Friday, November 16, 2007

Beeronomics: Polling Results and You

I deliberately made the question, "what is the best Oregon brewery?," vague and open to interpretation. I didn't, for example, ask for "your favorite" brewery, or the "highest quality." I did this because I wanted, in a completely unscientific way, to examine some economic theories about consumer preference. What led me to think about this was the thought experiment: if you were starting up a new brewery, what would you do for your first offering. You have some choices, go for a style that is well known and liked in Oregon (IPA) or try something distinct and unique (like Hair of the Dog). Obviously, as I mentioned before, brewing is not all about business for many Oregon brewers, but you can't live the dream if you are not making a living.

Economists believe that consumers like variety in what they consume (you don't have the same meal for dinner every day of your life). They also believe that consumer's tastes vary depending on the person and that income matters a lot in the types of goods you consume - higher income individuals have preferences for higher quality or luxury goods. So what is a producer to do given these stylized facts? Well the fact that individual consumers love variety may lead you to try and offer them many beers of many styles (Rogue and Deschutes come immediately to mind), but this is expensive. It is hard to brew in smaller batches, have many different products for which you have to find tap handles and shelf space, and have to market many different beers. Other breweries seem to concentrate on a 'flagship' brew and hope that leads consumers to their other offerings (Widmer and Bridgeport come to mind here). The fact that there are also many different types of consumers out there has two competing effects for which there is often no equilibrium. Do you try and stake out as big a section of consumers by offering them a product somewhere in the middle of the spectrum? Doing so almost assuredly mans you will face tough competition (Terminal Gravity's IPA). Or do you go for a niche market that may be smaller but you have all to your own (HotD Fred)?

Once a brewery is established if faces another set of questions: do we try and grow sales of our established beers or create even less distinct beers to appeal to a wider audience to take advantage of economies of scale, or do we grow our variety to appeal to more customers and to keep current customers happy? I think the trend toward macro-style lagers (Full Sail Session) is a strong move toward the former, while Rogue, for example is a clear example of the other strategy. Finally, I think there is a reputation effect that is hard to break. Widmer is a clear example. When Rob and Kurt started Widmer, they were pioneers brewing styles no one had ever heard of before. In those early days of green palettes what became a hit was what are now considered less-distinct beers. So it is hard to break that early reputation a brewery establishes.

So at last, to the poll results: In a strange and suspicious flurry of voting Rogue surged ahead in the space of a few hours. But I am extremely pleased as I am taking a group of OSU students to meet with Jack Joyce, the owner, and I can share with him the exciting news. He will be so pleased. Deschutes, Full Sail and HotD also garnered much support. For big breweries, Widmer and MacTarnahans (which had for most of the poll had zero votes) had few votes, quite obviously because their beers are not generally considered on par with the others. But I think if I were to try and make something out of them I would say that the strategy of trying to produce a variety of quality beers is what begets a reputation as a great brewery. I voted for Deschutes for this reason. With the exception of Quail Springs, which has now been replaced by the excellent Inversion IPA, every single one of their beers is, in my opinion, a absolutely exceptional, flawless beer. I am stunned at how well they have achieved this feat and thus my vote. Rogue is perhaps a more interesting brewery, always trying out new beers and new takes on old styles, but their offerings, while generally exceptional, have a few less than stellar examples. Terminal Gravity, by contrast makes what may be my favorite IPA, but is not known as a great brewery by my voters probably because that is about the full extent of customers experience with them. Since they have decided to compete on such a popular style, I fear for their continuing success (they have already lost their taps in two local joints here in Corvallis). The most surprising outcome, in my opinion, is Bridgeport. I have such fond memories of the old Bridgeport brewery in the Pearl, when I was an undergrad and the Pearl was still industrial, and I was appalled when I returned after the big remodel. Perhaps this is such an iconic part of Bridgeport's identity that I am not the only one that cannot forgive the injustice. But their IPA is perhaps the quintessential NW beer. Blue Heron was perhaps the pioneering bottled NW micro-brew. What gives, no love for the Ponzis?

Thanks for everyone who participated in the poll and now, go buy some great NW beer and rethink your choice.

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