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Sunday, October 28, 2018

Rogue Changes Horses as National Stature FIzzles

The news that Brett Joyce will step down as president of Rogue Ales & Spirits after nearly 11 years at the helm was greeted with surprise in beer circles. Maybe it shouldn't have been. Rogue has been spiraling downward for several years. Is new leadership the answer?

Exploring alternative narratives, Beer Business Daily asked Joyce if there was a lurking scandal or #metoo situation behind his decision. He assured them that is not the case. Inquiring minds may fairly wonder why the question was asked in the first place. You wonder.

Current general manager Dharma Tamm, will assume the top leadership role in January. The 31-year-old joined Rogue in January 2017. He's a Stanford grad (engineering and German) and worked in the ABI High End for seven years before joining Rogue.

Joyce, who will stay involved as owner and board member, says the transition has been in the works for some time, that it's just time for him to step aside. Given Rogue's apparent trajectory, no one's arguing. But handing over the controls to someone who's been with the organization for less than two years has raised eyebrows.

Looking back, you will recall that Rogue was launched by the late Jack Joyce (Brett's dad) and some fellow Nike execs in 1988. Rogue formulated a uncommon game plan from the start, initiating a national sales strategy. It has sold the bulk of its beer outside Oregon for years.

The national strategy was successful for several reasons. First, being in 50 states was genius when consumers didn't have a lot of beer choices. Second, Rogue beer was nicely packaged and sold at a premium price. Those factors helped Rogue carve out a wildly successful niche.

Of course, the national strategy is now unraveling. The flood of new breweries over the course of the last decade has brought local beer to communities that once only had access to national and regional brands. Rogue is one of the victims, but not the only one. The pain is being felt widely.

According to Brewbound, Rogue's overall production peaked at 117,000 barrels in 2014. Numbers have declined each year since, as a tsunami of new craft breweries opened. Rogue's overall sales volume declined to 98,000 barrels in 2017, and 2018 is likely to show additional losses.

The situation in Oregon is much better. Rogue has a small collection of pubs that help counterbalance declining retail sales. If you believe OLCC stats, Rogue's numbers have been relatively stable in recent years. Volume peaked in 2016, but has stayed pretty constant. It looks like they are on track to produce and sell more than 15,000 barrels this year.

So the challenge Tamm inherits is definitely a national one. Rogue isn't just competing with the thousands of small breweries that have opened. Big beer, mainly the AB High End, has dramatically increased its retail footprint over the past 5-10 years, putting the squeeze on Rogue and other regional and national brands in the grocery and convenience channels.

The spin pushed by Tamm and Joyce is that Rogue is a diversified brand. As noted, they do have a small number of pubs. Perhaps more importantly, they have an evolving spirits business, which is a good place to be given the growing popularity of hard liquor among younger drinkers.

Nonetheless, the odds of Rogue regaining its national stature appear to be long. That has nothing to do with Tamm, who may turn out to be perfectly fine in an industry where millennial drinkers (his age) are the primary target. The marketplace has simply moved on from Rogue's approach.

As Rogue's national numbers continue to slide, the prediction here, suggested by a well-placed and reliable industry informant, is that Joyce will either return or bring in another wild card to pick up the pieces in a couple of years. We shall see.

Tuesday, October 23, 2018

Bill Coors and Oregon's Brewpub Bill

When Bill Coors passed away last week, there was an outpouring of sympathy around the beer industry. The dude was 102 and lived a long life, which included an incredible four decades as the head of Coors Brewing. We are unlikely to see Bill's equal anytime soon.

Maybe that's good news. As Jeff Alworth outlined yesterday, this guy was much more than a bold entrepreneur who introduced the aluminum can and transformed Coors into a national brand. Bill Coors was a racist who held unpopular views on organized labor, women's rights and more.

It's largely forgotten, but Coors' politics nearly derailed Oregon's Brewpub legislation in 1985. The story is briefly documented in Portland Beer and has been retold in various places since the book was published in 2013.

Briefly, Portland's founding brewers were attempting to change the law so they could sell beer directly to patrons in a pub setting. At the time, breweries (only Widmer and Bridgeport were open) could only sell their beer in taverns, bars and restaurants.

That situation was a carryover from the end of Prohibition in 1933. Breweries were prime targets for punitive laws because they had owned saloons, distributors and retailers in the bad old days. Corruption was rampant. When Prohibition ended, states were charged with establishing laws to ensure that scenario didn’t repeat itself.

Oregon’s three-tier system, similar to many states, required breweries to sell their wares to taverns, bars and retailers through independent distributors. Or they could sell directly to those outlets, a time-consuming and logistically awkward proposition.

The founding brewers, including the Widmers, Dick and Nancy Ponzi and Karl Ockert (Bridgeport), Mike and Brian McMenamin, and the gents who would launch Portland Brewing, figured brewpubs would be the key to their success. They were working to get the appropriate legislation passed.

At the same time, Coors was trying to tap the Oregon market. For decades, its beer had been available in a limited number of states, creating a sort of cult-like status, as depicted in the movie, Smokey and the Bandit. By 1985, Coors was distributed in 43 states, but it wanted to be in all 50.

Coors ran into a snag: Oregon had a 50-year-old statute forbidding the sale of unpasteurized beer, which was officially considered unhealthy. Coors beer was cold filtered, not pasteurized. Ironically, Oregon’s goofy pasteurization law applied only to packaged beer sold in stores. Taverns, bars and restaurants were free to sell unpasteurized beer in any form.

Given that virtually all draft (and craft) beer is unpasteurized, Oregon's crazy law seems pretty comical in retrospect. Nonetheless, it was the law. In fact, Coors was selling its beer in some Oregon bars and restaurants by 1984, hoping to demonstrate the hypocrisy of the law.

The pasteurization law became a dynamic issue in 1985 largely due to Coors' politics. Under the leadership of Bill Coors, the company abused workers and was belligerently anti-union. Some of his racist, homophobic remarks were quoted in the New York Times and other newspapers. Coors was not very popular in Oregon.

That was bad timing for the folks pursuing brewpub legislation because their effort got entangled with Coors' effort to fully enter the Oregon market. Senate Bill 45 combined language allowing brewpubs and Coors in Oregon. That bill passed the House 45-14 in early June and was expected to be passed by the Senate.

It didn't happen. Several key members of the Senate still objected to Coors in Oregon. They were willing to use the pasteurization law to keep Coors out of Oregon because they didn't like its politics. The measure was defeated 16-14. Brewpubs were the unfortunate victim.

When I was interviewing the founding brewers for Portland Beer, they all thought the brewpub legislation had passed in the same bill that allowed Coors into Oregon. Not quite.

As it turned out, an ally of the brewpub legislation, Rep. Verner Anderson of Roseburg, had inserted the brewpub language into SB 813, which addressed the granting of liquor licenses to bed and breakfast establishments. In effect, there were two separate bills with the brewpub language in the legislative pipeline by early June. SB 45 failed.

Since the brewpub language was amended to SB 813 after it had already cleared both the House and Senate, it need only go through Conference Committee for review. In a five-minute meeting on the afternoon of June 17, the bill was unanimously approved. It headed to Governor Vic Atiyeh’s desk, where he signed it into law on July 13.

No thanks to the politics of Bill Coors, brewpubs became legal in Oregon. McMenamins launched the state's first brewpub a few months later. They would eventually help fuel a revolution in how Oregonians think about and consume beer, a revolution that continues to this day.

What happened to Coors? Although it looked like Coors would once again be banned from Oregon stores, events intervened. In Portland, Circuit Court Judge Bill Snouffer ruled the state’s goofy pasteurization law unconstitutional on June 12. He found that “neither the safety nor the health of the people of the state is jeopardized by the consumption of unpasteurized beer.”

This ruling came down hours after the Senate voted down SB 45. No one was quite sure what would happen next. Some wondered if the OLCC would appeal Snouffer’s ruling. Didn’t happen. In the end, the legislature passed SB 50, a rewritten bill allowing Coors into Oregon, on June 19.

Coors soon became available in stores around the state, for better or for worse.

Sunday, October 14, 2018

Cicerone and the Search for Off-Flavors in Beer

Having judged in competitions several times in recent years, I've always been interested to hear what brewers and experienced homebrewers say about beers. In a lot of cases, they would talk about things I was tasting, but didn't necessarily know how to describe.

That led me to think it might be useful to get some formal training on how to detect and describe flaws and off-flavors. A few weeks ago, I found out about a Cicerone Off-Flavor class that was being held in Portland. Viola.

For the record, I'm not seeking any kind of Cicerone certification. I think the value of those certifications depends on where you are in your career and your intentions. I'm not in the beer industry, likely won't ever be part of the industry. I'm also not a decorated homebrewer (when I was brewing, my beers were often infected). The Off-Flavor class was strictly an educational junket for me.

The class, which was held at Ex Novo Brewing in Portland, was small...12 people. The gent who facilitated the class, Bobby Wood, travels around the Northwest teaching classes and doing other things related to the Cicerone program. It's a tough job, but someone has to do it. He told me via email that classes vary in size:
Depending on the market, off flavor courses can sometimes have up to 40 or so attendees, especially if the course is being held in conjunction with a major industry event, though attendance can sometimes be difficult to predict.
I expected to see industry-connected folks at the class. Sure enough, I was the only one from outside the industry. The rest were bartenders, servers, brewers and brewery reps. Wood verified that attendees run the gamut from beer aficionados to homebrewers to service staff and sales reps.

There were no quickie intros, which was too bad because I was curious to know why people were there. Some were evidently there simply to improve their ability to detect and identify flaws. Others were getting ready to take a Cicerone test and the Off-Flavor class was part of the prep.

The format is pretty simple. When you sit down, there are seven small glasses in front of you. One is a control beer. The other six are the control beer spiked with chemicals that induce common off-flavors DMS, Diacetyl, Acetaldehyde, Trans-2-Nonenal, Lightstruck (Skunky) and Infection.

There's a certain technique to tasting that I wasn't fully familiar with. The spiked samples, Wood noted, presented more robust flaws than we are likely to find in the wild. Still, some of these flaws are more difficult to detect than others and proper tasting approach is helpful.

By far the easiest flaw to detect, at least for me, is Lightstruck, which can happen to a beer in a matter of minutes when it is exposed to the right (or wrong) kind of light. Trans-2 is another easy one, featuring a dry mouthfeel and papery flavor. The others are more nuanced. Palates vary.

We also talked about how flaws occur. The most instructive point here is that flaws don't always emanate in the brewery. Beer can be damaged by inappropriate handling, dirty tap lines, poor packaging, etc. This isn't exactly breaking news, but it's important to recognize that flaws in beer are sometimes caused by things that happen after it leaves the brewery.

The basic Off-Flavor class runs just over an hour and costs $49. I thought that was a decent value because I think it's useful to hear what others who taste and evaluate beer have to say. However, you can purchase a kit to do this tasting as an independent group in a private setting.

Several people have asked when the Off-Flavor class will be offered again in Portland. I have no idea. Wood told me they typically offer the course here quarterly, but that depends on demand and attendance history. Navigate to the Cicerone Off-Flavor page for upcoming sites and dates.

The value of the class will depend largely on what you're looking for. There are several layers of Off-Flavor courses, this one being the most basic. I thought it was time and money well-spent. But opinions will certainly vary.

Monday, October 1, 2018

Cashing in on Oregon's Bottle Bill

As a lifelong supporter of recycling, I've always returned my empties. I was a big proponent of the BottleDrop redemption centers when they started showing up a few years ago. Instead of returning empties to my bottleshop or grocery store, I could drop bags off every few weeks.

The notion that the BottleDrop concept might be part of a money grab didn't occur to me. Recent experiences there led me to take a deeper look at what's going on. Sure enough, BottleDrop centers are part of a giant money making scheme.

Oregon's Bottle Bill, you may recall, came to fruition in in 1971. It was the first of its kind in the country. The idea was that putting a nickel deposit on beer and soda containers would reduce what was then considered to be a growing litter problem.

The law has been updated several times, most recently in 2011, when it was expanded to include all drink containers except wine, liquor and milk as of 2018. More importantly, returns would mostly move away from large grocery stores to BottleDrop redemption centers.

If your Fred Meyer, for example, is located within 2 miles of a redemption center, they don't have to take empties. If your Freddy's is within the 2-mile limit, the store can still decline to take empties if it's willing to pay a $200 fine per day. My Fred Meyer is apparently doing just that.

Of course, it's been common knowledge for decades that grocers and distributors hate the headaches attached to redeeming empties. The smell and the mess come to mind. Grocers also don't like the extra staffing required to count empties or keep machines functioning.

By 2011, grocers and distributors realized recycling proponents would succeed in expanding the list of containers requiring a deposit. The 2011 Bottle Bill update was a compromise supported by grocers, distributors and recycling advocates. It included establishment of the BottleDrop redemption centers, as well as language requiring the container deposit to increase to 10 cents if the rate of return dropped below 80 percent and stayed there for two years.

At this point, it pays to know how Oregon's redemption system works. You might think it's managed by the state. Not so. When a retailer buys product to put on store shelves, the distributor is paid for the drinks, including deposits on the containers. When a customer returns the container to the store or a BottleDrop redemption center, the deposit is returned.

The rub is that something like 35 percent of the containers (600 million in 2015) eligible for return aren't returned. Some wind up in the garbage. Some wind up in curbside recycling. When that happens, distributors, not the retailer or the state, keep the cash. A lot cash...about $30 million in 2015 according to a 2017 Willamette Week story.

Some were concerned about the potential increase to 10 cents when the 2011 update was being configured. They saw it as a windfall for distributors. Return rates at 5 cents had been dropping, prompting the fear that 10 cents would happen. Distributors pushed the idea that return rates would improve thanks to the BottleDrop centers and that the 10 cent deposit would never happen.

Of course, we now know that was bad advice. In July of 2016, the OLCC announced that the redemption rate had dropped below 80 percent for two consecutive years. The 10 cent deposit on containers went into effect in April 2017.

That led to charges that distributors knew all along the deposit would increase. Slow execution was probably part of the problem. Distributors agreed to build 45 BottleDrop centers as part of the 2011 compromise. By my count, there are fewer than 25 of them today. Distributors say they're behind because locating and implementing redemption centers got too expensive. Food for thought.

For a while, I wondered why BottleDrop centers are always such a gross mess. I wondered why I regularly find machines not working and see long lines of folks waiting to return containers. I wondered why these places routinely appear to be drastically understaffed. I wondered about some of the quirky rules they have in play. But now I get it.

The fact is, distributors have a financial disincentive to keep BottleDrop locations clean, well-staffed and running smoothly. With the 10 cent deposit and the expanded list of eligible returnables, the $30 million windfall they got in 2015 has likely doubled..or increased significantly, at least.

Distributors big and small are no enemies of mine. They have an important job to do. But if we want Oregon's redemption system to be run efficiently, maybe the best approach would be to have it run by an entity that doesn't directly benefit by it not being operated efficiently.