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Sunday, April 23, 2017

Little Beast Sets Up Shop in Beaverton

One of the most anticipated brewery openings in recent times became official Saturday evening. Little Beast Brewing, the creative child of Charles Porter and his wife and partner, Brenda Crow, held a launch party at OP Wurst in Southeast Portland. A fine time was had by all.

I'll get to the Little Beast details shortly. This was a significant event because Porter has a rich brewing background. He co-founded Logsdon Farmhouse Ales with David Logsdon in 2009, then abruptly departed a couple of years back. It took some time to get Little Beast off the ground. Porter lives in my neighborhood and I got vague updates on the project from time to time.

Breweries open every day. You know this. Little Beast is special because Porter doesn't make typical beers and his beers have won awards in significant competitions. His particular talent is producing mixed culture brews that lean on local produce and micro-flora. Barrel-aging and bottle conditioning are part of that, obviously.

In fact, the Little Beast name itself is nicely conceptualized. How so? Because it's the "little beasts" in micro-flora that ferment the farmhouse and wild ales Porter is known for. A degree in biology provides him with an understanding of yeast and bacteria, handy stuff to know if you're going to monkey around with wild and sour beers.

There's a significant and growing interest in these beers. Cascade Brewing has built an empire on its sour beers. DeGarde in Tillamonk has done well with its wild ales, as has Wolves and People out in Newberg. There's also Yachats Brewing, where Charlie Van Meter, who worked with Porter at Logsdon, is producing some uniquely unconventional beers.

Little Beast will for now operate out of the former Brannon's Pub & Brewery in Beaverton. They're occupying the brewing space there while Westgate Bourbon Bar and Taphouse operates the pub portion of the space. This is a relatively inexpensive way to get the brewery up and running and to build a following. A taproom somewhere in Portland is in the future.

Samples of Bes, a tart wheat ale, and Fera, a brett-fermented Saison, were poured at OP Wurst. Porter also shared a few bottled beers around. Everything was pretty tasty. I preferred the Bes to the Fera, but that was a tough call. Many liked the Fera.

Little Beast will offer year-around flagship and seasonal beers in draft and bottled form. Limited, exclusive stuff will evidently be sold direct via some sort of membership. I'm guessing the standards will show up intermittently in area beer bars and bottleshops. There's a tentative list of shops and bars coming and I'll update this post when/if I receive it.

I expect Little Beast to do well. They have a premium product that's somewhat unconventional and Porter is no stranger to brand building. But these are strange times in craft beer. It's getting crowded out there. Nothing comes easy. Porter and Crow know this.

Monday, April 17, 2017

Craft Beer's Frenetic, Trendy New Culture

Last week's Craft Beer Conference spewed a lot of data relating to the state of the industry. Craft segment growth slowed last year. You knew that. And the part of the segment that accounted for the bulk of the growth that occurred is the one that connects most directly with its patrons.

The facts are these: Breweries that produce less than 15,000 bbls accounted for 75 percent of the segment's growth, about 1.4 million bbls. Taprooms did nicely. Brewpubs experienced a great year, up nearly 15 percent to 1.35 million total bbls.

On the other side of the ledger, regional brewers were up just 150,000 bbls or 10 percent of segment growth. Keep in mind that regional brewers account for roughly 75 of total craft volume. In effect, these guys are having their lunch eaten largely by smaller, local breweries.

This theme has been gathering momentum for a while, related to the fact that craft breweries have been opening all over the place. Given a choice, consumers are often choosing local beer over beer produced elsewhere, at least when it comes to craft beer. Remember, craft is still only a small share of overall beer.

This isn't strictly about the quality of the beer. Nope. There's a game being played that involves brand connection. The folks who chase craft beer are driven to connect with brands. Smaller, local brands are much better-positioned to make those connections than stodgy, older breweries.

Who are the beer chasers? Mostly, though not entirely, millennials. Yep. Somewhere along the line, a swath of the millennial generation got hooked on craft beer. Their (21-35) age group is historically the largest beer consumer. But millennials have migrated to craft in droves. Don't ask me why. Maybe because it's one of the few things they can get excited about. We know their trophy cases are full. (I kid.)

The effort to reach this crowd has strategic layers. Breweries strive to project an identity that resonates with the youthful fan crowd. Identities are conceptualized accordingly. The outdoor motif seems in vogue currently. The need to stand out in an increasingly crowded market has led to packaging that carries wild graphics, bright colors and clever names. All that glitters might not be gold, but shiny things can and do attract attention.

Of course, the beer itself is also caught up in what's happening. New interpretations of existing styles, as well as newly imagined styles, are the order of the day. That's more or less how we arrived at the point where hazy IPAs and eclectic fruit and barrel beers have become the rage. Something else will come along soon enough. Trust me.

Don't forget the role of social media in pushing the envelope forward. Smartphone-addicted millennials depend on social media for news and information. That's where brand identities are amplified by some exponential factor, creating chatter that fuels the fan crowd and ignites feeding frenzies for new beers, events, brewery schwag, etc.

What this arrangement has produced is a frenetic, stifling trendiness. Brand churn is accelerating. Beers come and go relentlessly in bottleshops, taprooms and pubs. Brands we saw regularly in past years are nowhere to be found these days, replaced by brands that will themselves be gone in a proverbial flash. Change is a speeding bullet.

Some years ago, a few of us talked about event fatigue. The events calendar was exploding and it was becoming impossible to keep up. That's ancient history now. Today we have widespread industry fatigue. Even people inside the industry have a hard time keeping pace. The gimmicks and gambits used to attract interest in beers are crazy and getting crazier.

Where does this end? Good question. I'm old enough to have seen frenetic trends come and go more than a few times. I suspect the current craft craze will collapse or significantly moderate at some point. That may involve a generational shift in tastes. Or not. But it will happen.

Monday, April 10, 2017

Brothers Cascadia Brewing Puts Bloom on Hazel Dell

As referenced in past posts here, these are wild times for craft beer. The crazy growth of recent years is slowing. Part of that is reality. You can't easily grow 15 or 20 percent a year once you reach a certain size. Brewery count is another reason. Access to local beer has dimmed retail sales.

We're going to hear a lot about the state of the industry from this week's Craft Brewers Conference in Washington, D.C. The Brewers Association brass are going to talk about the good and the bad. It'll be a giant drunk fest in between press conferences and presentations. This much I know.

But not everyone connected to the industry is spending a drunken week in Trumpland. Some folks are at home working in their breweries or busy opening up new ones.

Monday afternoon I stopped in on the private soft opening of Brothers Cascadia Brewing in Hazel Dell. This place has been in planning for a while and they opened the doors to a nice crowd of friends and family. Pretty cool.

How did I get invited? Fair question. Because I rarely get invited to anything. Never mind why. It turns out the general manager there is Micah Loiselle. For years, Micah worked behind the bar at Laurelwood's Sandy pub, a place I frequented almost nightly. If you've visited Laurelwood on any kind of regular basis in recent years, you know Micah. He's the guilty party who invited me.

When I walked in just after the 3 p.m. start time, the place was already busy. You hate to take too much stock in a situation where it's almost all friends and family, but I suspect the crowd is a good omen. This place has the potential to do nicely. 

As I've said once or twice in past columns, there's still plenty of room for smaller, neighborhood breweries that intend to serve a mostly local clientele. That's particularly true in places where that clientele is underserved from a craft beer standpoint. Hazel Dell is that kind of place. 

Once upon a time, Hazel Dell was a thriving area. Today, the area around Brothers Cascadia Brewing on 99th St and Highway 99 could use some investment and help. In some ways, it reminds me of the Lents area in Southeast Portland, where a revitalization project is underway. 

Three partners, Sherman Gore, Jason Bos and Richard Tiffany, installed a 10 bbl brewery in an old, bombed out auto body shop building. They intend to focus on mainstream styles like IPA, Kolsch and Pilsner. But they are also developing an interesting barrel program. They aren't selling food in the pub, but there's a food cart-ish scenario out front.

The pub itself is just quaint and charming enough to meet the needs of thirsty beer fans. High ceilings and a clean grubbiness are a reminder of what most craft breweries looked like back in the day, before gobs of money flowed into the industry and places got spiffy and flashy. None of that here, thank the Dog. 

I sampled two beers: Hellcat Imperial Stout is a barrel-aged monster (9.5 percent) brewed with raspberries, then aged in red wine barrels. Interesting beer. I think a bourbon barrel treatment would have added more character, but Hellcat is pretty tasty as is; Saison de La Mancha is fermented with French Saison yeast and lacto, aged in red wine barrels and dry-hopped with Mandarina Bavaria hops. Mildly tart, nicely refreshing. My guess is the beers will be fine here. If you can make boutique styles like these well, your standards should be fine. 

I'm not exactly sure about regular hours. They will evidently have a soft opening for the public on Wednesday, the 12th, from 3:00-10:00 p.m. After that, they're off and running. There's no functioning website at the moment, which leaves the Facebook page if you need information. Hopefully, it will be updated in coming days.  

Brothers Cascadia is a nice example of the breweries that continue to pop up around the country. They identified an underserved area and opened there. As long as they run the business well and don't have visions of grandeur fueled by dreams of regional distribution, they'll be fine. Staying true to local fans will pave their way to success.

Things are looking up in Hazel Dell. Trust me.

Update: As of today, Brothers Cascadia will be open 3:00 p.m. to 10:00 p.m., Wednesday through Monday. They will be closed Tuesdays. 

Tuesday, April 4, 2017

California's Great Train Robbery

My friend (I use the term loosely) Jeff Alworth yesterday posted an article exploring the success of Michelob Ultra. It's a zany story, frankly. Ultra has been knocking it out of the park, showing huge growth over the last few years, though it tastes like carbonated water with a twist of light beer.

Go read Jeff's article if you haven't. He's basically saying the success of Ultra, alongside the continued growth of craft, suggests the old paradigm of craft beer vs light lager has collapsed and that consumers now think only of beer. Some chase flavor, some don't.

In fact, the success of Michelob Ultra reminds me of the success of Kona, which is a big winner for the Craft Brew Alliance in the same way Michelob Ultra is a winner for Anheuser-Busch. It's also true that neither can do enough to overcome the losses of their parents.

A case in point is California, the biggest market in the country. Despite the growth of Ultra, AB lost 10 percent of its volume in California over the past two years. Sales were down 446,000 bbls in 2016 and 386,000 bbls in 2015. AB, which once owned nearly half the California beer market, now controls less than a third of it.

MillerCoors is also taking a shellacking in the Golden State. It lost 10 percent of its volume over the past two years...500,000 bbls. Once a formidable player in California, MC now controls less than 20 percent of the market. And indicators don't look good.

Who's stealing market share? Constellation brands is a big winner, gaining more than 700,000 bbls over the last two years to 4.3 million total bbls. Constellation, which includes Ballast Point, Corona, Modelo and Pacifico, reached 18 percent of market share in California at the end of 2016. It will likely pass MillerCoors this year.

The other big winner in California is other (mostly local and regional) craft, basically anything but Constellation-owned Ballast Point. Other craft was up 20 percent (813,000 bbls) over the last two years and now has a 21.5 share of the market, second only to Anheuser-Busch.

Consider the magnitude of the "great train robbery" that has transpired in California in recent years. Anheuser-Busch and MillerCoors have lost 1.35 million bbls between them while Constellation and other craft gained 1.5 million bbls. These are shocking stats. And there's more.

AB's best selling beer, Bud Light, declined nearly 9 percent to $140 million in IRI last year. Meanwhile, Constellation-owned Modelo Especial grew 20 percent to nearly $138 million. Sometime this year, Modelo Especial will surpass Bud Light as the top selling brand in California.

What we're seeing in California, which accounts for some 15 percent of nationwide IRI, is Constellation gulping up market share with a mix of light and craft beer while craft brewers grow with their unique product. Michelob Ultra fits into a growth niche somehow.

These parallel universes will continue to exist. Craft beer will never conquer the world. Light lager will always have a place because many consumers don't and never will care about flavor profiles or who makes their beer. Some choose light lager because craft beer makes them fat. Indeed, a large segment of consumers will always be content with light beer, though at the moment a lot of folks are moving away from long-established, mainstream brands.

The ongoing implosion in California and elsewhere has Anheuser-Busch and MillerCoors on edge. Huge losses have a way of creating panic. Buying craft brands in hopes of reversing the negative momentum is part of their strategy, and it's working to some extent. But they simply can't replace what they're losing fast enough.

Interesting times. And train robberies.

Saturday, March 25, 2017

Messy Times for the Craft Brew Alliance

Not so long ago, the folks at the Craft Brew Alliance were all smiles. That was back in August, right after they signed an agreement with Anheuser-Busch expanding the relationship and establishing the framework of a sale. The CBA's stock price spiked to over $21 a share. High times.

Fast forward to last week. The smugness is gone. So is the hefty stock price. After a three week delay, the CBA released fourth quarter and full year earnings. The numbers aren't pretty, though there is continued good news for what has become the company's flagship brand, Kona.

Despite that fact that Kona was up bigly for the year, the full CBA portfolio was down 6 percent, declining by nearly 39K bbls. The fourth quarter was particularly unkind, as the brand family was down 13 percent. That sad number occurred partly due to the fact that wholesaler inventories were built out late last year in anticipation of the Portland brewery's temporary closure. And constricted in late 2016 due to slowing craft category growth. Still. Not good.

Kona is essentially dragging the CBA forward. It gained 13 percent (up more than 45K bbls) and reached nearly 400K total bbls in 2016. Based on those numbers, Kona is a top 10 craft brewer, according to one industry publication. It is easily the CBA's largest brand family, more than double the volume of flagging Widmer.

Indeed, the rest of the CBA portfolio appears to be in free fall. Redhook tanked, declining nearly 32 percent to 127K bbls last year, Widmer shipments dropped 15.7 percent to 148K bbls. Over the course of the past two years, Widmer and Redhook have lost 136K bbls. Omission, the CBA's (throwaway) gluten-reduced brand, dropped nearly 17 percent.

Given the stifling collapse of once proud Widmer and Redhook, the CBA doesn't have a lot of options going forward. It will certainly ride Kona's momentum for as long as it can. Part of that strategy relies on its arrangement with Anheuser-Busch, whose distribution network has helped turn Kona into a national and emerging international player.

In a press release, CEO Andy Thomas acknowledged the poor 2016 performance, but emphasized the importance of the agreements with AB and the acceleration of Kona. “Looking forward, we are excited to build on the strength of Kona, which continues to distinguish itself in an increasingly competitive category,” he wrote.

The CBA may not be in as much distress as last year's numbers suggest. Even if you take away Kona, the deal with Anheuser-Busch is going to reap significant benefits on the cost and profit sides of the ledger in coming years. The partnership may actually help insulate the CBA from imminent challenges that will be faced by many if not most large craft breweries.

Nonetheless, the distressing numbers make you wonder about the road ahead. Will the CBA be absorbed by Anheuser-Busch or remain more or less independent? Last summer's agreement, which heavily favors the CBA, makes it financially advantageous for AB to pull the trigger on full purchase sooner than later. (AB currently has about a 33 percent stake in the CBA.)

When I wrote about the situation last summer, I thought a buyout was imminent. At the time, MegaBrew was still being evaluated by the Department of Justice and AB was laying somewhat low. I figured, particularly in light of the escalating costs to AB if they didn't move soon, a buyout would happen sometime in 2017. It might still happen.

I'm guessing the collapse of Redhook and Widmer isn't a huge concern for AB. Those are tired regional brands that don't have the kind of marketing traction AB wants. Kona is the darling. It suggests a lifestyle and a place consumers want to connect with. The national and international growth of the Kona family proves that.

Kona's growing popularity adds a complicated twist to the possibility of a buyout. Anheuser-Busch has little or no interest in the CBA's declining brands. It only truly wants Kona. But the CBA can't reasonably sell Kona by itself because Kona is the only growth engine it has. Without Kona, the CBA may as well not exist.

If I had a crystal ball, I'd know which way this is going to go. I don't. But it's hard to imagine a scenario in which the CBA sells Kona separately. If a sale happens, I think AB buys the CBA as a block entity, then spins off Widmer, Redhook and the other junk brands. The other possibility is there's no sale and the CBA carries on as it is, sucking up to its mentor, Anheuser-Busch.

These are uncertain, messy times in craft beer. You do what you have to.

Friday, March 17, 2017

Belmont Station Preps for 20th Birthday Bash

Portland’s original bottleshop and beer bar is hitting the ripe old age of 20. Nearly drinking age. They’re celebrating with a 20/20 theme…20 days of events for 20 years, April 1-20.

The fun gets started on Saturday, April 1, at the Horse Brass, where Belmont Station got its start in 1997. The Brass will have a collection of special beers on tap when it opens at 11 a.m. Some of those beers will have been made with help from Belmont Station staff. Fancy that.

Guests ought to have a decent buzz going by 1 p.m., when they will march up 45th Street to the current location. There will be several bottle releases and more special beers on tap. The parade will include noisemakers, bubbles, signage and typical parade fare, though no floats.

“Twenty years is a nice milestone,” majority owner Lisa Morrison told me. “Besides being a celebration for patrons, we’re honoring the contributions of people who made and continue to make Belmont Station what it is today. People like Joy Campbell, Don Younger and Carl Singmaster, not to mention our awesome staff, past and present.”

Another featured event, mini-Puckerfest, is set for April 7-9. They’ll be pouring at least eight sour beers at all times during the weekend. A number of special beers from well-known breweries will be released, including one from de Garde called, “The Station.”

“As part of mini-Puckerfest, we’ll be doing another Battle of the Blends competition,” Morrison said. “Two teams made up of Belmont staff produced blends with Cascade Brewing. Patrons will vote on their favorite for the insufferable bragging rights.”

The weekend of April 14-16 is mini-Bigger Badder Blacker fest, featuring a Deschutes night with an Abyss variant, Black Butte 25-28 and a vintage bottle sale, plus other offerings through the weekend from Ninkasi, Fort George and more.

Next up is the annual Samuel Smith's Salute on Tuesday, April 18. Tom Bowers of Merchant du Vin will showcase the iconic brewery and its place in modern craft beer culture. There will be bottles pouring at the bar and Tom will lead the annual Samuel Smith salute during the course of the evening.

The party finishes up on April 20, with Lagunitas tapping Waldo Special Ale at 4:19 p.m. (so it can be in your glass at 4:20). Sixpoint will contribute their Puff to the party (including Puff rolling papers) and Laurelwood will have a special 4/20-themed IPA.

Old-timers will recall that Belmont Station was the only place of its kind when it opened next to the Horse Brass. Campbell and Younger launched the small store largely because Horse Brass patrons kept asking to purchase imported beers and other specialty items. They caved.

“We were just slightly more than an afterthought next to the Horse Brass,” says Chris Ormand, who spent a decade at the Station before joining General Distributing last year. “We sold novelties, specialty food and off-beat videos, most of it imported from the UK. And beer.”

They stocked some 400 bottles in those days. It’s hard to fathom given present circumstances, but each bottle was displayed with a price tag. The actual beer was stored in large walk-in coolers. Customers would jot down a list of what they wanted and give it to the clerk, who would round up the beers.

The beer selection has exploded, obviously. Modern Belmont Station carries some 1,500 beers, ciders and meads in bottles and cans, and also features 23 rotating taps pouring some of the best beer in the city. It’s a Cheers bar for many locals (myself included), as well as a destination for tourists.

“There truly was nothing like Belmont Station when Joy and Don launched it 20 years ago,” Morrison says. “It was a big deal when my business partner, Carl Singmaster, joined as co-owner, moved it to the current location and added the beer bar.”

Belmont Station is generally regarded as the best bottleshop and beer bar in Portland. They were again recognized at the Oregon Beer Awards as our Best Beer Bar and Bottleshop. But Morrison takes the high road.

“I guess we are looked at as setting the standard for what a bottle shop and beer bar should be,” she said. “That’s something we strive for. I like to think we’re respected for our knowledgeable service, our friendly and cozy atmosphere and the fact that we've been consistent through the years.”

Keep in mind that many of the events happening during the 20/20 festival are still being finalized. Check the Belmont Station website for updated details as the celebration gets closer.

Saturday, March 11, 2017

Squeamish Market Breaks Buyout Momentum

Here we are nearly three months into 2017 and not a single notable US craft brewery has been bought by big beer. That's not the scenario many predicted. After several years of intense activity, many expected to see more buyouts this year. Nope. What the hell?

A good part of what's going on can be traced to the dramatic craft slowdown that occurred in mainstream outlets during 2016 and is continuing into 2017. The other day I talked about why the slowdown isn't as serious as the data suggests. That logic still holds.

Indeed, it's clear that craft growth is happening in smaller outlets that aren't tracked by IRI or Nielsen. Beer bars, breweries, taprooms, growler stations and related outlets have multiplied like rabbits in recent years and are stealing a lot of volume from mainstream stores.

And collapsing sales in mainstream grocery and convenience stores are a serious issue for potential craft suitors. Missed sales projections by large and small brands and an imploding category have deal makers like Anheuser-Busch and MillerCoors on edge. They're afraid to pull the trigger.

Fear of a sagging market isn't the only reason checkbooks aren't opening. The big box slowdown means it's now a buyer's market out there. Deals that were being negotiated or contemplated are dead or being reevaluated. Paying too much for something that tanks is a risky career move.

The uncertainty extends to other buyers. Private equity is in the same boat as AB and MC. They see a soft market that looks increasingly risky. Reports suggest some of the more recent private equity acquisitions haven't panned out very well. Craft is no longer an investment darling.

Another bad hombre is debt. The industry is swimming in it. Anheuser-Busch and MillerCoors both have it, thanks largely to MegaBrew. They'd like to pay it down before they take on any more. Brewers have debt problems, too. Many borrowed to finance expansion when things were booming. Now they're stuck. They can't afford to sell at the prices suitors are offering or might offer. Debt is a double-edged sword in a sketchy market.

Consider the case of Speakeasy Brewing, which just closed. They've been around 20 years. They took on debt to expand. But the growth they expected failed to materialize. They were badly over-leveraged and sought capital to keep going. Lenders wouldn't play ball in this market and they were forced to close. This may be a common theme until things stabilize.

As far as the big boys go, they're moving from acquisition to consolidation, focused on the craft brands they have. The High End is putting a lot of effort into getting its beers in grocery sets around the country. That's going to be the status quo for awhile and it's going to impact small brewer access to shelves in large stores and national chains.

The flip-side of that effort is a place like the recently opened Breakside brewpub in Slabtown. Breakside has built a solid reputation with great beers. It distributes fairly widely. But the Dekum pub is tiny and the Milwaukie facility is for production. Breakside wanted a stronger presence in the local market. So it invested a lot on a marquee location that will achieve just that.

My newest (anonymous) industry friend predicts we're moving toward a system that is both hyper-local and hyper-national. He sees the High End and related MC brands eventually dominating national chains, while smaller breweries, like Breakside, dominate local pubs and such. He may be onto something. We shall see.

As for buyouts, don't expect to see many for awhile. The indicators are too negative. Breweries that took on debt expecting high growth or a big buyout are in deep trouble.

Monday, March 6, 2017

About Craft Beer's 'Big Funk'

Craft beer is in a bit of a funk. That subject has been discussed widely, of late, including here. The numbers are quite shocking, honestly. But there may be an explanation that doesn't spell imminent doom for the industry.

It's no secret that 2016 was a shitty year for craft beer. For the first time in a long time, growth lagged badly. That was the theme carried forth by Dan Wandel of IRI in his year-in-review presentation for the Brewers Association. Craft beer growth "slowed suddenly and substantially," Wandel said.

Below are a few gory details from his presentation:
  • Off-premise craft growth, double-digit 2004 to 2015 in supermarkets, dropped to 6.3 percent in 2016. That was better than the beer category as a whole (up about 3 percent), but a fairly alarming decline from recent years.
  • Though every region saw double digit growth in 2015, not one region performed as well in 2016, although the Southeast was close at 9 percent.
  • More than half of the country's top craft brewers lost share in 2016.
  • Seasonals, the second largest craft sub-category after IPA, were down 6.3 percent. They lost 2.3 share points (16.7 percent share of the craft category). Yikes!
  • New brands, which consumers are turning to, helped offset seasonal losses. But if new brands were removed from the numbers, craft would be in modest decline for the year.
  • Things aren't improving in early 2017. Craft velocity in supermarkets is the slowest its been since 2014, the worst slowdown in the history of craft tracking.
There's a lot of speculation as to why we're seeing this apparent collapse. Everyone has an opinion, obviously, and there are bad guys, trolls and whipping boys lurking. I'll get to what I think it is a reasonable explanation momentarily. For now...

Bad hombre #: Marijuana, which is is growing like crazy where it's legal and, some believe, stealing share from beer. Wandel mentioned a survey that suggests legalized marijuana is leading to decreased alcohol consumption and, eventually, a 7 percent decline in beer industry revenue.

Bad hombre #2: Canned wine. Yep. There are now more than 30 varieties of wine available in cans and, per Wandel, they're selling like mad in supermarkets. Millennials apparently love the stuff. The wine hucksters even had the gall to advertise during the Super Bowl.

Bad hombre #3: Turbulence in the industry. Something like half of the top 25 craft breweries have experienced leadership changes over the course of the last two years. Hard to know the specifics of why that's happened, but some think it has destabilized the industry to some degree.

Bad hombre #4: Unsustainable numbers. When craft growth was consistently in the teens, it was up, up and away. But many people figured that kind of growth couldn't last forever. For one, it's tough to keep putting up such numbers once you reach a certain size. It becomes impossible.

As I said, everyone has an opinion. Many in the industry are grasping for answers, desperately wondering why craft beer is in a funk. This is big business, after all, with a lot of money involved. It's easy to understand why everyone demands answers.

I have a hard time buying most of the suggested answers. Marijuana is legal in a handful of states. It's sucking significant share from craft beer? Doubtful. Canned wine? Fine. It's selling. So are spirits. There's competition. Nothing new. Leadership upheaval? Exactly how is that causing sales to bomb? The unsustainable numbers argument is the only one that makes sense.

In fact, craft beer probably isn't in as much trouble as IRI (or Nielsen) stats suggest. Independent craft brewers will face serious challenges in grocery as AB expands its High End brands into new markets and pushes smaller brands out. But that project will take some time.

What's going on is that craft growth is happening outside the view of IRI, which mainly tracks sales in large national chains. More and more beer is being sold directly to consumers in breweries, pubs and taprooms. For the most part, IRI isn't getting a whiff of those numbers.

This altered model is a result of new breweries opening around the country. Local craft beer is more readily available than ever. Consumers who once bought craft beer in supermarkets now have other options. That change is causing an apparent drag on growth due to the way IRI data is collected.

How many more breweries can we support? Who knows? It isn't infinite. I think there's still room for smaller breweries targeting mostly local clientele. Distribution in grocery isn't going to be a viable option for most small breweries due to the power and reach of big beer.

For now, don't get too excited about stories announcing doomsday scenarios for craft beer. Most of those stories are based on data that's hopelessly obsolete. The industry faces challenges, for sure, but those challenges probably aren't quite what they appear to be.

Wednesday, March 1, 2017

Breakside, Younger Steal OBA Show

Breakside Brewing and Don Younger dominated Tuesday evening's Oregon Beer Awards, presented in front of a packed house at Revolution Hall. The industry-centric affair, sponsored by Willamette Week, coincided with the release of the 2017 Beer Guide.

Breakside walked away with 10 medals, including four golds. It won two medals, a bronze and a gold, in the hotly contested IPA category. It's not all that surprising to see Breakside do well.Their beers are well-made and have won medals in a lot of places. But seeing them win 15 percent of the total medals awarded in 22 categories was somewhat shocking.

Jeff Alworth, who is few years younger than me and slightly less of a curmudgeon, speculates in his event recap that Breakside winning so many medals is a little awkward. It's awkward because Breakside's head brewer, Ben Edmunds, organizes the OBA judging. Yup.

In fact, it would be pretty impossible to mess with the tasting results. Beers are numbered and tasted blind. Numbers become names when the winners are chosen. Ben would have to be pretty shifty to alter the outcomes. Also pretty dishonest. I can't see it. Claims of impropriety remind me of an NFL pool I ran for many years with a friend. Whenever we won money, people complained that we were fixing the results. That was quite impossible. I had no power to modify picks or results. Such is the case with Ben Edmunds and Breakside. It just looks awkward.

Don Younger, who passed away in 2011, was honored for Lifetime Achievement. Younger, you will recall, was owner of the Horse Brass. Very early on, the Old Tavern Rat became a passionate advocate for Oregon craft beer. His energy and promotional ideas helped make Portland what it is. He is one of a handful of local icons who essentially launched the craft beer industry here.

Organizers showed a wonderful video, created by Lucas Chemotti and Ezra Johnson-Greenough. It featured comments from folks who knew Younger well...Jerry Fechter (Lompoc Brewing), Karl Ockert (founding brewer at Bridgeport Brewing), John Foyston (Oregonian for many years), Carl Singmaster (Belmont Station), Fred Bowman (co-founder of Portland Brewing) and others. It was a fabulous tribute. Follow the link above if you haven't seen the video.

With respect to the results, I'm not going to pile on and post them here. No point. You can chase them down in a variety of places, including here. There are always surprises. That's what happens when beers are judged anonymously. Some beers that are well-regarded don't do well. Some that aren't regarded at all do. That was definitely the case this year, as it was last year, the first time blind judging was used.

The event itself has grown in popularity, complete with red carpet interviews. This was the second year at Revolution Hall and it sold out for the first time. That led to some issues with folks entering the venue. I arrived fairly early and waited only a few minutes to get in. Folks who showed up later, like Jeff, got stuck in long lines and were not happy.

Organizers actually anticipated problems herding people through the door, having experienced it last year, They made a concerted effort to shepherd people into the venue via multiple lines. Somehow, it didn't work out. For some reason, Portlanders accustomed to waiting in single file lines (possibly for rare specialty beer) wanted to enter the venue that way. Doh!

Once inside, there seemed to be ample seating in the theater. I sat in the balcony area and enjoyed panoramic views. There were the usual lines for beer. Hey, these are pro drinkers. What did you expect? They didn't mess with food this year, avoiding last year's free-for-all fiasco. If you wanted or needed to eat, there was a food truck parked outside. Problem solved.

After last year's event, which packed the venue about as tight as it was Tuesday night, I wondered if organizers might consider moving to a larger venue. They're kinda stuck. They need something larger than Revolution Hall, but smaller than the Schnitz. There isn't much in-between that would work for them, I'm told. That will force them to figure out how to make Revolution Hall work.

Speaking of Revolution Hall, everyone knows the building originally housed Washington High School, right? Sitting upstairs gave me the opportunity to snoop around while sipping a beer. There's some amazing history on display in the trophy/memento cases. That part of Revolution Hall is worth a look if you're into that sort of thing. Very cool surprise.

My thanks once again to Martin Cizmar and Willamette Week, for asking me to be part of OBA judging and the 2017 Beer Guide. Special thanks to Steph Barnhart, Ezra Johnson-Greenough, Ben Edmunds and the countless volunteers (you know who you are) without whom this event would not happen. I hope to see you next year.

Sunday, February 26, 2017

Why Beer Won't Go the Way of Music

Forty years ago this month, I began what would end up being a seven year stint in the record business. I was in college when I started and it was the first long-term job I'd had. It was part-time for several years, then mostly full-time for the last three or so years.

Music was a commodity in those days. There was no iTunes or Amazon from which to buy music. There was no Spotify or Pandora. If you wanted a song or album, you went to the record store and bought it. Unless maybe you could borrow it from a friend to record.

In fact, record stores in those days were a lot like bottleshops. We catered to folks who enjoyed listening to music and had to buy a record or tape to do so. Today's bottleshops cater to folks who enjoy beer, which they have to physically buy and drink. Beer is very much an analog product.

I got that job at Budget Tapes & Records mainly because I spent too much time and money on records. The owner had stores in two cities and got used to seeing me in both. That's because I went to school in one city and lived in the other during summers and breaks. I never applied for a job. He asked me to work for him because he needed occasional part-time help in both stores.

The owner, Mike, was a crusty fellow. I came to like him, but a lot of store patrons didn't. Vinyl records in those days often had flaws that would cause skips. Mike loved to challenge and badger customers who felt they had purchased defective product. It wasn't a pretty sight. His nickname among local businesses was, "Bad." Not ideal.

On the other hand, Mike could be quite a character. He drove a fancy GMC van when I worked for him. One day he asked me what was different about his van. I couldn't say, didn't notice anything. It turned out he had gotten the GMC logo (in several places) changed to MCG, his initials. That to me was always funny.

He became a rabid basketball fan and developed a friendship with George Raveling, then the basketball coach at Washington State. Raveling would come into the store looking for rare stuff. We'd scurry to find it, which often meant special ordering it. We also curated the music played during pre-game warm-ups at home games.

Selling records and tapes was mostly a good gig. Ordering and inventory control was painful without computers, but selling was fun. If you've seen the documentary on Tower Records, you know how wild the business was during those years. The money, booze and drugs flowed.

Mike's life jumped the tracks at some point in the late seventies. He had opened a third store by that time. Soon he was divorced and candying up his nose. The pitfalls of rapid success, I guess. Several years later, he was arrested for running coke and wound up doing a stint in prison.

Around that time the record business was transitioning to digital. Compact Discs cost several times as much as vinyl in those days. Many small stores didn't have the money to play that game. Mike's stores eventually folded or were sold. Stores that survived the transition generally enjoyed good times through the nineties, as consumers converted collections to CD.

Of course, it would all come tumbling down. For all its promise, digital turned out to be box office poison for the record industry. Consumers, miffed for years by high prices, happily discovered CDs could be converted to compressed files and easily shared. The industry, long dependent on selling a commodity, collapsed.

A similar outcome isn't likely with beer, which can't be digitized. Beer will remain a commodity until someone figures out how to reduce it to a pill or computer file. That probably won't happen anytime soon, good news for the owners of beer bars and for people who like to drink beer.

Closing the loop on my story, I recently learned that my old friend and boss passed away several years ago. He had straightened up, evidently, and drove a bus for the local transit system for years. I can easily picture him driving a bus around and chatting with riders. He had the gift of gab.

We shared good times and plenty of shitty beers. Thanks for the indelible memories, Mr. Gaede.

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.

Sunday, January 1, 2017

The Sketchy Beer Year Ahead

We can all agree that 2016 was a tough year. That was particularly true in the entertainment world, where we lost a number of high profile folks. You know who they are. It's also been a tough year for craft beer. I've talked about that in several posts and it's been talked about by others.

Recent reports suggest the slowdown we saw for most of the year continued into the holiday season. Volume growth continued its downward spiral. There was very little good news in the beverage industry as a whole, and beer is obviously part of that.

Everyone in the know wonders if the trends will continue into 2017. That would be fairly bad news for a lot of brewers, but especially for those who hope to score big via distribution. I continue to believe brewpubs and smaller breweries that serve local clienteles will mostly be fine. Retail distribution is another matter.

Softening Market
Now that Anheuser-Busch's merger with SABMiller is complete, many believe brewery acquisitions will slow. Or stop. Heightened DOJ scrutiny is part of that logic. There are also those who think AB and MillerCoors have carved out geographic territory and will now go about the business of building those brands out.

My view is that there will almost certainly be additional acquisitions. DOJ isn't going to be much of a drag on deals. They already waved through a buyout that happened as Mega Brew was being finalized. In the loosened regulatory schematic of the Trump era, it seems unlikely that DOJ is going to be active in blocking mergers and buyouts.

Another factor is overall market weakness. As recently noted here, craft dollar growth dropped dramatically in 2016. It is now barely ahead of volume growth. That means much of the volume growth we are seeing is the result of discounting. The growing popularity of cheaper imports is more evidence that craft beer is hitting a wall on price.

What does that mean? In an overcrowded, increasingly competitive marketplace, breweries that counted on double digit growth and easy profits are vulnerable. They will struggle to make it in a soft, discount-driven market, and be more likely to sell to big beer or private equity. Not all who want to sell will be good targets, so I suspect we'll see closures increase in 2017.

Brewery closures, if they happen, will have an impact similar to the housing market crash a few years back. All of a sudden, we may see breweries (and brewing equipment) available for pennies on dollar of initial investment. That's not good news for the equipment market. We certainly don't want that to happen, but it may be the logical result of an overheated, bloated market.

There is relative safety, if not independence, in selling out. That was surely part of what motivated the folks who sold out to big beer in recent years. If you want to insulate yourself in an overcrowded market, partnering with the deep pockets of big beer isn't a bad idea. Those who sold may have been among the first to see the prospect of oversupply, overpricing and a softening market.

Other Concerns
Despite the probability of more buyouts and consolidation, there are other serious concerns out there. On the distribution side, Anheuser-Busch has been buying up distributors much faster than craft brands in recent years. The ongoing plan is to leverage the power of distribution in every way possible.

That means cutthroat pricing of AB-owned High End brands via AB branch distributors. That type of vertical integration is actually illegal in some states. Where it is legal, like Oregon, the idea is to undercut independent craft brewers and gain access to tap handles and shelf space. It's not a bad strategy in a market where rising prices are a concern. Worry.

There's also the brewpub angle. Reports say AB intends to greatly expand its brewpub portfolio in 2017. We've already seen this with 10 Barrel, which now operates pubs in several cities. Word is, AB plans to take Goose Island national and international. The big idea is to compete with independents and build credibility in key markets everywhere.

What of the IPA craze? Craft's most popular style shows really no signs of slowing down. The downside of that fixation is it has overflowed into other styles, which have gotten hoppier. That's the result of brewers chasing consumer tastes. It's gotten tough to find beers that aren't hoppy.

Now comes news that non-craft IPAs (Goose Island, among others) saw stupendous sales growth last year. Some of that is undoubtedly the result of distribution reach and leveraged pricing. That tactic on the part of big beer will surely escalate. To maintain their edge, independent brewers are finding new ways to differentiate their beers, leading to wilder interpretations of the style.

Specialty beers are a final area of interest. High-priced, specialty beers have attracted a huge following in recent years among geeks, a crowd that has shown a willingness to pay exorbitant prices for a rare experience. Brewers pander to that crowd because it's easy money. Will it continue? Undoubtedly. These beers seem pretty immune to price pressures for now.

Whatever happens, it's sure to be a wild year ahead. Get ready.