Deschutes Brewery is looking beyond beer and outside of its own brand for its big innovation of 2020. The Bend, Oregon-headquartered craft brewery today unveiled Modified Theory, a line of flavored malt beverages, during its annual distributor summit.
Speaking to Brewbound last week, Deschutes VP of marketing Neal Stewart said the company was searching for “true whitespace” in the FMB segment as many of its competitors flood the market with hard seltzers and canned cocktails.
“It kind of feels like bloody water to me,” Stewart said of hard seltzers and canned cocktails. “So how do we find the blue water?”
What Deschutes landed on is Modified Theory, a product that the company is calling a “crafted hard bevy.”
Modified Theory checks in at 5.5% ABV and comes in three flavors — Tahitian Lime Agave, Tarocco Orange Vanilla and Northwest Berry Lavender. The brand was inspired by trends in craft cocktails and mixology, and the packaging suggests it can be drunk straight, served on the rocks or treated as a mixer.
Modified Theory will be sold in 6- and 12-packs throughout Deschutes’ 32-state footprint starting in March 2020, and if successful, could be sold in additional markets outside of Deschutes’ existing footprint, Stewart said. Modified Theory is already available on draft in Deschutes’ taprooms in Bend and Portland, Oregon.
In an effort to further differentiate the product from its traditional beer offerings, Deschutes is suggesting its wholesalers place Modified Theory between the FMB and canned cocktail sections of stores.
“We don’t want this to be in the craft beer section,” Stewart said. “I think that would be a disservice to craft beer drinkers and confusing.”
Beyond shelf sets, Stewart said Deschutes will be asking its wholesalers to offer Modified Theory in “completely different accounts than craft beer.” Stewart admits that there was a lot of internal discussion on whether to use the Deschutes name for Modified Theory, but the company decided there was “a lot of upside” and “a better chance of incrementality” by launching it as a new brand.
In fact, Deschutes conducted more consumer research for Modified Theory than any product in the company’s 31-year history. What the company found was that consumers are intrigued by the prospect of mixing spirits with a malt-based beverage. The research showed that 82% of FMB drinkers said they would buy the product, and 93% of multicultural FMB drinkers said they planned to purchase it. Those high purchase intent numbers has Deschutes believing Modified Theory can not only attract new legal-drinking-age consumers but also a multicultural consumer who is incremental to its core beer business. To further attract those consumers, Deschutes will release bilingual point-of-sale items and has plans for multicultural marketing campaigns.
Stewart estimated that Deschutes’ Bend production facility could pump out as much as 30,000 barrels of Modified Theory in Year One. That figure could climb if national accounts take to the product and would represent a good chunk of potential business for a company whose volume has declined high single digits in recent years. Stewart said Deschutes is on pace to produce around 300,000 barrels of beer by the end of this year.
“If we get a great reaction from those key customers, then that number goes up substantially,” he said.
Deschutes is projecting that a large portion of Modified Theory’s volume will come from its variety pack, while its 6-packs will be treated as seasonal releases, Stewart said. The company will release Tahitian Lime Agave in 6-packs in March, and Northwest Berry Lavender in the fall. Tarocco Orange Vanilla will be exclusive to the variety pack, which will retail for around $18.99.
Although Modified Theory is made with all natural flavors, no preservatives and is gluten reduced, Stewart said the brand is not being marketed as a “better-for-you” play.
“Consumers actually told us, ‘When I’m drinking alcohol, I kind of throw those things to the wind. I’m not worried about calories as much,’ which flies in the face of everything we’re hearing out there,” he said. “We believe there is still a large consumer set out there that’s not thinking about calories as much, and they truly do want flavor.”
So, to reach those active lifestyle consumers, Deschutes is rolling out Wowza, a low-calorie, low-carb hazy pale ale. The beer, which checks in at 4% ABV, 100 calories and 4 grams of carbs will compete with craft offerings such as Dogfish Head’s Slightly Mighty IPA, Lagunitas DayTime IPA and Boulevard Easy Sport blonde, among others.
“This is a trend that’s not going away,” Stewart said. “There are a lot of consumers out there looking for low-calorie, low-carb, less-filling beers. Can we do that and explore the whitespace that is hazy pale ales?”
Deschutes believes it can with Wowza. In an effort to reach those active lifestyle consumers and local sports fans, Deschutes has inked a three-year deal to become the official sponsor of the NBA’s Portland Trailblazers radio network. As part of the sponsorship, the “play of the game” segment will include the Wowza name, and Deschutes will have the ability to use the Blazers’ logos on its branding.
Wowza will initially be sold on draft October through December at Blazers home games, as well as select accounts in Oregon. The beer will officially launch in all of Deschutes’ markets in January.