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Tuesday, June 19, 2018

CBA Leverages Local Focus with Cisco in Portsmouth

As the Craft Brew Alliance taxis down the runway toward an eventual buyout by Anheuser-Busch, it continues efforts to reposition its brands as local. The most recent version of this trend is in Portsmouth, N.H., where the former Redhook pub is being rebranded as Cisco Brewing.

Recall what the CBA is doing elsewhere. In Portland, it shuttered the underperforming Gasthaus Pub late last year and replaced it with a tasting room featuring specialty beers. In Seattle, it opened the upscale Redhook Brewlab pub in the Capitol Hill neighborhood. They're also expanding Kona's brewing capacity in Hawaii.

The decision to end the Deadhook, I mean Redhook, run in Portsmouth makes good sense in the current craft beer climate. Redhook was once a brand with a national following. But the exploding brewery count has made local beer available everywhere and flipped the rules. Like a lot of regional and national brands, Redhook has been a loser in that scenario.

Cisco, based on nearby Nantucket Island, is a better bet in Portsmouth. It's a recognized local brand in the area and offers significant growth potential. They intend to lean heavily on an island theme in the reimagined pub. The CBA brass have learned via Kona, the crown jewel in their portfolio, that the island theme and connection to place is good for brand building.

If you're wondering how Cisco teamed up with the CBA, it's not complicated. The companies signed into a partnership arrangement several years ago. The CBA has no ownership stake in Cisco, although stories announcing the deal back in 2015 reported a 25 percent stake was being discussed. That never happened. Maybe it will now.

Anyway, the partnership gave Cisco access to the Portsmouth brewery, which likely had growing unused capacity as Redhook (and CBA) brands declined in appeal. The situation called for the CBA to do something to fill the capacity void and Cisco appeared to be a great choice. In a sense, Cisco is sliding into the space as Redhook slides out. The rebranded pub will make that official.

Cisco's core brands, including Whale's Tale Pale Ale and Grey Lady, have been brewed in Portsmouth since 2015. Having the capacity to brew and package those beers in large quantities helped fuel growth and expand the Cisco footprint. The portfolio continues on that path with the addition of Madaquet IPA and the newly launched grapefruit Gripah IPA.

The transition in Portsmouth, underway as we speak, evidently won't result in lost jobs. The current staff will retain their current roles with the rebranding. To support a smooth transformation, Cisco is conducting a branding "boot camp" for current Portsmouth staff this week. They have some fairly grandiose plans for this place.

When you look at this situation, you have to think the CBA sees a reflection of Kona in Cisco. Nantucket and Portsmouth aren't exactly tropical destinations, as is obviously the case with Kona. But Cisco's connection to Nantucket represents the kind thematic branding angle that has supported Kona's rise, as it did with Corona, for example.

The change in Portsmouth is a smart business move on the part of the CBA. It's stuck chasing the local theme that's dominating today's industry, and Cisco represents great potential. Pursuing that strategy fits perfectly with maximizing profits, which means the CBA will get a higher price per share in the coming AB buyout.

On the off chance that the expected buyout fails to materialize, well, further development of the local theme will serve as a rear guard action to keep the CBA viable on its own. You may question their motives, but don't make the mistake of thinking these are dumb people.

They aren't.

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