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Tuesday, April 03, 2012

Are Flagships Doomed?

Two decades ago, this was how you built a successful craft brewery: find a market niche that wasn't being exploited, plant a flag with your "flagship" brand, and start buying fermenters to prepare for meteoric growth. Indeed, this has been the American model for decades. A beer is associated with its key brand: High Life, Blitz, Budweiser. The effort to introduce new brands (Genuine Draft, Henry Weinhard's, Bud Light) were extremely slow ventures--and often doomed. In craft brewing, once a company had seized a style, it was very hard for other breweries to do more than chip away at the market. Deschutes grabbed porter, Sierra Nevada pale, Sam Adams lager, and New Belgium amber.

That model is a dinosaur.

A couple weeks ago, it all crystallized for me when I was on an expedition to try the Widmer's most obscure beer. This is the Widmer Brothers who, in the old model of business, seized hefeweizen. The Brothers invited me and a few bloggers to witness this beer in its native environment: a low-ceilinged, claustrophobic room in the depths underneath the Rose Garden. Fortunately, the evening began with a Blazer game (though it was that Milwaukee debacle on March 20, which wasn't ideal). The rare species was not available to plebes in the arena, though.

Instead, after the game, we had a pint at some secret restaurant that only those privileged with extremely good, court-side-type tickets have ever seen. Those VIPs can enter the place privately, away from the rabble, dine finely in soft pools of light while the masses team rowdily above. (I caught sight of Paul Allen roaming outside the restaurant after the game.) I trust this kind of lifestyle is not in my future.

Then we were off to the press room, that aforementioned claustrophobic den. This is where beat reporters cover the blazers and post their stories to the papers back home. And this is where the Widmers offer Off the Record Pale Ale, made exclusively for the press. And it was there, sipping that beer that will never, for love or money, be available to the general public, that I had my moment of clarity.

This year Widmer Brothers will release 23 different bottled beers. Or, put another way, 22 beers not named Hefeweizen. Twenty three beers! (Draft-only, festival beers, and Collaborators are not included in this tally.) If you think about those old companies that raced to early success with their flagships, none of them is close to a single-beer brewery. Sam Adams, Sierra Nevada, and New Belgium all dominate certain segments of the craft market, but they also have vast lines of 48, 17, and 25 beers, respectively.

Brands are still very important. The value of Sierra Nevada Pale, Widmer Hefeweizen, Fat Tire, and Boston Lager is immense. But these brands are sort of like the macro brands--they don't boast the kind of dynamic growth potential of specialty beers. In order to grow, breweries can't depend on a beer that accounts for 80% of production. They need legions of small-sellers, beers that account for a few percent of their total sales, to boost growth. One of the great virtues of beer is its infinite possibilities: a brewery can create a product for a market as tiny as a few beat reporters. Atomization is the nature of US culture, though. No one gets their news, entertainment, or products from the same few titans. For the near future, anyway, niche is the way.

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Full disclosure: the Widmer Brothers paid for the whole thing--tickets to the game and beers at the game and secret restaurant afterward. They also gave us pints of Off the Record Pale when we finally descended to the press room after the game.

10 comments:

Rich Isaacs said...

I agree with your conclusion that a brewery can't start by grabbing a whole style and just producing that one beer, but I do think breweries grow by doing normal styles better than the competition. What I mean is that a company like Founders doesn't survive by just releasing KBS and Breakfast Stout. They need their Pale Ale and Porter to bridge the gaps between their specialty releases. Plus, specialty releases can be quite expensive to brew so the profit is generally lower though I'm guessing on that part.

But with the number of breweries available now, you can't just pick one style and stop there. You need a hook to get people to drink your stuff in the first place.

I'd say The Bruery comes closest to purely surviving on niche releases but they have their Reserve Society to help out with cashflow and support such a business model.

Pete Dunlop said...

Established brands, even if they're good beers, fail to create much excitement in an industry that is increasing driven by social media chatter and special event buzz.

In Widmer's case, Hefeweizen sales have been declining. They have responded by embarking on a diligent specialty beer program...which is refreshing and expanding their brand presence at the same time. It's a smart move, really the only move. I give them a lot of credit for creatively and experimentation. Some truly great beers are coming out of this program, in my opinion.

By the way, I appreciate the full disclosure. Widmer essentially paid you for this coverage. This kind of disclosure ought to be standard practice within the blogging community. Too bad it isn't.

Rich Isaacs said...

The disclosure may actually be required if he makes money on the blog. Certain issues with taxes and such. Doesn't stop it from being a tremendously good idea though.

Pete Dunlop said...

I think Jeff can verify that he makes no money directly from the blog. I often wonder about the junkets brewers occasionally provide, where beer and food is provided. Or beer shipments. It isn't technically compensation, I guess. Anyway, there are blogs out there that do make money where there is zero disclosure. Trust me.

Jeff Alworth said...

Rich (first commont), agreed. It would be fascinating to do a study and ask craft drinkers this question: Do you mainly drink favorite brands of beer or mainly experiment with beers unknown to you? My guess is that this would be about 50-50, but who knows?

On the issue of disclosure, there is actually some law mandating we disclose when products were given to us (it doesn't have to do with taxes, which are an issue for a different thread). I sort of hate the idea that you're legally mandated to do that, but the reason I try to do it is for a different reason.

If you're going to be in the business--whether for fun or career--of evaluating something, you're announcing: "listen to me, I have something valuable to say." If you want people to actually listen, you better be very up-front about any potential conflicts of interest.

The purest way is to avoid free products or junkets. I respect those who do (rare though they may be), but I think disclosure is adequate. Knowing you're going to have to cop to a freebie changes the way you write about something. Indeed, it actually makes me more critical. I have to be scrupulously honest (and harsh, where needed) or people's BS-detectors will go off.

Anonymous said...

Why do you refer to Henry's as a new beer? I'm sure there is some context for your remark, but I don't get it.

Rich Isaacs said...

Fair enough Pete. I was just guessing about Jeff making money off the blog, but you're right there aren't any ads or anything on it.

Jeff, I'd agree that would be a really interesting study. I think you'd get different answers depending if you asked when they are drinking the beers though. Like, beers for everyday at home versus beers you'd order at a bar. There's probably a lot of people out there that will buy something consistently for home drinking. I know I'd fall into the variety category as I try new things all the time, but that isn't specific to just beer.

As for disclosure about free stuff, I think it's definitely a good thing. Getting something for free versus paying money for it will affect reviews. It doesn't totally surprise me that you're harsher when it's free, though, because it frees you up from the regret of spending money on something and being disappointed in it. The latter makes you more likely to convince yourself it wasn't bad or at least look for a silver lining. Increase the price and the silver lining becomes larger.

Soggy Coaster said...

So, Jeff, how was Off the Record Pale Ale? Or is that information available only on background?

Pete Dunlop said...

It's pretty common for entities to ask for coverage in exchange for something...beer, tokens, tickets, passes, lodging, etc. Negative reporting is generally not encouraged or appreciated.

Jeff Alworth said...

I did once have blogads on the site--but I had no control over what appeared, so I wasn't commenting on breweries I was trying to get money from. (I scrapped them because they made too little money. Now I have no income from the blog. Not by choice!)

Soggy, the beer was a pretty standard pale. My palate wasn't exactly the freshest it's ever been. I think they were shooting for a beer that would be tasty but not too weird for a broad range of palates. The Blazers folks said the media really like the beer and love the idea.

Pete, I disagree that negative reporting is not appreciated. I've panned a number of beers by breweries, and while I know they disagree with my reviews, they never suggest that I should do anything but offer my actual view (maybe because they know it's hopeless).

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