Deschutes Brewery’s Portland Pub Set to Open; Off-Premise Dollar Sales +9% Over Last 13 Weeks

Deschutes Brewery’s Portland, Oregon, pub is slated to reopen later today after being closed for three months.

The pub’s reopening, along with those of other restaurants and bars in Multnomah County — Oregon’s most populated county — was delayed a week after Gov. Kate Brown imposed a one-week moratorium on reopenings due to a spike in the number of COVID-19 cases.

Although infections have continued to rise, Brown is allowing restaurants and bars in the county to reopen today, albeit with safety precautions.

The return of the Portland pub will be another shot in the arm for Deschutes, having opened its Bend pub June 1 and seen traffic is steadily increasing by the day, VP of sales and marketing Neal Stewart said. On-premise sales accounted for a quarter of the company’s business pre-COVID-19.

Stewart, who took over as VP of sales in February, recently shared the craft brewery’s off-premise sales trends over the last 13 weeks, covering the time in which the novel coronavirus shutdown on-premise sales at bars, restaurants and taprooms across the U.S.

Through June 7, Deschutes’ portfolio-wide dollar sales increased 9.3%, said Stewart, citing multi-outlet and convenience store data from IRI. Those gains were driven by core offerings Fresh Squeezed IPA (+7.7%), Fresh Haze IPA (+53.7%), Black Butte Porter (+5%) and Mirror Pond Pale Ale (+ 7.7%).

When the pandemic hit, Deschutes’ focus turned to its core four offerings: Fresh Squeezed, Fresh Haze, Mirror Pond Pale Ale and Black Butte Porter. That strategy, Stewart said, is the same playbook the company was running before COVID-19.

“I think we’ve learned our lesson on how to manage our portfolio better, and we are going to invest more time, effort, energy, [and] budget in building brands over the long-term, rather than the constant thrash of innovation,” he said.

Stewart stressed the importance of keeping the company focused on its top brands, including Fresh Haze, which has only been on the market for a couple of years.

“Fresh Haze should be 45,000 barrels for us this year,” he said. “We have aspirations of that being a 100,000-barrel brand. It should be.”

The pandemic has led Deschutes to pull back on its big innovation for the year, Modified Theory, a line of flavored malt beverages that launched in the spring but was hurt due to the disruption of chain resets.

“Building distribution on a completely new-to-world brand during the pandemic was something that I was not willing to ask our distributors to do,” Stewart said.

For Modified Theory, the plan moving forward is still to-be-determined, but Stewart said the company will focus on selling it in its home markets — the Pacific Northwest and northern California — in an effort to demonstrate success before taking it to wider geographies.

The focus on its core offerings has helped Deschutes return its shipments to wholesalers to a similar level as in 2019. According to Stewart, Deschutes will ship around 25,000 barrels to wholesalers this month.

“That’s about what we did last year, and that’s with 1,000 of those barrels being draft beer,” he explained. “Whereas last year, probably 6,000 to 7,000 barrels of that 25,000 was draft beer. So it demonstrates the strength that we’ve built in the process of building in off-premise. And obviously, the more that bars open up and draft beer comes back, the more supplemental it is to that.”

Deschutes’ second quarter volumes finished 15% higher than the company’s highest volume projection when the pandemic began, Stewart said, with the third quarter projected to be 14% higher than the company’s high-end forecast. Stewart believes there’s a chance to post similar numbers in Q4.

“If we do all that, then that puts us in a situation obviously that we’re very pleased with, and we end up being down mid-teens in total business year-over-year,” he said. “But I think right now with that result, we’re pretty happy because it’s all about building a sustainable business model.”

Still, Stewart is maintaining a cautious and conservative approach to forecasting, even as on-premise sales begin to return.

“Now, because of the way we forecasted the rest of the year, any keg that leaves our brewery feels like it’s incremental because we didn’t bake it into our entire operating budget.”

Given the number of unknowns, taking that cautious approach has led to re-forecasting weekly, even as the company’s macro trends are on the upswing, Stewart said.

Deschutes, which laid off 350 employees in the early days of the pandemic, has also begun rehiring its workforce, including 19 people in commercial brewing operations, six people in sales and 13 people mostly in operations at the Bend production facility, Stewart said,

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