Deschutes Is a Model for How Craft Brews Can Fight Back Against ‘Big Beer’

Gary Fish is one of America’s most successful craft beer brewers. The twist on that achievement is that he never really set out to be one. When Fish opened his Deschutes Brewery & Public House in 1988, he saw himself as a restaurateur. With a storefront location on Bond Street in Oregon’s old mill town of Bend, the brewpub boasted a locally sourced menu complemented with Fish’s own brand of porters and ales that he brewed in small tanks on the premises. At first, the reception for Fish’s beer was, well, kind of warm. “Bend was a blue-collar town,” he recalls. “It was very much a Bud Light kind of town." [kickout id="3" label="gary fish"] Little by little, though, Fish’s brews started to catch on. A few tavern owners from Portland started pouring beer brewed at Deschutes—a name Fish took from the river that wanders through the center of town—and demand at his restaurant grew. Before long, Fish had rented a building across the street to serve as a warehouse for his beer. “We scrounged up some used kegs and got into the manufacturing business without even knowing it,” he recalls. Today, Deschutes beer is among the most popular craft brews in America. Fish sells his brand in 30 states, the District of Columbia and three Canadian provinces. A three-story production brewery equipped with 10 fermentation tanks custom-built in Germany now produces the 450,000+ barrels of beer that Deschutes makes yearly. Fish has opened a second brewpub in Portland and a pub at the Portland airport. Additionally, to serve fans on the East Coast, he opened a tasting room in Roanoke, Virginia, in 2017, though announced plans to build a full brewery there are on hold. From its handful of offerings 30 years ago, Deschutes now bottles nine year-round beers, several seasonal brews, a few draft-only varieties and six limited-edition, small-batch offerings that Deschutes calls “audacious, experimental, outrageously coddled beers.” As American success stories go, then, Gary Fish and Deschutes are tough to top. But for Fish and independent brewers like him, the pleasant buzz of success increasingly comes with an aftertaste called stress. Craft brews have grown so popular in America that they’re almost too popular: The 100 or so other independent breweries that existed when Deschutes started have mushroomed into 7,000, and Deschutes is, in theory, competing with all of them—for customers, for shelf space, for simple brand awareness. There’s more. Primed to the growing popularity of craft brews among millennials and saddled with years of declining sales of their own brands, huge corporate brewers like MillerCoors and A-B InBev (“Big Beer,” to use the industry argot) began buying up independent labels a decade ago, creating a competitive dynamic that, understandably, many smaller brands consider unfair and misleading. By quietly operating small brewers, Big Beer is effectively leveraging its might to lure customers away from the actual small brewers—and many drinkers are none the wiser. [kickout id="5"] “The problem is transparency,” notes Jess Baker, editor in chief of CraftBeer.com, an information and advocacy site run by the Brewers Association, which represents the country’s craft breweries. The mega breweries, she explains, “don’t say they own these [craft] beers. What happens is beer lovers who want to spend local can’t always tell the difference.” Actually, transparency is just one of the problems. The saturation of the marketplace, the hidden hand of multinational brewery corporations—Fish says it’s not just the inescapable reality of brewing beer today; it’s a permanent one. “I don’t see this dynamic going away,” he says. As a consequence, Fish has had to up his game in most every respect, both to hold onto his market share and continue to draw new customers. Deschutes’ strategy—which touches most every aspect of the business, from operations to packaging—serves as a model for how the proverbial little guy can hold his own amid growing competition. As Fish puts it, “We have got to be more diligent, and more creative.” Small beer fights big beer Easier said than done, of course. But Deschutes has made several key moves to retain a competitive edge, the most striking of which is its packaging. Deschutes now puts several of its sub-brands—including the citrusy Fresh Haze and the dark lager Schwarzbier—in cans. There was a time that aluminum ran contrary to a refined image, but Fish is untroubled. “The stigma that canned beer is a lower quality is clearly no longer an issue,” he says. Cans also allow Deschutes with a convenient way to let customers sample its new and experimental varieties. The brewery tasting room features a machine that seals a lid on a crowler (a 32-ounce can) which visitors can fill with the beer of their choice. “They can take that beer straight from the tap back home,” Fish says. And since Deschutes listens keenly to customer feedback when deciding what beers to put into regular production, cans serve as a key part of the research and development apparatus. The most obvious changes to Deschutes’ packaging, though, are visible on store shelves. Deschutes recently rolled out a redesign of its Red Chair Northwest Pale Ale. (Its Black Butte Porter and Mirror Pond Pale Ale have also been reworked, and other labels will follow.) [kickout id="1" label="before/after packaging"] Craft brew packaging has long been famed for its quirkiness. To cite one example, 21st Amendment Brewery, based in San Francisco, has a seasonal brew called Fireside Chat featuring Franklin D. Roosevelt smoking a cig at his hearth and holding a beer in his hand. The problem: When scores of craft brews are busy being quirky beside one another, the result—from a brand-awareness point of view—is chaos. “We joke that it’s a bit like the hipster movement. Everyone’s trying so hard to be differentiated that they all end up looking the same,” says Simon Thorneycroft, founder and CEO of Perspective Branding, which Deschutes retained to rework the look of its bottles and carriers. In a segment where packaging favors busy backgrounds and bizarre mascots, Deschutes now favors … its name. By dropping the word “Brewery” from “Deschutes Brewery,” Perspective opened up space on the carrier and used it to run the name big across the front. (Customers, Fish believes, don’t need to be told that beer comes from a brewery.) Meanwhile, instead of using a jumble of colors, Perspective opted for one: red. “One brand—bright red, and I made that pop,” Thorneycroft says. [kickout id="6"] Going forward, Deschutes’ varieties will be distinguished by the use of background motifs (a ski lift for Red Chair, for example)—set within snowy-blue landscapes that contrast with the signature red and pay homage to the beers’ roots in the Pacific Northwest. Another significant change to the packaging is the oft-overlooked top of the bottle, which juts out above the carriers. Because the black tops and black neck bands of the old bottles were hard to make out on the packaging, Perspective decided to draw the eye with red caps and bands. The irony here is that Deschutes, a craft beer, is actually trying to look a bit more like the mainstream industrial beers your father drank. But Thorneycroft says that those midcentury suds understood the importance of keeping the brand name as the focus of the packaging. “I wanted to put the brand back at the center,” he says. What makes a craft brew, anyway? The fact that so many big brewers are trying to look and act like craft brews raises a key question: What exactly is the difference? According to the Brewers Association, to be considered “craft,” a brewery can make no more than 6 million barrels of beer a year. They also have to brew traditional beer—no stuff like flavored malt beverages—and, critically, they must remain “free from a substantial interest by a non-craft brewer.” [kickout id="4" label="original"] Until relatively recently, it was pretty easy to tell the difference between a craft brew and an industrial brand. The distinctive, non-corporate feel of craft brews helped make them popular in the first place. That dynamic also depended on there being a relatively small number of craft brews, but in the mid-1990s, their numbers began to explode. State laws grew friendlier toward brewing until, as Fish puts it, “you can [now] become a professional brewer by filling out a few forms, paying a small fee, and you’re in business.” The 250 craft breweries that existed in 1994 morphed to over 2,600 in the space of two decades. As of 2016, craft brewers accounted for 12 percent of the domestic market share for beer. Consumer demand for craft brews and lower barriers for entry have not only meant more competition—they invariably drew the attention of Big Beer, which had big problems to solve. Dollar sales for domestic beers have been slipping for years. They fell by 4.2 percent last year, per IRI data. By contrast, craft beer sales rose 2.5 percent in the same period. After years of tweaking their standing offerings, big brewers decided about a decade ago that it would be easier to simply go shopping for independent labels. Between 2011 and 2017, for instance, AB InBev bought up no fewer than 10 craft breweries, including Goose Island in Chicago, Seattle’s Elysian and New York’s Blue Point. The mega brewer then slipped these labels into its High End division and created what beverage site Vinepair called “a well-funded super group dedicated to putting AB InBev labels front and center at every bar and beer store.” Craft brewers have fought back, notably through the 2017 creation of the Craft Brewer Seal, a logo of an upside-down beer bottle that small brewers can use as “a signal to the beer lover that ‘we are independent’,” Baker says. Since the logo’s institution, over 4,200 brewers (including Deschutes) have signed on to use it. The art of limited-edition brewing Still, going up against Big Beer is a daunting challenge, which is why Deschutes’ countermeasures take pains to emphasize the kind of quality and individuality for which craft labels have always been sought out. [kickout id="2" label="pdx brewery"] A few years ago, Fish added barrel aging to his repertoire. By putting his beers into old bourbon barrels, they take on the flavor characteristics of the whiskey and give Deschutes a beer it can sell at a higher margin. Deschutes’ stout Abyss spends 12 months in old oak barrels, yielding a beer that’s “something not just to quaff, but contemplate,” the web site says. Deschutes’ old barrel collection now stands at 4,000, producing limited-run beers that become, as Fish says, “kind of a collector’s item.” Since taking delivery of his 10 new fermentation tanks from Burgstadt, Germany, each with a capacity of 1,300 barrels, Fish has been able to greatly expand his pilot-brewing operation. Pilot brewing allows operators to make beer in small batches, and in Deschutes’ case, it allows Fish to have an ever-changing menu of beers that visitors can sample. “We can brew 20 brews a week—purely experimental beers,” he says. [kickout id="7"] Pilot brewing also allows him to improve the full-production beers he already sells, using the customer feedback he solicits and reads diligently. “It really is quite a tool, and we consider it a competitive advantage to have this facility that allows us to do that in a very refined, scientific way,” he explains. Fish has also innovated in ways that have nothing to do with fermentation tanks. Several years ago, Fish instituted an employee stock ownership plan for its 550 workers. "It’s a great way to keep everyone’s head in the game,” Fish says. “It’s a cultural evolution for us.” An evolution, certainly, from the early 1990s, when his fledging operation was filling kegs in his brewpub and loading them onto trucks in the middle of the street. Fish isn’t sorry that happenstance changed him from being a restaurateur to a brewer. “Life is what happens,” he says, “when you’re planning for other things.”