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Wednesday, February 24, 2016

Thoughts on the Oregon Beer Awards, Rev. 2

When I wrote about last year's Oregon Beer Awards, I predicted organizers would iron out the hiccups that undermined the quality of the first-time event. Sometimes I'm right, sometimes I'm wrong. But I was right about this. This year's OBA was much-improved.

Full disclosure. I was a member of the large group of folks who judged beers back in January. I was also a member of a smaller group of "experts" who compiled the Top 10 list. And I wrote several snippets for the Portland Beer Guide, which you can get around town or access online here.

What did they do better this year?

First, they got serious about objectively judging the beers. The tasting panel was expanded from roughly 20 to over 100. Tastings were double blind, meaning we had no idea whose beer we were tasting. Beers that won medals were chosen objectively. No politics, labels or other distracting details involved.

Second, the awards event itself was vastly improved over last year's half-baked affair at the Doug Fir Lounge. As a venue, Revolution Hall worked pretty well. It's bigger and the layout is better. Organizers had an auditorium with a stage, an MC, a flock of presenters and projected images that reflected what was happening.

The results have been posted in various places, so I'm not going to post them here. Did I agree with every medal choice? Hell no. But it doesn't matter because I know how the tasting and judging was done and I'm confident every beer that won deserved to win. Jeff's informed thoughts are here.

There were surprises for sure. The biggest upset of the evening, in my estimation, occurred in the Sour and Wild Beer category. It was there that Stickmen snatched the Gold medal, with Cascade taking Silver and Bronze. It's well known that Stickmen has had some issues. Some wondered if perhaps one of their standard beers had gotten mixed up with the sours. Not very nice, eh?

A tribute to the late Fred Eckhardt, presented by Lisa Morrison, was nicely done. Fred was posthumously receiving a Lifetime Achievement award and being inducted into the "new" Hall of Fame. I wondered who's Hall of Fame. Willamette Week's? I'm pretty sure there's more than one Hall of Fame inducting members. That needs to be fixed. One Hall of Fame, please.

The highlight of the evening for me occurred when former Portland mayor Bud Clark appeared on stage to present the IPA medals, our version of Best Picture at the Academy Awards. Clark, founder of Goose Hollow Inn in 1967, was mayor from 1985 to 1992, formative years for craft beer here. He was later pictured on Bridgeport's Old Knucklehead label. It was pretty cool seeing the 84-year-old up there presenting and I made a point to tell him so.

Where does the event go from here? It's pretty clear the Oregon Beer Awards will evolve into our own little GABF. Revolution Hall was packed to the gills and there's no reason to think attendance is going to do anything but grow. They will almost certainly have to look for a larger venue next year.

Besides a larger venue, they're going to have to rethink food. Event tickets supposedly included sandwiches from Bunk. The reality was something different. Runners would bring out trays of sandwiches that instantly disappeared in feeding frenzies. Yet beer, which you paid for after the freebie built into your ticket, was plentiful. This needs to be fixed.

I also wonder why we can't add a bit of class. Call me old fashioned. I don't expect brewers and industry-connected folks to show up in tuxedos. But why do so many presenters and medalists show up onstage looking like characters out of a Dickens novel? Put a little style into it, folks.

Honestly, the shortcomings are best viewed as scars in fine leather. The progress they made from last year to this year was huge. A lot of the credit belongs to Steph Barnhart, organizer extraordinaire for Willamette Week (whatever you're paying her, it isn't enough) and to Breakside's Ben Edmunds, who worked tirelessly to organize the beer judging. There's also Ezra Johnson-Greenough, who played a major role in creating the OBA concept and shepherding the judging and awards.

Amazing effort, folks.

Monday, February 22, 2016

The (Rita) Kids Are Not Alright

Our friends at Anheuser-Busch continue to face serious challenges, despite their ongoing efforts to co-opt craft beer by buying up breweries and distributors. It turns out the Rita family of brands, expected to be a big hit with young drinkers when initially launched in 2012, is a lemon.

Not that anyone in the craft beer crowd would drink this snot, but it does provide an interesting, entertaining look at how lousy products are handled in the board rooms of big beer.

Lima-A-Rita was the first of the Rita brands and the most popular of the bunch. It did okay out of the gate, then nosedived to less than half of its peak sales numbers by 2015.

Reports say the Rita family, which includes several flavor variations released after Lime-A-Rita, declined by 25 percent last year. That downward momentum continued into January 2016, according to IRI data. We're talking about a fairly dysfunctional family.

Of course, the folks at AB are sure the Rita family is fine...doesn't even need counseling. All it needs is a restart, supported by a well-funded advertising campaign. It's already underway, with an ad that aired during the Grammy's. There's much more to come. AB is going to drop some serious coin on the campaign because, quite frankly, it can.

They will also release a flurry of new variants in 2016. Sensing the (8%) ABV may have been a little steep in the first wave, the new "Splash" Rita's will be in the 4% range. Lime-A-Rita and Straw-Ber-Rita are coming in March, and Water-Melon-Rita will drop during the summer. Some markets will evidently get additional flavors during the year. That's a promise, not a threat.

You might think the Rita family is competing with craft beer. But fruit flavored drinks like this largely transcend craft beer. Products in this segment tend to briefly appeal to consumers based on newness, then flame out quickly. That seems to be what's happening with the Ritas. Increased competition from a barrage of hard sodas will make things worse.

Sometimes you've got to know your limits, realize you're stuck with a losing hand in a competitive game. Sometimes you need to let go. But the folks at Anheuser-Busch don't live by those rules. Why? Because they've got wads of cash to spend on crackpot marketing schemes designed to prop up failing brands that have limited, declining appeal.

It must be nice.

Tuesday, February 16, 2016

Paying the Cost to be the Boss

Last week's news that the Boston-area Craft Brewers Guild has been slapped with a significant license suspension for paying to play shocked the industry. It's easy to assume that shock is related to the suspension, but I suspect there's something else at work.

If you don't know the details, they are these: The Massachusetts Alcohol Beverage Commission issued a 90-day license suspension to Sheehan's Craft Brewers Guild. The suspension came after the ABC discovered the distributor was paying some bars $1,000-$2,000 per tap handle.

The Sheehans reportedly aren't sure what they'll do. They can appeal the suspension, which might lead to it being reduced or maybe tossed out. Another option is for them to pay a fine equal to half of three months worth of revenue, somewhere in the $10-15 million range, say informed sources.

One thing these guys aren't going to do is quietly accept a 90-day suspension. If they do, they might as well shut down. Because a suspension of that length would activate termination clauses in their contracts with suppliers. Breweries can't afford to be off the market for so long. They would be forced to terminate and go elsewhere, and could legally do so.

The list of CBG suppliers is long and includes: 21st Amendment, Allagash, Ballast Point, Bells, Boulevard, Full Sail, Green Flash, Lagunitas and many more.

By the way, the ABC isn't finished. They have nailed a small number of bars for receiving payments and are in the process of investigating additional retailers, brewers and distributors. Those efforts may result in penalties similar in relative severity to what regulators handed the Sheehans.

Of course, the elephant in the living room is that the practice of paying to play is pretty widespread. And not just in Massachusetts. It's everywhere. One of my industry friends tells me there are bars in Portland that demand payment to put on certain beers.

It seems likely the Sheehans will argue on appeal that the practice of paying to play, although illegal, hasn't been enforced. That leads to defacto legalization, forcing them to engage in the practice to compete with other distributors. Not sure what "defacto" means? Look it up.

My guess is the Sheehans will push the defacto argument. They will argue that regulators, by failing to monitor the marketplace, created a situation where pay-to-play became standard. They probably won't win with that argument, but it might get them a reduced fine or suspension.

Look folks, what happened Massachusetts could happen anywhere. And needs to. That's the real reason shock waves are crashing around the industry. Most know pay-to-play is widespread. What if state and federal regulators get serious about stopping it?

There's no particular to reason to believe regulators are getting serious. The Massachusetts case came about only because a now defunct brewery launched a Twitter tirade that resulted in an investigation by the Boston Globe, which lit up regulators who were apparently resting comfortably.

It would be great if the action in Massachusetts encourages distributors, retailers and brewers to abide by pay-to-play laws. There will surely be short-term disruptions while everyone gets on board, voluntarily or forcibly. But snuffing pay-to-play is a worthy cause.

Update (3/2/16): CBG to pay $2.6 million. Story here.

Thursday, February 11, 2016

Craft Beer Continues Blistering Growth in Portland

Maybe one of the worst kept secrets in beer is that Portland is the top craft beer market in the country. This has been the case for many years and, but the numbers continue paint a pretty crazy picture, based on IRI (Information Resources, Inc.) stats I've been looking at in a couple of industry publications.

During 2015, the craft segment grew 11 percent and ended with a 44 share (dollar volume) in Portland grocery stores. The next closest segment was Domestic Premium, which lost more than 1 percent to finish at just under 20 share.

Keep in mind that IRI expanded the definition of craft to include Blue Moon, Shock Top and Leinunkugel for 2015. Those brands were flat and combined for less than 3 percent of craft dollar share for the year, which means fake craft brands aren't contributing much to overall craft growth here, as expected.

You might think growth in the craft segment is being driven by the large breweries, places like Deschutes, Widmer, Portland Brewing, Bridgeport, New Belgium, etc. But that's not the case. In fact, the big guys collectively lost more than 1.5 percent dollar share for the year, led by Gambrinus/Bridgeport at -14 percent. This isn't your grandpa's craft beer market.

It turns out a few up-and-coming breweries showed the biggest percentage growth for 2015. Hop Valley led the pack, up 86 percent and accounting for nearly 2 percent of the market in dollars. I have no idea which specific brands drove that growth, but I suspect it has a lot to do with releasing more options in price-friendly six-packs of bottles and cans. Hop Valley's dollar growth ($1.7 million) led the entire market.

Of course, there's more. A host of mostly smaller breweries combined to overcome what the larger breweries lost, a trend started several years ago. Be careful about reading too much into the graph below. Why? Because Ninkasi's 10 percent growth and Sierra Nevada's 21 percent growth represent a lot more volume (in beer and dollars) than the big growth numbers posted by Breakside, Three Creeks, etc. The graph is best seen as a rough visual aid.

We've known for a while that Portland is an increasingly brutal market for macro lagers. It's actually worse than it looks because IRI is based on retail sales and does not include beer sold in taverns, pubs, restaurants or independent convenience stores. If all beer sold in Portland were part of IRI, craft's market share would easily exceed 60 percent in dollars. Well, that's what I've been told by people who know about such things.

There's not much more to say, except let the beatdown continue.

Thursday, February 4, 2016

The 2016 Plan: No Quitters at Anheuser-Busch

Like 'em or hate 'em, you have to give the folks at Anheuser-Busch credit. They've been called anti-competitive sociopaths and delusional sycophants. But one thing you never hear them called is quitters. They don't know the meaning of the word.

I've been reading various reports on the AB strategy for the coming year and it is mesmerizing. The guys evidently believe there's no such thing as a dead end brand that can't be returned to viability via truckloads of cash and retread marketing schemes. Never mind the actual product.

The big idea, as usual, is gaining market share, something AB hasn't done since 2008. There's a pile of PR schlock behind that goal. Some of the themes include "investing in the future" and "strengthening relationships." Just the kinds of things you expect to hear from talking heads in a woebegone organization.

Of course, growth is tough when you've got a bunch of brands in freefall. AB has been losing share in the premium segment for years, and the decline is redlining with young drinkers who are uninterested in the products and largely unreachable via traditional advertising channels. It's a serious problem.

That reality is driving investment in the so-called High End, which expanded with the acquisition of several craft breweries in 2015. Expect a continuation of that theme in 2016, as spending will reach a new, unspecified high. The High End segment likely represents the best chance they have to offset declines through the rest of their portfolio.

Their goal with the High End segment is aggressive. They hope to double whatever the growth rate is in craft beer. If craft hits 20 percent growth this year, AB wants the High End to reach 40 percent. It's probably unrealistic, but that's what happens when you're desperate to grow your numbers and your new product pipeline is vacant.

They do have winners in the High End. Goose Island IPA, now brewed in factories everywhere, had a big year in 2015. AB wants it to be the #1 IPA in the land this year. Its other craft minions, including 10 Barrel, Elysian and Blue Point, also did well. Then there's Stella Artois, which was up 20 percent and will receive additional investment in an effort to double volume within a few years.

Along the lines of refusing to quit on flat-lining brands, the suits are determined to revive the fortunes of Shock Top, their very own fake craft brand. They are upping the ante considerably, spending more out of the gate than they did all of last year. Among other things, that money will buy Shock Top a Super Bowl spot. You won't want to miss it. Trust me.

The best I've saved for last. Bud Light, which has been in steady decline in recent years, will get the biggest investment ever. The guys simply refuse to quit on their pet brand. Instead, they'll leverage their connection with the NFL, including several Super Bowl ads and team cans. Some cities will even get NBA cans, apparently. Because everyone knows the road to improved brand identity and credibility is paved with fancy new packaging.

Some people say the guys at AB don't have a sense of humor. But that can't be true. When you stubbornly hang onto flagging brands and your only winning strategy is buying up your competition because you don't have any new ideas of your own, you better have a sense of humor.