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Wednesday, January 31, 2018

All That Glitters...GDI Sells to Columbia

After you spend a few years around the beer industry, you get to know people. For me, it somehow came to pass that a lot of people I know and talk to regularly are part of General Distributing. But not for long.

The news that General is being sold to Columbia Distributing came as a bit of a shock. I didn't get word from inside GDI. Nope. A friend alerted me Monday afternoon. I quickly texted Jim Fick (part of the owning family), who verified that the company is, indeed, being sold.

Maybe I shouldn't have been shocked. It's been common knowledge for at least several years that Columbia, which is huge and has a presence in several states, wanted to purchase much smaller General. Until now, the price simply hadn't been right. Finally, it evidently was.

Not that long ago, GDI was a laughing stock in beer circles. A large part of its territory is rural, where it sells loads of yellow beer. Perhaps that explains why ownership was slow to respond to the craft beer wave. When I first met Jim Fick in 2013, GDI had a pathetic craft portfolio of mostly second and third tier brands.

That began to change when Steve "Tiny" Irwin was named General Manager in 2015. Irwin's background in craft beer is strong. He immediately began to build a savvy team of craft aficionados. His relationships around the industry helped GDI sign of a handful of vibrant brands...Sunriver, Melvin, Modern Times, Left Hand, Founders, etc.

The sale to Columbia means all GDI brands are free to go wherever they wish. They are not tied to Columbia. That's the law in Oregon. When a distributor sells, the contracts it has with beer suppliers (breweries) are null and void. Feel free to move on.

The irony is the brands in question chose General for a reason. Irwin may have been part of that reason. But any of those brands could have chosen Maletis or Columbia, the area's biggest players. They chose General because they felt they would get more attention and have a greater chance of success by being part of a smaller book of brands.

With General out of the picture, those brands will have to decide where to go. Consolidation in distribution means limited choices. Will GDI's brands go to Columbia or Maletis, both of which have huge books? Will they roll the dice and go with Point Blank or one of the smaller distributors that have small books, but limited retail penetration?

Of course, this isn't just about brands. Most GDI employees will be out of work when the sale closes at the end of March. It hardly matters that Columbia says it will give these folks a chance to interview for open positions. This is a business and you don't need duplication. A few GDI folks will probably transition to Columbia. Most won't. That's the nature of the buyout beast.

When I spoke to Irwin Tuesday evening, I asked him what was next for him. He nimbly dodged the question, saying his first priority was finding jobs for his people and the right homes for the brands he so diligently signed over the past few years. I honestly hope he succeeds.

If you step back and look at this sale, you may be tempted to believe the Fick family planned for several years to sell the business. They hired Irwin because they figured he would build a respectable craft portfolio that might increase the overall value of the business. If you think that, you aren't alone. Several people who know the industry have suggested it to me.

The alternative narrative, and one I am forced to consider after talking to Irwin and other reliable industry sources, is that the Ficks simply lost faith. They invested heavily in craft when the industry was growing like a weed several years ago. In 2017, growth slowed dramatically. They saw the business changing in crazy ways. They decided it was time to get out.

I don't know which version of the story I believe or want you to believe. But I don't think we're better off with General Distributing out of the picture. All that glitters isn't gold.

Sunday, January 28, 2018

Swill on the Line for Eagles Fans

The Philadelphia Eagles are playing in the Super Bowl. They'll be up against New England, a team they lost to in the 2005 Super Bowl. A little payback would be nice. Also, Philly fans will get to cash in on free beer if their team wins.

If you aren't paying much attention to this year's game, you aren't alone. It's a game between teams that aren't widely popular. Most of the country can't stand the Patriots and their smug fans. Philly doesn't stack up much better. Eagles fans brawled with each other and threw beer cans at Vikings fans before the NFC Championship. Afterwards, they pelted the Vikings team bus with beer cans. Anyone hate sour winners?

Sometimes choosing a team to root for in big games can be a challenge. But everyone surely sees that Philly is a bit of a tough case. Its sports teams haven't had a lot of success in recent times. The Eagles last won an NFL title in 1960. Despite its boorish fans, much of the country will be rooting for the Eagles in the big game. Everyone loves a hard luck loser...I mean underdog.

As everyone knows, betting is a big part of any Super Bowl. Most people around the country wouldn't be interested in this year's game (any year's game, actually) if they weren't invested in an office pool, square game or other betting. Gambling is a big reason for the NFL's success...and also for the ratings of Super Bowls.

This year's big game bet was hatched last summer, when Eagles offensive lineman Lane Johnson promised to provide free beer to beer drinking Philadelphians if the team won the Super Bowl. It was a crazy thing to do. But Anheuser-Busch quickly doubled down, saying it would provide the beer (the term is used loosely, as you shall see) if the Eagles win it all.

Of course, no one had any way of knowing at the time that the Eagles would wind up in the Super Bowl. So the beer guarantee on AB's part might well be viewed as nothing more than a publicity stunt. Which maybe isn't a bad thing, given the declining fortunes of Bud and Bud Light. Even a fake goodwill campaign is better than nothing.

With the Eagles in the big game, the AB suits needed to wipe away thoughts that they might have impure thoughts or be playing favorites due to a beer guarantee. So they produced videos congratulating the Eagles and Patriots. You do what you have to.

But the shills at AB must be thanking their lucky stars. Because it turns out Philly metro, which is slightly larger than Boston metro (6.2 million to 5.5 million), is in dire need of some positive spin for AB products. According to surveys, Bud Light is #5 on the list of beers recently consumed by drinking age adults. Yuengling, Coors Light and Miller Light were the top three.

Things are better for AB in Boston metro, where Bud Light came in #2 behind Sam Adams, both of which track well ahead of the rest of the top five. If AB wants to make an impact, it seems like a far better investment to pick up the tab for hard luck, longsuffering Philly fans than to mess with beer depraved Boston.

The good news for Philly fans? The Eagles have to win the game for them to collect free beer. The bad news? The beer is Bud Light. But I hope they win, anyway.

Wednesday, January 24, 2018

Charlie Papazian Will Ride into the Sunset

I brewed my first batch of beer in 1995. I have my wife and Charlie Papazian to thank. She gave me his book, The Complete Joy of Homebrewing, for my birthday that year. The book guided my entry into the world of real beer. I mention it because Papazian will retire from the Brewers Association when he turns 70 next year, after 40 years of service to craft beer.

Papazian played an essential role in what became a revolution. He is the Henry Ford of craft beer. There were certainly people homebrewing before he formed the American Homebrewers Association. But he inspired a generation to make good beer and provided a road map describing how to do it.

We know Papazian would go on to do much more, which I shall get to. But his homebrewing book was possibly the crucial piece. Because some of the homebrewers who referenced the book would go on to launch the craft beer industry in this country.

Kurt and Rob Widmer were avid homebrewers and thought they might be able to make a living as pros. They wound up launching Widmer Brewing. Art Larrance, Fred Bowman and Jim Goodwin got caught in the same siphon and wound up founding Portland Brewing in 1986. The list goes on and on. You can bet many of these folks read Papazian's book along the way.

One of the great features of the book is it doesn't read like a textbook. The tone is friendly, down-home: "Relax. Don't worry. Have a homebrew." Learning how to make beer was supposed to be fun, not arduous. I can vividly remember reading the book as much for entertainment as for brewing intel. Like most who used it, I didn't become a pro brewer. But I did homebrew for many years and the book did help push my interest in better beer.

Of course, Papazian would go on to do much more. When he and Charlie Matzen formed the AHA in 1978, they published Zymurgy, a magazine that promoted the organization and publicized the federal legalization of homebrewing that year. In 1982, Papazian helped launch the Great American Beer Festival. Now in its 37th year, GABF attracts some 60,000 attendees annually and awards arguably the most coveted medals of any competition.

Soon thereafter, the Association of Brewers was reorganized to include the AHA and Institute for Brewing and Fermentation Studies. Later, in 2005, the Association of Brewers and the Brewers’ Association of America merged to form the Brewers Association, the not-for-profit trade association that supports small and independent American brewers.

Papazian will spend his final year at the Brewers Association completing muriad projects, including a craft brewing archive. The archive will reportedly house 40 years of craft beer history, including more than 100,000 publications, photographs, audiotapes, films, videos and documents. He'll also deliver the keynote address at the National Homebrew Conference in Portland next summer.

I've not met Mr. Papazian personally, though I certainly could have. We crossed paths at the Craft Brewers Conference a couple of years ago and again at GABF last year. He has achieved virtual rock star status among beer fans. While roaming the grounds of events, he is routinely greeted and asked to pose for photos. I've considered getting a picture with him, always thought better of it.

Like so many of the folks who launched the craft beer movement, Papazian didn't fathom where it might go. Looking back, he had this to say in a Brewers Association press release:

“I had a playful vision that there would be a homebrewer in every neighborhood and a brewery in every town. But what I did not imagine, couldn’t imagine, never considered, was the impact that craft brewing would have on our culture, economy and American life."

Thanks for everything, Charlie. Well-done. We wish you well.

Saturday, January 13, 2018

The Rising Tide of Craft Cans

The rapid rise of beer in packaged form began in earnest after World War II. Beer had been available in bottles for many years and in cans for about a decade. But draft was king. That began to change following Prohibition, largely the result of consumers preferring to drink beer somewhere other than a bar or tavern.

Advancements in packaging, refrigeration and transportation made during the war eventually helped make packaged beer more popular than draft. Growing up through the sixties and seventies, I clearly remember an abundance of macro beer choices in bottles and cans.

Most people considered cans to be inferior in those days. They were easier to handle, but there was the constant scourge of tasting the can, whether it was steel or aluminum. Bottles were preferred by most self-respecting beer drinkers and mainstream consumers.

When craft beer came along, canning was impractical. Not that anyone would have bothered with it. The supposition was that bottles were superior if you wanted to protect the integrity of your product. So packaged craft beer came mostly in 12 oz bottles or 22 oz  bombers. Cans were rare.

Today, those assumptions and practices are under siege. A lot of consumers have decided they like the flexibility of cans, which are lighter, less breakable and easier to take on excursions than awkward bottles. They've also decided that beer from a can tastes just fine, that maybe the reason cans had a bad rep in the past was the beer that came in them.

Walk into your local bottleshop and you'll see the result: cans everywhere. In fact, you're more likely to see that trend on display in a bottleshop than you are in a grocery story, according to intel in a recent article by Brewers Association economist Bart Watson. Cans are winning big with a particular segment of the market, which I'll get to shortly.

In the big picture, bottles remain the top dog in packaged craft beer, Watson says. Bottles accounted for about 72 percent of packaged craft production in 2016. Cans came in at just over 28 percent. But can growth is spiraling upward. Watson reckons cans will account for about 31 percent of packaged craft in 2017, once the numbers are in.

The most intriguing part of this for me is where the most spectacular growth is occurring. You might assume brewers across the board are switching to cans. But that isn't the case at all. In fact, only a small percentage of breweries are switching from bottles to cans, according to Watson. Regional craft breweries are largely sticking with glass.

That's why you aren't going to be blown away by craft cans in grocery. Regional and national craft continue to dominate shelves in that channel. Which means a lot of bottles. So shopping the beer aisle in grocery isn't going to be much of an indicator, in terms of can growth. But your local bottleshop probably is.

The reason is wrapped around who's using cans and who's growing. Watson demonstrates this with a table which shows that smaller (likely newer) breweries are far more heavily invested in cans than older, larger breweries. It also turns out smaller breweries are responsible for the greatest craft segment growth, by percentage. And this beer is far easier to find in bottleshops than grocery.

Breweries producing less than 10,000 barrels were responsible for 58 percent of craft segment growth last year; those producing between 10,000 and 100,000 barrels were responsible for 17 percent of segment growth. Between them, these folks accounted for more than 85 percent of craft can share in 2016 and they grew that share by more than 20 percent last year.

The trend to cans is an emerging tsunami. In a few years, they will surely account for more than 50 percent of packaged beer. Cans have gained traction with young fans who flock to smaller, newer breweries. It hardly matters that those breweries tend to produce trendy brews to attract that audience. The appeal of those beers is driving wider acceptance of cans by the day.

Larger, established brewers are being forced to take note. Most have been slow to accept and adopt cans, but attitudes are changing. Hey, even if you don't want to brew and release trendy new styles, putting your beer in cans with updated label art is smart marketing.

Wednesday, January 3, 2018

Novelty and (Brief) Ecstasy

When Art Larrance opened the Raccoon Lodge in 1998, his top priority was finding what he now refers to as a "magic elixir." In short, he and his minions, principally Ron Gansberg and Preston Weesner, wanted to invent a unique beer that would define them.

You know the story. After messing with barrels as part of an IPA aging experiment, they more or less stumbled on sour beer. The concept didn't catch on right away, but they had their "magic elixir." Cascade Brewing, Larrance's corporate name since day one, has ridden sour beer to great fame and fortune.

Keep in mind that Larrance was one of Portland's founding brewers at Portland Brewing. He was quick to understand that standard, everyday beers weren't going be enough to keep a brewery viable. He figured he had to have something special to rise and stay above the crowd.

That philosophy was not generally embraced by craft brewers prior to the spike in brewery count that started to happen about 10 years ago. Breweries went about their business with standard lineups and the occasional seasonal, in draft and occasionally packaged form.

As Jeff Alworth pointed out in a recent post, the accelerating brewery count has altered strategies dramatically. Since 2007, the number of breweries in this country has quadrupled. We now have more than 6,000 operating breweries. You need to do something to attract attention in that environment.

The consequence of this reality is that virtually all craft breweries are rapidly pushing out experimental beers hoping to land on something that will attract the momentary interest of consumers who have very short attention spans. Even the beers tend to come and go quickly.

I don't use Untappd or any other app that might help me track my beer consumption. But I'm guessing I drank or sampled nearly 1,000 beers last year. Most of those beers I drank once. Many of them I saw once, as they vanished from sight after a brief period. But never mind.

Let's face it. The push for novelty has resulted in a lot of sketchy beer. We're currently stuck in a hazy rut. Breweries are nervously throwing everything but the kitchen sink at hazy beers, hoping to create something that produces ecstasy in the minds and mouths of consumers, if only briefly.

You must have a hazy, preferably several, to be relevant in today's marketplace. Within the last 24 hours, I've received several press releases and seen numerous social media posts announcing the release of hazy beers in cans and on draft. It makes my head spin.

Frankly speaking, it is no longer possible to keep track of all the new and soon-to-be expired brands. The notion that a beer isn't relevant unless it's new and trendy is creating a high level of insanity and insecurity in craft beer. The mass urge to discover new and unique beers got us here.

I have no idea how we get out.