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Tuesday, August 27, 2019

The Day Anheuser-Busch Blinked

It turns out I was wrong. For the past couple of years, I had been expecting and predicting that Anheuser-Busch would purchase the Craft Brew Alliance based on contractual terms agreed to in 2016. The final deadline came and went last week with no offer. Blink.

There are reasons for everything and those of us who expected a deal missed the most important indicator...which is that the last of three escalating offer prices agreed to in 2016 was entirely too high in 2019. That's really what it came down to.

The escalating contractual prices have been reported here and there over the course of the last three years. During the first two years, AB could have purchased the CBA for less than the $24.50 required by the final 2019 deadline. It failed to act.

Had AB followed through with a purchase last week, the hefty price would have delivered a veritable financial windfall to CBA shareholders and executives, alike. Those folks are now holding stock that's trading at around $10/share. They were hoping for a gravy train deal that didn't happen. Sucky.

It was fairly obvious in recent weeks that the chances of a deal were dimming. The stock price was meandering around at under $15. Had anyone sniffed a deal, the price would have rocketed to $20 or more. Even the $15 price was artificial, propped up by looming buyout potential. As soon as it became known that there would be no deal, the price collapsed. And here we are.

Those of us who believed a deal would happen thought AB would pay the premium price to avoid the possibility of CBA being sold to another interested party. Prior to the deadline passing, the CBA could have sold itself to anyone, but AB had the right to counter. Now that the deadline has passed without a deal, the CBA can sell itself to anyone at any price and AB has no recourse.  

There's a toxic pill attached to that because, as I've noted here before, the 2016 contract requires Anheuser-Busch to fulfill contract brewing and distribution terms through 2026 (2028 for the master distribution portion of the contract), regardless of who owns the CBA. Should the CBA be purchased by say, Heineken, AB would have to honor the terms of the contract. Many of us thought they'd avoid that possibility. We whiffed.

I need to backtrack for just a minute. One of the things everyone should fully realize is that outside Kona, the CBA has no value to AB. Widmer and Redhook are in steep decline. The other brands, even the ones that are growing, are small and really of no interest to big beer. The only reason they would buy the CBA is Kona, which continues to grow in a tough market. 

Why was Anheuser-Busch willing to risk the possibility of losing Kona and being stuck with some fairly nasty contract terms? Good question. With craft beer flat or growing slowly, AB may fear that even Kona will falter. That notion may have been bolstered by the knowledge that the CBA primed the pump with advertising to help fuel Kona growth in early 2019. 

But the market likely held the real key. Because the CBA has been routinely missing on revenue projections, shareholder return has been poor and the stock price has suffered. AB may have simply concluded it could pass on the buyout deadline and acquire the CBA for significantly less than the required offer price. That could happen in coming weeks.

There's another possibility I haven't seen mentioned. As part of its merger with SABMiller, Anheuser-Busch is required to give the Department of Justice 30-day notice of any brewery acquisition. What if AB gave DOJ notice and DOJ refused to consider the acquisition? I don't have any evidence of that, but I doubt either party would have admitted it. So it is a possibility.

Where does the CBA go from here? They'll discuss the future in a press conference next week. Some think the CBA can carry on independently (AB owns 31 percent). It will receive a $20 million international distribution incentive payment from AB that kicked in when no buyout materialized. That money could be used to pay down debt or finance marketing efforts for Kona.

Honestly, though, it's tough to see a way forward for the CBA under its current leadership. For the last three years, that leadership has been focused almost entirely on selling the business to Anheuser-Busch at a premium price. They failed. They also invested in pet brands and programs that failed to deliver value for shareholders. And they don't alone have the ability to help Kona, their only significant growth engine, reach its full potential nationally and internationally.

My guess is the CBA will soon sell to someone for something less than $20 a share. The buyer may or may not be Anheuser-Busch. In fact, I believe current CBA leadership, having been jilted at the altar, will aggressively try to sell to someone else while AB is stuck holding the 2016 contract bag.

The weeks and months ahead ought to be interesting. Don't touch that dial. 

Sunday, August 11, 2019

Biskie and Me: Life With the Best Dog

She was born on Valentine's Day in 2009 in rural Oregon City. I don't recall the size of the litter, but I think it was the third for her parents, Lucy and Chester. Biskie would, of course, become my best friend and virtual assistant for much of the next 10 years.

She wound up with us by good fortune. Her older brother Blitz, born in 2007, replaced Bert, our Lab who passed away in late 2006. We liked Blitz' personna so much that we planned to get a second dog from the same parents the next year. This one, at my wife Laura's request, would be a girl.

We were in line to get the pick of the 2008 litter. Then Laura suffered a bad knee injury while skiing. Surgery and recovery time would be needed. With me working a crazy schedule, we decided a new puppy maybe wasn't the best idea. So we gave the pick to a friend and work colleague of mine, Tara, who today has Roxy.

We didn't put ourselves on the list for the next litter because we weren't sure what we wanted to do. We were both working a lot. After I got laid off in February 2009, we changed our tune and decided the time was right for a puppy. Puppies are labor intensive and it looked like I'd be at home for a while. The economy was woefully bad.

The catch was we weren't on the breeder's pick list. When we contacted her, we learned all the girls in the most recent litter were spoken for. Crap. Laura looked at pups from different parents and decided to pass. A week or so later, the breeder called and told us one of the buyers had backed out because they were moving. A Lucy/Chester pup would be available.

Which pup we didn't know. We were at the bottom of the list and would have access to the pup that was passed over by other buyers. Laura went out to Oregon City and looked at the pups. But we still didn't know which one would be ours. Of the two females in the mix, the breeder picked the one she thought was right for another buyer. We wound up with Biskie by default. A windfall.

With Blitz, April 2009
I need to digress for a moment, because 2009 was a dreadful year for us. Early on, Laura's dad passed away. He'd been recovering from a stroke, but his death was unexpected. Then I was laid off, with really no chance of finding comparable work. Before the year was out, my dad would also pass away. Biscuit was the only good thing that happened to us that year. And she was great.

She was supposed to be Laura's dog, but it didn't stick. I was at home with her every day. I took the two dogs on regular jaunts. For several years, we would get in our beat up Mazda pickup and drive to Fernhill Park, an off leash dog park where they could run and chase squirrels until they were exhausted. Such great times, thinking back.

At 3 months, May 2009
Because I was home with her most of the time, Biskie never spent much time in a crate. Her destructive brother did a lot of crate time, but she never destroyed anything. That might have been because I was with her constantly or because she had Blitz to keep her entertained. I tend to think the former. Take your pick.

About the names, we have chosen B-names for all of our Labs...Bert, Bruno, Blitz and Biscuit. Why? Because all but one of the Labs I grew up with had B-names...Beau, Banana, and Burleson. The only exception to the rule was Angus, a Lab I knew as a child. Laura went along with the naming convention and it stuck.

Biskie was just a baby when I took her to visit my mom in Liberty Lake (near Spokane) in July 2009. That's where she did her first significant swimming and retrieving. She was a natural who had no problem jumping off a dock or entering the water from the shoreline. I have photos and video of those early retrieves.

Liberty Lake, July 2009
It was evident from the day she arrived home that Biskie was a special girl. She was easy to manage and had a warm and entertaining personna. On that trip to Liberty Lake and on our various travels, she would eagerly follow my lead most of the time. I never worried about her racing off after something. I trusted her and my trust was (almost) never violated.

Her life was not without drama. She could be awkward at times. On one occasion, she jumped out the back of the truck with the tailgate still up while we were unloading the dogs. She went head over heels and caught a paw between the bumper and the truck body. Miraculously, she wasn't injured, a tribute to youth, flexibility and strength...but not coordination or good sense.

Whether by DNA or injury, Biskie developed something of an unstable rear end early in life. As a result, she refused to walk on bare wood or tile floors. We solved the problem at home with mats in the kitchen, rugs in the common areas and towels in between. When taking her on trips, we always carried a stack of towels to create a path on unfriendly surfaces we might find. A quaint memory.

Safe passage
Another cute habit was her desire to collect sticks on our run/walks and bring them home. On occasion, she would attempt to carry sticks that more closely resembled small logs. She succeeded from time to time. People who saw her doing this would chuckle and sometimes ask to take photos of our silly girl.

A less fortunate quirk was her habit of scooping up and swallowing chunks of paper, garbage and other junk while running around in the nearby park. She got extremely ill and had to spend a night in doggie ICU after eating a soccer sock that plugged up her gut and almost killed her. That incident may have contributed to the condition that eventually struck her down.

Biscuit was not aggressive. There was never any threat of her biting a child or attacking another dog. But she took exception from time to time. If her older, larger brother attempted to co-op her food, she bit him about the ears and cheeks in protest. When a dog rudely stole a stick she was carrying on a walk one day, she looked to me for direction. "Get your stick," I said. She chased him down and bit him on the back of the neck until he dropped it. "Good girl!"I  told her.

As mentioned, she became a sort of work assistant for me. Although not by choice, I never returned to full-time work after being laid off in 2009. No one would hire me. Still true. That led to a lot of freelance and contract work, most of which has been done at home. She was my constant companion, sleeping or chilling quietly on the pad next to my desk.

That arrangement came in handy when I was working on Portland Beer, essentially a fulltime job without the luxury of pay or benefits. As I toiled through the research and writing, I would occasionally get stuck and need to think something through. I would get down on the floor and cradle her head in my arms while considering the issue at hand. She accepted the contact gladly.

Collecting sticks on the Oregon coast, April 2016
There are so many great memories. One of the best is a trip we took in August 2016. We stayed in a house near the Deschutes River outside Sunriver. With easy access to the river, we took the dogs swimming daily. Biskie became expert at leaping off a boat dock to retrieve whatever we'd throw in the river. It was so damned entertaining to watch. Also fleeting.

We got disturbing news the following August. She had been peeing involuntarily in the house. A trip to the vet revealed high blood sugar. Our sweet girl was losing the function of her pancreas and had to start insulin therapy. The worst thing about that isn't the shots, by the way. The worst thing by far is the knowledge that your pet's life will be shortened.

For the next two years, we worked diligently to manage her blood sugars and keep her healthy. She immediately lost 10 or so pounds of water weight, not a bad thing. We struggled at times with blood sugars as her pancreas sputtered and produced erratic amounts of its own insulin. Eventually, we started feeding her four small meals a day to balance things out.

The shift in feedings required us to adjust our schedules. Fortunately, Laura retired shortly after we learned of Biskie's illness. I had started working a regular consulting gig, still doing a good portion of work at home. We had the flexibility to care for her, though it meant someone had to be at home to feed her and give shots. We traveled separately, except on one or two occasions.

Sandy River Delta, 2011
I think we always knew the diabetes would catch up with her at some point. Certainly Laura knew. She worked in healthcare for 42 years and has expertise in diabetes. Biskie lived a quality life for most of the two years she had left. She lost most of her eyesight over the course of the last six months, but still functioned more or less normally by smell, sound and feel. Dogs are amazing.

Two of the biggest challenges we faced were occasional bouts of appetite loss and vomiting. Those issues are more significant with a diabetic dog than with a normal one because the result is erratic blood sugars, weight loss and possible death (low blood sugar). Our solution was always to change her food. Her appetite would return and she would rebound.

We didn't know when we'd run up against a wall. I needed to make a short trip to Liberty Lake in early August. Just before I left, Biskie had a bout of appetite loss and erratic blood sugars. In fact, both dogs had been ill with some sort of gut issue. Once again, changing her food brought back her appetite and she rebounded. She did fine while I was gone.

When I returned home Monday evening, both dogs greeted me. Biskie ate well and went on her normal walks Monday evening and Tuesday morning. When I arrived home on bike after a workout and a beer that night, she was waiting for me inside our driveway gate. That was normal. I had no idea the walk we were about to take would be our last. Life can be brutal.

On Wednesday morning, our girl didn't get up to eat her breakfast. Like her brother, she was always food driven, so this was a serious concern. She refused to eat anything. I got some hamburger and she ate a little, but couldn't continue. She was fading badly by Wednesday evening. Thursday afternoon, she slipped away peacefully in our arms at home, with assistance from a caring vet.

I've not been able to shake her loss. We had such a special connection, I think due to the hundreds of hours I spent with her while she was young and during a time when things were going poorly for me. We became pals. The suddenly severed connection has left me with a deep sense of loss. Laura had a slightly different relationship with our girl, but feels a similar sense of grief.

I can't help feeling like we were somehow cheated, that the 10 years we had with her weren't enough. But there's nothing to do about it. We don't have a time machine or a way to bring her back with a strand of DNA. So the memories we have are all we're going to have. Damn.

Godspeed, sweet girl. We loved you so much.💔

Note: We are not dogless. Blitz survives his sister and is a little confused about how to act as a solo dog because he has always had a stablemate. Biskie was his pal for 10 years and was always the one running things, even during her illness. He's trying hard to work it out...a good boy.

PS: At three weeks, I realize that our sense of loss is magnified by the fact that, with a brief exception, we've had two dogs in the house for nearly 25 years. Having just one seems strange and has been as hard for us to get use to as it has been for Blitz.