangely enough, there was (when I last looked) only one comment on the actual blog, perhaps a sign that social media has overtaken blogs as the place people go to vent.

Jeff was referring to the fact that a growing number of craft brands are starting to look a lot like mass market brands. At the same time, mass market brewers are creating crafty brands and doing all they can to emulate craft brands. Thus, you have a sort of morphing or blurring on both ends of the spectrum. Interesting times.

It seems to me this transformation was predictable. There are plenty of antecedent examples in other industries. The beer industry is by all accounts an odd one, but it isn't all that much different than many others.

The allegory that works well for me is the American auto industry. Following World War II, that industry dominated our economy. American vehicles were sold here and abroad. This was largely due to the fact that our industrial base had not been shattered by bombing or incursion during the war. But never mind.

By the 1960s, if not sooner, other countries wanted a piece of the action. Germany and Japan, losers in the war, were probably the most aggressive. English cars were out there, too, always saddled with electrical and mechanical problems.The challenge for Germany and Japan was to compete in an industry owned by the United States. They were going to have to earn their way.

The strategy they used, brilliant in its simplicity, was to attack the American industry where it was weakest. American cars were big, inefficient, expensive and, in many cases, not very well-designed or built. Germany and Japan exploited these shortcoming with cars that were small, efficient and inexpensive. Build quality got better as time moved along.

Despite the fact that many of their early cars weren't much to look at, the Japanese and German automakers established themselves in the market because they offered good value. You could buy one of their cars for significantly less than you would pay for a comparable American car and it cost you less to maintain and operate.

At the time, a lot of people figured the foreign brands would stick to small cars and leave the large car market to the Americans. But that's not what happened. Instead, the established foreign brands moved beyond the small car segment and went after the core market with larger cars that were often a better value than their American counterparts.

The point is, foreign automakers morphed their products and strategy once they gained a foothold. There was also some morphing on the part of American automakers, who introduced smaller, more efficient cars, most of which weren't very well made. Eventually, competition did force US automakers to improve quality standards.

What does any of this have to do with the morphing of craft beer? Read on.

When the original craft brewers came on the scene in the early 1980s, it would have been impossible for them to enter the market with lagers. No one would have paid any attention. They needed to build a niche where the status quo was weakest. Lo and behold, craft brewers produced beer with flavor and character, a veritable vacant lot for the mass market beers.

Today, the craft beer industry is well-established. There are more than 3,000 operating breweries. Market share is growing, but still a relatively small piece of the overall beer pie. Craft brewers are essentially competing against each other for a small, albeit growing, portion of the market. This is eerily similar to what was happening in the auto industry by the 1970s.

Until now, craft brewers largely ignored the mass market. No more. Today, a few craft brands are going after the core market with products and marketing tactics that look a lot like the macro brands. So we see craft lagers with creative ad campaigns. This was inevitable and we'll probably see more of it....just as the mass market brands will continue to launch crafty beers.

Of course, the parallel to what happened in the car industry is not exact. Craft brewers have always pushed a premium product whereas the foreign car companies were initially selling what amounted to a budget or value product. Nonetheless, they shared the strategy of going after dominant industries at their weakest point, then morphed once established. By the way, this strategy isn't a well-kept secret. It's been applied many times over the years in many industries.

Where do we go from here? The reality is the number of craft breweries is growing faster than craft volume growth. While there will always be room for specialty and mainstream craft beers, the largest untapped chunk of the market is the macro segment. It seems likely this is where craft brewers will increasingly roam as we move forward.