Brewbound Awards 2025: Large Brewery of the Year - Deschutes Brewery

Speaker 1 [00:00] Our next award winner is our large brewery of the year, and it's Deschutes Brewery. Joining me now is Deschutes CEO Peter Skerbeck. Congratulations, Peter.

Speaker 2 [00:11] Thank you, Justin. This is such an honor, and it is so fun to be recognized by the team at BrewBound. Um, for, for the work we've been doing, we've been having a lot of fun and obviously made some real progress over these last couple of years.

Speaker 1 [00:23] I'd say, you know, we were digging into the numbers and you had quite a turnaround in 2024 with a focused portfolio to shoot. Outperformed the overall craft industry, growing 9%, I believe, right?

Speaker 2 [00:37] That is, and that includes our non-alcoholic, which again it's broadening what we think about as as craft and what as a craft producer we can bring to the fan that gets them super stoked.

Speaker 1 [00:48] So let's dive into that because we had you at Brewbound Live in 2024. Yeah, it was last year. So. You were on stage. You were speaking about a focused portfolio, and that includes the fresh squeezed family as well as the non-alcoholic family, and you've done really well behind those brands, but I, I, I kind of want to hear from you, you know, what have you learned in the last year from, you know, as that, uh, strategy has. evolved and unfolded.

Speaker 2 [01:19] I think we've just been validated that the strategy of focus really works, especially when you're focusing on the right brands in the right channels for the right occasion, right? And Fresh Squeezed, I think, is a prime example of that. We look at Fresh Squeeze in our home market. This is more than a 10 year old brand. At a time where very much the category is facing real challenges as it applies to depletion growth and overall syndicated data story around what's working in retail, for Fresh Squeeze to be growing in our home market with the tenure it has is just incredible. And again, it's for ourselves clearing out the clutter of a lot of the rest of the portfolio and focusing on display, focusing on execution. And being top-notch in that execution wherever we can be that has helped, help us generate that kind of trend at a time in the category. And equally, what's been fun to watch is there are really 22 focal points and you nailed it. This is what we talked about last year. It was fresh squeezed and it was the non-alcoholic portfolio. And those were the two things that we pushed really, really hard this year. So fresh squeezed, you know, muted growth compared to NA because it's in a tenured category, but still seeing mid-single digit growth in our home markets, which is awesome. But when we look at non-AC, we literally doubled this year 2x, which is incredible, incredible growth.

Speaker 1 [02:38] That is incredible growth. So You've really built an NA portfolio by tapping into the brand equity of, of some of your top offerings. You've got Fresh Squeezed, you've got, uh, Black Beaut. And as well as you're partnering with Patagonia there. So what have you learned about that space and why do you think that that strategy of using sort of existing brand equity to enter a new realm has paid off for you?

Speaker 2 [03:07] Yeah, first and foremost, we are very aware of our brand awareness and where it's at, and whereas those of us in the beer community probably know who Deschutes is, but for the most part, the consumer really doesn't. Once you get outside of some core West Coast markets, and this is meant to be a national play. Our goal with non-alcoholic beer was always to take full fidelity, full aroma, full body, full mouthfeel, the real beer drinking experience, and just have the consumer tell us whether they want or don't want the alcohol on that occasion. Um, and, and so there are two things. I mean, one, leveraging equity of existing brands, as you mentioned, right? Fresh Squeezed, our number one brand, and Black Butte, where is not our number one, it is America's number one porter and very special to us because in so many ways that's the beer that put us on the map when we were founded in 1988. So the idea of trying to create a brand from scratch, it just, we didn't have any idea of how we would scale that. And so it was, let's truly borrow the equities of existing of existing brands that people love and bring them the alternative so they can choose, do I want alcohol or do I not, but I know I'm not having to sacrifice on the quality and the taste of the liquid. Now that's also why we were so late to market, to be clear, we, we've been in, were in R&D 7 years ago from today, and you know other companies didn't even exist in the space, started and flourished before we ever released our first product because our strategy was always meant to be we don't want to just create a great non-alcoholic beer, we want to create a great non-alcoholic. Counterpoint to our core beers and flavor matching existing recipes and the diligence that we needed to execute to ensure that we're delivering to the fan exactly what they expect from fresh squeezed IPA or Black Butte in their non-alcoholic counterparts was something that we were delivering on.

Speaker 1 [04:58] Is there anything you've learned since you've entered the NA space that you've had to sort of tweak your strategy or, you know, anything like that that has sort of come up where you're like, we kind of have to pivot here?

Speaker 2 [05:10] So far, Not so extremely, I, I would say the only pivot might be our alcohol containing beer strategy is very focused on a single behemoth brand, fresh squeezed. The non-alk side is much more of a portfolio play, and that matches where we're at in the cycle for this category. Craft beer as a whole, seeing declines, focusing on where you can get scale and drive both fan value and retailer value and distributor value is really important, but on the non-al side we're really selling a whole portfolio. And it's as you mentioned, it's not just Fresh Squeezed and Black Butte, but it's also Superstoke, which is a standalone brand. It's our partnership with Patagonia on the first scaled nationally nationally available USDA organic non-alk option, and it's the second very exciting Patagonia SKU that we just released, which is an IPA. Again, all organic, so very, very cool, but we're finding that retailers for the most part are looking for a portfolio solution, not just a single SKU or a single style that's well represented, but a portfolio they can trust. And the good news about our portfolio. Is every brand that has been released for any appreciable amount of time, Fresh Squeezed, Black Butte, Superstoked, Patagonia, they've all won gold medals at the most prestigious competitions globally, either GABF, or World Beer Cup, or US Beer Open, which is awesome. It's awesome. I mean, from a taste standpoint, and taste is what matters. We, we may say all these other things about brand, and I think having sharp brand positioning and an engaging brand is really important, but when we ask consumers what is the most important thing in your decision making for what to purchase, it's, it's taste. And this is beer, not alcoholic beer, and it's beyond beer. That is the number one most important thing. So on that front, I feel like it took a lot of work, but we are delivering and we want to keep getting better every chance we get.

Speaker 1 [07:06] Well, we're, we're definitely living in a flavor era, it seems.

Speaker 2 [07:11] We are indeed, and flavor takes many forms.

Speaker 1 [07:15] So I want to switch gears a little bit and talk about your partnership with Kirkland because you've been doing very well with that partnership and it, it's a hellas that's really taken off through it, so. How has that sort of affected the brewery's trajectory working with Costco in that way?

Speaker 2 [07:35] It, it's so exciting and, and beyond, beyond just the commercial opportunity that comes with, with being able to reach folks all across the country and all across the world, that this beer is going to be exported to warehouses abroad just shortly, which is very exciting. What I love about it is the beer itself was actually brewed at our Ben pub, the initial recipe. And it was a super high quality, you know, nothing spared Hellis that won a gold medal at the Great American Beer Fest. We had no real commercial plan for this, and it was a discussion with the team at Costco that were really the visionaries behind, you know, how could we take an ultra, ultra high quality beer and scale it and bring it to membership at an incredible value. What I love about this so much is that I think that Hella style is a very nice, if you kind of think about the Venn diagram of import and premium drinkers and then dyed in the wool craft lager drinkers, that Hellis is kind of right there in the middle where I think it can hit a sweet spot for the, for the beer drinker regardless of where you're coming from and regardless with what your prior beer drinking experience may be or your exposure. To different categories. Hellis is, you know, malt forward, still has that nice spicy tetang hop character. Um, it's just a crowd pleaser of a beer. And when I think about our craft as a brewer, the opportunity to bring to the whole nation and beyond. A product of this quality at scale is just, it's an incredible honor because this is what we dream of, right? It's like creating a great lager and then having people drink it. And the reality is we might create a great lager and it may not make it past the bounds of our gates at our pubs or past the. State of Oregon and Washington. So the chance to bring our craft broadly to, to the, the entire country is awesome, man. It's awesome. And for it to be a hell of style too. I just, I love this style and I, I, I know it's kind of like old school Germanic style, but I think it's so tasty.

Speaker 1 [09:33] Well, one of the things I, I, I'm curious about is you've got all these irons in the fire. You're working non-alk, you're, you're working the fresh squeeze play. You're working this Kirkland beer and you've got some new things that are, that are on the horizon too. Are, are you able to keep up with the demand that that's going to be out there for these products?

Speaker 2 [09:55] We are because we will continue to invest to do so, and, and we've done that just in the last year, made major investment to ensure that we're able to support the scale. In fact, we brought online a whole fermentation cellar that was originally put in in 2017. But never commissioned because there wasn't the need that we fully commissioned that adds a couple 100,000 barrels of fermentation capacity. So we're doing major projects on that front, changing our ability to do different pack types. We'll be speeding up canning. We'll be automating variety packing, so we're very much in a cycle of investing to support growth across some wildly different categories, as you noted. This really is our transition moment into beverage as a whole, and we're thinking about the business in that fashion.

Speaker 1 [10:43] When you look back at 2025, what do you consider Dech's biggest win? God,

Speaker 2 [10:48] oh God, this has been such an exciting year. I, I know it should be one, but I'm gonna kind of give you two, and, and one is firmly happened and commercially proven out, and the other is just at its infancy. Um, the first is doubling the size of the non-alk category. Um, I, I think that's amazing and getting to a point where fresh squeezed through syndicated has been the highest velocity broadly distributed non-Ak brand. Doesn't have the most distribution. But that's pure opportunity from, from my point of view. So if we're floating at something like 20% ACV, but we're the highest velocity single SKU, that's awesome. The fact that fans are so excited about the liquid is exactly what we wanted to do. We wanted to make it so truly no sacrifice was being made. You're just choosing whether you want alcohol or not in that occasion, and we'll keep working at that. But I think seeing that NA portfolio scale and be loved by the consumer and the fan, that that's number one. That is our biggest achievement. In 2025, the one that I bolted on is kind of like asterisk to the side. is the very, very early launches of Party Bomb, OK, this, this very cool novel Beyond Beer product that actually uses a co-product of our dealalization, which is how we get this tremendously clean flavor with real fruit. I mean this is way outside of the norm for us, and the way that we created the brand defies all standard linear processes that many CPG, CMOs, or the like would take. We completely blew all of it up and involved the fan and the consumer from the very onset of how we would position that brand, of the flavors of the liquid, the naming, the visual identity. Everything was fan driven, which is unconventional. We started with like 70 different concepts, put them in front of fans, whittled it down, um, we did tons of AB testing and research, but we did all of this in like the course of 60 days and didn't have a brand when we were starting retailer conversations to having a fully baked, fully designed, ready to go thing, which look, that's an unconventional way of doing things in the space, but moving very quickly and involving the fan never seems like a bad move to me. What I love though is we finally got the litmus test to are people gonna like this or not? And when we rolled this out to, to the drinker, to the fan, it was met with like A reception that defies anything I expected and the same was true for distributors and retailers. So look, it's not in the marketplace. Anything can happen, but just the early reaction to something that was way outside of our comfort zone, done in a very unorthodox fashion is heartening to say the least.

Speaker 1 [13:33] So tell us a little more about Party Bomb. What, what exactly, it's an FNB, right? By

Speaker 2 [13:39] technical and regulatory definition, it's an FMB, and I feel like all of us in the industry, we do this all the time. We're like FMBs and RTDs and one has a malt base and one has a distilled base, and we've done so much consumer research on this and equals 45,000 plus, and basically what we've determined is that is not how the consumer thinks about it. Flavored alc and flavor is the driver, the base of the alcohol, where it fits in the cold box, where it's available, it is almost a non-factor. Depending on the market that you're in a little bit, right, for availability purposes, but the play in the flavored Al was driven off quite a lot in the way of insights. One was big, bold flavors that really weren't being offered. Think about the offering that Buzzballs has really giant flavors, bright, colorful, huge on the flavor front. And that's all at a higher ABV. So you've got other folks that are operating great products in that category all at higher ABVs. And then you have on the lower end a really limited set that, you know, the, the thing we saw was lower carbonation, a little bit learning from the twisted tea consumer. We did a lot of talking to that, that consumer base. We did a lot of looking at adjacent products like noca and things with lower carbonation and basically said, There is white space. It sounds counterintuitive, but there is white space, and the white space is very, very full flavor, lower ABV, low carb. And low carbonation, not low carbohydrate, to be clear, um, and, and that was, that was the focal point. Those were the kind of insights we tested that and asked consumers what they wanted and what they felt like they would drink that doesn't exist in the marketplace, and that's what we're trying to deliver. Walt's creating a product that has no weird ingredients, real fruit, natural flavor, no weird stuff, and, and that's an anomaly in the flavored out category.

Speaker 1 [15:28] Hey, I've tasted through it and I, I thought that it tasted great, so I mean, thank you, but I don't know that I'm your target market either.

Speaker 2 [15:37] But you're definitely not, not our target market, and this is what we learned in the deep research, you know, the most loyal craft consumer, and when we look at our most loyal craft beer consumer in our own portfolio. About 20% of their alcohol consumption occasions are with craft beer, and the other 80% are everything else, domestic premium imports, flavored out category, distilled spirits, wine, you name it. And, and so as we've tested this in our own and operated locations, which tend towards dyed in the wool craft fans, people are loving it. Our own brew team is loving it, which that, that says something right there.

Speaker 1 [16:17] Well, I mean, you have the non-out portfolio, you have fresh squeeze. Is this sort of a, a third pillar for you moving forward? It

Speaker 2 [16:25] is, and that's always been in our strategy. Um, this third pillar and moving into broader Bev and the exact manifestation in terms of the specifications of the product by ABV, by flavor type, that was always gonna be driven by the consumer. That was the point. But The, the diversification outside of let's just call it classic beer has been part of our strategy for 3 years and it was really only possible to fully realize once we reached a certain amount of scale on the non-oxide because our intention was always to try and use the co-product from de-alkalization knowing how high quality it is and knowing that it gives us an economic advantage over some competitors, um, to be able to invest more in flavors. That was always part of our strategy. Took one.

Speaker 1 [17:11] So when you look ahead to 2026, what do you see as the biggest opportunity?

Speaker 2 [17:16] So they're twofold in 2026. 1, we still need to grow ACV on our non-alp portfolio. The velocity data is there to support it. We know the fan and the consumer love it. We need more distribution. That's way up there. And number 2 is the successful launch of something that is beyond beer that requires different marketing tactics, different means of engagement with the fans. They're adjacent. It's not wildly different, it's still beverage, but this is going to be a learning for us being historically a brewer, and I think the amount of excitement internally throughout the team. On the commercial side is, is very, very high and we're looking forward to this and it, it helps too that the brand party bomb is so fun and so fun to activate that it's energizing in and of itself. So here we go. Yeah,

Speaker 1 [18:06] well, do you see it as more of a grocery play to start, or do you see those elements inconvenience? Is it both? You know. What is sort of the channel strategy with a party bond?

Speaker 2 [18:17] It's a great question. So there are two channel strategies. One is for grocery, and we're coming out with a single SKU. We don't want to spread velocity across multiple SKUs. We're very careful with that. We know this product is new, so people are going to want a sample. We're launching with a variety pack at 5% alcohol. 4 flavors that will be the SKU that we focus on. I, I wouldn't surprise me if things go well and the consumer response is similar to what we've seen as we've sampled people in the marketplace that we don't end up With demand for a single flavor of one of the flavors that's in the variety pack pretty swiftly thereafter, but we'll see how that goes. That's the grocery channel strategy right now. Focus on that one SKU, scale that one SKU, get the consumer super excited and coming back for more. Convenience, completely different strategy. Convenience, we're launching with a line of Party Bomb called Party Crashers, which is slightly higher ABV. So it's 8% ABV in a 19.2 ounce container, same high quality fruit ingredients. They're the same flavors as exist at the 5% version. And so that's a single serve, two SKUs only. It's the strawberry lemonade and the pineapple whip, which is like a sleeper slayer of a flavor. It's just those two, and we have the ability to go further, but I think let's anchor, display value to the fan and consumer and display value to that retail partner at convenience, and then we will do more after that. But they're different strategies for sure.

Speaker 1 [19:46] I, I love that strategy. I, I love the differentiated strategy, the the attack one where, I mean, it, it, it's sort of played out where the grocery channel consumer is. Looking for mid to lower strength items whereas convenience is definitely that high play.

Speaker 2 [20:05] Totally and it's single serve for the most part and so we wanted to be cognizant of that and I think that's a learning we had when, when you asked earlier about some of these learnings. The, the learning we had is don't try and transpose and this was a historic sin of ours, one channel strategy to another channel. We don't do that. Our strategies are formed by channel. To best fit that fan and that consumer.

Speaker 1 [20:27] I love it. So, well, congratulations again, Peter, and to Deschutes. Uh, we are so happy to be able to celebrate you this year.

Speaker 2 [20:36] Thank you so much. This is such a special honor for us and thank you for the recognition.