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Friday, March 27, 2020

The Pandemic and Beyond

The past two weeks have been catastrophic for the American economy. Millions of jobs have been lost, at least for the duration of the coronavirus pandemic. We don't yet know when the economy will reopen. But there's a good chance it will never be quite the same.

Craft beer has, of course, been hard hit by social distancing and shelter in place directives. The closure of bars and pubs has sent owners and employees scrambling. I'm not sure how many people have been laid off in the Oregon beer industry. It's a big number.

Many of those people had jobs in pubs, bars, taprooms, etc. Deschutes laid off 300; McMenamin's 3,500. Anyone who follows the industry knows someone who was laid off or had their hours and/or pay reduced. Or maybe they weren't paid on schedule for work already done, as in the case of Brandon Easley and laid off McMenamin's employees. The money simply isn't flowing as it was a few weeks ago.

I've seen people whining about the layoff numbers. What were these companies supposed to do? If the United States had job saving programs like some European countries, people might have stayed in jobs, albeit with not much to do. Instead, they're collecting unemployment benefits. At least being laid off allowed for that.

I suspect the layoffs aren't over. On-premise sales are flat, something we haven't seen since Prohibition. Many breweries are holding onto production staff to keep packaged beer flowing into distribution channels, or to sell on a to-go or delivery basis. But these are stopgap measures designed to keep places afloat, not a shift in how they hope to generate profits going forward.

As much as everyone is hoping for a fast recovery, it seems unlikely with the economy at large or craft beer. It's become obvious as we've stumbled through the pandemic that American small businesses are leveraged and lack the reserves to weather economic jolts as severe as this one. They need a steady flow of inbound cash to stay viable and it isn't there.

Craft beer has its own problems. There are too many breweries and markets are saturated in many areas. A colleague told me he believes 20 percent of American craft breweries will fail as a result of the pandemic...roughly 1,600 breweries. I think that estimate is low. The pandemic is going to accentuate overcrowding and saturation issues, accelerating the failure rate.

We don't know when the social distancing and shelter in place directives will end. That's probably a month or two away. When they do end, everyone will start to dig out. As breweries ramp up production, they won't be doing so for a full complement of patrons. Why? Because people aren't going to immediately have disposable cash. This epidemic is an economic calamity.

Habits and attitudes are also going to be altered, just as they were by 9/11 and the Great Recession. How long will it take for confidence to return? When will people feel comfortable in group gatherings? Even when they can afford to do so, when will they flock back to bars, pubs and taprooms? My guess is that's going to take some time.

In fact, it's difficult to imagine what the post-pandemic economy looks like. We won't truly begin to assess the event's downstream impact until we reach the other side. But it's going to be a tough slog for everyone when restrictions end. And craft beer is far from immune to that reality.

All anyone can do is make the best of things and hope for better days.



Friday, February 14, 2020

Grains of Wrath to Open in Former Side Bar Space

Grains of Wrath is coming to Portland. Naturally, this isn't the first place you're hearing about that. It was splashed across social media and various beer sites after the press release hit inboxes Wednesday. But there's more to the story than most realize.

Camas Patio
As almost everyone knows, Grains of Wrath (GoW) has been operating in downtown Camas for about two years. The business there has been an unqualified success, attracting patrons from all around. It's packed during peak hours, often busy in between.

Brewmaster Mike Hunsaker established a solid reputation in Portland via his time at Fat Heads. Hunsaker is surely best-known for his IPAs, but he has extensive brewing chops. He's won a number of awards at GoW, including medals for his Vienna Lager at GABF in 2018 and 2019. Hunsaker's beers are good enough that people cross the bridge to enjoy them.

Wednesday's press release announced plans to open on North Williams. I assumed that meant they would be taking over the old 5th Quadrant space. That was based on the fact that GoW operates a highly successful pub business in Camas and would be replicating that model here.

Not the case.

In fact, GoW will occupy only the relatively small space that was previously Lompoc's Side Bar. The place, expected to open this spring, will comprise a brewery and some 50 seats. It'll be a 21 and over establishment that features Hunsaker's beer, light food, liquor, wine and cider.

"The expansion is limited by design," co-owner and general manager Brendan Greenen told me via email. "We like the retail aspect of a taproom, but don't have a lot of interest in another restaurant unless it's the perfect storm of location and opportunity. We have a large restaurant as it is, and intend to keep that as our home base for now."

The Team (courtesy Grains of Wrath)
There's more to unpack. Greenen and partners, Hunsaker, Shawn Parker and Brendan Ford, see a lot of great restaurants in the North Williams area. They don't really want or need to compete with those places. Instead, they feel like they can supplement the texture or the area with a focus on great beer, liquor and limited food.

"The 21+ focus is really just a factor of the tiny space," Greenen said. "What we've seen in our Camas location, especially during the summer with our large patio, is that kids get restless and want to get up and move around. In a large space like our brewpub, that’s generally not an issue. In a small space like in PDX, it would present multiple issues."

They aren't exactly sure what 'light food" means. Part of the problem, as they renovate the recently leased spaced, is figuring out where to put the food prep area. And what to offer in a limited menu.

"We're still kind of fleshing the menu ideas out," Greenen said. "We're looking at a couple of spots within the leased space to figure out where it would be best to place that part of our operation."

They're leaning toward a quality sausage/meat/small plate menu in which they would partner with  local purveyors to have quality product, yet a small menu. The reason they want food is they want to be able to offer liquor to customers, in addition to beer, wine and cider. Makes sense.

So what we'll have is a Grains of Wrath outpost in the old Side Bar space. They hope to launch the brewing part of the operation there by late summer. Until then, all of the beer will come from Camas. That hardly matters. Hunsaker's beers have fans. When GoW builds it, people will come.



Tuesday, February 4, 2020

At pFriem, Business Symmetry Drives Success

The business of America is business. Cool Calvin Coolidge said something like that nearly a century ago. It was in the middle of Prohibition. He certainly wasn't thinking about beer. But the folks who formed pFriem Family Brewers have taken that notion to heart.

Head brewer Gavin Lord in the new warm room.
A group of media nerds had the pleasure of touring pFriem's soon-to-be open production facility in Cascade Locks over the weekend. The new facility is a crucial cog in the strategic plan that the pFriem brain trust has articulated. Without it, they would be unable to support growth moving forward.

Since it opened in 2012, pFriem has been in an almost constant state of expansion. The Hood River headquarters houses the original 15-barrel brewhouse and they've increased the size of the space several times. This is where they produce the widely popular IPA and Pilsner, the various seasonals, as well as the barrel-aged stuff.

In fact, everything has been produced in Hood River. Last year, that meant something like 140 different beers, all told. Limited space in Hood River has caused logistical challenges. Producing barrel-aged product is a time consuming, space hogging process. Keeping kegs, bottles and cans of the most popular styles requires production and packaging space. Then you need space to store kegs, bottles, cans, grain, hops, as well as product that is conditioning or ready to ship.

For the past several years, pFriem has been leasing space where it stores some the materials it uses in the production and packaging process. They've been forced to navigate logistical hoops involving material storage, as well as warm room conditioning and cold storage in Hood River. It's been a drag on progress and something needed to be done.

Like everything else they do, the 22,000 square foot facility in Cascade Locks was not planned in haste. They started thinking about it three years ago. The idea was that it should be big enough to meet their needs for 4-5 years once open. Besides being obsessed with quality, these guys are meticulous planners. They're well aware of the slowing that's going on in craft beer, also aware that their own numbers continue to grow.

Union Local 541 box
Perusing the new facility, I tracked down founding partner, Rudy Kellner. I asked him if they think the place is big enough to support pFriem's upward trajectory. I asked because I've seen how fast places like this fill up when a brewery is in high growth mode. He told me the facility is actually a bit bigger than they originally envisioned and they feel comfortable. It figures.

They're playing it safe, obviously, knowing full well that it's better to have space you don't need than to need space you don't have. If it winds up being too small in a few years, there's a readily available and buildable lot next door, Kellner said. No stone left unturned.

The new facility will soon house the entire barrel program. There's room for hundreds of barrels and brewers will be able to access and move them fairly easily. A significantly larger warm room (than what they have in Hood River) has garage doors on a long side so stacks of packaged product can be efficiently moved as needed. Ample cold storage, space to stage empty packaging materials and ingredients, as well as a designated Coolship room, complete the picture.


They put a lot of thought into this place. There won't be an official tasting room or pub in Cascade Locks, though they will host an unknown number of special events in an open area near the barrel stacks. I don't know what the area around the facility is going to look like, but it may lend itself to small outdoor fests down the road.

Up until now, pFriem's barrel program has been rumbling along in cramped quarters. The space in Hood River was insufficient to support the robust innovation and production goals of that program. The Cascade Locks facility changes the game completely, allowing for the efficient production of a high value product that's a small, but important part of the business.

Fans who want to tap into those beers may be interested in pFriemsters Union Local 541, which pFriem launched last summer. The club was initially available only to Founding Members, but there are a limited number of spots are available to new members in 2020. Members receive regular allocations of rare pFriem beer, exclusive merchandise, VIP access to events and more. Hubba.

With the space-intensive barrel program gone from Hood River, pFriem will undertake a renovation and expansion program there. The 15-barrel setup will carry on, to be used mainly for smaller batch beers. They'll install a new state-of-the-art brewhouse that's roughly three times the size of the original, which is where the high volume beers will be brewed. Plus, a canning line.

Indeed, the introduction of Pilsner and IPA in cans last year was and is a gigantic home run. Cans account for about a third of of total sales, and helped grow brewing volume by 50 percent in 2019. Although IPA edges Pilsner in can sales, Pilsner is pFriem's best selling beer, a development they would never have predicted back in 2012. They are evidently looking at putting additional styles in cans once the new brewery ramps up.


But beer isn't the only focus at pFriem. Their desire to evolve and expand food offerings at their pub has been thwarted somewhat by the limited size of the kitchen there. That's going to change. The pub will close for several days (Feb. 18-21) to facilitate a kitchen remodel that will grant head chef Justin Congdon and his staff space needed to upgrade their program. The pub will reopen on Feb. 22, just in time for Zwickelmania 2020.

It's worth mentioning that the Ports of Hood River and Cascade Locks have embraced and supported pFriem's mission. Beer is manufacturing and the Gorge welcomes those jobs, as well as businesses that attract year-round clientele from Portland and beyond. The success of pFriem has confirmed the strategic faith the Port of Hood River had in them from the start.

There's an instructive note here. As I've said before, pFriem appears to do a lot of things well. In a maturing industry that is increasingly crowded and competitive, it continues to flourish. There's nothing easy or lucky about it. Lots of places have appeared on the scene in recent years. Some have made good beer. Few have been able to maintain their integrity with scaled growth.

In effect, pFriem is showing us what a successful contemporary craft brewery looks like. They plan and manage for success. The co-founding team of Josh Pfriem, Ken Whiteman and Kellner has navigated a steep growth curve in a challenging industry while maintaining core values of innovation, quality and employee growth. The art of business symmetry.