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Thursday, January 24, 2019

Craft Brew Alliance Fumbles Forward

Tuesday's news that the Craft Brew Alliance has closed its Widmer pub on Russell St. came as a surprise to many. It was less of a surprise to others, who have taken recent brewery and pub closures to heart and are braced for more. Certainly there will be more closures in 2019.

I heard about the Widmer closure on social media. If there was a release, I wouldn't have gotten it. I was deleted from the CBA media rolls long ago. Even their PR firm doesn't send updates. Thin skins are everywhere in this industry, but these guys are special.

The fact is, I've known several CBA brewers over the years. I've never acknowledged anything but respect for these folks. But my writing here hasn't been influenced by that. My goal is to be objective and that's not something CBA management is interested in. They prefer blind promotion. Oh well. No hard feelings.

The fortune hunters who currently run the CBA have spun their activities a variety of ways as they wait for an offer from Anheuser-Busch. As explained here and elsewhere, the contract renewal signed by the two parties in 2016 established a framework for a slow moving buyout. That's been reported in a number of places, not just here.

When they discontinued food service at the Russell St. pub in November 2017, they kept it open to showcase the specialty beers they're brewing in the innovation brewery. So they said. And that seemed reasonable. Rebuilding slipping local credibility would be a wise move, given the CBA portfolio, outside Kona, had been in negative growth mode for a while now.

But that was apparently a ruse. The decision to close the pub/taproom permanently a year later means they've effectively abandoned the local strategy. They say they'll continue to work the local angle with new canned product and by selling to beer bars and bottleshops. The tiny retail store on Russell will remain open to support that mission. Thank goodness.

The blunt reality is you cannot build local credibility on any kind of scale without a pub. Well, maybe you can if you're tiny and you produce nothing but stellar specialty beers. Upright comes to mind on that count and even Upright has a taproom. Building a following for Widmer's innovation beers (forget the dreadful PH stuff) without a pub will be impossible, out of the question.

Profitability, or lack thereof, was the reason given for closing the pub. Maybe they were losing money there. But this is a company that made millions last year. And the pub operated with a small staff and sold beer directly to patrons, where profit per pint is greatest. Even if the place was losing a bit of money, you keep it open to maintain a brand face in the community. Their commitment to the local strategy was evidently fleeting.

Only the fortune hunters upstairs on Russell St. know for sure. Don't give these bunglers too much credit, though. They've been swimming in Anheuser-Busch's wake for too long, and not for the better. If Widmer (and Redhook) hadn't stumbled onto Kona all those years ago, no one would be paying any attention to the CBA at this point. It would be roadkill.

But maybe, just maybe, closing the pub is a signal of something bigger. Perhaps the buyout CBA leadership has been praying for is in the works. Keep in mind that Anheuser-Busch must give DOJ 30 days notice of attempting to buy any craft brewery. Even though AB already owns roughly a third of the CBA, it would still have to give notice when submitting an offer.

If there is such an offer in place, closing the pub makes sense. Whatever the new ownership arrangement turns out to be, Anheuser-Busch won't be interested in rescuing the CBA's contracting brands. Kona is the darling. Redhook and Widmer will be cast adrift, probably sold. If someone wants to resurrect those brands, it won't be the clowns currently running the CBA.

Watch the CBA stock price for insight. When news of the pub closure hit the newscycle on Tuesday, the price was just under $16. It hasn't really moved, which means speculators haven't sniffed an impending buyout. If they do, the stock price will quickly rise to above $20. Why? Because AB is contractually obligated to offer at least $24.50/share between now and August.

There's irony here. When Widmer was born some 35 years ago, the focus was on beer. The boys had no thought of getting rich. But things have flipped. The people running things now covet money. And there's money to be made by selling the CBA to big beer.

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