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Tuesday, May 31, 2016

Hot Summer in the City at Anheuser-Busch

Memorial Day traditionally marks the beginning of the lurch toward the coming dog days of summer. Official summer won't arrive for a few weeks, but a few days of warm weather will give us a taste of what's on the horizon. For better or worse.

Now seems like a good time to check in again with our good friends at Anheuser-Busch. Summer is a busy time for them and, anyway, their efforts to maintain market share using unscrupulous strategies and initiatives are drawing scrutiny and bad press.

Summer Discounting
AB launched aggressive discounting programs in supermarket chains over the Memorial Day weekend and beyond. In one scenario, customers buy an 18-pack of Bud/Bud Light and get a second at 50% off. In another, you buy two 12-packs and get a third for a penny.

Convenience stores in many areas are seeing similar deals targeting the holiday weekends of summer. You'll see 12-packs of Bud/Bud Light selling for $9.99 coinciding with Memorial Day (through June 6), Fourth of July and Labor Day weekends. 12-packs will sell for $10.99 the rest of the time, according to reports.

The discounting extends to AB craft/crafty product, brands like Goose IPA and Shock Top, in some markets. Buy two six-packs of these brands and get a third for free. These offers may or may not be linked to the various holiday weekends.

Naturally, AB says there's no summer price war. They're just trying to attain an appropriate "price mix." Sure thing. In fact, this kind of price cutting is pretty cutthroat and something only Anheuser-Busch could pull off thanks to production and distribution efficiencies.

How much will the discounting gambit help or hurt? Hard to say. The big idea is to hang onto Bud/Bud Light drinkers while at the same continuing to build the market penetration of their craft and crafty brands. The only brand in the AB premium family showing growth is Michelob Ultra, perhaps a sign that Millennials will go for light beer when they get fat.

By the way, it's worth noting that AB's craft acquisitions are up 40 percent for the year in IRI, outperforming the craft segment as a whole. Goose Island is a big part of that and a nice example of what you can do with a flaccid brand when you have a massive, nationwide distribution network. Elysian, Golden Road, Blue Point and Four Peaks and Breckenridge are all up.

Branch Distributors
As many who stop by here know, the AB distribution network is a topic of interest for the Department of Justice as it reviews the pending acquisition of SABMiller. Beyond the issue of wholly-owned branch distributors is an incentive program that appears to violate anti-trust laws.

You know how it works, right? AB-affiliated distributors, owned and independent, are financially incentivized to advertise and sell AB brands. Distributors that tow the company line by moving 98 percent of their sales in AB brands receive the bulk of their advertising budget back.

This practice, contrary to the stated position of AB suits, is almost certainly a violation of fair trade regulations because it is designed to thwart promotion of smaller craft brands. The DOJ is evidently talking to craft brewers and distributors to develop a full understanding of how AB's incentive program restricts market access and hurts small brewers.

Just as branch distributors should be considered illegal, so should anti-competitive incentive programs. We can only hope DOJ approval of the ABI/SABMiller merger is contingent on the resulting behemoth agreeing to meaningful rules on distributor ownership and incentive programs. Otherwise, this merger/acquisition is big trouble for craft brewers.

Seattle Slip
You are surely aware of the recent situation in Seattle, where the Washington State Liquor and Cannabis Board (WSLCB) is charging AB with exercising exclusivity arrangements at several concert venues. The violation carries a fine of $150,000 and a three-day suspension. The fine is pocket change to the behemoth. The suspension will never happen.

Investigators discovered two venues that sold only beer available through Anheuser-Busch distributors. That alone is not illegal and would not have triggered any action. Except a manager at one venue told investigators that the venue did, indeed, have an agreement to sell only products provided by an AB distributor. In Washington, as in most states, that arrangement is illegal.

In fact, anyone who has attended a concert or sporting event has probably been subjected to this kind of subterfuge. You know the fix is in when you walk around a stadium or concert hall searching for a decent beer and find nothing but swill. Only in recent times have we started to see a shift toward better beers in these situations and now only because consumers demand it.

We don't know how the Seattle case will turn out. Consistent with past behavior, AB denies that it did anything wrong and has the resources to make sure the case drags on for years, if necessary. My guess is they will eventually pay all or some portion of the fine without admitting guilt. And the cycle of forcing them to comply with legitimate laws will start anew.

It's going to be a long, hot summer.

Friday, May 27, 2016

Looking for a 3-Way? Your Wait is Nearly Over

One of the most popular summer seasonals is preparing for another road trip. The fourth rendition of 3-Way IPA, a collaboration between Astoria's Fort George Brewing and two rotating breweries, will hit tap lines and store shelves in the next few weeks.

If you don't know about 3-Way IPA, you may not have been paying attention. It's been a sought-after beer since first launched in 2013. Each year features a new collaboration, new recipe, new can design, but with the same name. It's available in 16-ounce four-pack cans and on draft from June through September,

Past collaborators
2013 – Gigantic, Lompoc
2014 – Boneyard, Block 15
2015 – Georgetown, pFriem

Hardcore hopheads will readily recall the 2014 collaboration, which featured what you might call the best aspects of the three breweries. Fort George had a tough time keeping up with the demand for that beer. Last year's follow-up was a completely different beer, as advertised, and didn't quite reach the standard set in 2014.

The collaborating breweries this time around are Barley Brown’s of Baker City and Melvin Brewing of Jackson, Wyoming. In other words, another great trio of breweries and brewers.

The Beer
"The goal with the grain bill was to produce an ultra-pale color, creating a simple, yet solid canvas for maximum hop expression," the press release says. "A lower than average mash temp decreased the amount of residual sugar. This lets the beer to have sweetness derived from the hop character rather than the malt."

Hop additions (again from the press release) include:
1st - Apollo for bittering - a high alpha hop that tends to exude grapefruit notes and contributes to an elaborate citrus character as it interacts with the aroma hops.
2nd - Simcoe, and a lot of it. This addition is twice the quantity of the 1st addition.
3rd - Simcoe, Citra, and Mosaic, added later than the average 3rd addition to decrease bittering and magnify the pleasant citrus character.
Dry Hopping – Double dry-hopped with Galaxy, Mosaic, and Citra. These hop additions create peach, pineapple, and grapefruit taste and aroma. The second dry hop addition is roused with CO2 to boost the hop efficacy.

Portland Release Party
Four-packs and draft of the new 3-Way will be available starting the week of June 13. Keep in mind that Fort George beer is distributed exclusively in the Pacific Northwest. A Portland release party is set for Friday, June 10, at the White Owl Social Club. Collaborating brewers will be in attendance, along with an assortment of beers from each brewery.

It'll be interesting to see how this year's beer holds up. If it comes close to matching what 3-Way was two years ago, a lot of people will be hoping Fort George has enough cans and enough hops to keep the beer flowing through the summer.

Sunday, May 22, 2016

Pints in the Pearl Coming June 4

I sometimes wonder how many beer festivals and related events can be shoehorned into the summer calendar. Apparently we don't yet have enough of them. If we did, the ongoing barrage of new stuff might be slowing down. It isn't.

One of this year's newcomers is Pints in the Pearl, set for an inaugural engagement on June 4. The event is the brainchild of the Pearl District Business Association, whose mission is to promote the Pearl District. Fulfillment of that mission evidently means giving the area the beer festival it never had. Alright.

The host breweries are Bridgeport, Deschutes, 10 Barrel and Fat Heads. Each will operate a station serving three or more beers, including one made just for the event, along with food items. Brewery staff will be present, allowing attendees to possibly chat about how the various beers were created.

Pints for the Pearl is a bit of an oddity, for sure. Instead of your standard festival tasting mug or glass, they're handing out a stainless steel pint glass. And each token gets a full glass of beer, which flies in the face of the tasters present at most events of this kind.

Your $20 admission includes the "limited edition" souvenir glass and three tokens. Each token is good for a 16 oz beer or one food item. Additional tokens will be $5 apiece. Tickets are available in advance on he company website here. Along these lines, they will only accept credit and debit cards at the event. Slightly odd, right?

In addition to beer and food tasting, Pints in the Pearl will feature family friendly entertainment ranging from corn-hole to live music by artists including The Weather Machine and local American Idol contestant Haley Johnson. Organizers say the event is open to all ages and they hope to attract several thousand folks.

I suppose it's fitting that the Pearl District, the birthplace of craft beer in Oregon, should host an event like this. I can recall Bridgeport putting on shindigs back when the roads were unpaved and the potholes were big enough to swallow a Volkswagen. Times have obviously changed in the so-called Pearl, but craft beer continues to play an important role here.

A small group of grubby media types sampled some of the beers that will be poured at the event. Most of the beers are standards of the four breweries, but each brewery is offering at least one special beer. Your choice is to play it safe with a standard or take a chance on something special.

Go to the website for more information location and times. There's also a Facebook page here.

Monday, May 16, 2016

The Gentrification of Craft Beer is Escalating

A while ago, I wrote a piece on what I called the "emerging gentrification" of craft beer. You can find that article here if you're so inclined. At its most basic level, the article looked at what was then happening to craft beer in terms of high-end product.

My thoughts in that original piece were mostly based on observation. I'd noticed, for example, that it had gotten pretty easy to find higher priced, $10+ bottles. There was a time not all that long ago when that was not so common. A change was underway.

Looking at that same scenario today, more than two years after the fact, it's pretty obvious that the trend is entrenched. It's now commonplace to find $15 bottles and $20 bottles are not unusual. Extrapolating to packaged product, $12 six-packs and $10 four-packs are fairly common.

The difference between now and late 2013 is I've seen stats that support what I'm seeing. In simple terms, high-end or premium craft brands are making a greater contribution to overall category growth than they did in the past. And the trend is escalating.

What's considered high-end product? Looking through some industry reports, the dividing line is $40. Brands selling for more than $40/case are split into: Premium ($40-$49.99); Superpremium ($50-$59.99); and APEX ($60 and up). Everything below the $40 watermark is considered Craft. This doesn't necessarily translate directly to large bottles, but you get the idea.

The growth stats are revealing: While the entirety of the $40+/case segment represents just 20 percent of overall craft volume, that group accounted for 54 percent of year-to-year dollar growth, April 2015-April 2016. Brands in the $40 and under set, which make up 80 percent of total craft sales and have traditionally driven growth, showed negative or flat growth.

Taking it a bit further, the 1,000 or so brands that fall into the Premium category saw dollar sales increase 34 percent. We're talking about 12 percent of total craft sales volume accounting for more than a third of growth. Superpremium, representing a smaller number of brands than Premium, was up a shocking 51 percent. Finally, APEX brands accounted for 11 percent of growth.

Some part of this is being driven by the collapse of previously top selling beers in the Craft category. Indeed, Sam Adams Boston Lager, New Belgium Ranger and Sam Adams Seasonal were all hit with double-digit declines during the period in question. And the top 15 bands were down 10 percent, collectively, in dollars. There is that to consider.

But you have to balance the decliners with brands that experienced big growth in the base tier. Goose Island IPA, Firestone Walker 805 Blonde and Founders Day IPA all doubled sales. Several brands from Lagunitas and New Glarus also showed solid growth. So the news is not all bad in the under $40/case category.

Keep in mind that growth at the top is happening at a time when overall segment growth is slowing. As referenced during the recent Craft Brewers Conference in Philly, craft's dollar share of overall beer is higher than ever at about 21 percent. But year-to-year growth, which was 18 percent during the two previous years, dropped to 13 percent. And the decline appears to be deepening.

There are logical explanations for everything. Brewers Association chief economist Bart Watson explained that slowing growth is the "new reality." Why so? Because once you achieve the share that craft has attained, it gets tougher to sustain crazy growth rates. "This is something we need to get used to," Watson said.

He's right, of course. If you're going to be worried about some aspect of craft beer, it isn't overall growth. Growing a 21 percent share of the pie by 11 or 12 percent annually ain't half bad. On the other hand, a base that's collapsing in favor of high end product might be reason for concern. A good analogy is a car brand whose sales are increasingly dominated by luxury models.

As I see it, part of what's happening is that higher priced specialty beers have turned the industry gaga. Intense competition in the Craft tier means a growing number of brewers are looking to specialty beers to define who they are and make more money per barrel. It's hard to blame them.

At the same time, brands in the Craft tier are being largely abandoned or priced upward. A lot of tired, under-performing brands live here. Go to a store, any store, and see how many craft brands sell for less than $10 a six-pack. Not many, if you're excluding sale beer, and likely few that you want. The brands doing well in this tier likely won't be in it for long.

It's worth noting that the trend is a team effort. The migration upward is being driven by brewers, distributors, stores, bars, etc. The greater profit per ounce of product moved is one of the unanticipated benefits of the craft beer craze. Everyone is rolling with the punches (and in the dough), refusing to look a gift horse in the mouth and hoping to ride that horse into the sunset.

The question is this: Is growth in the high end tier sustainable long-term? I don't think it is. I think there's a limit to how much consumers are willing to pay for supposedly fancy beer. We just don't yet know what the limit is.

What's going to drive craft category growth when demand for high end product crashes or significantly declines? I don't have an answer. But the question is worth asking.

Thursday, May 12, 2016

Laurelwood Launches Summer Seasonal in Cans

Just in time for summer, Laurelwood Brewing is adding another canned beer to its lineup. Six-packs of Golden Ale will begin appearing on area store shelves in coming days and weeks and be available through September.

Recall that Laurelwood's first canned beer, Red Elephant IRA, was released in August 2015. The success of that beer helped push them toward releasing another beer. It's also true that owner/founder Mike De Kalb is a fan of canned beer.

"I think canned beer stays fresher and everyone knows how much easier it is than bottles to schlep around for summer activities," De Kalb said. "Our challenge was to decide which of our beers should be the second to be canned. We think Golden Ale is the perfect choice for summer."

If you aren't aware, Golden Ale is a longtime member of Laurelwood's stable of beers, having been brewed since virtually the beginning in 2001. The beer won Gold and Silver medals at the 2002 and 2013 World Beer Cup, respectively, as well as several Great American Beer Festival medals. It's no slouch.

As with the Red Elephant cans, production and canning of Golden Ale will be done at Laurelwood's flagship location on Sandy Blvd. De Kalb and his staff were concerned about their ability to manage the production and canning schedule when they launched Red Elephant, but they've worked things out and feel good about now adding a second canned beer.

"Our issue with Red Elephant, a year-round beer, is we couldn't wind up in an "out" situation," De Kalb said. "You can't let that happen when you have shelf space at Safeway, Fred Meyer and other large stores. We've tweaked the scheduling to the point where I'm confident we can proceed with the production and canning of two beers."

Meanwhile, production brewing is fully underway at Full Sail in Hood River. All of Laurelwood's six- and 12-packs (Workhorse only) of bottles are produced in the Gorge. Laurelwood beers are widely distributed in Oregon, Washington, Idaho, Alaska, California and British Columbia. Shipments are also reaching Puerto Rico and Japan.

I'm guessing Golden Ale will be as big of a hit as the Red Elephant cans have been. Because it's lighter and potentially appealing to a wider demographic, Golden Ale may even surpass the success of Red Elephant cans. Regardless, it's excellent timing on Laurelwood's part.

Tuesday, May 10, 2016

Last Refuge of a Scoundrel

When I was in high school and college, I had friends who drank Budweiser because they liked the red, white and blue logo. Forget about the beer. They drank Bud because they liked the colors on the packaging. Don't ask me if it was a patriotic thing. I think not.

Now comes word that Budweiser, a subsidiary of foreign-owned InBev, will replace "Budweiser" with "America" on its 12 oz cans and bottles for summer. It's all part of the company's plan to sell shitty beer by wrapping itself in patriotism.

The irony is hard to miss, right? Budweiser isn't an American company. But the suits in Belgium or Brazil figure the patriotic strategy will work in America, home of the brave and apparently also some of the dumbest, most ill-informed and gullible consumers in the world.

New packaging will hit shelves in late May and hang on through the fall elections. You'll be seeing billboards, murals, digital ads and retail displays throughout the summer. They're calling it the "America is in Your Hands" campaign. No kidding.

Honestly, if America truly is in the hands of citizens who buy into this shameful bit of chicanery, the country is in a lot more trouble than many think.

It's worth mentioning that Anheuser-Busch is also expanding the deep discounting it started a while ago. Reports say 18 packs of several AB brands will be buy one, get a second at 40% off in some areas. Such discounting is easy for AB to pull off due to its scale and extremely low cost per barrel. Other brewers can't afford to offer similar pricing.

When a foreign company uses fake patriotism (as well as cutthroat discounting) to sell bad beer, we've entered a scandalous new dimension. As Samuel Johnson said back when people were evidently a lot smarter than they are today, "Patriotism is the last refuge of a scoundrel."

Update: Here's a link to the approved TTB label application. America

Wednesday, May 4, 2016

Brand Confusion and the Illusion of Choice

The drunk fest otherwise known as the 2016 Craft Brewers Conference is underway in Philly. There are a number of issues facing the industry, despite positive growth. One of the biggest is the ongoing question of how and why the Brewers Association defines a craft brewer.

Allagash founder Rob Tod addressed that matter as he stepped to the stage for the first time as Chairman of the Brewers Association Board. He talked about the importance of the craft brewer definition and wasted no time getting to the heart of the matter.

"You hear people saying 'craft' no longer matters, that it's 'only the beer' that matters, not where it's brewed." Not so, Tod chided. As he went on to note, the Brewers Association does not define "craft beer." What it does define is what a "craft brewer" is. Because the BA's job is to promote and protect small, independent brewers.

Frankly speaking, there's plenty of room to quibble with the Brewers Association's definition of a craft brewer. Their definition allows Sam Adams and Yuengling in, but keeps Widmer, for example, out. Not the best. However, one thing we can certainly agree on is any craft brewer that is fully owned by a major brewer ceases to be a craft brewer.

There are sound reasons for this and I've been through them here countless times. As Tod reminded the folks in Philly, when you fall outside the small and independent definition, you are fundamentally different. It means you have access to materials, distribution and retail that independent brewers simply don't have. Not to mention capacity and economies of scale.

See, that's the thing. Once breweries join forces with Anheuser-Busch, they simply aren't playing on the same field with independent brewers. They enjoy significant advantages in a number of areas and, even if they make good beer, aren't and shouldn't be considered craft breweries.

The good news is acquisitions can't keep pace with new brewery openings. AB will never own more than a small percentage of the independent craft brewery count. The bad news is they don't need or want to own a huge number of breweries. They just need enough craft breweries to blur the lines of what authentic craft beer is, at least partially via what Stone's Greg Koch refers to as "the illusion of choice."

If you aren't sure what that means, follow along.

In Koch's case, he walks into an airport bar and sees a bunch of IPAs and some other beers on tap, including Goose Island, Golden Road, 10 Barrel and Elysian. The unknowing patron looks at that list and assumes he/she has choices. But Koch knows each of these brewers is fully owned by big beer. The independent brewer has no place here.

In my case, I walk into my athletic club, which has an uneven history with beer variety. I typically see the four taps occupied by Elysian, Widmer, Goose Island and 10 Barrel. Again, the average patron sees choice. But I know each of these breweries is fully or partially owned by Anheuser-Busch. In reality, choice is very limited.

What's the endgame? AB wants to occupy enough tap handles and store shelves that consumers become totally perplexed about craft beer. Once that happens, they'll use advantages in cost (lowest per barrel in the industry) and distribution to squeeze craft brewers out of the market. Then they can gradually get back to selling the homogenized sludge they know and love.

You look at what's happening and you realize how important it is that the Brewers Association continue to define what a craft brewer is. But the real challenge is getting people who don't care who brews the beer to understand why it does matter. That's a tough one.

Because education is never easy, and it's particularly hard when there's a ton of money invested in making people believe something else.

Sunday, May 1, 2016

Cheers to Belgian Beers Turns 10

The rush toward summer means we are moving into the teeth of the outdoor festival season, Large events are on the way. Next week's Cheers to Belgian Beers festival, which has built a sizable following, celebrates its 10th year on Friday and Saturday, May 13-14.

What's unique about the event is that its 70-odd Belgian-style beers are brewed by Oregon craft brewers using the same yeast strain. The strain this year is Imperial Organic 58 Lioness, a yeast that works well in a variety of dark and light beers.

To ensure a wide variety of beers, the Oregon Brewers Guild uses a dart throw competition to determine the style (light, dark, high or low ABV) that each participating brewery will produce. Kind of a cool idea, huh?

The event is free, which means you can enter the venue and stalk the grounds without paying a dime. If you want to drink beer, $20 will get you a souvenir tasting glass and 10 drink tickets. Most tastes will cost a ticket; some will be two. Additional tickets are $1 each. Advance tickets went on sale a while ago here. Buying in advance will save you time, but not money due to the added service fees. The evolving beer list is here.

Cheers to Belgian Beers happens at the North Warehouse, 723 N Tillamook St. Event hours are 1:00 to 9:00 p.m. Friday and Noon to 8:00 p.m. Saturday. Monk’s Deli and the Urban German Grill are the food vendors. Keep in mind that parking in the area is limited. If you can, take public transit (Bus Line 35 stops a block away and the Yellow Max Line stops two blocks away) or ride a bike (bike parking is complimentary).

Finally, this event is for ages 21 and over. So please don't show up with the kiddies.

Official Stuff
Cheers to Belgian Beers is sponsored by MCF Craft Brewing Systems, Boelter Beverage, The Country Malt Group, Great Western Malting, Imperial Organic Yeast and the Portland Mercury.

It is organized by the Oregon Brewers Guild, a non-profit organization whose mission is to promote the state’s craft brewing industry and the common interests of its members. Founded in 1992, the Oregon Brewers Guild is one of the nation’s oldest craft brewers associations, comprising 154 brewing companies, 122 associate or supplier members and more than 3,500 enthusiast members or S.N.O.B.s (Supporters of Native Oregon Beer). To learn more, visit www.oregoncraftbeer.org.

The festival is still seeking volunteers, who will receive a glass, 10 drink tickets, and a t-shirt after their shift. An OLCC Servers Permit is not required to participate as a volunteer server at this event. Go here to sign up.