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Monday, October 06, 2008

Oregon Beer Business: Four Views

Over the summer, I got a call from Ben Jacklet at Oregon Business magazine to do a little deep background on an article he was working on. It's out now, and well worth a read. In it, he talks to the owners of four of the big Oregon breweries and discovers that their business models are wildly different--yet all of the companies are succeeding. I don't know what it reveals about business strategy, but it sure says a lot about the characters in the beer biz. I encourage you to go read the whole thing, but here are a few excerpts to whet your appetite:

Rogue's plan from the start was to create an identity for the beer and take it national (international, it turned out) as soon as possible. No wonder, given where the founders came from.
The 65-year-old Rogue founder [Jack Joyce] is quick to reject or contradict the typical answer to that question, or any question for that matter. But get him talking, and powerful themes emerge: the interrelated powers of instinct, creative freedom, irreverence and good ideas. Oh yeah, and then there is the fact that Joyce was deeply involved from Day One with Nike’s launch and development of the Air Jordan brand. He knows a thing or two about pricing, marketing and brand loyalty. He understands the importance of developing world-class products that are worth a premium to consumers. He respects the power of “unique thunder,” his term for the creative interplay between consumer and business at the point of sale....

Given that continued growth, any interest in taking Rogue public?

“God, no,” he laughs. “We wouldn’t pass the drug test.”
Deschutes took the opposite course--steady local growth. But the tortoise approach has worked well for owner Gary Fish.
Deschutes is not distributed as widely as Full Sail, Rogue, or the brands of the Craft Brewers Alliance, but it is No. 1 within Oregon. Two decades of steady growth have enabled Fish to ramp up production in Bend and bring brewing back to Portland’s Brewery Blocks, with a 10,000-square-foot brewpub that opened in May. And while he is not offering specifics yet, he is entertaining options to take Deschutes national.

One thing Fish is certain about: the consumer’s appetite for more craft beer will only grow. Mention market saturation to him and you’d better be ready for powerful rebuttal. “People ask me: ‘There are 90 breweries in Oregon. How many breweries can Oregon handle?’ I turn it around. There are 350 wineries in Oregon. How many wineries can Oregon handle? ... “Saturation? Are you kidding me? [Craft brewing is] 4% of the market; 1,400 companies nationally share 4% of the market. And it’s growing, and it will continue to grow. Saturation? We haven’t even scratched the surface.”
Widmer [Craft Brewers Alliance]
Jacklet is clearly a great reporter--he managed to hone in on the key dynamic that has market the Widmers since they signed up with A-B in the 90s--how to retain street cred while making the moves typical of a corporate brewery.
The distribution partnership with Anheuser Busch has enabled Widmer to grow into a national brand that performs well in Northern Virginia, North Carolina and Southern California as well as the Northwest. It has also brought backlash from some beer purists who equate Anheuser-Busch with pure evil. Never mind that it has never had anything to do with how Widmer brews its beer.

The “too big to be micro” critique is clearly a sore spot for the brothers. In their view, their beer has gotten better as they have grown, due to equipment upgrades and competitive hiring for brewing specialists. “If people were saying our beer used to be good but it’s not good any more, then I would apologize for that,” says Kurt. “But it is very difficult to apologize for getting too big when the quality is better than it’s ever been.”
Full Sail
From a good but perishable company in the late 90s, Full Sail has become the very definition of street cred. They have so much, in fact, that brewing part of the Henry's portfolio--not to mention the first Oregon micro-macro--only seems to have burnished their credibility. Jacklet cites an unlikely source: the number 47.
To reinvigorate the Full Sail brand, [CEO Irene] Firmat worked with Chris Riley, a brand consultant based in Portland who has done a lot of work for Apple. In one of the interviews Riley’s team conducted, a customer said she liked Full Sail but she didn’t like to buy products from large companies. The interviewer asked the customer what she considered large, and she said 500 employees. Firmat couldn’t believe it. She had told Riley Full Sail had about 50 employees, but a recount found 47. She reported to Riley and he started laughing. “You don’t know what 47 is?” he asked. She had no clue. “It turns out there’s a cult around the number 47,” she says. “If you Google it there’s a mathematician out of Oregon State who has done all this research on it; 47 is the most randomly used number in the world.”
By the way, Jacklet cites me comparing the Oregon beer culture to the Italian Renaissance. My point was that the creativity in brewing here feeds on itself, creating brewing Bottecellis and Michelangelos, all supported by an enthusiastic, appreciative audience. It's a point I've made before on the site, but that was the origin.

Go read the whole article. Also, there are links from the online story to interviews with the Joyce, Fish, the Widmers, and Irene Firmat.

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