Widmer Brothers Brewing Company

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Widmer Brothers Brewing Company

929 N. Russell
Portland, Oregon 97227
U.S.A.
Telephone: (503) 281-2437
Fax: (503) 281-1496
Web site: http://www.widmer.com

Private Company
Incorporated: 1984
Employees: 130
Sales: $33 million (2004 est.)
NAIC: 312120 Breweries

Widmer Brothers Brewing Company is a Portland, Oregon-based "craft brewer" that produces several distinctive varieties of beer. The firm's brews include top seller Hefeweizen, an unfiltered wheat beer; black raspberry-flavored Widberry; Drop Top Amber; Blonde Ale; seasonal varieties like Okto and Snowplow Milk Stout; and others that are brewed for sale on draft only. Hefeweizen is available in most American states, and the rest are found primarily on the West Coast. The firm is run by brothers Kurt and Rob Widmer, who sold a minority stake to Anheuser-Busch in 1997 to gain access to the industry leader's distribution network.

Beginnings

Widmer Brothers Brewing Company was founded in 1984 in Portland, Oregon by Kurt and Rob Widmer. Older brother Kurt had come to appreciate a wide variety of beer while living in Germany in the 1970s, and had begun making his own beer when he returned to the United States. He used a traditional strain of yeast obtained from the Brewing Research Institute in Weihenstephan, Bavaria, and later returned to Germany to fine-tune his craft at a brewery in Dusseldorf. By the early 1980s he had developed a recipe for beer that produced consistently good results.

In 1984 the Widmer brothers decided to found a brewery, and raised more than $50,000 from family members and an outside investor. With their father Raymond, they assembled a small brewery out of used dairy and restaurant equipment, and by fall had begun running test batches. The first Widmer offering, Altbier (German for "old beer"), was offered for sale in early 1985, and the richly flavored brew was soon joined by a lighter variety, Weizen, which used wheat as an ingredient. Unlike German wheat beers, which had a slight flavor of bananas and cloves, the Widmers' recipe produced a less noticeable aftertaste.

Whereas the United States had once been home to thousands of regional breweries, 13 years of Prohibition had reduced the number to about 800, after which national competition, mergers, and bankruptcies had pared the total to just 50 by the 1980s. At this time home-brewers like Kurt Widmer were starting to make traditional varieties of beer that giants like Anheuser-Busch, Miller, and Coors had abandoned, while a relaxed legal environment began to lower the barriers to brewing beer for local consumption. Portland was an early locus of such activity, with the Cartwright Brewing Company founded there in 1980, followed four years later by the Bridgeport Brewing Company and Widmer Brothers.

Not everyone was ambitious enough to try the beers of these unfamiliar new companies, however, and the brothers faced an uphill battle to get taverns to offer them (Widmer Brothers sold its beer in kegs only, believing flavor was degraded by the bottling process). To boost interest they formed the "Widmer Designated Drinker" program, in which the brothers and their friends rented vans (driven by nondrinkers) and traveled to clients' bars where they ordered copious amounts of the company's beer. For the new firm's first year production totaled 400 31-gallon barrels.

The Creation of Hefeweizen in 1986

In 1986 a variation on Widmer's wheat beer was introduced that would prove a turning point in the firm's evolution. Faced with demand for a third variety of beer, but limited by their ownership of just two brewing vessels, the brothers reluctantly filled a keg with Weizen without filtering it to remove the wheat proteins and yeast particles that made it appear cloudy. Bar owner and early company supporter Carl Simpson liked the resultant hazy, golden appearance, and when he served it in 22-ounce glasses with lemon wedges his customers did, too. Dubbed Hefeweizen, it would soon go on to become the firm's top seller.

Annual production increased each year, and by 1989 the maximum capacity of the company's brewing equipment had been reached, forcing the Widmers to turn away business. That year the firm bought two adjoining historic buildings in Portland that were slated for demolition, which would be refurbished to house a new brewery. The 100-year-old Smithson and McKay Buildings featured Italianate and Romanesque Revival brickwork and a unique cast-iron storefront, and were listed on the National Register of Historic Places. They required extensive interior work, however, which made the renovation costs significantly higher than constructing a new facility from scratch.

In June 1990 the firm began moving into its newly completed brewhouse, whose state-of-the-art equipment had twice the 8,000-barrel annual capacity of the original location. The new site also had room for a pub, offices, basement storage, and possible banquet rooms and rental apartments.

Once it was fully operational the new brewery enabled the firm to increase production dramatically, but demand was growing even faster. In 1992 Widmer Brothers began laying plans to build an expansion adjacent to its new brewery that would once again double production. Output for the year reached 27,400 barrels, 20,550 of which was Hefeweizen. The Widmers continued to distribute their beer in kegs only, as they strove to offer the best-tasting beer possible.

In early 1994 the company sued a former employee who was planning to open a new brewery in Portland, claiming he was violating a noncompete agreement he had signed. The case was later settled out of court with a payment to Widmer. During the year the firm also added a new beer called Dunkel Weizen and leased a closed G. Heileman plant in Milwaukee to brew Hefeweizen, but the facility was reportedly not able to produce the beer to Widmer's satisfaction and the deal was terminated.

In March 1995 a pub and restaurant, the Widmer Gasthaus, was opened adjacent to the company's brewery, and a major expansion was begun across the street on property the firm had acquired. In September the Widmers sold a stake to Desai Capital Management for $10 million to fund the new construction. The company had also recently engaged CKS Partners to handle advertising, which was initially budgeted at $1 million per year. Production for the year reached 69,200 barrels, of which 58,820 was Hefeweizen, and revenues hit an estimated $10 million.

Oregon now had 70 breweries or brewpubs (where beer was brewed for sale on-site), and the state's drinkers led the nation in consumption of craft beers, with nearly 9 percent of the total consumed in 1995 coming from local firms. Widmer sold a greater portion of this amount than any of its competitors, though its out-of-state presence was reduced because it did not bottle its beers.

Bottling Beginning in 1996

In the spring of 1996 the firm's new $20 million brewery opened, with its brewing vessels and utilities connected to the older one via under-the-street tunnels. It would focus exclusively on brewing Hefeweizen, and included a new bottling line that met the Widmers' strict standards for maintaining flavor. Several other varieties would be bottled there, including Amberbier, Blackbier, and Widberry.

On May 6 Hefeweizen reached store shelves in Oregon and Washington in 22-ounce bottles and six-packs of 12-ounce bottles. The public response was overwhelming, and in June the firm reported that demand of 15,000 barrels (206,700 cases) was more than double the anticipated production of 6,000 barrels (82,600 cases). Plans for a $1.5 million expansion to the new plant were soon announced that would boost annual capacity to 310,000 barrels.

Widmer was now producing 11 different beers, some of which were only offered on draft. They included Hefeweizen, Widberry Weizen, Blackbier, Amberbier, Altbier, and Weizen year-round; and Doppelbock, Oktoberfest, and Winternacht on a seasonal basis. The firm's distribution area extended to Oregon, Washington, California, Wyoming, Colorado, Montana, Nevada, Idaho, and Alaska and a handful of other markets around the United States.

The company's success was not lost on the brewing industry's leaders, who had been warily eying the upstarts around the country that were taking a small but growing portion of their business. Some, including Miller and Coors, had launched pseudo-microbrews like Red Dog and Killian's whose packaging obscured their corporate origins, while others began seeking to take over the most successful new firms. The number of small brewers also was reaching critical mass, and distributors had started to drop slower-moving brands, while Anheuser-Busch's wholesalers were strongly urged to commit a "100 percent share of mind" to its brews, with incentives offered if they jettisoned other lines. Meanwhile, imported beer sales were rebounding through the aggressive efforts of firms like Corona, and makers of distilled spirits were working to reclaim their own share of the alcoholic beverage market. As its growth began to level off, in January 1997 the company laid off 11 employees.

Company Perspectives:

Widmer Brothers Brewing Company currently produces an extensive line of European and American style beers year-round. These offerings include America's Original Hefeweizen, Drop Top Amber Ale, Widmer Blonde, and Widberry "O." Seasons and holidays inspired Widmer Brothers to be the first brewery to introduce seasonal beers to America—an idea that has spawned such favorites as Snowplow and Okto, returning each year by popular demand. In keeping with the tradition of hand-crafted brewing, the Widmer Brothers continue to develop new and exciting beers.

Selling a Stake to Anheuser-Busch in 1997

In September 1996 August A. Busch, the chairman of Anheuser-Busch (A-B), met with the Widmers at their brewpub in Oregon, initiating a dialogue between the two firms. A-B had already purchased a stake in Seattle's Redhook Ale Brewery and then helped it reach a national market, and in April 1997 Widmer Brothers sold a 27 percent stake in the firm to the industry's leader for $18.25 million. The move helped strengthen the company financially at a time when many craft brewers were in trouble, though some critics grumbled that the sale was contrary to the principles with which brewers like the Widmers had entered the business. A-B made approximately 45 percent of the beer sold in the United States, and its distribution network would give Widmer Brothers the ability to reach a national market.

The year 1997 also saw the firm introduce several new brews, including Widmer Vienna and Czech Pilsner, as well as a hard cider beverage. The company was now making seven year-round brews and a changing lineup of three seasonals, which included Golden Bock, Sommerbrau Kolsch, and Hop Jack Pale Ale. During the year the firm ran into distribution trouble in Denver, Colorado, when its local distributor there went under, and it took more than a year before its products were restored to the area.

In early 2000 Widmer Brothers unveiled redesigned packaging, which emphasized the "W" initial in the firm's name and featured more colorful graphics. Distribution was continuing to roll out around the United States, and in 2003 the company began brewing Hefeweizen at a Redhook-owned brewery in Portsmouth, New Hampshire that was similar to the firm's Portland facility. Redhook also would distribute the beer for Widmer, while dropping production of its own Hefeweizen in the East. The new arrangement would halt the flow of other Widmer products to the area, however, as the firm would no longer truck them the long miles from Oregon. The year 2003 also saw introduction of Drop Top Amber Ale, which was touted for its smooth flavor and slightly fruity aroma. Widmer was now ranked as the fourth largest craft brewer in the United States, behind Sierra Nevada of California, New Belgium of Colorado, and Redhook, which had brewed 229,000 barrels in 2003 to Widmer's 170,000.

Forming the Craft Brands Alliance in 2004

In 2004 Widmer Brothers expanded its relationship with Redhook to create a joint sales and marketing organization called Craft Brands Alliance LLC that would handle both companies' products on the West Coast. The move was expected to help the firms cut costs by utilizing common staff for a number of tasks. The two companies would sell their beers to Craft Brands, which would then handle all advertising and marketing, distributing the product through A-B wholesalers.

The year also saw the introduction of a seasonal brew called Snowplow Milk Stout, which had been developed by the Oregon Brew Crew, a homebrewers club to which the brothers belonged and with which the firm had begun collaborating in 1997. Widmer Brothers had been honored a number of times over the years in beer tasting contests, and in 2004 the company was named Brewer of the Year at the Great American Beer Festival in Colorado, while its Hefeweizen won a gold medal at the 2004 World Beer Cup. Production increased yet again during the year to 199,000 barrels, an increase of more than 17 percent over 2003.

In April 2005 the firm turned 21, the legal drinking age in the United States, and the Widmer brothers celebrated with an Octoberfest party at the brewery in September. The company's beers were now available in 45 states across the United States.

After more than two decades in operation, Widmer Brothers Brewing Company had established itself as the largest brewer in Oregon, and one of the leading craft brewers in the United States. The firm's ties to Anheuser-Busch and joint marketing agreement with Redhook, along with numerous still-untapped markets, made future growth a certainty.

Principal Subsidiaries

Craft Brands Alliance LLC (50%).

Principal Competitors

Redhook Ale Brewery; Pyramid Breweries; Deschutes Brewing Company; Anchor Brewing Company; Full Sail Brewing Company; Portland Brewing Company; Boston Beer Company; Sierra Nevada Brewing Company; New Belgium Brewing Company.

Key Dates:

1984:: Kurt and Rob Widmer found Widmer Brothers Brewing Company.
1986:: Hefeweizen unfiltered wheat beer debuts.
1990:: The firm opens a new brewery/headquarters facility.
1996:: A second brewery and bottling plant is added across the street.
1997:: Anheuser-Busch buys a 27 percent stake in the firm for $18 million.
2003:: The company begins brewing Hefeweizen at the New Hampshire Redhook plant.
2004:: Widmer and Redhook form the Craft Brands Alliance to handle West Coast sales.