E-Malt.com News article: USA, OR: Widmer Bros. Brewing Co. expands while sales decline

Early this week, a crane eased two 54,000-gallon tanks through the roof of Widmer Bros. Brewing Co., opening a new chapter in the Portland brewery's history. It's the start of a $3 mln project to expand the brewery's capacity, enabling it to churn out the equivalent of 46 mln bottles a year, Oregonlive.com reported on May, 23.

Executives with Craft Brew Alliance Inc. (CBA), the Portland-based corporate parent of Widmer, say the expansion shows faith in the brand, one of the pioneers in the nation's microbrew movement.

But Widmer's core beers have been struggling. Sales have declined two years in a row, even as the company enters new U.S. markets.

Its staple, Hefeweizen, which makes up around 60 percent of all Widmer-brand revenue, has led the decline, crowded out in bars across the country by a bevy of other wheat beers.

CBA is trying to change that with a 12-pack approach. It's consistently rolled out new beer after new Widmer beer, rebranded old ones, redesigned packaging and charged higher prices.

"In the next 12 month period, we're going to be brewing 23 different Widmer beers," chairman Kurt Widmer said. That's about twice what the brand produced only two years ago, said Joe Casey, Widmer's senior director of brewing.

CBA has similarly refocused its second label, Woodinville, Wash.-based Redhook Ale Brewery Inc. This year, it jumped in on another craft trend, canning a beer from its third brand, Hawaii-based Kona Brewing Co. Inc. It's also canning Redhook Long Hammer IPA.

Also this spring, CBA unveiled a new brand in Oregon called Omission that has nearly all gluten removed. Unlike many gluten-free beers that use sorghum or non-grain ingredients, Omission uses low-gluten barley. Widmer removes much of the gluten by adding a protein-eating enzyme.

CBA says Omission meets international gluten-free standards of 20 parts per million. The beers, especially its Pale Ale, are getting good reviews from beer drinkers and rave thank-yous from gluten-sensitive adults.

Omission signals Widmer's renewed attempt to reclaim its trail blazer status amid a beer scene full of small innovators and large copycats. The U.S. counted more than 2,000 breweries in 2010, up from 1,600 just six years earlier and fewer than 50 in 1983, according to the Beer Institute's Brewers Almanac. Oregon added 14 new breweries in 2010 to its total of 119, fourth highest in the nation.

Craft Brew Alliance no longer even meets the Brewers Association's definition of a craft brewery, largely because Anheuser-Busch owns 32 percent of the company. The mega brewer took a stake as part of an agreement to distribute CBA's beers.

The trade association now considers CBA to be the sixth-largest regional brewer, a segment that includes Yuengling, Boston Beer Co., Sierra Nevada and New Belgium Brewing.

This week's tank installation represents another achievement for brothers Kurt and Rob Widmer, who founded their brewery in 1984. The parent corporation formed more recently, after Widmer and Redhook formed a joint venture in 2004 and then merged in 2008.

CBA bought Kona in 2010 and leveraged A-B's nationwide distribution network to sell Kona in 31 states. During the first quarter of 2012, Kona eclipsed Redhook in sales.

Both brands helped keep CBA profitable for three years following a steep loss in 2008. Yet chief executive Terry Michaelson acknowledged concerns about Widmer's decline.

"Not all of our brands are showing positive growth," he said. "We believe we are still in the foundation-building stage, and we are looking to make improvements in all aspects of our business."

Widmer sales had grown rapidly for years to a peak of 286,000 barrels in 2009. Since then, shipments have declined 5 percent through last year. Keg sales, in particular, have suffered.

Hefeweizen, which relies heavily on sales at bars, where drinkers can enjoy a lemon with the draft, has been squeezed by other entrants.

"We had the market pretty much to ourselves," Rob Widmer said. Now, "just about every brewery is brewing an unfiltered wheat beer... Imitation is a high form of flattery."

Thus, its foray into multiple beer styles - including the one with gluten removed. Widmer first experimented with gluten-free ingredients nearly 8 years ago, with poor results. "It's nothing that I wanted to drink," Kurt Widmer said. But the brewer tried again two years ago, capitalizing on an enzyme normally used to de-cloud beer.

CBA says it's the first U.S. brewery to extract gluten from traditional beer ingredients, though others have done it internationally.

It's not the only new gluten-free beer on the market, however. About the same time Omission hit store shelves, a small gluten-free startup brewery, Portland-based Harvester Brewing, debuted 22-ounce bottles of chestnut-based beer. Like Omission, they have sold well, New Seasons Market and Market of Choice stewards say.

Harvester co-founder James Neumeister said he respects what Widmer is trying to do, even though it doesn't meet his definition of gluten-free. "To me, putting barley in a gluten-free beer is like making vegetarian food with meat," he said.

Michaelson defends Omission's approach and its taste, pointing out that it's selling well. In one month, he says, sales have doubled the size of the gluten-free beer market in Oregon, and the company's now unveiling the beers in other states. Specialty grocers echo that claim.

"We're going through 2-3 cases a week," said Matt Lemos, who oversees beer sales at a Market of Choice in Eugene. "That's good for something new."


25 May, 2012