Following Test Drive, Craft Brew Alliance Formally Establishes ‘pH Experiment’ Business Unit

Midway through last year, Craft Brew Alliance (CBA) launched an innovation initiative aimed at testing the viability of, and consumer demand for, non-traditional alcoholic beverages that play on the fringes of the beer category.

Today, the Portland-headquartered craft beer company – which owns the Kona, Widmer Brothers, Redhook, Omission, Square Mile, Cisco Brewers, Appalachian Mountain Brewery and Wynwood labels – announced that its so-called “pH Experiment” has become a standalone business unit.

In a press release, the company said its goal is to generate $25 million in new revenue by 2025, a figure that equates to nearly one-third of Craft Brew Alliance’s net sales in 2017 (2018 financial results will be released on Wednesday).

“With the pH Experiment, we now have the vehicle to unleash our innovation engine and create relevant new products and experiences for today’s drinkers, as we continue focusing on increasing topline growth and shareholder value,” Andy Thomas, the CEO of CBA, said via the release.

Speaking to Brewbound, Karmen Olson, the general manager of the pH Experiment, who previously served as CBA’s director of innovation, said the new growth unit would work to identify ways of delivering new drinking experiences to consumers.

“When I look at the beverage category altogether, the leaders are talking about consumer problems,” she said. “In beer, we talk about industry problems. We understand that we need to be much more focused on the consumer and the beer drinker, rather than the stuff behind the scenes in our industry.”

After experimenting with a wide range of offerings – including a pickle juice gose, a hard tea, and a hazy IPA made with Tang, among others – and soliciting feedback from consumer focus groups, CBA settled on bringing a cider-based spritz beverage called “Pre” that draws inspiration from Italian aperitivo drinks.

“With Pre, I created an infusion of herbs and spices that I believe really deliver on a classic aperitivo experience,” Thomas Bleigh, CBA’s innovation brewmaster who designed the product, said via a release.

According to CBA, drinkers polled in focus groups named “Aperol Spritz” as their second-favorite summer beverage behind beer.

“We knew there was an opportunity to do something unique,” added Bleigh.

Pre aperitivo spritz, which checks in at 6.6 percent ABV, contains 160 calories, 1 gram of sugar and 7 grams of carbohydrates, according to CBA.

It will initially launch in five yet-to-be-disclosed test markets across the U.S., and be packaged in 6-packs of 12 oz. cans, as well as clear bottles.

“We had gathered some insights that indicated there was an appetite for clear bottles,” Olson told Brewbound, noting that respondents said they associated clear bottles with fewer calories and a better tasting product.

The launch of “Pre” comes about two months after Michigan’s Virtue Cider, owned by Anheuser-Busch InBev, which also controls 31.4 percent of CBA, unveiled its own low-ABV “Mezzo Spritz” product. That blood orange-flavored offering has just 80 calories and checks in at 3.5 percent ABV.

The Pre aperitivo spritz offering, which is being produced at the Widmer Brothers brewery in Portland, will sell for a suggested retail price of $10.99, Olson added, and be sold in areas where hard seltzer, cider, and rosé consumption are high.

“We looked at places where there is an appetite for those beverages, and where we had the best wholesaler relationships,” she said.

After spritz, CBA will look to release between three and five products annually, and partner with wholesalers and retailers to identify consumer needs that aren’t being met with traditional beer offerings.

“We are working with partners that are willing to look at a six-month window of commercial viability,” she said. “We want to gain feedback on merchandising, package configurations, and pricing, and we are asking wholesalers and retailers to come along for the ride with us.”

Olson stressed that while long-term goal is to grow sales and become a bigger chunk of CBA’s overall business, it also is comfortable with “failing fast.”

“We are trying to move pretty quickly,” she said, noting that the company could cycle through new concepts every 90 days until it finds a winner.

In addition to creating new products, including the possible development of CBD drinks, the division is also open to “strategic acquisitions,” Olson said.

“If there is a company doing a better job than we can, or that has capabilities we don’t, that is still on the table for us as well,” she said.

CBA will also add three new positions within the division in sales, marketing, and consumer insights.

A press release with additional details is below.

Craft Brew Alliance Launches New Growth Unit Focused on Quenching Drinkers’ Thirst

PORTLAND, Ore. (March 5, 2019) Craft Brew Alliance (NASDAQ: BREW) is launching a new standalone business unit, the pH Experiment, dedicated to creating, incubating and accelerating growth with new products and experiences that put drinkers’ needs first. The growth unit is the evolution of CBA’s Innovation team and their pH Experiment beverage initiative, which launched in 2018 as a litmus test to explore opportunities outside of beer, as well as recent consumer research projects with the Yale Center for Customer Insights and global consultancy Prophet.

“What’s particularly exciting about the pH Experiment is that we’re mining a vast trove of recently acquired consumer insights and tapping into the strength of CBA’s infrastructure to anticipate and quickly deliver on emerging needs,” said Andy Thomas, CEO of CBA. “With the pH Experiment, we now have the vehicle to unleash our innovation engine and create relevant new products and experiences for today’s drinkers, as we continue focusing on increasing topline growth and shareholder value.”

The pH Experiment will expand on the Innovation team’s test-and-learn platform, tapping into CBA’s resources, distribution capability, and deep consumer research insights to quickly develop, test, and evaluate a range of new products in select markets across the U.S. The first new products will launch in Spring, with additional tests planned this year. CBA will add new resources to support pH Experiment product testing and market launches.

“Our goal is to provide long-term, sustainable growth for CBA,” said Karmen Olson, General Manager of the pH Experiment. “We’ll do that by combining the spirit and agility of an innovation startup with the muscle of a large craft brewer, working side by side with drinkers, retailers and wholesalers to quickly get products to market, listen to feedback, iterate, and either expand or fail fast.”

Pre Aperitivo Spritz will be the first new product in market from the pH Experiment. Developed by CBA Innovation Brewmaster Thomas Bleigh, Pre Aperitivo Spritz is a 6.6% ABV dry, botanical bubbly with an herbaceous bitterness that stays unapologetically true to a classic Italian aperitivo. Available in 12 oz. six-pack cans and clear bottles, Pre is naturally gluten free with only one gram of sugar.

“During focus groups with drinkers, ‘Aperol Spritz’ was named as a favorite summer beverage, ranking #2 behind only beer, so we knew there was an opportunity to do something unique,” said Bleigh. “With Pre, I created an infusion of herbs and spices that I believe really deliver on a classic aperitivo experience.”

While craft beer will continue to be at the heart of what CBA brings to consumers nationwide, the pH Experiment will be focused on anticipating and identifying drinkers’ needs. As opportunities arise, the unit will also explore options to partner or access resources beyond current capabilities. The pH Experiment is targeting $25 million in revenue by 2025.

About Craft Brew Alliance

CBA is an independent craft brewing company that brews, brands, and brings to market world-class American craft beers.

Our distinctive portfolio combines the power of Kona Brewing Company, a dynamic, fast-growing national craft beer brand, with strong regional breweries and innovative lifestyle brands Appalachian Mountain Brewery, Cisco Brewers, Omission Brewing Co., Redhook Brewery, Square Mile Cider Co., Widmer Brothers Brewing, and Wynwood Brewing Co. CBA nurtures the growth and development of its brands in today’s increasingly competitive beer market through our state-of-the-art brewing and distribution capability, integrated sales and marketing infrastructure, and strong focus on partnerships, local community and sustainability.

Formed in 2008, CBA is headquartered in Portland, Oregon and operates breweries and brewpubs across the U.S. CBA beers are available in all 50 U.S. states and 30 different countries around the world. For more information about CBA and our brands, please visit www.craftbrew.com.

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