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OCTOBER 2008: COVER STORY
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DRINKING
AGE
285 million bottles of beer on the wallOregon’s brewing industry by the numbers |
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| 63: | Number of brewing companies in Oregon |
| 88: | Number of brewing facilities in Oregon |
| 1: | Portland’s rank among U.S. metro areas for craft brewing markets |
| 1: | Oregon’s rank among states, craft beer consumption per capita |
| 2: | Oregon’s rank, hop production |
| 4: | Oregon’s rank, breweries per capita (behind Vermont, Montana and Maine) |
| 860,000: | Barrels of beer brewed in Oregon in 2007 |
| 5,000: | Brewery jobs in Oregon |
| $2.25 billion: | Annual impact of Oregon’s beer industry |
| 5.9%: | U.S. market share of craft beers by dollars |
| 3.8%: | U.S market share of craft beer by volume |
| 11.4%: | Oregon market share of local craft beer by volume |
| Sources: Oregon Brewers Guild, Brewers Association, John Dunham and Associates | |
Metro Portland has 38 breweries, more than any other city in
the world. Statewide there are 80. In other states craft
brewers dream of a future where 10% of the draft beer poured in
pubs and taverns will be independently brewed by local
artisans. Here that figure is nearing 40% and it won’t
remain a minority share much longer. New brewpubs are bubbling
with customers in small towns and cities all over the state,
and the beer pioneers who launched the industry continue to
grow, evolve and spawn creative start-ups. Two notable recent
additions to Oregon’s brewpub population, Three Creeks
Brewery Co. in Sisters, and Double Mountain in Hood River, were
entrepreneurial efforts by former employees of the Lucky
Labrador Brewing Company in Portland and Full Sail Brewing in
Hood River.
No other state can match Oregon’s thirst for and
fascination with craft beer or the robust diversity of its
brewing industry, from the plucky Roots Organic Brewing Company
of North Portland to the sprawling 2,000-job empire of the
McMenamin brothers. Gov. Ted Kulongoski’s “Economic
Vision for Oregon,” written in October 2006 to chart a
strategy for the “innovation state,” singles out
the “distinctive taste of an Oregon micro-brew” as
a home-brewed innovation propelling the economy forward.
Portland writer Jeff Alworth, author of the blog Beervana,
compares Oregon’s beer culture to the Italian
Renaissance.
Whether you think of it as an industry cluster or a cultural
flowering, beer is serious business in Oregon. The industry
celebrated its unofficial coming of age this summer with the
21st annual Oregon Brewers Festival, and the beer pioneers who
started it all are still on the leading edge. A look at five of
Oregon’s most distinctive beer barons — Jack Joyce
of Rogue Ales, Irene Firmat of Full Sail Brewing, Kurt and Rob
Widmer of the newly formed Craft Brewers Alliance, and Gary
Fish of Deschutes Brewing — reveals plenty about how they
helped build this quirky empire, and where they might lead it
from here.
These five leaders and their strategies are as distinct from
one another as are the beers they brew. The goal they share is
to build on 20 years of evolution and growth without losing the
commitment to creativity and fun that made them such a hit in
the first place. As Gary Fish, founder and CEO of Deschutes
Brewing, points out, “We haven’t even scratched the
surface.”
PHOTOS BY DENISE FARWELL
ROGUE ALES
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ROGUE BOSS OF A ROGUE NATION
Jack Joyce is the first to admit, make that announce with
pride, that Rogue Nation has no use for HR departments,
planning or discipline.
“We also have a saying around here that anything worth
doing is worth doing half-assed,” Joyce adds.
How exactly has this business grown by more than 30% for each
of the past three years?
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HEADQUARTERS: Newport FOUNDED: 1988 OWNERSHIP: Jack Joyce, Bob Woodell and Rob Strasser (all formerly of Nike) FOUNDER: Jack Joyce PRESIDENT: Brett Joyce EMPLOYEES: 250 PRODUCTION: 60,000 barrels GROWTH: more than 30% each of the past three years BRANDS: Dead Guy Ale, Shakespeare Stout, Hazelnut Spiced Rum NEW DEVELOPMENTS: Leasing farmland and partnering with hop and barley growers; plans for using hop fiber as fabric for apparel WEB EXCLUSIVE: READ FULL Q&A WITH JACK JOYCE |
The 65-year-old Rogue founder 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.
“The other thing we got out of Nike was a board,”
he says. “We started at zero and we couldn’t afford
the talent, but we had beer. So we got a nonshareholder board
that’s been with us for years, which includes the former
president of Nike, the former president of Adidas USA and the
guy who ran production at Nike.”
Not bad. But the path to Rogue nationhood has been far from
corporate. Rather than pursuing efficiencies, Joyce has built
his 250-employee fiefdom through creativity and whim. He got
into distilling after hiring a merchant marine who used to make
hooch in the engine room. He got into farming for the fun of
it, he says; it just so happened that the price for hops was in
the process of quadrupling. He’s led Rogue into
McMenamins-style beer lodging in Astoria and restaurants in the
Portland International Airport, the Oregon Aquarium and the
North Beach neighborhood of San Francisco. Rather than pawning
the usual mugs and coasters through his website, he sells Rogue
Nation yo-yos, tattoos and condoms.
Plan or no plan, it appears to be penciling out. Rogue ales
have been selling in all 50 states for over five years, and
Joyce says: “We aren’t just in these states. We
sell through them.”
The latest adventure for Rogue involves leasing farmland for
hops in the Willamette Valley and barley in Central Oregon.
Joyce insists the analysis for Rogue’s foray into farming
“does not exist to this day,” but it certainly was
good timing, given the insane recent price bumps for beer
ingredients, especially for hops.
Joyce and his partners are also exploring secondary uses of
the hop plant for making fabric. If all goes according to
non-plan, Rogue may one day release all-Oregon-ingredient Rogue
Nation apparel to accompany its new all-Oregon-ingredient
Independence Ale. Or it may not. It depends.
“We don’t do anything for money,” Joyce says
of the farming venture, with a characteristic flair for
contradiction. “But once we do something, then it’s
a matter of pride. We’re going to make money at
it.”
Joyce doesn’t claim to understand how Rogue Nation, a
land of $5 beers, keeps booming even as the larger nation it
operates inside faces hard economic times, with home values
plunging and prices soaring. “I don’t know the
answer to that question,” he says. “Especially in
economic times like these. Unless there’s a list of
things you won’t take off your shopping list no matter
how bad things get. For our customers, Rogue is pretty high up
on the list.”
Given that continued growth, any interest in taking Rogue
public?
“God, no,” he laughs. “We wouldn’t
pass the drug test.”
DESCHUTES BREWERY
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DESCHUTES RIDES A SWIFT CURRENT
It will come as little surprise to those familiar with the
rise of Bend’s Deschutes Brewery that founder and CEO
Gary Fish is an intense skier. He has approached the business
of beer with the gusto of a skier launching off a cornice into
a field of powder. He has had to improvise and learn from his
mistakes at full speed, because few would have predicted 20
years ago that the City of Bend or the business of craft
brewing would become what they are today.
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.
Fish, 51, grew up in a family that was deeply involved in the
California wine renaissance of the 1960s and ’70s.
Instead of following his parents into wine, he moved from
California to Utah for the skiing. Then, after consulting with
his father and helping a friend launch a brewpub in California,
he decided to plunge in waist-deep with a brewpub in Bend in
1988. At first Deschutes struggled in Bend, but its reputation
for quality spread, thanks to the artistry of brewmaster John
Harris (now with Full Sail), who created recipes for Black
Butte Porter, Mirror Pond Pale Ale and other distinctive
Deschutes brews.
“For the first six or eight years we never had to sell
any beer,” says Fish. “People just came and bought
it. We had the brewing operation at the pub and we got a little
building that we used as a warehouse. You haven’t lived
until you’ve driven a forklift down a sloped parking lot
with a full load of kegs in the middle of winter, with chains
on.”
Next came the letters from the City of Bend concerning the
problems with operating an industrial process in a downtown
commercial business district. Fish bought property on the other
side of the river and launched into bottling to boost volume
and pay off debt. “We learned as we went and we made more
than our share of mistakes,” he says. “But we were
always making good beer, and the industry was growing
rapidly.”
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HEADQUARTERS: Bend FOUNDED: 1988 FOUNDER AND CEO: Gary Fish EMPLOYEES: 290 PRODUCTION: 163,000 barrels in 2007 (No. 1 in Oregon sales, second in total sales) BRANDS: Black Butte Porter, Mirror Pond Ale, Obsidian Stout, Jubelale GROWTH: on par with craft industry average (6%-8%) in the past few years NEW DEVELOPMENTS: 10,000-square-foot brewpub opened in Portland’s Pearl District in April; potential collaborations with large and/or small brewers to expand nationally WEB EXCLUSIVE: READ FULL Q&A WITH GARY FISH |
So was Central Oregon. Evoking the beauty of the high desert
with brews like Bachelor Bitter and Obsidian Stout was a great
strategy in Oregon. Winning market share outside of the
Northwest, where people don’t think of Bachelor as a
mountain, has proved more difficult.
“We have a lot of people on the East Coast who love our
beer,” he says. “We would like to get it to them.
We think that we will, but we don’t know how. Does it
make sense in this era of $4 a gallon gasoline to make beer in
Bend and ship it to New York? Probably not. Does it make more
sense to make it on the East Coast? Yeah. If we can make it the
Deschutes way. If we can make it to our standards. That kind of
an alliance could be with a big brewery, it could be with a
small brewery. Who knows?”
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? There are 2,000 wineries in California. Have you ever
heard anybody talk about saturation in the California wine
industry?
“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.”
CRAFT BREWERS ALLIANCE (FORMERLY WIDMER BROTHERS BREWERY)
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GOING PUBLIC, GOING NATIONAL
The Widmer brothers weren’t the first Oregon craft
brewers to serve up great beer, but they were the first to take
craft brewing to new levels. In the 1990s they were first to
gain access to Anheuser Busch’s legendary distribution
system, and now they are first to go public, as part of a
complex alliance with a 36% share soon to be held by InBev, the
Brazilian/Belgian giant that is swallowing Anheuser Busch to
become the largest brewer in the world.
So it’s a little surprising to hear Kurt Widmer,
co-founder of Widmer Brothers Brewing and now chairman of the
Craft Brewers Alliance, understate with a convincing poker face
that “Nothing’s really changed around
here.”
His brother and co-founder, Rob Widmer, now vice president of
corporate quality assurance and industry relations, elaborates:
“Ever since the start we’ve been growing so rapidly
and changing so much that everybody who is here now is used to
that kind of environment, where you take a vacation, you come
back and you have to figure the place out again. Change is the
constant around here.”
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HEADQUARTERS: Portland FOUNDED: 1984 OWNERSHIP: Public (ticker HOOK), minority share (36%) owned by InBev/Anheuser-Busch CO-FOUNDERS: Kurt Widmer, now chairman; Rob Widmer, now VP CO-CEOS: David Mickelson (former president, Red Hook Ale Brewery) and Terry Michaelson (president of a joint venture between Widmer and Red Hook) EMPLOYEES: 550* PRODUCTION: 600,000 barrels* barrels REVENUES: growth every year other than 1997; flat in 2007 BRANDS: Widmer Hefeweizen, Kona Longboard Lager, Blackhook Porter NEW DEVELOPMENTS: Recently completed merger with Seattle-based Red Hook; unknown impact of InBev’s $52 billion purchase of A-B; eying future acquisitions * Figures include all four brewing companies affiliated with Craft Brewers Alliance. WEB EXCLUSIVE: READ FULL Q&A WITH THE WIDMER BROTHERS |
The newly formed Craft Brewers Alliance operates breweries in
Washington, New Hampshire and Portland and holds minority
stakes in Kona Brewing Co. of Hawaii and Goose Island Beer
Company of Chicago. The move should lead to all sorts of
synergies and economies of scale over time, but Kurt, 56, says
first thing’s first: “So many of our people have
been in deal mode for a long, long time. It’s nice to
have them out of deal mode and back in beer-brewing and
beer-selling mode, doing what they should be doing.”
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.”
Besides, adds the 51-year-old Rob: “Compared to InBev,
we are a speck.”
InBev took the podium as the largest brewer in the world when
it annouced it will buy Anheuser Busch for $52 billion in July,
not long after August Busch IV vowed no merger would occur on
his watch. Whether that mega-deal will affect the Craft Brewers
Alliance remains to be seen. For now the alliance has work to
do. Red Hook lost money in 2007 and post-merger HOOK stock is
selling for about half of what it was fetching a year ago. The
craft brewers merger was completed amid an economic slump that
has deflated consumer confidence and sent commodity prices
soaring for the wheat that fuels Widmer Hefeweizen and the hops
that give the Broken Halo IPA its bite.
But with a strong portfolio of brands under one umbrella and
the ability to brew regionally to save on distribution costs,
the alliance has great potential to grow, and to acquire more
breweries. “Every now and then we get a call from someone
who wants access to the A-B system,” says Kurt.
“Not that we control that access, but they want to know
how it works and things like that. It’s a remarkable
system and, well, short answer: There may be additions down the
road.”
Again, Rob elaborates: “Our customers want one-stop
shopping. They want our salesmen to walk in and offer a lot of
choices. They are national players and they want national
distribution. That goes back to the excellent distribution
system that A-B offers. You can do a program nationally with a
keystroke.”
FULL SAIL BREWING
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BACK FROM THE BRINK, FULL STEAM AHEAD
Irene Firmat stopped off at the Full Sail pub in Hood River
midway through a busy day when a customer informed her that her
brewery had been sold to Miller.
“I said, ‘No we haven’t,’” she
recalls. “He said, ‘You guys are always the last to
know.’ I said, ‘Wait a minute, I’m not just
an employee. I started the company. I’m the CEO. If
somebody was buying the company I think I would
know.’”
Having politely put the rumor-monger in his place, Firmat
returned to the daily task of keeping Full Sail healthy,
profitable and independent. History has shown her that these
things are not to be taken for granted.
Firmat, now 50 years old, came into brewing from a business
background. She was a single woman opening a brewery in Hood
River in 1988, when one resume among the stacks caught her eye:
“Objective: To master the art and science of
brewing.”
“I thought, ‘That’s my guy. That is
perfect.’ And just to be truthful, we ended up falling in
love and getting married and he’s now my
husband.”
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HEADQUARTERS: Hood River FOUNDED: 1987 OWNERSHIP: Employee owned CO-FOUNDER AND CEO: Irene Firmat EMPLOYEES: 83 PRODUCTION: 130,000 barrels GROWTH: more than 20% for each of the past three years. BRANDS: Full Sail Amber, Session Lager, Henry Weinhard’s NEW DEVELOPMENTS: Renewing a contract with MillerCoors to brew Henry Weinhard’s brands in Hood River, expanding distribution, brewing lighter beers WEB EXCLUSIVE: READ FULL Q&A WITH IRENE FIRMAT |
Ten years later, Full Sail’s board voted 4-2 to sell the
company, with Firmat and her husband, brewmaster Jamie
Emmerson, voting no. The top bidder was Vijay Mallya of United
Breweries Ltd., who made it clear he was interested in the Full
Sail brand — not the brewery. “For us to look
people in the eye who had built the company,” she says
shaking her head. “I couldn’t do it. They would
have ended up with nothing.”
Firmat borrowed money to set up an employee stock fund and
assemble a counter-offer. She and her husband personally
guaranteed the loans. Their offer couldn’t compete with
that of United Breweries, but when United pulled out one hour
before the deadline, they had an opening. “Everyone was
waiting in the pub to hear, and when we called and said it was
a go, you could hear this scream rise up in the pub. It was
incredible.”
That euphoria soon gave way to the daunting challenge of
freeing the company from debt. Over the past decade, Firmat has
steered Full Sail from the brink of disaster to steady growth
through a combination of new products, new partnerships and a
revamped brand image. She pushed for a craft-beer option
for drinkers who prefer a lighter beer, and Full Sail’s
Session Lager has been a critical and commercial hit. She also
has renewed a contract with MillerCoors to continue brewing
Henry Weinhard’s beers in Hood River, bringing back a
legendary Oregon brand with broad appeal.
To reinvigorate the Full Sail brand, 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.”
Full Sail continues to print the most randomly used number in
the world on its bottles, although that employee count becomes
increasingly dated as the company grows. Between the success of
Session Lager, the solidity of the Henry’s contract and
Full Sail’s new push to gain market share on the East
Coast, Firmat sees plenty of room for growth.
“We live in a place where people’s
expectations of flavor and freshness and buying local are
deeply embedded,” she says. “We take this for
granted. But on the East Coast it is cutting edge. The thing we
always talked about when we started the brewery was, this is
not a fad. This is a core trend on how people drink.”
Have an opinion?
E-mail feedback@oregonbusiness.com
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