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Thursday, December 31, 2020

Eyes on a Better Year as 2020 Skulks into History

All things considered, the pandemic hasn't been a bad time to raise an intense Labrador puppy. I hate to think what we would have done without all the readily available time, time required to deal with Bunk's incessant need for exercise, attention and supervision. 

Of the Labs I've had in my life, Bunk is by far the craziest and most difficult to manage. And the competition isn't close. Most Labs calm down and become relatively normal around the age of two. I fear Bunk won't calm down until she's five or six or seven. Wild times ahead.

If the pandemic has been a decent time to raise a puppy, it has been a devastating time for craft beer. That's especially true of smaller breweries and related businesses that depend on foot traffic to generate direct to consumer sales. A lot of these folks have implemented creative strategies to stay afloat, but it's been a tough slog. 

Strangely enough, the pandemic has given a boost to larger, typically older breweries who were seeing catastrophic volume declines prior to 2020. They got new life because their beers have placement in retail, which is where most consumers have been forced to purchase their beer fix during the Covid mess due to the nearly complete collapse of draft.

We don't know for sure what lies ahead. A year ago, people were bitching and moaning about how bad 2019 was and looking forward to 2020. We know how that turned out. But there does appear to be a shard of light at the end of the tunnel. Vaccines are becoming available, though the process of getting people vaccinated is creeping along so slowly that it will take years at the current pace.

In a perfect world, we'd all like to see things return to a semblance of normalcy soon. But we're probably looking at late spring or summer, at the earliest, as the point at which most restrictions will be lifted and people can return to normal activities. Even that timetable may be overly optimistic due to the complications connected with vaccine production, distribution and inoculation.  

As far as the craft beer world goes, there are a lot of challenges that may impact a return to normalcy. Honestly, I'm not sure there can be a return to the old normal. Not in the short run, anyway. Among the challenges facing the industry:

  • Craft beer was losing momentum prior to the pandemic. That was a product of consolidation, market saturation and distribution challenges, but consumer tastes were also evolving toward seltzers and various alternatives to craft beer. While the craft bubble may not have been bursting, it was certainly losing its shape. Then came the pandemic. 

  • The overall economy has been propped up by federal and, in some cases, state help, but it's a mess. The federal response has been so woefully inadequate that there will likely be a lot of pubic sector job losses at the state and local level due to revenue shortfalls and budget cuts. That isn't going to be good news for an industry hoping to regain its mojo.

  • We don't know how many restaurants, bars and taprooms will survive to the other side, but the industry has been hobbled. There are going to be fewer places buying beer from suppliers in the new world. Also keep in mind that the likely surge in patrons when things initially open up probably won't last. Why? The unstable economy. 

  • One big unknown is how much longstanding damage the pandemic did to beer consumption patterns. In my experience, regular beer outings were usually wrapped around my workout schedule. Both of those activities have been completely disrupted by the pandemic. Will I be able to return to that kind of arrangement? Do I even want to? Lifestyles have been skewed for millions and it remains to be seen what that means going forward.

  • Work itself is going to be changed when we emerge from the pandemic. Many who once worked in offices are going to be working remotely because business discovered technology allows it to do so efficiently. That dynamic will alter human movements. How will that impact restaurants, bars and pubs? We don't know. Maybe not much. Maybe a lot.

  • Finally, breweries, beer bars and some restaurants have made it easy for consumers by packaging their beer, offering easy ordering, free delivery, etc. Doing that was a matter of survival. It's low margin business compared to selling draft. Will consumers continue to seek the comfort of online ordering and delivery? How long will it take for breweries to transition out of the desperation model? We shall see.

Notwithstanding the challenges, we're all hoping for a brighter 2021. The experiences of the past year have been unprecedented on many fronts. On the occasion of seeing 2020 in the rearview mirror, I want to extend best wishes to my friends in beer. Most of you have had a much tougher year than I have, despite my challenges with Bunk. 

Time to move onward and upward. Happy New Year!

Thursday, September 17, 2020

In the Clouds: Portland Beer and the Road Ahead

Because I am not prone to follow Twitter, I missed a notification (in May!) from Oregon Hops and Brewing Archives relating to the materials I assembled as part of my work on Portland Beer. I donated those materials to the OHBA in 2014 and they finally have the materials catalogued for use. The work was finished up by a graduate student intern and took some time.

Why I wasn't notified directly about this I don't know. But never mind. The archived materials include transcribed interviews with founding craft brewers and other industry-connected veterans, as well as pertinent newspaper articles and documents. There are also a number of photos, all protected by some form of copyright.

I had intended to share the recorded interviews, which would provide interesting oral histories down the road. But I eventually realized doing so would require a lot of tedious editing due to the nature of those conversations. So the recordings will stay with me, probably for good.

These materials may be of interest to folks researching Portland's brewing history at some point in the future. I should note that all of this stuff is digital. Although I have physical artifacts that might be included in an archive like this, I don't believe OHBA has the space to warehouse these kinds of items at this point in time. Perhaps someday.

Portland Beer was, more than anything, a labor of love. While it may not be perfect, it is the only book to date that traces the development of the brewing industry here. Prior to writing the book, I spent a couple decades observing craft beer as a consumer, homebrewer, festival attendee and volunteer. I launched this blog in 2011 partly as a means of getting further immersed in the industry.

In fact, I doubt the publisher of my book would have enlisted me to write it without the blog, which (somehow) gave me credibility I would not have otherwise enjoyed. Whether I should have taken on the book project is another matter and one I will debate with myself in the years to come. Being a beer historian and writer is cool and all, but it doesn't pay many bills.

Regardless, the book is what it is. While I may question the decision to write it, the book is a decent contribution to Portland's story. It will likely remain a part of the historical record for as long as such records are kept. Perhaps one day someone will update the story. My book may be updated at some point, though only the final chapters would need significant changes.

The blog is another matter entirely. It is a living document, requiring constant attention and effort to stay relevant. The OHBA announcement regarding the book materials mentions the blog. They evidently did a web crawl of the content here and made the results part of the archive. That's fine, but the blog isn't very active at this point. Not compared to what it was a few years ago.

Why is it less active? You have to go back to the beginning to understand. I had been laid off in the Great Recession of 2008-09. I expected to return to the marketing communications work I had done for 20 years. When there was nothing happening by 2011, I started my beer journey. I probably should have pursued realistic work outside my career path instead of starting the blog or writing the book.

At the time, I thought the blog would help keep my writing, research and technical skills sharp and make me employable. Plus, I was interested in beer and knew I would be okay spending significant time around it. I was right about the latter, wrong about the former. It became evident soon enough that I wasn't employable, not doing the work I had done before, anyway.

Oh, the blog (and to some extent the book) did open up paid writing opportunities, another objective. I've been able to write about beer for a variety of outlets. That's fun work and it can be pretty interesting. But, as with the book, it doesn't provide much of an income stream for most who pursue it. Changes in the media landscape have made that path increasingly sketchy of late.

I actually kept rolling with the blog well beyond the point where I knew it had no upside. I enjoyed it. While a lot of the early posts were fluffy and promotional, the coverage improved as my perceptions and knowledge of the industry sharpened. Part of that evolution meant the approach became more analytical and critical. That became problematic down the road.

My vision for the blog was always that it would provide thoughtful, objective coverage. I didn't want to find myself regurgitating press releases or providing promotional coverage in exchange for beers or schwag. It became increasingly clear over the years that my vision was out of step with the industry, which mostly prefers promotion to objectivity.

While my output had declined over the last couple of years, it went off the deep end at the end of 2019. First Biscuit passed away in August. Then came knee replacement surgery in late October and the recovery. Then came the pandemic. Then we acquired Bunk, a dog who has required constant supervision and attention since we brought her home at the end of March.

There's no clear path back to what I was doing before. That work requires a lot of time and effort for not much return and no upside. I don't exactly know what the future holds. I'll probably write on topics that are of interest to me in and out of beer. I've actually done some of that already with posts that are wholly personal. How much of what I do going forward will focus on beer I can't say.

Of course, I will continue to observe the industry. I've contributed to Willamette Week's Beer Guide for five or six years and will continue to do that sort of work when possible. I wish there were more opportunities for paid beer writing, but the nature of the industry and state of the media landscape have made those prospects fleeting.

So there you have it. If you were wondering why things have slowed down here, now you know. As the puppy grows up and I have more time to focus on what's going on in beer and other things, I expect to spend more time thinking and writing. But there's no timetable and really no restrictions on content.


Sunday, July 19, 2020

AB/CBA Suit Alleges Conspiracy, Collusion, Dereliction of Duty

Given the players involved and the result, a lawsuit was probably inevitable. The suit filed last week in Multnomah County court alleges that Anheuser-Busch conspired to drive down the value of the Craft Brew Alliance, allowing it to acquire the company for less than fair value. Further, the suit charges that AB was aided and abetted by CBA leadership that sherked its fiduciary duties.

The lawsuit was filed by shareholder Tim Malloy, represented by Portland law firm, Motschenbacher and Blattner. Malloy seeks class action status and a jury trial. He seeks damages of $107 million on behalf of CBA shareholders. essentially the amount shareholders were shorted when the company sold for $16.50, not $24.50.

I've followed this story for several years. I anticipated that AB would purchase the CBA for the required offer price in 2017 or 2018. They didn't. I then expected them to buy the CBA for the obligatory $24.50/share prior to the expiration of the contract last August. That didn't happen. Instead, AB jilted the CBA, opting to pay $20 million for holding the option open. About two months later, the parties announced that the sale would move forward at $16.50 per share.

The suit is a double-edged sword and worth reading if you can find it and have time...it isn't a quick read. Malloy alleges that AB, whose distribution network is responsible for 90+ percent of CBA sales, "systematically and purposefully" used its control of that network to slow the sale of CBA products as the buyout approached, artificially lowering the company’s results and stock price.

There's some interesting detail. Keep in mind that Kona is the only CBA brand AB wants. It's a unicorn brand with wide appeal. Kona sales were increasing rapidly year-over-year (+13% in 2014, +16% in 2015, +17% in 2016). But the gains reversed (+10% in 2017, +8% in 2018, +4% in 2019) as the deadline for the buyout approached.

The suit references Kona stock outs in hot markets that allegedly occurred due to AB's dictatorial focus on its fully owned brands...10 Barrel, Goose Island, Elysian, etc. That strategy isn't news. Anheuser-Busch, which owns distributors in states that allow it, has gotten into regulatory trouble for incentifying the sale of its own brands over others sold via those distributors and independents they work with. Nonetheless, it would be fairly damning if they were treating Kona like a redheaded stepchild in the runup to the CBA buyout.

The flipside of the complaint involves CBA leadership. The suit names CEO Andy Thomas and other board members and managers as defendants. Malloy alleges that they negotiated the merger on the basis of a personal financial gain rather than for the benefit of common shareholders. In effect, he believes CBA leaders insulated themselves from non-controlling shareholders and had little or no incentive to maximize the sale price.

There's more, of course. Malloy claims that the CBA's sole objective in recent years was acquisition by Anheuser-Busch. An accurate appraisal, I think. CBA leadership, he says, failed to pursue strategies that might have produced organic growth because its only plan was to offload the company to AB. When the expected buyout at what would have been a good price failed to materialize, the defendants scrambled to sell the company to AB at any price. They never considered another buyer because, again, they had always intended to sell to Anheuser-Busch.

The plaintiff acknowledges that the CBA had no choice but to negotiate with Anheuser-Busch once a deal at the contracted price didn't happen. That was the reality of AB's partial ownership (around 31 percent), its two seats on the board of directors and its control of CBA distribution. Those things made it impossible to sell to anyone but Anheuser-Busch.

Nonetheless, the suit charges that "defendants acted disloyally and in bad faith by knowingly and intentionally abdicating their fiduciary obligations to the company’s non-controlling shareholders, declining to take all reasonable steps to maximize value for all shareholders, favoring a deal with Anheuser Busch, and placing their own personal interests ahead of the Company’s shareholders."

It's hard to know where this is headed. Anheuser-Busch's acquisition of the CBA has been under regulatory review since it was announced in November. Regulators appear troubled by aspects of the deal and have asked for further documentation at least twice. In response, the Hawaii portion of Kona's business is to be sold to a (supposedly) independent group. The deal remains in limbo.

As for Malloy's suit, the defendants have not responded publicly that I'm aware of. Whether the case will go to a jury trial, as requested, remains to be seen. The text of the suit suggests that Malloy has documents supporting his allegations. The form of that evidence is not revealed in the suit. If it turns out that he has substantive proof of his charges, the suit may have traction.

If it does have traction and it does wind up in a trial situation, I suspect AB/CBA will simply settle out of court. They would have no desire to air dirty laundry connected with what is turning out to be a toxic public relations deal. And $107 million is pocket change to Anheuser-Busch.

Could the lawsuit scuttle the acquisition? Doubtful. Anheuser-Busch has wanted to add to Kona to its portfolio for many years. They got it on the cheap and won't grumble too much if they have to pay a little more to make the court case go away...particularly if it looks like they will lose.

If the deal isn't finalized for whatever reason, the CBA is in trouble. They've been burning through cash and have a maxed out credit line. They don't have the cash to do much of anything. Without the buyout or a credit line extension, the company may be bankrupt.

Wednesday, May 13, 2020

LIfe Chronicles: The Case of the Artificial Knee

Long before I started thinking about craft beer, I was playing sports or enjoying some form of active recreation. You think you're indestructible. It never occurred to me that I might one day have knee problems or, perish the thought, need to have knee replacement surgery. How naive I was.

Pre-surgery: Bone-on-bone
A year ago this time, I was taking steps to deal with an arthritic left knee. Both knees had been problematic for a decade or so, the result of too much racquetball for the last 30 years; too much tennis, football and related high impact activities dating back to boyhood. Meniscus tears in both knees were repaired arthroscopically in 2006.

By 2013 or so, the left one was bothering me again. It was a different pain. X-rays showed narrowing space between the bones on the medial (inner) side. I was nearly bone-on-bone. The orthopedist told me I'd eventually need to have the knee replaced. I did what I could to extend the life of my natural joint, but it had gotten so bad by late 2018 that I had trouble walking my Labradors or doing much of anything.

Getting a knee replaced in American healthcare is a process. You jump through a lot of hoops along the way. When I saw my primary care doc for another issue, I mentioned the knee. She suggested I get x-rays while I was there. I don't suppose she was all that surprised when the films showed severe osteoarthritis in the knee.

The first thing they ask you in that situation is what your goal is. Are you going to be okay with limited activity and a lot of TV watching or do you want to be active? That info helps them formulate a treatment plan. In my case, I hoped to stay active. I wasn't interested in wearing a brace or being significantly limited in what I could do.

My primary care doc gave me a prescription for an anti-inflammatory medicine, a drug that had helped quite a bit when the arthritis first appeared. It was ineffective at this point. She also referred me to orthopedics, but first I got a cortisone shot. That's one of the hoops you have to jump through before they consider more invasive treatment. Some people respond well to cortisone. In my case, the shot reduced my static (sitting) pain, but did little to reduce the pain during activity.

Not responding well to the cortisone shot put me in line for more aggressive therapy. When I saw an orthopedic doc, he reviewed my films, considered my general health and told me I looked like a good candidate for partial knee replacement. That was the case because my knee appeared to be in relatively good shape, except on the thin medial side.

If you do a little research, you'll discover partial knee replacements aren't as common as total replacements. There are a variety of reasons for that. Age is one factor. Some people wait until they're quite old and their knees are completely shot. The medial side of my knee was ruined by activity, not age, which meant the less invasive partial replacement was an option for me.

Why did I prefer a partial replacement? A number of my friends and work associates asked that question. The answer is that a partial replacement is far less invasive. You keep your ligaments, tendons and knee cap. With a total replacement, all that stuff is gone. Recovery from a partial replacement also tends to be faster. And you can always replace a partial with a total someday.

Although I was a candidate for the surgery, the orthopedic folks had to (again) remind me of less invasive options (like wearing a brace) and walk me through the risks of surgery. One of those risks is that some patients don't derive much benefit. They get the surgery and don't get the results they were hoping for. It's not a huge percentage, but it is one of the risks.

My next stop was an MRI tunnel. An MRI, they told me, would confirm for the surgeon that my knee was what they were seeing on the x-rays. What they evidently don't want to do is go into surgery without seeing the entire picture and discover problems that didn't show up on the x-rays. Surprises like that aren't very welcome in the operating room, I guess.

The MRI was fine, supporting what they were seeing in the x-rays. They felt comfortable about the surgery. This was last summer. I found they were scheduling several months out, which meant my surgery would likely happen in the fall. In the end, it was scheduled for October 30, just a few days after I was set to return from a trip to Kauai.
One day post-surgery

I had to be careful with my legs on that trip. Why? Because one of the concerns with a surgery like this is infection. All of the medical people I interacted with warbled on and on about that. They don't want you showing up for surgery with a bunch of cuts or scratches on your legs. That meant I had to be careful when I was mingling with the ocean and rocks.

The surgery itself was quick. I arrived in the morning and was quickly put into the prep area. My left leg got the sanitation treatment. Again. I got a spinal block and they gave me some medications to help post-surgery. With a partial replacement, they expect to send you home the day of the surgery. They don't want you hanging around sucking up hospital space and staff time.

My surgery took less than an hour and I woke about 45 minutes later. A nurse was massaging my feet. The spinal block hadn't worn off and my legs were fairly numb. I guess massaging the feet gets blood moving and helps bring the feeling back. They gave me some food, Pretty soon, the feeling in my legs returned and I was able to get up. They want you up and around quickly with a surgery like this to help prevent clotting. I probably overdid it. They worry about patients falling. I didn't.

The medical people expect you to have some pain after knee replacement, though they admit everyone is different. I was given over-the-counter meds and told to take them for several weeks. For pain, they game me Oxycodone and told me to take it as needed. They advise you to stay ahead of the pain. I never had much pain, but I took the Oxy for a couple of days, then stopped.

I slept in a bedroom on the main floor of the house for the first week or so. That first night, the smoke alarm in that room started chirping a low battery warning. Perfect. Rather than wake up my wife who was sleeping upstairs, I ambled downstairs (cane-assisted) and got a new battery, then stood on a chair and replaced the offender. Maybe I should have handled it another way. No harm done.

They had given me an ice machine and advised me to use it and elevate my left leg several times a day. The idea is to keep swelling down and speed healing. I followed that advice faithfully. I was given exercises I could do in or out of bed. Those exercises were similar to the ones I had done years earlier following arthroscopic surgeries and I did them as directed.

The medical people pushed me into attending physical therapy sessions. I hadn't done formal PT after my scope surgeries and was skeptical about it following knee replacement. Most people who have knee replacement need PT. No doubt about it. But I had learned to do my own and I'm disciplined enough to do the exercises religiously. The people in the PT clinic were terrific, but they didn't offer much of anything I couldn't do on my own.

Post-surgery: No bone-on-bone.
In fact, their approach was so conservative that I didn't have the desired range of motion in my new knee when I visited my orthopedic office for a follow-up two weeks post-surgery. My PA (physician assistant in orthopedics) was mystified. He gave me an exercise to remedy the issue, which worked well. The PT folks were contacted. Honestly, I don't think they knew what to do with me. Most of the people I met in PT were significantly older than me and had gotten total knee replacements. Totally different bag. I quit formal PT soon after my follow-up appointment. My PA green-lighted that.

My early recovery was fast, maybe too fast. I was driving and walking the dog within a week. I probably did too much. Then I started having odd pains in the repaired joint about six weeks out. I wondered if something had gone wrong. My PA advised me that many patients have strange pains during the recovery process, which can take six months or more. He would have been happy to see me, but I begged off, realizing what I was feeling was probably normal.

Four months after surgery, the odd pains began to fade. I passed through six months a few weeks ago and can confidently say I'll have a full recovery. I walk without pain, can even run if I want to. I know I'll ski again. Golf won't be a problem. Keep in mind that I could never have done those things again without the surgery. No chance. I don't know about racquet sports. Pickleball I will definitely play. After the pandemic ends, I'll hit the racquetball around and see how it feels. Maybe I'll play again occasionally, maybe not.

How does the knee feel? The orthopedic folks will tell you that a replaced knee will not feel like the real thing. That's definitely the case. There's a plastic spacer/pad between the two metal pieces, invisible in the x-rays. That pad simply can't mimic the natural joint cushioning. It gets a little clunky at times, but feels a whole lot better than bone-on-bone. Trust me.

Some of the people I played racquetball and tennis with over the years either have considered or will contemplate having this surgery. It's not a big deal. It was an easy decision for me because my knee hurt every minute, regardless of what I was doing. I was absolutely unable to do normal things, like go on any kind of significant walk. Now those things aren't a problem. Even an ill-mannered Labrador puppy is okay.

My thanks to Dr. Eric Bosworth and the folks at Kaiser Permanente, particularly the team at the Westside Medical Office in Hillsboro. They made my journey relatively painless and positioned me for a good outcome. Thanks also to my wife, Laura, who took care of me during my recovery and encouraged me to follow the advice of medical people. I actually complied with some of it.

Thursday, April 23, 2020

Pandemic 2020: The Great Disrupter

It goes without saying that the pandemic we are currently passing through has been a catastrophic disruptor in myriad ways. By the time we exit the other side, whenever that is, this will be the greatest deflationary event since the Great Depression.

There will be no return to anything approximating normal in the near term. Supply chains are broken and too many are or will be unemployed. The government response has been wholly insufficient. A recent column in the New York times predicted a very slow return to what the city was prior to the pandemic. Regardless of how and when stay home orders are lifted around the country, recovery will surely be long everywhere.

Mucking up the works is the fact that a vaccine for the coronavirus is probably a year or more away. This bug isn't going away quietly and infection rates are likely to spool upward once restrictions are lifted. That means there will be some risk involved in going to public places and a pretty good chance a lot of people will limit that risk when things begin to open. Once there's a vaccine, attitudes will moderate. But that's not happening soon.

Even when it's risk-free to go out again, will people go? Keep in mind that many small businesses, including breweries, pubs and taprooms, won't reopen when this shitstorm subsides. Or they'll have limited payrolls. The pandemic is delivering a monstrous hit to the economy and a lot of people aren't going to have jobs or disposable cash in the immediate aftermath of this thing.

Another factor that hasn't been widely discussed is that people are experiencing new things. They're doing things at home that they've never done. I saw my neighbor cutting her son's hair. I see people gardening and cooking and doing things around the house that they haven't been doing forever. It's fair to wonder how much of that carries over when things reopen.

In beer, it's been interesting to watch the creative responses to the closure of bars, restaurants, pubs and taprooms. Draft died a quick death in the wake of stay at home directives. Places that were never interested in packaging beer for retail sale have been forced to do just that. Boneyard, Barley Brown's and Rosenstadt, for example. It was package or perish. Beer-to-go and by delivery are part of that,

These sales models aren't really sustainable for smaller breweries. Selling draft beer direct to consumers is a good business. Kegs in distribution are okay. But packaging and distributing add cost and offer lower margins. Same goes for delivery of packaged product. Aspects of these "revised" models may carry on in some form when we emerge from the pandemic. But these are really emergency measures put into play to keep places afloat.

Creative strategies won't be enough. There will be brewery failures, lots of them. More than 46 percent of breweries surveyed by the Brewers Association reported they could survive only one to three months. Nearly 13 percent said they would last a month or less. There were more than 8,000 breweries in the United States prior to the pandemic. We may lose a third of them.

Keep in mind that more than half of the craft breweries we have today opened in the last five years. Also keep in mind that those breweries contributed 94 percent of craft growth in 2019, while breweries that opened in 2014 or earlier contributed just 6 percent. Shocking. That point was made by Bart Watson in his State of the Industry presentation at the Craft Brewers Conference.

There's an important point to be made here, which is that newer breweries succeeded primarily by selling directly to consumers in draft, specialty bottles and premium 4-packs. A huge percentage of newer brewers adopted that model, which the pandemic has now laid low. Watson, in his presentation, wondered if perhaps too many have bet on the direct strategy. We shall see.

While there will be fewer brewers on the other side of the pandemic, there will also be fewer places buying beer. As Watson pointed out in his talk, a huge number of bars and restaurants aren't going to reopen. That number will be significantly larger than the number of breweries that close. So even though there will be fewer breweries, they will be competing for far fewer tap handles in the establishments that do survive. How this plays out is uncertain.

In some sense, it appears the pandemic has reopened the door for established breweries that rely on large scale production and distribution to grocery and retail chains. Beer sales in off premise channels are up, which may provide a boost for larger craft breweries that have been losing market share to upstarts who own the direct to consumer market, but can't effectively compete in grocery.

The only thing we know for sure is that craft beer, like a lot of other industries, will almost certainly look substantially different on the other side of the coronavirus mess. Exactly what it will look like remains uncertain and unpredictable.

Photo credit: Barley Brown's

Monday, April 6, 2020

Larrance Sells Cascade; Will Carry on with OBF

The sale of Cascade Brewing to a group of local investors, announced by press release last week, is one of the bigger beer stories of the pandemic. It puts an end to a part of Art Larrance's beer legacy in Oregon. He received a lifetime achievement award from the Oregon Brewers Guild in February, but his final legacy is yet to be written because he'll continue to be part of the industry for now. 

In fact, the terms of the deal, described as a "phased transition sale," will require Larrance to remain involved in Cascade's business in an advisory capacity pending regulatory review, and to provide assistance to the incoming ownership. I'm not sure if there's a contractual time limit or if it depends on how long it takes to jump through regulatory hoops. Anyway, it ought to be an interesting arrangement.

The sale did not come as a much of a surprise to many who follow the industry. Cascade has been slipping for several years. A Brewbound story reported that annual barrelage declined 21 percent 2017-2018. Those are the most recent Brewers Association numbers. If you look at Oregon stats, the output of Cascade's blending house, where the lucrative sour beers are produced, was down 27 percent 2018-2019. Even more depressing.

Why would the business be tanking? Maybe because the market for specialty sour beers has become increasingly crowded and competitive. When Cascade launched its sour project in 2002-03, the resulting beers were a novelty. Today, sour beers are widely available. It may be that Cascade didn't keep up with the curve of what others were doing. I don't know if that's an accurate point. I do know my geek friends who currently chase sours have a lot of choices and most prefer beers from breweries other than Cascade. 

Cascade's trajectory is the key to understanding why Larrance decided to sell, though the pandemic may have made the sale more urgent. The curious thing to me, when I read the press release, is how the new owners intend to restore Cascade's status in a crowded market. The incoming team has experience in brewery, restaurant and taproom management, but does not appear to have knowledge of the niche industry Cascade is part of. That makes the sale intriguing.

When I spoke to Larrance on the phone, he told me it was time for him to step aside and let new owners write the next chapter in the Cascade story. "I'm getting old," he said. "I need to retire and let younger folks take on the challenges of today's industry." That's a pretty standard response in situations like this. If he were a politician, he would have said he wanted to spend more time with family. The deal had evidently been in the works for a while and now was a good time to finalize it. 

With Brian Yaeger at the Barrel House, 2013
The seeds of Cascade's story go back to Larrance's days at Portland Brewing. Recall that he and high school buddies Fred Bowman and Jim Goodwin co-founded Portland Brewing in 1986. They and the other founding brewers were instrumental in getting Oregon's Brewpub legislation passed in 1985. The Brewpub Bill (aka SB 813)  allowed breweries to sell their beer directly to consumers and essentially launched the craft beer revolution here.

Portland Brewing was highly successful in its original location on Northwest Flanders. It later moved to a much larger facility in industrial Northwest Portland. Soon thereafter, Larrance was tossed to the curb when the founders lost control of the company, a story detailed in Portland Beer. Being forced out unceremoniously provided the motivation that resulted in the founding of Cascade Brewing and, eventually, the opening of the Raccoon Lodge in 1998. 

The Raccoon Lodge has always been an enigma. It failed to ever build much of a following. The beers, which were always branded as Raccoon Lodge products, were serviceable, if not exciting. But the location in Raleigh Hills was problematic from the start. The reason is that beer fans from Beaverton and the westside have no problem traveling to the city core, where the craft beer scene has always been centered. But folks from the core rarely return the favor by traveling to the westside. So the Lodge was not a winner. 

Larrance built the Lodge with help from associate Ron Gansberg, who left Cascade suddenly a couple of years back. Gansberg alone brewed the Raccoon beers for many years. From the start, he and Larrance were determined to come up with what they referred to as a "magic elixir." They did not want to be part of what they called the "hops arms race" that was then underway. That didn't seem like a viable business strategy. Instead, they wanted to develop a product that could be produced on a small scale and sold at a premium price. 

People forget, but the sour program they landed on did not come about by way of an established concept. It was the result of creative experimentation. They saw people like Alan Sprints producing small batch specialty beers. They saw brewers playing around with barrel aging. Gansberg's initial experiments involved putting an English-style IPA in wine barrels. They then tapped a barrel every month over a four month period to see how the beer had evolved next to the same beer from stainless. 

Those experiments fueled their interest in the idea of barrel aging and bacteria. In the end, they chose to produce Northwest style sour beers featuring Oregon fruit, a style that didn't exist previously. They chose lactobacillus for fermentation because they felt it was a unique option. It took some trial and error to get the beers where they wanted them to be, but eventually Cascade was winning medals in competitions and praise from a variety of publications. Larrance has always claimed that he provided Gansberg with the tools needed to build a successful program and otherwise stayed out of the way. 

The Barrel House in 2011
Of course, medals and national recognition failed to solve the Raccoon Lodge problem. They needed a location in the city core. Larrance finally found the space on Southeast Belmont, where Cascade Brewing's Barrel House opened in 2010. The area around the pub has morphed considerably since then, with trendy shopping and residential spaces. But the Barrel House was a gigantic hit from the start. It made Cascade beers readily accessible to the crowd that wanted them and would likely not travel to the westside. It also allowed for easy tourist access and the Barrel House in its heyday always attracted visitors from afar.

The success of the beers created a new problem: they did not have enough production space. That's what led to the opening of the Blending House off Highway 217 several years ago. The climate-controlled space quadrupled the available room for blending and aging from 5,000 to over 22,000 square feet. That facility is pretty amazing to behold. Larrance spent a bundle. 

In the face of declining business, Cascade did not stand still. They rebranded several years ago, introducing refined labeling appropriate for beer that sells at wine prices. They also moved away from the large format bottles to smaller ones. More recently, the Raccoon Lodge was rebranded as The Lodge at Cascade Brewing, an overdue ploy to leverage the Cascade name. It will be interesting to see what the new ownership group does to reverse the downward momentum, given what has already been done. 

Art Larrance, who turned 76 in February, will carry on as director of the Oregon Brewers Festival. an event he helped found in 1988. Once the premier beer event of the year in Portland, OBF has seen declining attendance in recent years. It now runs three days in late July, down from five a few years ago. The coronavirus pandemic may force its cancellation this year. Organizers will make a decision on that in early May, Larrance told me. Industry friends tell me OBF is for sale, has been for a while. 

I met Art Larrance a quarter century ago when I started volunteering at OBF. Our relationship was cordial, but remote until 2010 or so. That's when I first started talking to him about the book I hoped to write on Portland's beer history. He provided gracious assistance, connecting me with people from the old days and sharing his collection of historical materials. The book could not have been written without his help. 

What does the future hold for Art Larrance? I last saw him last summer at the Lodge, where we had arranged to meet to talk about something. I wound up riding along as he delivered a keg to a pub in Hillsboro. Yup, one of the founders of Oregon's craft beer movement was selling and delivering Cascade beer. Retirement, whether full or partial, won't change him that much. He knows a lot of people and likes to jabber about the business. He'll be around.

Friday, March 27, 2020

The Pandemic and Beyond

The past two weeks have been catastrophic for the American economy. Millions of jobs have been lost, at least for the duration of the coronavirus pandemic. We don't yet know when the economy will reopen. But there's a good chance it will never be quite the same.

Craft beer has, of course, been hard hit by social distancing and shelter in place directives. The closure of bars and pubs has sent owners and employees scrambling. I'm not sure how many people have been laid off in the Oregon beer industry. It's a big number.

Many of those people had jobs in pubs, bars, taprooms, etc. Deschutes laid off 300; McMenamin's 3,500. Anyone who follows the industry knows someone who was laid off or had their hours and/or pay reduced. Or maybe they weren't paid on schedule for work already done, as in the case of Brandon Easley and laid off McMenamin's employees. The money simply isn't flowing as it was a few weeks ago.

I've seen people whining about the layoff numbers. What were these companies supposed to do? If the United States had job saving programs like some European countries, people might have stayed in jobs, albeit with not much to do. Instead, they're collecting unemployment benefits. At least being laid off allowed for that.

I suspect the layoffs aren't over. On-premise sales are flat, something we haven't seen since Prohibition. Many breweries are holding onto production staff to keep packaged beer flowing into distribution channels, or to sell on a to-go or delivery basis. But these are stopgap measures designed to keep places afloat, not a shift in how they hope to generate profits going forward.

As much as everyone is hoping for a fast recovery, it seems unlikely with the economy at large or craft beer. It's become obvious as we've stumbled through the pandemic that American small businesses are leveraged and lack the reserves to weather economic jolts as severe as this one. They need a steady flow of inbound cash to stay viable and it isn't there.

Craft beer has its own problems. There are too many breweries and markets are saturated in many areas. A colleague told me he believes 20 percent of American craft breweries will fail as a result of the pandemic...roughly 1,600 breweries. I think that estimate is low. The pandemic is going to accentuate overcrowding and saturation issues, accelerating the failure rate.

We don't know when the social distancing and shelter in place directives will end. That's probably a month or two away. When they do end, everyone will start to dig out. As breweries ramp up production, they won't be doing so for a full complement of patrons. Why? Because people aren't going to immediately have disposable cash. This epidemic is an economic calamity.

Habits and attitudes are also going to be altered, just as they were by 9/11 and the Great Recession. How long will it take for confidence to return? When will people feel comfortable in group gatherings? Even when they can afford to do so, when will they flock back to bars, pubs and taprooms? My guess is that's going to take some time.

In fact, it's difficult to imagine what the post-pandemic economy looks like. We won't truly begin to assess the event's downstream impact until we reach the other side. But it's going to be a tough slog for everyone when restrictions end. And craft beer is far from immune to that reality.

All anyone can do is make the best of things and hope for better days.

Friday, February 14, 2020

Grains of Wrath to Open in Former Side Bar Space

Grains of Wrath is coming to Portland. Naturally, this isn't the first place you're hearing about that. It was splashed across social media and various beer sites after the press release hit inboxes Wednesday. But there's more to the story than most realize.

Camas Patio
As almost everyone knows, Grains of Wrath (GoW) has been operating in downtown Camas for about two years. The business there has been an unqualified success, attracting patrons from all around. It's packed during peak hours, often busy in between.

Brewmaster Mike Hunsaker established a solid reputation in Portland via his time at Fat Heads. Hunsaker is surely best-known for his IPAs, but he has extensive brewing chops. He's won a number of awards at GoW, including medals for his Vienna Lager at GABF in 2018 and 2019. Hunsaker's beers are good enough that people cross the bridge to enjoy them.

Wednesday's press release announced plans to open on North Williams. I assumed that meant they would be taking over the old 5th Quadrant space. That was based on the fact that GoW operates a highly successful pub business in Camas and would be replicating that model here.

Not the case.

In fact, GoW will occupy only the relatively small space that was previously Lompoc's Side Bar. The place, expected to open this spring, will comprise a brewery and some 50 seats. It'll be a 21 and over establishment that features Hunsaker's beer, light food, liquor, wine and cider.

"The expansion is limited by design," co-owner and general manager Brendan Greenen told me via email. "We like the retail aspect of a taproom, but don't have a lot of interest in another restaurant unless it's the perfect storm of location and opportunity. We have a large restaurant as it is, and intend to keep that as our home base for now."

The Team (courtesy Grains of Wrath)
There's more to unpack. Greenen and partners, Hunsaker, Shawn Parker and Brendan Ford, see a lot of great restaurants in the North Williams area. They don't really want or need to compete with those places. Instead, they feel like they can supplement the texture or the area with a focus on great beer, liquor and limited food.

"The 21+ focus is really just a factor of the tiny space," Greenen said. "What we've seen in our Camas location, especially during the summer with our large patio, is that kids get restless and want to get up and move around. In a large space like our brewpub, that’s generally not an issue. In a small space like in PDX, it would present multiple issues."

They aren't exactly sure what 'light food" means. Part of the problem, as they renovate the recently leased spaced, is figuring out where to put the food prep area. And what to offer in a limited menu.

"We're still kind of fleshing the menu ideas out," Greenen said. "We're looking at a couple of spots within the leased space to figure out where it would be best to place that part of our operation."

They're leaning toward a quality sausage/meat/small plate menu in which they would partner with  local purveyors to have quality product, yet a small menu. The reason they want food is they want to be able to offer liquor to customers, in addition to beer, wine and cider. Makes sense.

So what we'll have is a Grains of Wrath outpost in the old Side Bar space. They hope to launch the brewing part of the operation there by late summer. Until then, all of the beer will come from Camas. That hardly matters. Hunsaker's beers have fans. When GoW builds it, people will come.

Tuesday, February 4, 2020

At pFriem, Business Symmetry Drives Success

The business of America is business. Cool Calvin Coolidge said something like that nearly a century ago. It was in the middle of Prohibition. He certainly wasn't thinking about beer. But the folks who formed pFriem Family Brewers have taken that notion to heart.

Head brewer Gavin Lord in the new warm room.
A group of media nerds had the pleasure of touring pFriem's soon-to-be open production facility in Cascade Locks over the weekend. The new facility is a crucial cog in the strategic plan that the pFriem brain trust has articulated. Without it, they would be unable to support growth moving forward.

Since it opened in 2012, pFriem has been in an almost constant state of expansion. The Hood River headquarters houses the original 15-barrel brewhouse and they've increased the size of the space several times. This is where they produce the widely popular IPA and Pilsner, the various seasonals, as well as the barrel-aged stuff.

In fact, everything has been produced in Hood River. Last year, that meant something like 140 different beers, all told. Limited space in Hood River has caused logistical challenges. Producing barrel-aged product is a time consuming, space hogging process. Keeping kegs, bottles and cans of the most popular styles requires production and packaging space. Then you need space to store kegs, bottles, cans, grain, hops, as well as product that is conditioning or ready to ship.

For the past several years, pFriem has been leasing space where it stores some the materials it uses in the production and packaging process. They've been forced to navigate logistical hoops involving material storage, as well as warm room conditioning and cold storage in Hood River. It's been a drag on progress and something needed to be done.

Like everything else they do, the 22,000 square foot facility in Cascade Locks was not planned in haste. They started thinking about it three years ago. The idea was that it should be big enough to meet their needs for 4-5 years once open. Besides being obsessed with quality, these guys are meticulous planners. They're well aware of the slowing that's going on in craft beer, also aware that their own numbers continue to grow.

Union Local 541 box
Perusing the new facility, I tracked down founding partner, Rudy Kellner. I asked him if they think the place is big enough to support pFriem's upward trajectory. I asked because I've seen how fast places like this fill up when a brewery is in high growth mode. He told me the facility is actually a bit bigger than they originally envisioned and they feel comfortable. It figures.

They're playing it safe, obviously, knowing full well that it's better to have space you don't need than to need space you don't have. If it winds up being too small in a few years, there's a readily available and buildable lot next door, Kellner said. No stone left unturned.

The new facility will soon house the entire barrel program. There's room for hundreds of barrels and brewers will be able to access and move them fairly easily. A significantly larger warm room (than what they have in Hood River) has garage doors on a long side so stacks of packaged product can be efficiently moved as needed. Ample cold storage, space to stage empty packaging materials and ingredients, as well as a designated Coolship room, complete the picture.

They put a lot of thought into this place. There won't be an official tasting room or pub in Cascade Locks, though they will host an unknown number of special events in an open area near the barrel stacks. I don't know what the area around the facility is going to look like, but it may lend itself to small outdoor fests down the road.

Up until now, pFriem's barrel program has been rumbling along in cramped quarters. The space in Hood River was insufficient to support the robust innovation and production goals of that program. The Cascade Locks facility changes the game completely, allowing for the efficient production of a high value product that's a small, but important part of the business.

Fans who want to tap into those beers may be interested in pFriemsters Union Local 541, which pFriem launched last summer. The club was initially available only to Founding Members, but there are a limited number of spots are available to new members in 2020. Members receive regular allocations of rare pFriem beer, exclusive merchandise, VIP access to events and more. Hubba.

With the space-intensive barrel program gone from Hood River, pFriem will undertake a renovation and expansion program there. The 15-barrel setup will carry on, to be used mainly for smaller batch beers. They'll install a new state-of-the-art brewhouse that's roughly three times the size of the original, which is where the high volume beers will be brewed. Plus, a canning line.

Indeed, the introduction of Pilsner and IPA in cans last year was and is a gigantic home run. Cans account for about a third of of total sales, and helped grow brewing volume by 50 percent in 2019. Although IPA edges Pilsner in can sales, Pilsner is pFriem's best selling beer, a development they would never have predicted back in 2012. They are evidently looking at putting additional styles in cans once the new brewery ramps up.

But beer isn't the only focus at pFriem. Their desire to evolve and expand food offerings at their pub has been thwarted somewhat by the limited size of the kitchen there. That's going to change. The pub will close for several days (Feb. 18-21) to facilitate a kitchen remodel that will grant head chef Justin Congdon and his staff space needed to upgrade their program. The pub will reopen on Feb. 22, just in time for Zwickelmania 2020.

It's worth mentioning that the Ports of Hood River and Cascade Locks have embraced and supported pFriem's mission. Beer is manufacturing and the Gorge welcomes those jobs, as well as businesses that attract year-round clientele from Portland and beyond. The success of pFriem has confirmed the strategic faith the Port of Hood River had in them from the start.

There's an instructive note here. As I've said before, pFriem appears to do a lot of things well. In a maturing industry that is increasingly crowded and competitive, it continues to flourish. There's nothing easy or lucky about it. Lots of places have appeared on the scene in recent years. Some have made good beer. Few have been able to maintain their integrity with scaled growth.

In effect, pFriem is showing us what a successful contemporary craft brewery looks like. They plan and manage for success. The co-founding team of Josh Pfriem, Ken Whiteman and Kellner has navigated a steep growth curve in a challenging industry while maintaining core values of innovation, quality and employee growth. The art of business symmetry.