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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.

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