No Safety in Numbers: Understanding the Buyouts

The recent announcement that Golden Road Brewing is being acquired by Anheuser-Busch raised some eyebrows, but didn't produce the flood of negative responses that we saw with 10 Barrel and Elysian buyouts. Like mass shootings, we're getting used to these things.

There were a number of comments made by Golden Road co-founder, Meg Gill, who got a fairly soft grilling by the media. Reading through the quotes, I began to gain a new perspective on why these buyouts are happening...and why they will continue to happen.

This isn't a situation where Gill is cashing out. Even though Golden Road was built to sell, as one article suggested, she isn't going anywhere. It also wasn't a scenario where they needed an infusion of capital to expand production. Golden Road has access to private equity capital.

It's quite clear that she was looking for security. She sees big advantages in being part of the AB family, which she describes as the "winning team in craft beer." There are decent reasons for this. Being on the team gives Golden Road access to a supply chain that will reduce production and packaging costs. The extensive AB distribution network factors in, as well. Gill described AB craft CEO Andy Goeler as a "brilliant marketer." Seriously.

Not to get too far afield, but I'm not sure I would describe anyone at AB as brilliant when it comes to craft beer marketing. Building craft brands isn't and hasn't been their claim to fame. They're mostly good at cutting costs through economies of scale and leveraging advantages built since the end of Prohibition. But never mind. Be my guest if you think these guys are brand builders.

In fact, it appears Gill decision to partner with AB may have been driven by the escalating craft brewery count. She sees an increasingly crowded marketplace where competition is getting brutal. She came to doubt Golden Road's ability to stay relevant in that environment on its own. So she phoned Anheuser-Busch, the only entity she deemed capable of providing the needed help.

Many assumed AB would target a California brewery this year. The surprise with Golden Road is its size...projected around 45,000 barrels this year. Most thought AB would go bigger. There's also the price. Experts believe they paid $100 million ($2,000 per barrel), significantly more than they are thought to have paid for 10 Barrel or Elysian.

But there's a method to AB's madness. They wanted a presence in the LA market. With this buy, they will own breweries in the nation's three largest metro areas...New York (Blue Point), Chicago (Goose Island) and LA (Golden Road). Add the top two craft beer cities to that list with Portland (10 Barrel) and Seattle (Elysian) and you've got a nice little collection. With more to come.

It may not have been on Gill's mind, but AB is leveraging its position in ways that go well beyond standard marketing. As discussed here in the past, the company is actively working to enable vertical integration of markets similar to what existed prior to Prohibition. Demolition of the three-tier system is part of that effort.

For now, this is happening primarily in states where the laws are flimsy. The Golden Road deal, once finalized, means Anheuser-Busch will operate in all three tiers (owning brewers, distributors and retailers) in California, Oregon and Washington. Only California, via the DOJ and state attorney general, is looking into AB's activities. Oregon and Washington are, so far, mum.

You really can't fault Meg Gill for selling Golden Road. I've seen a number of reports suggesting Golden Road's beers aren't that great. If you want to improve a mediocre product and push it out to an increasingly competitive market, maybe leaning on AB's distribution network and supply chain efficiencies is exactly the right move.

Given the state of craft beer, where new breweries continue to open virtually by the day, I expect to see more established breweries looking for ways to insulate themselves from the brutality of the marketplace. Selling to AB is one way to do that so there's no telling how many of these folks will wind up in the hands of big beer. To be continued...

Trains, Beer Squabble in the Earthquake State

There's beer on the tracks in California. In what is becoming an uncomfortably common occurrence in craft beer, an established entity is challenging a brewery's right to trademark a brand. A lot of people will be watching to see how it turns out.

Anyone who watches these things is aware of the story. FiftyFifty Brewing of Truckee was hoping to trademark its B.A.R.T. Its application ran into opposition from the other B.A.R.T., an acronym for Bay Area Rapid Transit, the folks who operate a rail system in the Bay Area.

This seems like a bit of an overreach to me. I mean, the FiftyFifty B.A.R.T. is a barrel-aged beer. The other B.A.R.T. is a bunch of stinky train cars. Yet the train people want you to believe the beer people are going to somehow damage the transit brand. Nope, they aren't kidding.

On to the specifics. The train people claim FiftyFifty's use of the B.A.R.T. name is likely to "cause dilution of the distinctive quality" of the B.A.R.T. identity. How anyone would confuse a train with a beer is anyone's guess. But the train people say their brand has been featured in a lot of movies and has earned widespread acclaim that must be protected.

The beer people have their own story and they're sticking to it. They've been using the B.A.R.T. acronym for several years to describe a limited production Barrel-Aged beer that's Really Tasty. Get it? The name also pays homage to a now deceased pup named Bart who once stalked the brewery. So, you see, there isn't any conspiracy on the part of the beer people to muscle in on the train people's territory.

What will happen to the challenge to FiftyFifty's trademark application is uncertain. Ask anyone. These things are almost never cut and dry. The problem for FiftyFifty, as is the case with many breweries, is they simply don't have the liquid funds needed to finance an extended course of litigation to challenge the train people. And the train people know it.

This really just looks like another case of a large entity bullying a smaller one because it can. B.A.R.T., the transit agency, is a publicly-owned system that's been operating since the early 1970s. It has nothing to do with beer and no one in their right mind is going to confuse B.A.R.T., the beer, with B.A.R.T., the transit system.

This is no way to run a railroad, kids.

Another BART

Beer in Wine Country: Russian River Brewing

Getting back to my post-Thanksgiving Day tour of California, the second stop was Russian River Brewing in Santa Rosa. As noted in the previous installment, Bear Republic was the first stop. Russian River was the inevitable second stop, since it is located between Bear and Lagunitas.

I had high expectations for Russian River. As most beer fans know, they produce some excellent beers, including Pliny the Elder, Blind Pig IPA, Damnation and others. There was probably no way my expectations for this place could have been met.

Line out the door sends ominous signals

First, Santa Rosa. The city was bustling, with lots of traffics and people everywhere. If you're fixing on visiting Russian River, it's pretty easy to find. But the availability of parking is not good and the street parking is not cheap. We were lucky to get a place not far from the pub. That's where our luck ran out.

The place was packed to the gills. It isn't a huge space to begin with, and the hype surrounding this place is evidently bringing in the masses. After waiting in line for a few minutes, a snarky little "greeter" told us it would be about 40 minutes for a table. Terrific.

The beer board was packed with options...like the bar

While my travel companions waited in the outdoor seating area, I looked over the beer menu on the board above the bar. All the usual stuff was there and more. The folks at Russian River, like brewers in Oregon and elsewhere, are engaged in barrel aging and sour beer production. This was news to me. But I digress.

I hung out in the four-deep mosh pit by the bar hoping to get the attention of a bartender. Finally, one asked me what he could do for me. Since I knew there was no seating and this was going to wind up being a quick stop, I ordered the base taster tray...Aud Blonde, O.V.L. Stout, Porter, Russian River IPA, Blind Pig IPA and Pliny. The mistake soon became apparent.

The standard beers were all pretty good. Russian River hasn't made a name for itself with its porter or stout, but those beers were fine. It's the IPA swell that RR has been riding to fame and (I guess) fortune. All the IPAs in the taster tray were good. Pliny has been a favorite of mine, although I'm starting to think it's a bit over-hyped.

The basic taster tray...snarky comments included

The thing is, I should have ordered some of the specialty beers they were featuring. The list was tantalizing. Had things been a little less frenetic around the bar, I likely would have tried to order some combination of barrel-aged and standard beers. Oh well...life goes on.

Russian River makes some fantastic beers. No doubt about it. But my sense is they've had a little too much success and received a little too much hype for their own good. That might help explain the snotty, snarky comments and slow service.

As far as I'm concerned, if I'm looking for condescending attitudes and snarky commentary, I'll go wine tasting. If you're planning a trip to Russian River Brewing, my advice is to visit when the place isn't teeming with yuppies. Good luck with that.

Beer in Wine Country: Bear Republic

As I may have alluded to earlier, I spent the day after Thanksgiving touring California wine country. Not for the wine, though. Part of the plan in spending T-Day down there was to soak up some of the local suds.

Vineyards everywhere. Good beer must be close

My top targets were Bear Republic, Russian River and Lagunitas. This was determined to some extent by the map. From where we were staying in Winters (not far from Davis), the map seemed to suggest my primary targets were not all that far apart. The trip in from Winters took longer than I thought it would.

Bear Republic Brewing, the northern-most of the target breweries in Healdsburg, wound up being the first stop on account of when they opened. Lagunitas was the more logical first stop, but they wouldn't be open when we got to Petaluma, according to their website. It turned out they opened earlier than advertised that day. Silly me for believing what I saw on the web.

Lovely fall colors on display at Healdsburg's city park

Healdsburg is a very cool place. Lots of shops up and down the main street area. We arrived 15 minutes or so before Bear Republic opened. I loitered in front of the pub for a few minutes and took some pictures, then stalked across the street to a park where leaves were falling in the face of Christmas decorations.

The Bear Republic pub is a nice space, with high ceilings, a long bar and plenty of table seating. They have a patio area that undoubtedly fills up nicely in the warmer weather. It was enclosed with the kind of clear vinyl you see around Portland during the cooler months...which is to say most of the year.

The front of the Bear

By the way, they appear to have a substantial production facility just north of the pub. There's no way they could support the demands of the pub and their distribution with the brewery in the pub building. There's a brew kettle and mash tun near the bar. They are mostly for show, I'd say, though it looks like they are being used, probably for small batches.

We sat down at a table and ordered a taster tray that included pretty much everything they had available...the standard house ales and the seasonals. It was lunchtime and food was in order. The menu choices are typical of what you find in most pubs, though there are some higher end items.

Formal labels keep confusion to a minimum

Most of the standard Bear Republic beers are well known to me. Red Rocket and Hop Rod Rye are old favs and I've brewed clones of each more than once. XP Pale Ale is a nice light ale, prefect for warm weather. Racer 5 is a serviceable IPA, although it has become somewhat pedestrian due to the hops arms race we've seen over the last few years.

All of the beers from the standard list were excellent. Peter Brown, a brown ale I was not familiar with, was quite nice. I'm not a stout fan, but Big Bear Black was excellent. The rest were true to form. In short, the house beers, which also enjoy pretty wide distribution, seem to be pretty refined. No surprise there. They've had plenty of time to tweak and refine these recipes through the years.

The Bear's old-style bar was bustling

The seasonal beers were disappointing by comparison. I liked Tartare, a low alcohol, vaguely sour beer based on the Berliner Weisse style. Cher Ami, a fruity, spicy Belgian-style ale wasn't bad. Mach 10, a double IPA (100+ IBUs and 9.2% ABV) I've had on draft in Portland, features a megaton blast of hops. Indeed, none of these beers were bad. They just seemed unfinished next to the standards. It makes sense, somehow.

The food was just okay. Soggy fish in the fish and chips. Fries that weren't especially hot when they arrived. A bland burger. I don't like to form an opinion about a pub's food based on a single visit. These guys had just opened and were getting ready for a busy lunch. I'll cut them some slack for now.

When I look at Bear Republic, it's very similar in feel to some of my favorite places in Portland. It's probably a little larger, which makes some sense. The most important point is that the standard beers are really terrific. I'll have some thoughts on that in future posts.

Next up: Russian River Brewing