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Widmer keeps it local as Anheuser-Busch pumps up Craft Brew Alliance.



PHOTO: SEAN HAGGERTY FOR WIDMER BROTHERS BREWING - Lead Innovation Brewer Corey Blodgett and a brewer from Japans North Island Beer work on a collaboration beer in late July 2016.

Local beer brewing heroes Widmer Brothers Brewing is part of a quartet that makes up the Craft Brew Alliance, which in turn is 31 percent owned by Anheuser-Busch (the Budweiser people).

As the megamerger between AB-InBev and SABMiller (the Coors people) proceeds, all eyes are on the Craft brew Alliance to see how the brand — if not the beer — changes. As well as Widmer Brothers, the Craft Brew Alliance’s companies are Kona Brewing Company, Redhook Brewery, Omission Beer, and Square Mile Cider Company.

Portfolios and networks

In late August, Anheuser-Busch announced some “new commercial agreements that expand and strengthen the companies’ long-term relationship and create new growth opportunities for both companies.” This is usually corporate-speak for some type of dilution of a brand, the moment when a niche product is taken mass market.

Mostly the changes are to do with distribution, not water and wort.

The three elements are an amended and extended master distribution agreement, a new contract brewing arrangement, and a new international distribution agreement.

CBA and AB just extended the current fee structure of their existing Master Distributor Agreement for 10 additional years. The goal is “to secure CBA’s brands in the industry’s strongest wholesaler network,” according to a release.

Talking about the first, Widmer’s Chief Operating Officer Scott Mennen, told the Business Tribune, “CBA has been part of our master distribution agreement for years, and this expands it, so we have a path to market.”

Mennen has worked in the brewing business for 29 years— 25 of them at Anheuser-Busch, including nine years at Anheuser-Busch as a Senior Brewmaster. The second part of the announcement is right in his wheelhouse: contract brewing.

CBA and AB are transitioning up to 300,000 barrels of volume into AB’s breweries. “This agreement will directly support CBA’s ongoing brewery footprint optimization and enable both companies to realize additional operational efficiencies.”

This means that within 18 months, some Kona or Red Hook beers will be made in Anheuser-Bush plants.

Fresh

Beer is a fresh product, and craft beer is especially sensitive to temperature changes and other ways of being compromised during shipping.

“The idea is to brew the beers as close to the consumer as possible, to have as fresh a beer as possible,” says Mennen.

So if a hit beer from Oregon or Hawaii can be made closer to a big market, such as the Midwest or East Coast, its chances of selling improve.

“We kicked this off with contract brewing with Blues City brewery in Memphis Tennessee and we’re very happy with it. So we see this as the next step.

But Mennen said AB won’t be brewing any Widmer beer any time soon. “The beers we’re focusing on are the larger volume ones from Red Hook and Kona. We do not anticipate Widmer beer to be contract brewed. We will keep the focus on Widmer in Portland.” Indeed, Widmer has just expanded its facilities on North Russell Street to handle higher volume, adding 200,000 barrels of capacity to bring it up to around 750,000 barrels per year.

“It’s now more flexible and efficient, and it’s also enhancing the capability and modernizing the bottle line to deal with bulk glass.”

Using bulk glass means a bottling plant can buy thousands of identical bottles and then label them and put them in cartons — six packs and cases — more rapidly than they used to. It also means they can make and bottle more types of beer in Portland.

PHOTO: SEAN HAGGERTY FOR WIDMER BROTHERS BREWING - The Craft Brew Alliance, which includes Widmer Brothers Brewing, has entered into new agreements with AB-InBev (Anheuseur Busch) for expanded distribution.  AB will also uses its own facilities to brew some Kona and Red Hook beers but none of Widmers. Widmer opened its Innovation Brewery July 1, 2016, to let its brewers experiment with small batches of new beers. Some of the facilities are visible though glass from the brewbpub on N. Russell St, like these steel tanks.

Brewing abroad, maybe

The third element is a new international distribution agreement.

It builds on CBA’s recent distribution arrangements with AB, which launched Kona in Brazil and Mexico. “It creates opportunities to accelerate the growth of CBA’s craft portfolio in additional international markets,” according to the release.

“This can get us into new markets,” says Mennen. “We’re working with AB in Brazil and Asia.”

If anyone is drinking a fresh Hef in Hong Kong, it’ll be imported, not brewed there.

“Right now we don’t contemplate brewing any CBA brews internationally, but we do export them. And AB-InBev is looking for how they can distribute them.”

On July 1, Widmer opened a new experimental microbrewery called the Innovation Brewhouse. The computer controlled 10-barrel system lets Widmer brewing staff tinker and come up with new beers that could be made in larger quantities in the main facility. Tom Bleigh joined Widmer as the Innovation Brewmaster from Portland’s Hopworks Urban Brewery. The brewers are visible through glass from the brewpub. It seems intended as much to keep Widmer’s credibility up with beer specialists as it is to foster skunkworks-like innovation.

One of the hassles of exporting beer is the vessels they are sent in. Stainless steel kegs are expensive and have a 20-year shelf life, but motivating a pub in England to return an empty keg to Portland is difficult. Widmer is experimenting with recyclable kegs which are made of cardboard, plastic and a food-safe membrane.

PHOTO: SEAN HAGGERTY FOR WIDMER BROTHERS BREWING - Widmer Brothers Innovation Brewing Team and Timbers Goalkeeper Jake Gleeson (L-R): Innovation Brewmaster Tom Bleigh, Gleeson, Lead Innovation Brewer Corey Blodgett, and Innovation Brewer Dan Munch. Portland Timbers goalkeeper Jake Gleesen (second from left) was invited to work on a Timbers beer. Widmer is a consistent TImbers sponsor in MLS.

Chinese entrepreneurs

Sam Holloway, a beer industry expert and an Associate Professor of Strategy and Entrepreneurship at the University of Portland, says all three elements are good for Widmer.

“Anheuser-Busch has the best equipment and talent in the industry, they just make a different kind of beer,” he told the Business Tribune, referring to the well-known light beers like Bud and Bud Lite.

“And Scott Mennen is a talented brewer. He’s made CBA better, and now the margins are increasing.”

Holloway says they are using the assets in place in a more efficient manner without making quality suffer.

Buying patterns do not support the idea that when a large corporation takes over a beloved small brewery, sales of the small beer drop.

“The most vocal (fans of that beer) get the attention of the media, but most people buy based on quality, location and price.”

He says craft brewers are not so much concerned with economies of scale as with building networks. “In a craft economy, if you are big, it makes sense to secure relationships with other breweries. Being big is no longer as powerful as it was, because buying habits are going small and local.”

For a craft brewery to scale up from 5,000 barrels per year to 100,000 barrels per year is a lot tougher than it used to be.”

The craft brew market is changing quickly. Holloway says there are 400 new craft breweries in the Netherlands alone.

“I was speaker at a craft brew expo in China in May and there were 700 entrepreneurs there. Consumer tastes are shifting to more flavorful beers. The big players with lighter beers will do what the consumers want.”

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